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Analog Devices DEF 14A 2009 Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 Filed by the Registrant þ
Filed by a Party other than the Registrant o Check the appropriate box:
Analog Devices, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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February 4,
2009
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders to be held at 10:00 a.m. local time on
Tuesday, March 10, 2009, at the Company’s headquarters
at Three Technology Way, Norwood, Massachusetts.
At the Annual Meeting you are being asked to elect four
Class I members to our Board of Directors, each for a term
of three years, ratify the selection of Ernst & Young
LLP as our independent registered public accounting firm for the
fiscal year ending October 31, 2009, and consider and vote
upon a shareholder proposal that we de-classify our Board of
Directors. Your Board of Directors recommends that you vote FOR
the election of each of the Class I directors named in the
proxy statement, FOR the ratification of Ernst & Young
LLP and AGAINST the shareholder proposal.
Please carefully review the attached proxy materials and take
the time to cast your vote.
Yours sincerely,
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ANALOG
DEVICES, INC.
ONE TECHNOLOGY WAY NORWOOD, MASSACHUSETTS 02062-9106
To our Shareholders:
The 2009 Annual Meeting of Shareholders of Analog Devices, Inc.
will be held at our headquarters at Three Technology Way,
Norwood, Massachusetts 02062, on Tuesday, March 10, 2009 at
10:00 a.m. local time. At the meeting, shareholders will
consider and vote on the following matters:
The shareholders will also act on any other business that may
properly come before the meeting.
Shareholders of record at the close of business on
January 16, 2009 are entitled to vote at the meeting. Your
vote is important no matter how many shares you own. Whether you
expect to attend the meeting or not, please vote your shares
over the Internet or by telephone in accordance with the
instructions set forth on the proxy card, or complete, sign,
date and promptly return the enclosed proxy card in the
postage-prepaid envelope we have provided. Your prompt response
is necessary to ensure that your shares are represented at the
meeting. You can change your vote and revoke your proxy at any
time before the polls close at the meeting by following the
procedures described in the accompanying proxy statement.
All shareholders are cordially invited to attend the meeting.
By order of the Board of Directors,
Margaret
K. Seif
Secretary
Norwood, Massachusetts
February 4, 2009
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ANALOG
DEVICES, INC.
ONE TECHNOLOGY WAY NORWOOD, MASSACHUSETTS 02062-9106
March 10,
2009
This proxy statement contains information about the 2009 Annual
Meeting of Shareholders of Analog Devices, Inc. The meeting will
be held on Tuesday, March 10, 2009, beginning at
10:00 a.m. local time, at our headquarters at Three
Technology Way, Norwood, Massachusetts 02062. You may obtain
directions to the location of the annual meeting by visiting our
website at www.analog.com or by contacting Mindy Kohl, Director,
Investor Relations, Analog Devices, Inc., One Technology Way,
Norwood, MA 02062; telephone:
781-461-3282.
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Analog
Devices, Inc., which is also referred to as Analog Devices, ADI,
or the Company in this proxy statement, for use at the annual
meeting and at any adjournment of that meeting. All proxies will
be voted in accordance with the instructions they contain. If
you do not specify your voting instructions on your proxy, it
will be voted in accordance with the recommendation of the Board
of Directors. You may revoke your proxy at any time before it is
exercised at the meeting by giving our secretary written notice
to that effect.
Our Annual Report to Shareholders for the fiscal year ended
November 1, 2008 is being mailed to shareholders with the
mailing of these proxy materials on or about February 4,
2009.
This proxy statement and the 2008 Annual Report to
Shareholders are available for viewing, printing and downloading
at www.analog.com/AnnualMeeting.
We will furnish to any shareholder (without charge) a copy of
our Annual Report on
Form 10-K
for the fiscal year ended November 1, 2008 as filed with
the Securities and Exchange Commission, except for exhibits,
upon written or oral request to Analog Devices, Inc., Attention:
Mindy Kohl, Director, Investor Relations, Analog Devices, Inc.,
One Technology Way, Norwood, MA 02062; telephone:
781-461-3282.
INFORMATION
ABOUT THE ANNUAL MEETING AND VOTING
At the annual meeting, shareholders will consider and vote on
the following matters:
1. The election of the four nominees named in this proxy
statement to our Board of Directors to serve as Class I
directors, each for a term of three years.
2. The ratification of the selection of Ernst &
Young LLP as our independent registered public accounting firm
for the fiscal year ending October 31, 2009.
3. To act upon a shareholder proposal that we de-classify
our Board of Directors.
The shareholders will also act on any other business that may
properly come before the meeting.
To be able to vote, you must have been an Analog Devices
shareholder of record at the close of business on
January 16, 2009. This date is the record date for the
annual meeting.
Shareholders of record at the close of business on
January 16, 2009 are entitled to vote on each proposal at
the annual meeting. The number of outstanding shares entitled to
vote on each proposal at the meeting is 291,190,002 shares
of our common stock.
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Each share of our common stock that you owned on the record date
entitles you to one vote on each matter that is voted on.
Your vote is important no matter how many shares you own. Please
take the time to vote. Take a moment to read the instructions
below. Choose the way to vote that is easiest and most
convenient for you and cast your vote as soon as possible.
If you are the “record holder” of your shares, meaning
that you own your shares in your own name and not through a bank
or brokerage firm, you may vote in one of four ways.
(1) You may vote over the Internet. If
you have Internet access, you may vote your shares from any
location in the world by following the “Vote by
Internet” instructions on the enclosed proxy card.
(2) You may vote by telephone. You may
vote your shares by following the “Vote by Telephone”
instructions on the enclosed proxy card.
(3) You may vote by mail. You may vote by
completing and signing the proxy card enclosed with this
proxy statement and promptly mailing it in the enclosed
postage-prepaid envelope. You do not need to put a stamp on the
enclosed envelope if you mail it in the United States. The
shares you own will be voted according to your instructions on
the proxy card you mail. If you return the proxy card, but do
not give any instructions on a particular matter described in
this proxy statement, the shares you own will be voted in
accordance with the recommendations of our Board of Directors.
The Board of Directors recommends that you vote FOR
Proposals 1 and 2 and AGAINST Proposal 3.
(4) You may vote in person. If you attend
the meeting, you may vote by delivering your completed proxy
card in person or you may vote by completing a ballot. Ballots
will be available at the meeting.
Yes. You can change your vote and revoke your proxy at any time
before the polls close at the meeting by doing any one of the
following things:
Your attendance at the meeting alone will not revoke your proxy.
If the shares you own are held in “street name” by a
bank or brokerage firm, your bank or brokerage firm, as the
record holder of your shares, is required to vote your shares
according to your instructions. In order to vote your shares,
you will need to follow the directions your bank or brokerage
firm provides you. Many banks and brokerage firms also offer the
option of voting over the Internet or by telephone, instructions
for which would be provided by your bank or brokerage firm on
your vote instruction form. Under the current rules of the New
York Stock Exchange, or NYSE, if you do not give instructions to
your bank or brokerage firm, it will still be able to vote your
shares with respect to certain “discretionary” items,
but will not be allowed to vote your shares with respect to
certain “non-discretionary” items. The election of
directors (proposal one) and the ratification of
Ernst & Young LLP as our independent registered
public accounting firm (proposal two) are each considered to be
a discretionary item under the NYSE rules and your bank or
brokerage firm will be able to vote on those items, even if it
does not receive instructions from you, so long as it
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holds your shares in its name. The shareholder proposal to
de-classify our Board (proposal three) is a
“non-discretionary” item. If you do not instruct your
bank or broker how to vote with respect to this item, your bank
or broker may not vote with respect to this proposal, but rather
those votes will be counted as “broker non-votes.”
If your shares are held in street name, you must bring an
account statement or letter from your bank or brokerage firm
showing that you are the beneficial owner of the shares as of
the record date (January 16, 2009) in order to be
admitted to the meeting on March 10, 2009. To be able to
vote your shares held in street name at the meeting, you will
need to obtain a proxy card from the holder of record.
If you participate in the Analog Devices Stock Fund through The
Investment Partnership Plan of Analog Devices, or TIP, your
proxy will also serve as a voting instruction for Fidelity
Management Trust Company, or Fidelity, which serves as the
administrator of TIP, with respect to shares of ADI common stock
attributable to your TIP account, or TIP shares, as of the
record date. You should sign the proxy card and return it in the
enclosed envelope to Broadridge Financial Solutions, Inc., or
you may submit your proxy over the Internet or by telephone by
following the instructions on the enclosed card. Broadridge will
notify Fidelity of the manner in which you have directed your
TIP shares to be voted. Fidelity will vote your TIP shares as of
the record date in the manner that you direct. If Broadridge
does not receive your voting instructions from you by
11:59 p.m. eastern time on March 5, 2009, Fidelity
will vote your TIP shares as of the record date in the same
manner, proportionally, as it votes the other shares of common
stock for which proper and timely voting instructions of other
TIP participants have been received by Fidelity.
If you participate in the Analog Ireland Success Sharing Share
Plan (the Ireland share plan), you may instruct Irish Pensions
Trust Limited, which serves as the trustee of the Ireland
share plan, to vote the amount of shares of common stock which
they hold on your behalf as of the record date. Mercer Trustees
Limited (Mercer), which administers the Irish share plan on
behalf of Irish Pensions Trust Limited, will send you a
voting card that you may use to direct Mercer how to vote your
shares. You should sign the voting card and return it to Mercer
in the envelope that Mercer provides. Mercer will vote the
shares in the manner that you direct on the voting card. If
Mercer does not receive your voting card by 5:00 p.m.
Greenwich Mean Time (GMT) on Friday, February 27, 2009,
Mercer will not vote your shares.
In order for business to be conducted at the meeting, a quorum
must be present in person or represented by valid proxies. For
each of the proposals to be presented at the meeting, a quorum
consists of the holders of a majority of the shares of common
stock issued and outstanding on January 16, 2009, the
record date, or at least 145,595,002 shares.
Shares of common stock represented in person or by proxy
(including “broker non-votes” and shares that abstain
or do not vote with respect to a particular proposal to be voted
upon) will be counted for the purpose of determining whether a
quorum exists at the meeting for that proposal. “Broker
non-votes” are shares that are held in “street
name” by a bank or brokerage firm that indicates on its
proxy that it does not have or did not exercise discretionary
authority to vote on a particular matter.
If a quorum is not present, the meeting will be adjourned until
a quorum is obtained.
Election of directors. Under our bylaws, a
nominee will be elected to the Board of Directors if the votes
cast “for” the nominee’s election exceed the
votes cast “against” the nominee’s election (with
abstentions and “broker non-votes” not counting as
votes “for” or “against”). If an uncontested
incumbent director nominee receives a majority of votes
“against” his election, the director must tender a
resignation from the Board. The Board will then decide whether
to accept the resignation within 90 days following
certification of the shareholder vote (based on the
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recommendation of a committee of independent directors). We will
publicly disclose the Board’s decision and its reasoning
with regard to the offered resignation.
Ratification of independent registered public accounting
firm. Under our bylaws, the affirmative vote of a
majority of the total number of votes cast at the meeting is
needed to ratify the selection of Ernst & Young LLP as
our independent registered public accounting firm.
Approval of shareholder proposal to de-classify the
Board. Under our bylaws, approval of the
shareholder proposal to de-classify our Board of Directors
requires a majority of the total number of votes cast at the
meeting.
Each share of common stock will be counted as one vote according
to the instructions contained on a proper proxy card, whether
submitted in person, by mail, over the Internet or by telephone,
or on a ballot voted in person at the meeting. With respect to
all proposals, shares will not be voted in favor of the matter,
and will not be counted as voting on the matter, if they either
(1) abstain from voting on a particular matter, or
(2) are broker non-votes. Accordingly, assuming the
presence of a quorum, abstentions for a particular director
nominee and broker non-votes will have no effect on the outcome
of the election of directors, the ratification of our
independent registered public accounting firm or the shareholder
proposal to de-classify our Board of Directors.
The votes will be counted, tabulated and certified by Broadridge
Financial Solutions, Inc.
Yes, your vote will be kept confidential and we will not
disclose your vote, unless (1) we are required to do so by
law (including in connection with the pursuit or defense of a
legal or administrative action or proceeding), or (2) there
is a contested election for the Board of Directors. The
inspector of elections will forward any written comments that
you make on the proxy card to management without providing your
name, unless you expressly request disclosure on your proxy card.
The Board of Directors recommends that you vote:
FOR the election of each of the four nominees to serve as
Class I directors on the Board of Directors, each for a
term of three years;
FOR the ratification of the selection of Ernst & Young
LLP as our independent registered public accounting firm for the
2009 fiscal year; and
AGAINST the shareholder proposal to de-classify our Board of
Directors.
The Board of Directors does not know of any other matters that
may come before the meeting. If any other matter properly comes
before the meeting, the persons named in the proxy card that
accompanies this proxy statement, whether you submit your proxy
in person, by mail, over the Internet or by telephone, will
exercise their judgment in deciding how to vote, or otherwise
act, at the meeting with respect to that matter or proposal.
Under Massachusetts law, where we are incorporated, an item may
not be brought before our shareholders at a meeting unless it
appears in the notice of the meeting. Our bylaws establish the
process for a shareholder to bring a matter before a meeting.
See “How and when may I submit a shareholder
proposal, including a shareholder nomination for director, for
the 2010 annual meeting?” below.
We will report the voting results in our quarterly report on
Form 10-Q
for the second quarter of fiscal 2009, which we expect to file
with the Securities and Exchange Commission in May 2009.
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If you are interested in submitting a proposal for inclusion in
the proxy statement for the 2010 annual meeting, you need to
follow the procedures outlined in
Rule 14a-8
of the Securities Exchange Act of 1934, or the Exchange Act. To
be eligible for inclusion, we must receive your shareholder
proposal for our proxy statement for the 2010 annual meeting of
shareholders at our principal corporate offices in Norwood,
Massachusetts at the address below no later than October 7,
2009.
Our amended and restated bylaws require that we be given advance
written notice of shareholder nominations for election to our
Board of Directors and of other matters that shareholders wish
to present for action at an annual meeting of shareholders
(other than matters included in our proxy materials in
accordance with
Rule 14a-8
under the Exchange Act). The Secretary must receive such notice
at the address noted below not less than 90 days or more
than 120 days before the first anniversary of the preceding
year’s annual meeting. However, if the date of our annual
meeting is advanced by more than 20 days, or delayed by
more than 60 days, from the anniversary date, then we must
receive such notice at the address noted below not earlier than
the 120th day before such annual meeting and not later than
the close of business on the later of (1) the 90th day
before such annual meeting or (2) the seventh day after the
day on which notice of the meeting date was mailed or public
disclosure was made, whichever occurs first. Assuming that the
2010 annual meeting is not advanced by more than 20 days
nor delayed by more than 60 days from the anniversary date
of the 2009 annual meeting, you would need to give us
appropriate notice at the address noted below no earlier than
November 10, 2009, and no later than December 10,
2009. If a shareholder does not provide timely notice of a
nomination or proposal to be presented at the 2010 annual
meeting, the proxies designated by our Board of Directors will
have discretionary authority to vote on any such proposal which
may come before the meeting. Under Massachusetts law, an item
may not be brought before our shareholders at a meeting unless
it appears in the notice of the meeting.
Our amended and restated bylaws also specify requirements
relating to the content of the notice that shareholders must
provide to the Secretary of Analog Devices for any matter,
including a shareholder proposal or nomination for director, to
be properly presented at a shareholder meeting. A copy of the
full text of our amended and restated bylaws is on file with the
Securities and Exchange Commission.
Any proposals, nominations or notices should be sent to:
Secretary, Analog Devices, Inc.
c/o: Mindy Kohl Director, Investor Relations Analog Devices, Inc. One Technology Way Norwood, MA 02062 Phone: 781-461-3282 Fax: 781-461-3491 Email: investor.relations@analog.com
We will bear the costs of solicitation of proxies. We have
engaged The Altman Group, Inc. to assist us with the
solicitation of proxies and expect to pay The Altman Group less
than $15,000 for their services. In addition to solicitations by
mail, The Altman Group and our directors, officers and regular
employees may solicit proxies by telephone, email and personal
interviews without additional remuneration. We will request
brokers, custodians and fiduciaries to forward proxy soliciting
material to the owners of shares of our common stock that they
hold in their names. We will reimburse banks and brokers for
their reasonable
out-of-pocket
expenses incurred in connection with the distribution of our
proxy materials.
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Our Annual Report on
Form 10-K
for the fiscal year ended November 1, 2008 is available on
our website at www.analog.com. If you would like a copy of our
Annual Report on
Form 10-K,
we will send you one without charge. Please contact:
Mindy Kohl
Director, Investor Relations Analog Devices, Inc. One Technology Way Norwood, MA 02062 Phone: 781-461-3282 Email: investor.relations@analog.com
If you have any questions about the annual meeting or your
ownership of our common stock, please contact Mindy Kohl, our
director of investor relations, at the address, telephone number
or email address listed above.
Some banks, brokers and other nominee record holders may be
participating in the practice of “householding” proxy
statements and annual reports. This means that only one copy of
our proxy statement and annual report to shareholders may have
been sent to multiple shareholders in your household. We will
promptly deliver a separate copy of either document to you if
you contact us at the following address or telephone number:
Investor Relations Department, Analog Devices, Inc., One
Technology Way, Norwood, Massachusetts 02062, telephone:
781-461-3282.
If you want to receive separate copies of the proxy statement or
annual report to shareholders in the future, or if you are
receiving multiple copies and would like to receive only one
copy per household, you should contact your bank, broker, or
other nominee record holder, or you may contact us at the above
address, telephone number or email address.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information regarding the
beneficial ownership of our common stock as of January 15,
2009 by:
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Section 16(a) of the Securities Exchange Act of 1934
requires our directors, executive officers and the holders of
more than 10% of our common stock to file with the SEC initial
reports of ownership of our common stock and other equity
securities on a Form 3 and reports of changes in such
ownership on a Form 4 or Form 5. Officers, directors
and 10% shareholders are required by SEC regulations to furnish
us with copies of all Section 16(a) forms they file. To our
knowledge, based solely on a review of our records and written
representations by the persons required to file these reports,
all filing requirements of Section 16(a) were satisfied
with respect to our most recent fiscal year with the exception
of (i) one Form 4 filed late due to our administrative
oversight on behalf of William Matson, one of our
Vice Presidents, reporting the vesting of 2,000 restricted
stock units and the subsequent issuance of 1,365 shares of
common stock (after payment of taxes), and (ii) one
Form 4 filed late due to our administrative oversight on
behalf of Robert Marshall, one of our Vice Presidents, reporting
the sale of 70,000 shares.
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Our Board of Directors is divided into three classes, with one
class being elected each year and members of each class holding
office for a three-year term. Our Board of Directors currently
consists of ten members, four of whom are Class I directors
(each with current terms expiring at the 2009 annual meeting),
three of whom are Class II directors (with terms expiring
at the 2010 annual meeting), and three of whom are
Class III directors (with terms expiring at the 2011 annual
meeting).
At the 2009 annual meeting, shareholders will have an
opportunity to vote for the nominees for Class I directors,
James A. Champy, Yves-Andre Istel, Neil Novich and Kenton J.
Sicchitano. Mr. Champy is currently serving as a
Class I director and has been a director since 2003.
Mr. Sicchitano is currently serving as a Class I
director and has been a director since 2003. Messrs. Istel
and Novich were appointed to our Board in December 2007 and May
2008, respectively. They were each recommended to the Board of
Directors by our Nominating and Corporate Governance Committee.
The persons named in the enclosed proxy card will vote for each
of these four nominees as Class I directors, unless you
instruct otherwise on the proxy card (whether executed by you or
through Internet or telephonic voting). Each of the nominees has
indicated his willingness to serve, if elected. However, if any
or all of the nominees should be unable or unwilling to serve,
the proxies may be voted for a substitute nominee designated by
our Board of Directors or our Board may reduce the number of
directors.
The following paragraphs provide information as of the date of
this proxy statement about each member of our Board of
Directors, including the nominees for Class I directors.
The information presented includes information each director has
given us about his age, all positions he holds, his principal
occupation and business experience for the past five years, and
the names of other publicly-held companies of which he serves as
a director. Information about the number of shares of common
stock beneficially owned by each director appears above under
the heading “Security Ownership of Certain Beneficial
Owners and Management.”
There are no family relationships among any of the directors and
executive officers of Analog.
Nominees
for Class I Directors (For a three-year term expiring at
the 2012 Annual Meeting)
Mr. Champy, age 66, has been a Vice President of Perot
Systems Corporation, a technology services and business
solutions company, since 1996. Mr. Champy also serves as a
trustee of the Massachusetts Institute of Technology.
Mr. Istel, age 72, has been a Senior Advisor to
Rothschild, Inc., an international investment bank, since
April 2002, and was Vice Chairman of Rothschild, Inc. from
1993 to April 2002. He was previously Chairman of Wasserstein
Perella & Co. International and Managing Director of
Wasserstein Perella & Co., Inc. from 1988 to 1992.
Mr. Istel also serves as a director of Imperial Sugar
Company, a processor and marketer of refined sugar; Compagnie
Financiere Richemont S.A., the parent group owning luxury good
companies, including Cartier and Montblanc; and Chairman of the
Board of Overseers of Reinet Investments S.C.A.
Mr. Novich, age 54, is the former Chairman, President
and Chief Executive Officer of Ryerson Inc., a leading global
metals distributor and fabricator. He joined Ryerson in 1994 as
Chief Operating Officer and served in that role until 1999 when
he was named Chairman, President and Chief Executive Officer, a
position he held through 2007. Prior to that he was a Director
at Bain & Company, an international consulting firm.
Mr. Novich also serves as a director of W.W. Grainger, Inc.
and is a Trustee of the Field Museum of Natural History and a
Trustee of the Children’s Home & Aid Society of
Illinois.
Mr. Sicchitano, age 64, has been retired since June
2001. He joined Price Waterhouse LLP, a predecessor firm of
PricewaterhouseCoopers LLP, in 1970 and became a partner in
1979. PricewaterhouseCoopers LLP, or PwC, is a public accounting
firm. At the time of his retirement, Mr. Sicchitano was the
Global Managing Partner of
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Independence and Regulatory Matters for PwC. During his
31-year
tenure with PwC, Mr. Sicchitano held various positions
including the Global Managing Partner of Audit/Business Advisory
Services and the Global Managing Partner responsible for
Audit/Business Advisory, Tax/Legal and Financial Advisory
Services. Mr. Sicchitano also serves as a director of
PerkinElmer, Inc. and MetLife, Inc. Mr. Sicchitano is a
certified public accountant.
Class II
Directors (Terms Expire at the 2010 Annual Meeting)
Mr. Fishman, age 63, has been our President and Chief
Executive Officer since November 1996 and served as our
President and Chief Operating Officer from November 1991 to
November 1996. Mr. Fishman served as our Executive Vice
President from 1988 to November 1991. He served as our Group
Vice President-Components from 1982 to 1988. Mr. Fishman
also serves as a director of Cognex Corporation and Xilinx, Inc.
Mr. Hodgson, age 65, has been retired since December
2006. He served as Senior Vice President and
Chief Marketing and Sales Officer for DuPont, a
science-based products and services company, from January 2006
to December 2006. Mr. Hodgson served as Senior Vice
President and Chief Customer Officer from May 2005 to January
2006, Executive Vice President and Chief Marketing and Sales
Officer from February 2002 to May 2005 and Group Vice President
and General Manager of DuPont iTechnologies from February 2000
to February 2002.
Mr. Saviers, age 64, has been retired since August
1998. He served as Chairman of the Board of Adaptec, Inc., a
provider of high-performance input/output products, from August
1997 to August 1998, President and Chief Executive Officer of
Adaptec from July 1995 to August 1998, and President and Chief
Operating Officer of Adaptec from August 1992 to July 1995.
Prior to joining Adaptec, Mr. Saviers was employed with
Digital Equipment Corporation, a computer manufacturer, for more
than five years, last serving as Vice President of its Personal
Computer and Peripherals Operation. Mr. Saviers is also the
founder and director of InPronto, Inc., a dental services firm.
Class III
Directors (Terms Expire at the 2011 Annual Meeting)
Mr. Doyle, age 77, has been self-employed as a
technical consultant since September 1991. He was employed
formerly by the Hewlett-Packard Company, a provider of
technology solutions, where he served as the Executive Vice
President of Business Development from 1988 through 1991,
Executive Vice President, Systems Technology Sector from 1986 to
1988, Executive Vice President, Information Systems and Networks
from 1984 to 1986, and Vice President, Research and Development
from 1981 to 1984. Mr. Doyle also serves as a director of
Xilinx, Inc.
Mr. Severino, age 62, has been an investment advisor
to emerging technology companies and venture funds since 1996.
From 1994 to 1996, he was Chairman of Bay Networks, Inc., a data
networking products services company, after its formation from
the merger of Wellfleet Communications, Inc. and Synoptics
Communications, Inc. Prior to that, he was a founder, President
and Chief Executive Officer of Wellfleet Communications, Inc.
Mr. Severino is also a director of Sonus Networks, Inc.
Mr. Stata, age 74, has served as our Chairman of the
Board of Directors since 1973 and an executive officer of our
company since November 1996. Mr. Stata served as our Chief
Executive Officer from 1973 to November 1996 and as our
President from 1971 to November 1991. Mr. Stata also serves
as a trustee of the Massachusetts Institute of Technology.
Our Board of Directors recommends that you vote FOR the
election of Messrs. Champy, Istel, Novich and
Sicchitano.
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CORPORATE
GOVERNANCE
We have long believed that good corporate governance is
important to ensure that Analog Devices is managed for the
long-term benefit of its shareholders. We periodically review
our corporate governance policies and practices and compare them
to those suggested by various authorities in corporate
governance and the practices of other public companies. As a
result, we have adopted policies and procedures that we believe
are in the best interests of Analog Devices and its
shareholders. In particular, we have adopted the following
policies and procedures:
Shareholder Voting for Election of
Directors. Our bylaws provide for a majority
voting standard in uncontested director elections, so a nominee
is elected to the Board if the votes “for” such
director exceed the votes “against” (with abstentions
and broker non-votes not counted as for or against such
election). If a nominee is an incumbent director in an
uncontested election and does not receive more votes
“for” his or her election than “against” his
or her election, the director must offer his or her resignation
to the Board promptly after the voting results are certified. A
committee of independent directors, which will specifically
exclude any director who is required to offer his or her own
resignation, will carefully consider all relevant factors,
including, as the committee deems appropriate, any stated
reasons why shareholders voted against the election of such
director, any alternatives for curing the underlying cause of
the votes cast against the election of such director, the
director’s tenure, the director’s qualifications, the
director’s past and expected future contributions to Analog
Devices, the overall composition of our Board and whether
accepting the resignation would cause Analog Devices to fail to
meet any applicable rules or regulations of the Securities and
Exchange Commission or the New York Stock Exchange. Our Board
will act upon this committee’s recommendation within
90 days following certification of the shareholder vote and
may, among other things, accept the resignation, maintain the
director but address what the committee believes to be the
underlying cause of the votes cast against the election of such
director, maintain the director but resolve that the director
will not be re-nominated in the future for election, or reject
the resignation. We will publicly disclose the Board’s
decision with regard to any resignation offered under these
circumstances with an explanation of how the decision was
reached, including, if applicable, the reasons for rejecting the
offered resignation.
Stock Ownership Guidelines. In January 2006,
we established stock ownership guidelines for our directors and
executive officers. Under our guidelines, the target share
ownership levels are two times the annual cash retainer for
directors, two times annual base salary for the Chief Executive
Officer and one times annual base salary for other executive
officers. Directors (including the CEO) have three years to
achieve their targeted level. Executive officers other than the
CEO have five years to achieve their targeted level. Shares
subject to unexercised options, whether or not vested, will not
be counted for purposes of satisfying these guidelines.
Stock Option Grant Date Policy. We do not time
or select the grant dates of any stock options or stock-based
awards in coordination with the release by us of material
non-public information, nor do we have any program, plan or
practice to do so. In addition, the Compensation Committee has
adopted specific written policies regarding the grant dates of
stock options and stock-based awards made to our executive
officers and employees. See “INFORMATION ABOUT EXECUTIVE
COMPENSATION — Compensation Discussion and
Analysis — Related Policies and
Considerations — Stock Option Grant Date Policy”
below for more information.
You can access the current charters for our Audit Committee,
Compensation Committee and Nominating and Corporate Governance
Committee, our Corporate Governance Guidelines, our Code of
Business Conduct and Ethics and our Stock Option Grant Date
Policy at www.analog.com/governance or by writing to:
Mindy Kohl
Director, Investor Relations Analog Devices, Inc. One Technology Way Norwood, MA 02062 Phone: 781-461-3282 Fax: 781-461-3491 Email: investor.relations@analog.com
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Under current NYSE rules, a director of Analog Devices only
qualifies as “independent” if our Board of Directors
affirmatively determines that the director has no material
relationship with Analog Devices (either directly or as a
partner, shareholder or officer of an organization that has a
relationship with Analog Devices). Our Board of Directors has
established guidelines to assist it in determining whether a
director has a material relationship with Analog Devices. Under
these guidelines, a director is not considered to have a
material relationship with Analog Devices if he or she is
independent under Section 303A.02(b) of the NYSE Listed
Company Manual and he or she:
The guidelines provide that ownership of a significant amount of
Analog Devices’ stock, by itself, does not constitute a
material relationship.
For relationships not covered by the guidelines set forth above,
the determination of whether a material relationship exists is
made by the members of our Board of Directors who are
independent (as defined above).
Our Board of Directors has determined that each of
Messrs. Champy, Doyle, Hodgson, Istel, Novich, Saviers,
Severino and Sicchitano is “independent” within the
meaning of Section 303A.02(b) of the NYSE Listed Company
Manual. Our Board reached a similar determination for
Mr. Thurow, who served as a director until December 2007,
and Ms. King, who served until March 2008. Each of these
directors has no relationship with Analog Devices, other than
any relationship that is categorically not material under the
guidelines shown above and other than as disclosed in this proxy
statement under “— Director Compensation”
and “— Certain Relationships and Related
Transactions.”
Shareholders of record of Analog Devices may recommend director
candidates for inclusion by the Board of Directors in the slate
of nominees which the Board recommends to our shareholders for
election. The qualifications of recommended candidates will be
reviewed by the Nominating and Corporate Governance Committee.
If the Board determines to nominate a shareholder-recommended
candidate and recommends his or her election as a director by
the shareholders, the name will be included in Analog
Devices’ proxy card for the shareholders’ meeting at
which his or her election is recommended.
Shareholders may recommend individuals for the Nominating and
Corporate Governance Committee to consider as potential director
candidates by submitting their names and background and a
statement as to whether the shareholder or group of shareholders
making the recommendation has beneficially owned more than 5% of
Analog Devices’ common stock for at least one year as of
the date such recommendation is made, to the “Analog
Devices Nominating and Corporate Governance Committee”,
Analog Devices, Inc., One Technology Way, PO Box 9106,
Norwood, MA 02062. The Nominating and Corporate Governance
Committee will consider a
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recommendation only if appropriate biographical information and
background material is provided on a timely basis.
The process followed by the Nominating and Corporate Governance
Committee to identify and evaluate candidates includes requests
to Board members and others for recommendations, meetings from
time to time to evaluate biographical information and background
material relating to potential candidates and interviews of
selected candidates by members of the Nominating and Corporate
Governance Committee and the Board. Assuming that appropriate
biographical and background material is provided for candidates
recommended by shareholders on a timely basis, the Nominating
and Corporate Governance Committee will evaluate director
candidates recommended by shareholders by following
substantially the same process, and applying substantially the
same criteria, as it follows for director candidates submitted
by Board members.
Shareholders also have the right to directly nominate director
candidates, without any action or recommendation on the part of
the Nominating and Corporate Governance Committee or the Board,
by following the procedures set forth in ADI’s amended and
restated bylaws and described in the response to the question
“How and when may I submit a shareholder proposal,
including a shareholder nomination for director, for the 2010
annual meeting?” contained elsewhere in this proxy
statement.
In considering whether to recommend any candidate for inclusion
in the Board’s slate of recommended director nominees,
including candidates recommended by shareholders, the Nominating
and Corporate Governance Committee will apply the criteria set
forth in Analog Devices’ Corporate Governance Guidelines.
These criteria include the candidate’s integrity, business
acumen, age, experience, commitment, diligence, conflicts of
interest and the ability to act in the interests of all
shareholders. The Nominating and Corporate Governance Committee
does not assign specific weights to particular criteria and no
particular criterion is necessarily applicable to all
prospective nominees. Analog Devices believes that the
backgrounds and qualifications of the directors, considered as a
group, should provide a significant composite mix of experience,
knowledge and abilities that will allow the Board to fulfill its
responsibilities.
The Board will give appropriate attention to written
communications on issues that are submitted by shareholders and
other interested parties, and will respond if and as
appropriate. Absent unusual circumstances or as contemplated by
committee charters, the Chairman of the Nominating and Corporate
Governance Committee will, with the assistance of Analog
Devices’ internal legal counsel, (1) be primarily
responsible for monitoring communications from shareholders and
other interested parties and (2) provide copies or
summaries of such communications to the other directors as he
considers appropriate.
Communications will be forwarded to all directors if they relate
to substantive matters and include suggestions or comments that
the Chairman of the Nominating and Corporate Governance
Committee considers to be important for the directors to review.
In general, communications relating to corporate governance and
long-term corporate strategy are more likely to be forwarded
than communications relating to personal grievances, commercial
solicitations, and matters as to which Analog Devices tends to
receive repetitive or duplicative communications.
Shareholders and other interested parties who wish to send
communications on any topic to the Board should address such
communications to John L. Doyle, Chairman of the Nominating and
Corporate Governance Committee,
c/o General
Counsel, Analog Devices, Inc., One Technology Way,
PO Box 9106, Norwood, MA 02062.
The Board of Directors has responsibility for establishing broad
corporate policies and reviewing our overall performance rather
than
day-to-day
operations. The Board’s primary responsibility is to
oversee the management of the Company and, in so doing, serve
the best interests of the Company and its shareholders. Subject
to oversight by the Nominating and Corporate Governance
Committee, the Board selects, evaluates and provides for the
succession of executive officers and the Board nominates for
election at annual shareholder meetings individuals to serve as
directors of Analog Devices and elects individuals to fill any
vacancies on the Board. It reviews corporate objectives and
strategies, and evaluates and approves significant policies and
proposed major commitments of corporate
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resources. It participates in decisions that have a potential
major economic impact on Analog Devices. Management keeps the
directors informed of Company activity through regular written
reports and presentations at Board and committee meetings.
The Board of Directors met nine times in our 2008 fiscal year,
or fiscal 2008, (including by telephone conference). During
fiscal 2008, each of our directors who served as a director
during fiscal 2008 attended 75% or more of the total number of
meetings of the Board of Directors and the committees of which
such director was a member during the period of time which he or
she served on such committee. The Board has standing Audit,
Compensation, and Nominating and Corporate Governance
Committees. Each committee has a charter that has been approved
by the Board. Each committee must review the appropriateness of
its charter and perform a self-evaluation at least annually.
Messrs. Stata and Fishman are the only directors who are
also employees of Analog Devices. They do not participate in any
Board or committee meeting at which their compensation is
evaluated. All members of all three committees are independent,
non-employee directors.
Our Board of Directors has appointed Mr. Doyle
“presiding director” to preside at all executive
sessions of “non-management” directors, as defined
under the rules of the NYSE.
Our Corporate Governance Guidelines set forth our policy that
directors should attend annual meetings of shareholders. All of
the directors that were directors at the time of the 2008 Annual
Meeting of Shareholders attended that meeting.
The current members of our Audit Committee are
Messrs. Sicchitano (Chair), Doyle and Hodgson.
Mr. Hodgson joined the Committee in March 2008. Christine
King was a member of the Committee until her departure from the
Board in March 2008. The Board of Directors has determined that
each of Messrs. Sicchitano, Doyle and Hodgson qualifies as
an “audit committee financial expert” under the rules
of the SEC. Each of Messrs. Sicchitano, Doyle and Hodgson
is an “independent director” under the rules of the
NYSE governing the qualifications of the members of audit
committees and
Rule 10A-3(b)(1)
of the Exchange Act. In addition, our Board of Directors has
determined that each member of the Audit Committee is
financially literate and has accounting
and/or
related financial management expertise as required under the
rules of the NYSE. None of Messrs. Sicchitano, Doyle or
Hodgson serves on the audit committees of more than two other
public companies.
The Audit Committee assists the Board’s oversight of the
integrity of our financial statements, the qualifications and
independence of our independent registered public accounting
firm, and the performance of our internal audit function and
independent registered public accounting firm. The Audit
Committee has the authority to engage such independent legal,
accounting and other advisors as it deems necessary or
appropriate to carry out its responsibilities. Such independent
advisors may be the regular advisors to the Company. The Audit
Committee is empowered, without further action by the Board, to
cause the Company to pay the compensation of such advisors as
established by the Audit Committee. The Audit Committee did not
retain any such advisors during fiscal 2008. The Audit Committee
met eight times during fiscal 2008 (including by telephone
conference). The responsibilities of our Audit Committee and its
activities during fiscal 2008 are described in the Report of the
Audit Committee below.
The current members of our Compensation Committee are
Messrs. Champy (Chair), Saviers and Severino. The Board has
determined that each of Messrs. Champy, Saviers and
Severino is independent as defined under the rules of the NYSE.
Our Compensation Committee held seven meetings (including by
telephone conference) during fiscal 2008. The Compensation
Committee evaluates and sets the compensation of our Chief
Executive Officer and our other executive officers, and makes
recommendations to our Board of Directors regarding the
compensation of our directors. The Compensation Committee
oversees the evaluation of senior management by the Board of
Directors. In connection with its oversight and administration
of ADI’s cash and equity incentive plans, the Compensation
Committee grants stock options and other stock incentives
(within guidelines established by our Board of Directors) to our
officers and employees.
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The Compensation Committee has the sole authority to engage and
terminate such independent legal, accounting and other advisors
as it deems necessary or appropriate to carry out its
responsibilities. Such independent advisors may be the regular
advisors to the Company. The Compensation Committee is
empowered, without further action by the Board, to cause the
Company to pay the compensation of such advisors as established
by the Compensation Committee. The Compensation Committee
retained Pearl Meyer and Partners (PMP), an independent
compensation consultant, during fiscal 2008. PMP reports
directly to the Compensation Committee and assists the Committee
in evaluating and designing our executive compensation program
and policies. In fiscal 2008, the Compensation Committee
instructed PMP to assist it in defining a peer group of
companies, compare our executive compensation arrangements to
those of the peer group, and provide market data and advice
regarding executive compensation plan design. PMP conducted a
detailed analysis of the competitiveness and appropriateness of
the Company’s total executive compensation opportunity in
comparison to our peer group. In connection with its work for
the Compensation Committee, PMP is invited to attend many of the
Committee’s meetings. PMP is retained only by the
Compensation Committee and does not provide any other consulting
services to Analog Devices.
In accordance with the terms of the 2006 Stock Incentive Plan,
the Compensation Committee has delegated to our executive
officers and certain members of senior management the power to
grant options and other stock awards to employees who are not
executive officers or directors, subject to specified
thresholds. The activities of our Compensation Committee and the
services PMP performed for the Committee during fiscal 2008 are
described in “INFORMATION ABOUT EXECUTIVE
COMPENSATION — Compensation Discussion and
Analysis” below.
The current members of our Nominating and Corporate Governance
Committee are Messrs. Doyle (Chair), Istel and Novich.
Mr. Istel joined the Committee in January 2008 and
Mr. Novich joined the Committee in June 2008. John
Hodgson rotated off the Committee in June 2008. The Board has
determined that each of Messrs. Doyle, Novich and Istel is
independent as defined under the rules of the NYSE. The purpose
of the Nominating and Corporate Governance Committee is to
identify individuals qualified to become Board members
consistent with criteria approved by the Board, recommend to the
Board the persons to be nominated by the Board for election as
directors at any meeting of shareholders, develop and recommend
to the Board a set of corporate governance principles and
oversee the evaluation of the Board. The responsibilities of the
Nominating and Corporate Governance Committee also include
oversight of the Board’s annual review of succession
planning with respect to senior executives and oversight of our
Code of Business Conduct and Ethics. The Nominating and
Corporate Governance Committee has the authority to engage such
independent legal and other advisors as it deems necessary or
appropriate to carry out its responsibilities. Such independent
advisors may be the regular advisors to the Company. The
Committee is empowered, without further action by the Board, to
cause the Company to pay the compensation of such advisors as
established by the Committee. The Committee did not retain any
such advisers during fiscal 2008. For information relating to
nominations of directors by our shareholders, see
“— Director Candidates” above. Our
Nominating and Corporate Governance Committee held four meetings
during fiscal 2008 (including by telephone conference).
The Audit Committee of the Board of Directors assists the
Board’s oversight of the integrity of our financial
statements, the qualifications and independence of our
independent registered public accounting firm, and the
performance of our internal audit function and independent
registered public accounting firm. The Audit Committee also
meets privately with the Company’s independent registered
public accounting firm and the Company’s internal auditors
to discuss the Company’s financial statements and
disclosures, accounting policies and their application, internal
controls over financial reporting, and other matters of
importance to the Audit Committee, the independent accounting
firm and the internal auditors. Management has the primary
responsibility for the financial statements and the reporting
process, including the system of internal controls. In
fulfilling its oversight responsibilities, the Audit Committee
reviewed and discussed with management the audited financial
statements contained in the Company’s Annual Report on
Form 10-K
and the quarterly financial statements during fiscal 2008,
including the specific disclosures in the section titled
“Management’s Discussion and Analysis of Financial
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Condition and Results of Operations.” These discussions
also addressed the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial
statements. The Audit Committee reports on these meetings to the
Company’s Board of Directors. The Audit Committee also
selects and appoints the Company’s independent registered
public accounting firm, reviews the performance of the
independent registered public accounting firm during the annual
audit and on assignments unrelated to the audit, assesses the
independence of the independent registered public accounting
firm and reviews and approves the independent registered public
accounting firm’s fees. The Audit Committee also has
adopted policies and procedures for the pre-approval of audit
and non-audit services for the purpose of maintaining the
independence of our independent registered public accounting
firm. The Audit Committee operates under a written charter
adopted by the Company’s Board of Directors.
The Audit Committee is composed of three non-employee directors,
each of whom is an “independent director” under the
rules of the NYSE governing the qualifications of the members of
audit committees and under
Rule 10A-3(b)(1)
of the Exchange Act. The Board of Directors has determined that
each of Messrs. Sicchitano, Doyle and Hodgson qualifies as
an “audit committee financial expert” under the rules
of the Securities and Exchange Commission. In addition, the
Board of Directors has determined that each member of the Audit
Committee is financially literate and has accounting
and/or
related financial management expertise as required under the
rules of the NYSE.
The Audit Committee held eight meetings (including by telephone
conference) during the fiscal year ended November 1, 2008.
The meetings were designed to facilitate and encourage
communication between members of the Audit Committee and
management as well as private communication between the members
of the Audit Committee, the Company’s internal auditors and
the Company’s independent registered public accounting
firm, Ernst & Young LLP.
The Audit Committee reviewed with the Company’s independent
registered public accounting firm, who are responsible for
expressing an opinion on the conformity of the audited financial
statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the
Company’s accounting principles and such other matters as
are required to be discussed with the Audit Committee under
generally accepted auditing standards. In addition, the Audit
Committee has discussed with the independent registered public
accounting firm (i) the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1 AU§380 (Codification of
Statements on Auditing Standards, AU§380), and
(ii) the independent registered public accounting
firm’s independence from Analog Devices and its management,
including the matters in the written disclosures we received
from the independent registered public accounting firm regarding
the applicable requirements of the Public Company Accounting
Oversight Board regarding the independent accountant’s
communications with the Audit Committee concerning independence,
and considered the appropriateness of the provision of non-audit
services by the independent registered public accounting firm
relative to their independence.
Based on its review and discussions, the Audit Committee
recommended to the Company’s Board of Directors (and the
Board of Directors has approved) that the Company’s audited
financial statements be included in the Company’s Annual
Report on
Form 10-K
for the fiscal year ended November 1, 2008. The Audit
Committee also selected Ernst & Young LLP as the
Company’s independent registered public accounting firm for
the fiscal year ending October 31, 2009.
Audit Committee,
Kenton J. Sicchitano, Chairman John L. Doyle John C. Hodgson*
* Mr. Hodgson joined the Audit Committee in March
2008, replacing Ms. King, who served on the Committee until
her departure from the Board in March 2008.
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The following table presents the aggregate fees billed for
services rendered by Ernst & Young LLP, our
independent registered public accounting firm, for the fiscal
years ended November 1, 2008 and November 3, 2007.
Audit Fees. These are fees related to
professional services rendered in connection with the audit of
our consolidated financial statements, the audit of the
effectiveness of our internal control over financial reporting,
the reviews of our interim financial statements included in each
of our Quarterly Reports on
Form 10-Q,
international statutory audits, and accounting consultations
that relate to the audited financial statements and are
necessary to comply with U.S. generally accepted accounting
principles.
Audit-Related Fees. These are fees for
assurance and related services and consisted primarily of audits
of employee benefit plans, due diligence and consultations
regarding proposed transactions and accounting matters not
related to the annual audit.
Tax Fees. These are fees for professional
services related to tax return preparation services for our
expatriates, international tax returns, tax advice and
assistance with international tax audits. Included in this
amount are fees of $625,000 in fiscal 2008 and $576,000 in
fiscal 2007 for tax compliance services for our international
affiliates and tax return preparation services for our
expatriate employees on international assignments.
Ernst & Young does not provide tax services to any
executive officer of Analog Devices.
The Audit Committee of our Board of Directors has adopted
policies and procedures for the pre-approval of audit and
non-audit services for the purpose of maintaining the
independence of our independent registered public accounting
firm. We may not engage our independent registered public
accounting firm to render any audit or non-audit service unless
either the service is approved in advance by the Audit Committee
or the engagement to render the service is entered into pursuant
to the Audit Committee’s pre-approval policies and
procedures. On an annual basis, the Audit Committee may
pre-approve services that are expected to be provided to Analog
Devices by the independent registered public accounting firm
during the following 12 months. At the time such
pre-approval is granted, the Audit Committee must
(1) identify the particular pre-approved services in a
sufficient level of detail so that management will not be called
upon to make judgment as to whether a proposed service fits
within the pre-approved services and (2) establish a
monetary limit with respect to each particular pre-approved
service, which limit may not be exceeded without obtaining
further pre-approval under the policy. At regularly scheduled
meetings of the Audit Committee, management or the independent
registered public accounting firm must report to the Audit
Committee regarding each service actually provided to Analog
Devices.
If the cost of any service exceeds the pre-approved monetary
limit, such service must be approved (1) by the entire
Audit Committee if the cost of the service exceeds $100,000 or
(2) by the Chairman of the Audit Committee if the cost of
the service is less than $100,000 but greater than $10,000. If
the cost of any service exceeds the pre-approved monetary limit,
individual items with a cost of less than $10,000 each do not
require further pre-approval, provided that the total cost of
all such individual items does not exceed $40,000 and an update
of all items in this category is provided to the Audit Committee
at each quarterly scheduled meeting. However, if the cost of all
such individual items will exceed $40,000, the Chairman of the
Audit Committee must receive a summary of such items with a
request for approval of any amounts to be incurred in excess of
$40,000.
The Audit Committee has delegated authority to the Chairman of
the Audit Committee to pre-approve any audit or non-audit
services to be provided to Analog Devices by the independent
registered public accounting firm for which the cost is less
than $100,000. During fiscal years 2007 and 2008, no services
were provided to Analog Devices by Ernst & Young LLP
other than in accordance with the pre-approval policies and
procedures described above.
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The following table details the total compensation earned by our
non-employee directors in fiscal 2008.
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We also reimburse our directors for travel and other related
expenses. Each director can elect to defer receipt of his or her
fees under our Deferred Compensation Plan. See “INFORMATION
ABOUT EXECUTIVE COMPENSATION — Non-Qualified Deferred
Compensation Plan” below.
Effective October 29, 2006, the Board established the
following stock option grant policy for non-employee directors:
Each newly elected non-employee director is automatically
granted a non-qualified stock option to purchase
15,000 shares of our common stock under our 2006 Stock
Incentive Plan (the “2006 Plan”) on the 15th day
of the month following the date of initial election as a
director, or if the NYSE is closed on that day, the next
succeeding business day that the NYSE is open, at an option
exercise price equal to the fair market value of the common
stock on the date of grant (which will equal the closing price
of the common stock on the date of grant, unless otherwise
determined by the Compensation Committee).
On an annual basis, each incumbent non-employee director is
automatically granted a non-qualified stock option to purchase
15,000 shares of our common stock under the 2006 Plan (with
the number of shares subject to the first annual option granted
to a director to be on a pro rata basis based on the length of
service during the calendar year in which such director was
elected) on the second business day following January 1 that the
NYSE is open, at an option exercise price equal to the fair
market value of the common stock on the date of grant (which
will equal the closing price of the common stock on the date of
grant, unless otherwise determined by the Compensation
Committee).
Options granted to our non-employee directors under the 2006
Plan vest in three equal installments on the first, second and
third anniversaries of the date of grant, subject to
acceleration as described below. These options will vest in full
upon the occurrence of a Change in Control Event (as defined in
the 2006 Plan) or the director’s death. Upon (1) the
director’s retirement from our Board after attaining
age 60, (2) removal of the director by the Board or
(3) the Board’s failure to nominate the director for
reelection as a director (other than because the director has
refused to serve as a director), each option will vest as to an
additional number of shares that would have vested if the
director continued to serve as a director through the next
succeeding anniversary of the date of grant. If the director
ceases to serve as a director by reason of his disability, as
determined by the Board, each option will continue to become
exercisable over its remaining term on the dates it otherwise
would have vested if the director’s service had not been
terminated for disability. In addition, upon the occurrence of a
Change in Control Event or in the event of
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the director’s death, disability or retirement after
age 60, each option will continue to be exercisable for the
balance of its term.
In accordance with the policy described above, on
January 5, 2009 we granted stock options for services
provided during calendar year 2008 to each non-employee director
for the purchase of 15,000 shares of our common stock at an
exercise price of $19.57 per share, except Mr. Novich who
received a pro-rated amount based on the date he joined the
Board.
During fiscal 2008, we paid Mr. Stata, our founder and
Chairman of the Board of Directors, a salary for his services as
an employee of Analog Devices in the amount of $250,000, a cash
bonus of $182,481 and other compensation of $21,000 representing
the amount contributed or accrued by us in fiscal 2008 under
applicable retirement arrangements and health care savings
accounts.
On January 3, 2008, we granted a stock option to
Mr. Stata for the purchase of 40,000 shares of our
common stock at an exercise price of $29.91 per share. This
option is exercisable, subject to Mr. Stata’s
continued employment with us, in five equal annual installments,
on each of the first, second, third, fourth and fifth
anniversaries of the grant date. Following the end of fiscal
2008, on January 5, 2009, we granted a stock option to
Mr. Stata for the purchase of 40,000 shares of our
common stock at an exercise price of $19.57 per share. This
option is exercisable, subject to Mr. Stata’s
continued employment with us, in five equal annual installments,
on each of the first, second, third, fourth and fifth
anniversaries of the grant date.
Our Board has adopted written policies and procedures for the
review of any transaction, arrangement or relationship in which
Analog Devices is a participant, the amount involved exceeds
$120,000, and one of our executive officers, directors, director
nominees or 5% shareholders (or their immediate family members,
each of whom we refer to as a “related person”) has a
direct or indirect material interest.
If a related person proposed to enter into such a transaction,
arrangement or relationship, which we refer to as a
“related person transaction,” the related person must
report the proposed related person transaction to our General
Counsel. The policy calls for the proposed related person
transaction to be reviewed and, if deemed appropriate, approved
by the Board’s Nominating and Corporate Governance
Committee. Whenever practicable, the reporting, review and
approval will occur prior to entry into the transaction. If
advance review and approval is not practicable, the Nominating
and Corporate Committee will review, and, in its discretion, may
ratify the related person transaction. The policy also permits
the Chairman of the Nominating and Corporate Governance
Committee to review and, if deemed appropriate, approve proposed
related person transactions that arise between committee
meetings, subject to ratification by the Nominating and
Corporate Governance Committee at its next meeting. Any related
person transactions that are ongoing in nature will be reviewed
annually.
A related person transaction reviewed under the policy will be
considered approved or ratified if it is authorized by the
Nominating and Corporate Governance Committee after full
disclosure of the related person’s interest in the
transaction. As appropriate for the circumstances, the
Nominating and Corporate Governance Committee will review and
consider:
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The Committee may approve or ratify the transaction only if the
Committee determines that, under all of the circumstances, the
transaction is in Analog Devices’ best interests. The
Committee may impose any conditions on the related person
transaction that it deems appropriate.
In addition to the transactions that are excluded by the
instructions to the SEC’s related person transaction
disclosure rule, the Board has determined that the following
transactions do not create a material direct or indirect
interest on behalf of related persons and, therefore, are not
related person transactions for purposes of this policy:
The policy provides that the transactions involving compensation
of executive officers shall be reviewed and approved by the
Compensation Committee in the manner specified in its charter.
In May 2008, the Company and Mr. Fishman settled an SEC
inquiry into the Company’s stock option granting practices
by agreeing to the entry of an administrative cease and desist
order without admitting or denying wrongdoing. Under the order,
the Company agreed to cease and desist from committing or
causing any violations of Section 10(b) of the Securities
Exchange Act and
Rule 10b-5
thereunder, paid a civil money penalty of $3 million, and
repriced options granted to Mr. Fishman and other directors
in certain years. Mr. Fishman agreed to cease and desist
from committing or causing any violations of
Sections 17(a)(2) and (3) of the Securities Act, paid
a civil money penalty of $1 million, and made a
disgorgement payment of $450,000 plus interest with respect to
certain stock options. Contemporaneous with the approval of the
settlement, the SEC filed a complaint and consent to judgment
against the Company and Mr. Fishman in the United States
District Court for the District of Columbia.
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INFORMATION
ABOUT EXECUTIVE COMPENSATION
Compensation
Discussion and Analysis
Analog Devices has designed its executive compensation program
to motivate and reward our executives for company performance
and to attract and retain talented executives.
At least 70% of our total compensation for the executive
officers listed in the Summary Compensation Table below, or
Named Executive Officers, is directly linked to the
Company’s performance in the form of performance-based cash
and equity awards. We believe this provides our executives an
opportunity to earn above average compensation if Analog Devices
delivers superior results. In addition, because competition in
the semiconductor industry is intense for qualified and talented
executives, we benchmark our total compensation against leading
semiconductor companies to ensure that we pay competitively.
We link a significant portion of our executives’ cash
compensation to Company performance measured by our operating
profit before taxes, or OPBT. Our target for executive bonus
payments in 2008 was a ratio of OPBT to revenue of 22.5%. This
is the same target that we use to determine the profit sharing
bonus for all Analog Devices employees. Under our Fiscal Year
2008 Executive Bonus Plan, or the 2008 Executive Bonus Plan, our
Compensation Committee has the discretion to increase individual
executive incentives for our 2008 fiscal year, or fiscal 2008,
by as much as 30% only if the Company and the executive achieve
superior business performance. In 2008, however, our
Compensation Committee did not modify the individual incentives
for any of our Named Executive Officers, electing to pay them
based on the same OPBT target that we paid to employees in the
broader Analog Devices profit sharing plan.
Analog Devices also provides long-term incentives to our
executives and employees in the form of stock options. Options
generally vest over five years, linking executives’ rewards
directly to their ability to create value for our shareholders
and providing an incentive for our executives to remain with
Analog Devices over the long term.
The global financial and credit crisis has presented challenges
for many companies, including Analog Devices. Our Compensation
Committee has frozen salaries at 2008 levels for executive
officers until business conditions improve. In addition, the
Compensation Committee has not lowered the performance targets
for our executive officers and 2009 cash incentive payments will
be made only if the Company achieves the same OPBT targets that
the Compensation Committee set for last year. Because the
Compensation Committee selected OPBT as the performance measure
for determining incentive payments for our employees (including
our executive officers), we do not believe that our executive
compensation is structured to promote inappropriate risk taking
by our executives. We believe that our focus on OPBT encourages
management to take a balanced approach that focuses on corporate
profitability.
Our Compensation Committee reviews and approves all compensation
for our executive officers, including salary, bonus, equity
compensation, perquisites, severance arrangements and change in
control benefits, as required by its charter. Our Compensation
Committee consists entirely of independent directors, and met
seven times during fiscal 2008.
The Compensation Committee has a two-fold philosophy regarding
the total compensation of our senior executives, which primarily
consists of base salary, target annual cash bonus and estimated
value of stock-based awards. First, the Compensation Committee
seeks to encourage and reward our executives for their
contributions to the Company’s performance and
profitability by tying at least 70% of our Named Executive
Officers’ total compensation directly to the Company’s
annual and long-term performance. Second, the Compensation
Committee seeks to ensure that our executive compensation is
competitive by targeting the total compensation of each
executive at approximately the 50th percentile of our
compensation peer group of companies described below. The actual
percentile may vary depending on our financial performance, each
executive’s individual performance and importance to the
Company or internal equity considerations among all senior
executives.
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While our Compensation Committee believes that compensation
survey data are useful guides for comparative purposes, we
believe that a successful compensation program also requires
that the Committee apply its own judgment and subjective
determination of individual performance by our executives.
Therefore, the Compensation Committee applies its judgment in
reconciling the program’s objectives with the realities of
rewarding excellent performance and retaining valued employees.
Our Compensation Committee has retained an independent
compensation consultant, Pearl Meyer and Partners, or PMP. Our
Compensation Committee worked directly with PMP to develop
recommendations for the Chief Executive Officer’s
compensation which are reflected in his employment and long-term
retention agreements. The Chief Executive Officer makes
recommendations each year to the Compensation Committee about
the compensation of the other executive officers based on their
achievement of annual Company and individual objectives. While
the Compensation Committee is solely responsible for approving
executive compensation, our Vice President of Human Resources
and other members of our human resources department support the
work of the Committee and PMP. In addition, at the request of
the Compensation Committee, our Chief Executive Officer meets
periodically with the Committee regarding the design of our
compensation programs. The Compensation Committee meets
periodically in executive session without management present.
In making its compensation determinations, our Compensation
Committee reviews and analyzes tally sheets, which provide a
total of all elements of compensation for each of our executive
officers. The Compensation Committee also annually reviews the
total compensation that each of our executive officers and other
key executives is eligible to receive against the compensation
levels of comparable positions of a peer group of companies. The
Compensation Committee selects peer companies in the
semiconductor industry based on their similarity to Analog
Devices in their revenue size and market capitalization.
In fiscal 2008, the Compensation Committee reviewed our 2007
peer group of six companies. Based on its review, the
Compensation Committee removed Maxim Integrated Products from
the group, because it was delisted as a public company during
the year, and added Cypress Semiconductor Corporation, LSI
Corporation, Marvell Technology Group Ltd. and ON Semiconductor
because they are semiconductor companies relatively comparable
to us in terms of revenue size and market capitalization. In
addition, we hire from the same talent pool as this peer group
of companies. Below are our 2007 peer group and our revised 2008
peer group:
For officers in positions for which the 2008 Peer Group
companies do not publicly disclose compensation data, the
Compensation Committee reviewed PMP’s 2008 CHiPS Executive
and Senior Management Total Compensation Survey reflecting the
average compensation, by position, of 15 semiconductor
companies, which were considered the peer group for these
officers.
Components
of Executive Compensation
Our compensation program includes both incentive and
retention-related compensation components. We include cash
bonuses to encourage and reward our executives for effective
performance in furthering our shorter-term plans and objectives.
We include stock options to encourage our executives to focus on
longer-term goals, to help retain key contributors and to more
closely align their interests with those of our shareholders. In
recent years, we have increased the portion of our executive
officers’ total compensation that varies from year to year
based on
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our results and the individual executive’s performance.
Annual compensation for our executive officers consists of the
following principal elements:
For fiscal 2008, the Compensation Committee determined the
amount of annual base salary that each executive received based
on the Committee’s evaluation of the following factors:
The salaries for all of our Named Executive Officers in fiscal
2008 appear in the Summary Compensation Table that follows this
Compensation Discussion and Analysis. The Compensation Committee
maintained Mr. Fishman’s salary at the same level as
it has been since 2003 because the Committee decided that any
increase in Mr. Fishman’s compensation should be in
the form of performance-based compensation. During 2008, the
Compensation Committee increased the salaries of
Messrs. Marshall and McAdam by 4% and Mr. Roche by
7.8% in order to maintain their salaries within the range of
comparable salaries in the 2007 Peer Group survey. In December
2007, Mr. McDonough announced his intention to retire
during 2008, so the Compensation Committee did not change
Mr. McDonough’s salary rate in 2008.
Due to widespread economic uncertainty in the United States, and
to reduce our payroll expenses, management froze employee
salaries at 2008 levels and postponed annual salary increases
which would normally take effect in early 2009 until business
conditions improve. Certain employees may receive promotional
raises in fiscal 2009 in recognition of increased
responsibilities, but none of our Named Executive Officers has
received such an increase.
In January 2008, the Compensation Committee approved the terms
of the 2008 Executive Bonus Plan. All executive officers,
including our Named Executive Officers, and other senior
management selected by the Chief Executive Officer participated
in the 2008 Executive Bonus Plan. We calculated and paid bonuses
under the 2008 Executive Bonus Plan as follows:
For purposes of this calculation, the Bonus Payout is calculated
on a quarterly basis (using Base Salary for that quarter) and
paid semi-annually after the end of the second and fourth fiscal
quarters. The Individual Payout Factor is applied only at the
end of the year to the sum of the four quarterly bonus payout
amounts, if the Compensation Committee considers it to be
appropriate.
Individual Target Bonus Percentages. The
Compensation Committee establishes Individual Target Bonus
Percentages as part of its annual review of each
executive’s compensation. The Compensation Committee
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established the following target bonuses, as a percentage of
base salary, for the Named Executive Officers in 2008, which are
the same as their target bonuses for 2007:
The Compensation Committee set these target bonus percentages to
ensure that a substantial portion of each executive’s cash
compensation is linked directly to business performance and to
provide the executives with a performance-based opportunity to
achieve total compensation (consisting of salary, bonus and
equity award) at approximately the
50th
percentile of the 2007 Peer Group. In particular, by fixing
Mr. Fishman’s target at 160% and not increasing his
base salary through 2010, the Compensation Committee ensured
that most of his total compensation would be based upon the
Company’s and Mr. Fishman’s performance. In
originally determining Mr. Fishman’s target bonus
percentage, the Compensation Committee took into account the
fact that, under his long-term retention agreement, he
participates in a cash-based incentive plan and is not eligible
for equity-based awards until at least the end of fiscal 2010,
as discussed under “Agreements with Mr. Fishman”
below. The Compensation Committee also maintained the target
bonus percentages for the other Named Executive Officers at the
same levels as in the prior year because their total cash
compensation, after taking into account the salary increases
discussed above, were within the ranges of total cash
compensation at the
50th
percentile in the 2007 Peer Group.
Bonus Payout Factor. The Compensation
Committee bases the Bonus Payout Factor on our OPBT (operating
profit before taxes) as a percentage of revenue for the
applicable quarterly bonus period. The Compensation Committee
selected OPBT as a measure of Company performance because OPBT
directly links incentive payments to Company profitability and
we have the goal of enabling employees to share in our
profitability. In addition, payments based on OPBT are not fixed
costs, like some other performance measures, but are variable
and paid only if we are profitable. The Compensation Committee
may adjust the OPBT in its sole discretion to include or exclude
special items such as (but not limited to) restructuring-related
expense, acquisition-related expense, gain or loss on
disposition of businesses, non-recurring royalty payments, and
other similar non-cash or non-recurring items. The Compensation
Committee annually sets the OPBT targets, which are equally
applicable to our executives under the Executive Bonus Plan and
all of our non-executive employees under our profit sharing
plan. We measure performance against those OPBT targets on a
quarterly basis, applying the corresponding Bonus Payout Factor
to Base Salary for that quarter, and pay the bonus amounts on a
semi-annual basis after the end of the second and fourth
quarters.
During fiscal 2008, we used the following table to determine the
bonus payout factor for each quarter:
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In the event that in any quarter Company OPBT exceeds the target
level, the bonuses increase from 100% to 300% so that as OPBT
increases over the target level, the bonus payout factor
increases correspondingly. For fiscal 2008, the Company’s
OPBT and Bonus Payout Factor for each quarter were as follows:
The OPBT for fiscal 2008 was calculated excluding
restructuring-related expenses in the fourth quarter as well as
certain divestiture-related expenses. Our Compensation Committee
believes these limited exclusions are necessary because we do
not expect these expenses to be ongoing future operating
expenses and their exclusion facilitates an appropriate
comparison of our current operating performance to our past
operating performance.
Individual Payout Factor. Each participant in
the 2008 Executive Bonus Plan, other than Messrs. Stata and
Fishman, was also eligible to have his or her award under this
plan increased by an additional Individual Payout Factor.
Messrs. Stata and Fishman are not eligible for the
additional Individual Payout Factor and their bonuses are
calculated using only the Bonus Payout Factor used for all other
Analog Devices employees.
The Individual Payout Factor can increase the calculated bonus
payment for executives by up to 30% based on superior business
performance attributable to the executives’ individual
efforts. At the end of the fiscal year, the Chief Executive
Officer reviews and assesses the performance of each of the
Named Executive Officers with respect to his goals and makes
recommendations to the Compensation Committee. The Committee
then, in its discretion, determines whether there is
extraordinary performance justifying the application of an
Individual Payout Factor for applicable Named Executive
Officers. In evaluating whether the Company and the individual
have achieved extraordinary business performance, the
Compensation Committee may consider, among other things, the
significant overachievement of revenue and profitability goals
for the executives’ respective businesses under the
Company’s annual business plan, as well as the achievement
of extraordinary individual non-financial results that
contributed positively to our performance. For fiscal 2008, the
Compensation Committee determined that the quarterly Bonus
Payout Factors accurately reflected our strong business
performance and therefore made no further adjustments to any
Named Executive Officer’s compensation using the Individual
Payout Factor.
The actual bonus payments for the Named Executive Officers under
the 2008 Executive Bonus Plan appear in the Summary Compensation
Table below.
In December 2008, the Compensation Committee approved the terms
of the 2009 Executive Bonus Plan, which were the same as the
2008 Executive Bonus Plan described above. The individual target
bonus percentages and OPBT targets remained the same for fiscal
2009 as they were in fiscal 2008. Achievement of the bonus
payout factor and individual payout factor for fiscal 2009 will
be determined based upon 2009 performance.
Our equity compensation program is a broad-based, long-term
employee retention program that is intended to attract, retain
and motivate our employees, officers and directors and to align
their interests with those of our shareholders. We currently
have one plan, the 2006 Stock Incentive Plan, as amended, or the
2006 Plan, under which we grant equity awards. The 2006 Plan
permits us to grant options to purchase shares of our common
stock, stock appreciation rights, restricted stock, restricted
stock units and other stock-based awards to all employees,
officers, directors, consultants and advisors of Analog. The
2006 Plan does not permit us to grant options with exercise
prices below the fair market value of our common stock on the
date on which the options are granted. We believe that our
option program is critical to our efforts to create and maintain
a competitive advantage in the extremely competitive
semiconductor industry.
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Our executive officers’ total compensation includes
long-term incentives afforded by stock options and, to a lesser
extent, stock-based awards such as restricted stock units. The
purpose of our equity compensation program and our use of stock
options is to reinforce the mutuality of long-term interests
between our employees and our shareholders and to assist in
attracting and retaining important key executives and employees
who are essential to our success.
All of our stock options have a term of ten years, and they
generally vest in five equal installments on each of the first,
second, third, fourth and fifth anniversaries of the date of
grant. We believe that meaningful vesting periods encourage
recipients to remain with the Company over the long-term and,
because the value of the awards is based on our stock price,
stock options encourage recipients to achieve longer-term goals,
such as strategic growth, business innovation and shareholder
return. In general, employees whose employment terminates (other
than for death or disability) before the award fully vests
forfeit the unvested portions of these awards. While we believe
that our longer vesting periods serve our employee retention
goals, they tend to increase the number of stock options
outstanding at any given time compared to companies that grant
stock options with shorter vesting schedules.
We annually set a goal to keep the shareholder dilution related
to our equity ownership program to a certain percentage, net of
forfeitures. This dilution percentage is calculated as the total
number of shares of common stock underlying new option grants
made during the year, net of management’s estimated
forfeitures and cancellations for the year, divided by the total
number of outstanding shares of our common stock at the
beginning of the year. For fiscal 2008, our net dilution
percentage was −0.8%, compared to 4.0% for our 2008 Peer
Group. Our 2008 net dilution percentage was significantly
lower than that of our 2008 Peer Group due to the divestitures
of our CPU voltage regulation and PC thermal monitoring product
line and our cellular handset radio and baseband chipset
operations during 2008, which resulted in the forfeiture of a
large number of equity awards held by employees associated with
those businesses. In addition, this low percentage reflects our
efforts to reduce the impact of stock option compensation
expense on our financial statements by granting fewer equity
awards.
In 2008, the Compensation Committee authorized grants of options
to the Named Executive Officers, as follows:
In granting these options, the Compensation Committee considered
the equity compensation levels of comparable executives at the
2007 Peer Group companies, as well as the number of shares of
Company stock and stock options that each of the executives
already held. The Compensation Committee authorized these grants
because the existing equity grants of Messrs. Marshall,
McAdam and Roche, valued on a Black-Scholes basis on their grant
date of January 3, 2008, had a value significantly below
the 50th percentiles of comparable equity grants shown in the
2007 Peer Group survey. Mr. Fishman did not receive an
equity award during 2008 because under his long-term retention
agreement, Mr. Fishman participates in a cash-based
incentive plan and is not eligible for equity-based awards until
at least November 14, 2010, as discussed under
“Agreements with Mr. Fishman” below.
Mr. McDonough announced his intention to retire in fiscal
2008, and therefore the Compensation Committee decided not to
grant him an equity award during 2008.
In 2006, we established stock ownership guidelines for our
executive officers. Under the guidelines, the target share
ownership levels are two times the annual base salary for the
Chief Executive Officer and one times annual base salary for
other executive officers. Executives other than the CEO have
five years to achieve the targeted level. The CEO has three
years to achieve the targeted level. We believe all of our
executives will meet their stock ownership guidelines in the
required time frame. Shares subject to unexercised options,
whether or not vested, will not be counted for purposes of
satisfying these guidelines.
We prohibit all hedging transactions or “short sales”
involving Company securities by our employees, including our
executives.
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We maintain broad-based benefits for all employees, including
health and dental insurance, life and disability insurance and
retirement plans. Executives are eligible to participate in all
of our employee benefit plans on the same basis as our other
employees.
In the United States, under our 401(k) plan, we contribute to
the plan on behalf all participants, including our Named
Executive Officers, amounts equal to 5% of the employee’s
eligible compensation, plus matching contributions up to an
additional 3%, subject to IRS limits.
We maintain a program under which we provide employees who are
eligible to participate in the 401(k) plan and whose
compensation is greater than the amount that may be taken into
account in any plan year as a result of the limits of
Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended, with a payment equal to 8% of the employee’s
compensation in excess of the IRS limit. We established the plan
to provide the same employee matching contribution described
above to our higher-paid employees to the extent their
compensation levels exceed the IRS 401(k) contribution limits.
We maintain a Deferred Compensation Plan under which our
executive officers and directors, along with a group of highly
compensated management and engineering employees, or fellows,
are eligible to defer receipt of some or all of their cash
compensation. Under our Deferred Compensation Plan, we also
provide all participants (other than non-employee directors)
with matching contributions equal to 8% of eligible
contributions. We offer the Deferred Compensation Plan to give
these employees the opportunity to save for retirement on a
tax-deferred basis. See ‘‘— Non-Qualified
Deferred Compensation Plan” below.
The Analog Devices B.V. Executive Pension Plan is a
defined-benefit pension plan covering all executive employees of
our Irish subsidiaries, including Messrs. Marshall and
McAdam. This plan is consistent with defined-benefit pension
plans commonly offered in Ireland and, because our Irish
executives are ineligible to participate in our
U.S.-based
401(k) plan, we make this comparable plan available to them.
This plan is described more fully below under
“— Pension Benefits.”
The ADBV Executive Investment Partnership Plan is a
defined-contribution plan covering all executive employees of
our Irish subsidiaries, including Messrs. Marshall and
McAdam. This plan is consistent with defined-contribution plans
commonly offered in Ireland, and because our Irish executives
are ineligible to participate in our
U.S.-based
401(k) plan, we make this comparable plan available to them.
Under this plan, we will match employee contributions to the
ADBV Executive Investment Partnership Plan, up to a maximum of
4% of their annual salary, subject to limits established by the
Irish tax authorities.
We offer very few perquisites to executive officers. The only
perquisites that we provided to our executives in 2008 were
automobiles for Messrs. Marshall and McAdam and tax and
estate planning services for Mr. Fishman, which are
detailed in the Summary Compensation Table below.
On November 14, 2005, we entered into an employment
agreement with Mr. Fishman. Under the employment agreement,
we agreed to continue to employ Mr. Fishman, and
Mr. Fishman agreed to continue to serve, as our President
and Chief Executive Officer for a term of five years. The
employment agreement provides for an annual base salary subject
to potential future increase by the Compensation Committee, and
provides for the payment of annual bonuses and, until we entered
into the 2007 long-term retention agreement described below,
annual equity incentive awards as determined by the Compensation
Committee. The employment agreement further required the Company
to seek to establish a long-term retention arrangement for
Mr. Fishman.
In October 2007, we entered into a long-term retention agreement
with Mr. Fishman, or the 2007 retention agreement. The
Compensation Committee designed this agreement to provide
appropriate long-term incentives linking Mr. Fishman’s
compensation directly to our annual performance and also to
encourage Mr. Fishman to
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remain as Chief Executive Officer through at least
November 14, 2010, or the retention period. The incentives
provided in the 2007 retention agreement are based on the
Company’s operating profit before taxes, or OPBT, and are
in lieu of any future equity awards to Mr. Fishman during
the retention period. OPBT is the same performance measure that
the Compensation Committee uses to determine the Executive Bonus
Plan described above as well as the bonuses we pay to all Analog
Devices employees under the profit sharing plan.
The terms of the 2007 retention agreement are described below
under “— Retention, Employment and Other
Agreements.” For fiscal 2008, the amount credited to
Mr. Fishman’s account was $3,624,058, which was based
on the Company achieving an average OPBT level of 24.3% compared
to its OPBT target of 22.5%. Amounts under the agreement will
only be payable to Mr. Fishman if he remains employed by us
through November 14, 2010.
The Compensation Committee approves our executive bonus plan for
each fiscal year and establishes, in its sole discretion, the
specific metrics applicable to the calculation of
Mr. Fishman’s annual bonus, which may vary from year
to year. Mr. Fishman’s annual bonus target percentage
under each executive bonus plan during the retention period is
160% of his then annual base salary.
In establishing the terms of this arrangement, the Compensation
Committee, with the assistance of PMP, reviewed the total
compensation packages of chief executive officers in the 2007
Peer Group. The Compensation Committee decided, based on this
review, that Mr. Fishman’s total annualized
compensation during the term of the agreement, including
payments under the agreement, would be slightly below the
50th
percentile of the comparable total compensation for chief
executive officers in the 2007 Peer Group if the Company
performed according to its annual bonus plan goals.
Mr. Fishman would have the opportunity to achieve
compensation significantly higher than the
50th
percentile if the Company’s performance exceeded its annual
bonus plan goals.
See “— Retention, Employment and Other
Agreements” below for additional information about the
terms of Mr. Fishman’s employment agreement and his
2007 retention agreement.
We enter into change in control employee retention agreements
with each of our executive officers and other key employees of
the Company. Among other things, these retention agreements
provide for severance benefits if the employee’s service
with us is terminated within 24 months after a change in
control (as defined in each agreement) that was approved by our
Board of Directors. We designed the change in control employee
retention agreements to help ensure that our executive team is
able to evaluate objectively whether a potential change in
control transaction is in the best interests of the Company and
our shareholders, without having to be concerned about their
future employment. These agreements also help ensure the
continued services of our executive officers throughout the
change in control transaction by giving them incentives to
remain with us. The Compensation Committee reviewed prevalent
market practices in determining the severance amounts and the
basis for selecting events triggering payments under the
agreements. The Compensation Committee also considered the
benefit of the releases of claims that we would receive in
exchange from the executive prior to the receipt of severance
amounts.
In fiscal 2008, the Compensation Committee asked PMP, its
compensation consultant, to review our severance, retention and
change in control arrangements. PMP advised the Compensation
Committee that our arrangements were consistent with market
practice among its 2007 Peer Group. See
“— Retention, Employment and Other
Agreements” below for additional information about these
agreements.
In addition, under our 2006 Stock Option Plan, in the event of a
change in control, all of our employees, including our Named
Executive Officers (except Mr. Fishman), would have
one-half of the shares of common stock subject to their then
outstanding unvested options accelerate and become immediately
exercisable. The remaining one-half of the unvested options
would continue to vest in accordance with the original vesting
schedules, provided that any remaining unvested options would
vest and become exercisable if, on or prior to the first
anniversary of the change in control, the employee is terminated
without “cause” or for “good reason” (as
defined in the plan). Under Mr. Fishman’s employment
agreement, all of his unvested outstanding stock options would
become fully vested and exercisable in full at the time of any
termination by the Company without cause or by Mr. Fishman
for good reason, each as defined in the agreement. We have
provided more detailed information about these benefits, along
with
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estimates of their value under various circumstances, under the
caption “— Potential Payments Upon Termination or
Change in Control” below.
We will not time or select the grant dates of any stock options
or stock-based awards in coordination with our release of
material non-public information, nor will we have any program,
plan or practice to do so. The Compensation Committee has
adopted the following specific policies regarding the grant
dates of stock options and stock-based awards, which we refer to
as awards, for our executive officers and employees:
Section 162(m) of the Internal Revenue Code of 1986, as
amended, generally disallows a tax deduction to public companies
for certain compensation in excess of $1 million paid to
the company’s Chief Executive Officer and the other
executive officers whose compensation is required to be
disclosed to our shareholders under the Securities and Exchange
Act of 1934 by reason of being among our most highly compensated
officers (excluding the Chief Financial Officer). Certain
compensation, including qualified performance-based
compensation, will not be subject to the deduction limit if
certain requirements are met. The Compensation Committee reviews
the potential effect of Section 162(m) periodically and
generally seeks to structure the long-term incentive
compensation granted to our executive officers, except cash
bonus awards, in a manner that is intended to avoid the
disallowance of deductions under Section 162(m).
Nevertheless, there can be no assurance that compensation
attributable to awards granted under our plans will be treated
as qualified performance-based compensation under
Section 162(m). In addition, the Compensation Committee
reserves the right to use its judgment to authorize compensation
payments that may be subject to the limit when the Compensation
Committee believes such payments are appropriate and in the best
interests of the Company and its shareholders, after taking into
consideration changing business conditions and the performance
of its employees.
Our Named Executive Officers also have change in control
employee retention agreements which contain provisions regarding
Section 280G of the Internal Revenue Code. In addition,
they are eligible to participate in our
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Deferred Compensation Plan, which contains provisions regarding
Section 409A of the Internal Revenue Code. See
“— Retention, Employment and Other
Agreements” below for additional information about these
arrangements.
We expense in our financial statements the compensation that we
pay to our executive officers, as required by
U.S. generally accepted accounting principles. As one of
many factors, the Compensation Committee considers the financial
statement impact in determining the amount of, and allocation
among the elements of, compensation. We account for stock-based
compensation under our 2006 Stock Incentive Plan and all
predecessor plans in accordance with the requirements of
SFAS 123R.
The following table contains certain information about the
compensation that our Chief Executive Officer, Chief Financial
Officer and three other most highly compensated executive
officers earned in fiscal 2008 and fiscal 2007. We refer to
these executive officers collectively as our Named Executive
Officers.
Summary
Compensation Table
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Grants of
Plan-Based Awards in Fiscal Year 2008
The following table presents information on plan-based awards in
fiscal 2008 to the officers named in the Summary Compensation
Table:
After the end of fiscal 2008, on January 5, 2009, we
granted the following stock options to our officers named in the
Summary Compensation Table, in each case at an exercise price of
$19.57 per share:
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Outstanding
Equity Awards at Fiscal Year-End 2008
The following table provides information with respect to
outstanding stock options held by the officers named in the
Summary Compensation Table as of November 1, 2008:
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37
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The following table contains information about the exercise of
stock options during the fiscal year ended November 1, 2008
by each of our officers named in the Summary Compensation Table:
The Analog Devices B.V. Executive Pension Plan is a
defined-benefit pension plan covering all executive employees of
our Irish subsidiaries, including Messrs. Marshall and
McAdam. Mr. Roche previously worked for Analog Devices
B.V., our Irish subsidiary, and has accumulated a benefit under
this plan. He is currently a U.S. employee and therefore is
not an active member of the plan. This plan is consistent with
defined-benefit pension plans commonly offered in Ireland and,
because our Irish executives are not eligible to participate in
our
U.S.-based
401(k) plan, we make this comparable plan available to them.
38
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A participant in this pension plan will be entitled to receive
an annual pension equal to the sum of 1/60th of the
participant’s “final pensionable salary,”
multiplied by the number of years of “pensionable
service” with us. “Final pensionable salary” is
the annual average of the three highest consecutive
“pensionable salaries” during the 10 years
preceding the normal retirement date or the termination date, if
earlier. “Pensionable salary” at any date is the
salary on that date less an amount equal to one and one-half
times the State Pension payable under the Social Welfare Acts in
Ireland. “Pensionable service” is the period of
service of the participant with us up to the earliest to occur
of the following: the normal retirement date, the date of the
participant’s retirement or the date on which the
participant’s service with us terminates. The normal
retirement date under the pension plan is the last day of the
month in which a participant attains his or her
65th birthday.
As part of their employment arrangements with us,
Messrs. Marshall and McAdam will be, if they were to retire
at age 60, entitled to have their pension benefits
increased to two-thirds of final pensionable salary. However,
their benefits under the pension plan will be pro rated based on
their years of service with us if they retire before
age 60. Compensation covered under this pension plan
includes the salaries shown in the Summary Compensation Table
above.
The following table sets forth the estimated present value of
accumulated pension benefits for the officers named in the
Summary Compensation Table as of November 1, 2008:
Since 1995, our executive officers and directors, along with
some of our management and engineering employees, are eligible
to participate in our Deferred Compensation Plan, or DCP. We
established the DCP to provide participants with the opportunity
to defer receiving all or a portion of their compensation, which
includes salary, bonus, director fees and Company matching
contributions. Before January 1, 2005, participants could
also defer gains on stock options and restricted stock that were
granted before July 23, 1997. We have operated the DCP in a
manner we believe is consistent with Internal Revenue Service
guidance regarding nonqualified deferred compensation plans.
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Each year, we credit each participant’s account with
earnings on the deferred amounts. These earnings represent the
amounts that the participant would have earned if the deferred
amounts had been invested in one or more of the various
investment options selected by the participant. Participants
have elected to invest most of their DCP balances in a
fixed-rate investment option that provides for a return based on
the Moody’s Baa index. We calculated the earnings credited
to participants electing the fixed-rate investment option for
fiscal 2008 using an average interest rate of 6.58%. Effective
January 1, 2009, we discontinued offering the Moody’s
Baa index as an investment alternative under the DCP.
Under the terms of the DCP, only the payment of the compensation
earned is deferred; we do not defer the expense in our financial
statements related to the participant’s deferred
compensation and investment earnings. We charge the salary,
bonuses, director fees and investment earnings on deferred
balances to our income statement as an expense in the period in
which the participant earned the compensation. Our balance sheet
includes separate line items for the Deferred Compensation Plan
Investments and Deferred Compensation Plan Liabilities.
We hold DCP assets in a separate Rabbi trust segregated from
other assets. To the extent possible, we invest in the same
investment alternatives that the DCP participants select for
their DCP balances. As a result, a small portion of these assets
are invested in mutual funds. Since most participants have
selected a fixed-rate investment option, the remaining portion
of these assets are invested in high-quality, short-term
interest-bearing instruments.
Participants whose employment with us terminates due to
retirement after reaching age 62, disability or death will
be paid their DCP balance in either a lump sum or in
installments over ten or fewer years, based on the elections
they have made. Participants who terminate their employment with
us for any other reason will receive payment of their DCP
balance in the form of a lump sum upon their termination of
employment.
Messrs. Fishman, McDonough, Marshall and McAdam do not
participate in the Non-Qualified Deferred Compensation Plan. The
following table shows the non-qualified deferred compensation
activity for Mr. Roche during fiscal 2008:
We enter into change in control employee retention agreements
with each of our executive officers and other key employees.
These agreements provide for severance benefits if any of the
following occurs:
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For purposes of our change in control employee retention
agreements, a “change in control” occurs when:
These agreements provide for the following severance benefits in
the event of termination following a change in control approved
by the Board:
In addition, if payments to the employee under his or her
agreement (together with any other payments or benefits,
including the accelerated vesting of stock options or restricted
stock awards that the employee receives in connection with a
change in control) would trigger the provisions of
Sections 280G and 4999 of the Internal Revenue Code of
1986, as amended, the change in control employee retention
agreements provide for the payment of an additional amount so
that the employee receives, net of excise taxes, the amount he
or she would have been entitled to receive in the absence of the
excise tax provided in Section 4999 of the Internal Revenue
Code.
Each agreement provides that, in the event of a potential change
in control (as defined in each agreement), the employee will not
voluntarily resign as an employee, subject to certain
conditions, for at least six months after the potential change
in control occurs. The Compensation Committee annually reviews
these agreements, and the agreements automatically renew each
year unless we give the employee three months’ notice that
his or her agreement will not be extended.
For other employees and senior management who are not parties to
change in control employee retention agreements, we have change
in control policies in place that provide for lump-sum severance
payments, based on length of service with us, if the
employee’s employment terminates under certain
circumstances within 18 months after a change in control
(as defined in these policies). Severance payments range from a
minimum of 2 weeks of annual base salary (for hourly
employees with less than 5 years of service) to a maximum
of 104 weeks of base salary. In addition to this payment,
senior management employees with at least 21 years of
service would receive an amount equal to the total cash bonuses
paid or awarded to the employee in the four fiscal quarters
preceding termination. In addition to the agreements and
policies described above, some of our stock option and
restricted stock awards provide that the option or award will
immediately vest in part or in full upon any change in control
of Analog Devices. See “— Potential Payments upon
Termination or Change in Control” below.
On November 14, 2005, we entered into an employment
agreement with Jerald G. Fishman. Under his employment
agreement, as amended, we agreed to continue to employ
Mr. Fishman, and Mr. Fishman has agreed to continue to
serve, as President and Chief Executive Officer of Analog
Devices for a term of five years at an annual base salary of
$930,935, subject to potential increase by the Compensation
Committee. Mr. Fishman is entitled to annual bonuses and,
until we entered into the 2007 long-term retention agreement
described below, annual equity incentive awards as determined by
the Compensation Committee. The employment agreement also
contains non-competition covenants in favor of Analog Devices
during Mr. Fishman’s employment and for two years
thereafter. The employment agreement provides for severance
benefits if we terminate Mr. Fishman’s employment
without “cause” or if Mr. Fishman terminates his
employment for “good reason,” as each of those terms
is defined in his employment agreement in each case after a
change in control. These benefits will be paid, following a
change in
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control, only if they are greater than the severance benefits
provided under his change in control employee retention
agreement. The severance benefits provided under the employment
agreement are a lump-sum payment equal to:
Mr. Fishman’s employment agreement also provides that
if his employment with us is terminated without
“cause” or if he resigns for “good reason,”
all then unvested outstanding stock options to purchase common
stock of Analog Devices held by Mr. Fishman would become
fully vested and exercisable in full.
Pursuant to Mr. Fishman’s employment agreement, we and
Mr. Fishman entered into a long-term retention agreement on
October 22, 2007, or the 2007 retention agreement. Our
Compensation Committee designed the agreement to retain
Mr. Fishman as our Chief Executive Officer at least through
November 14, 2010, or the retention period, which our Board
believes is in the best interests of our Company. The 2007
retention agreement provides for annual performance-based cash
incentives and is designed to closely align the amounts that
Mr. Fishman may earn under that agreement with our
performance during the retention period.
The incentives provided in his 2007 retention agreement are in
lieu of any additional equity grants to Mr. Fishman during
the retention period.
Mr. Fishman’s 2007 retention agreement provides that,
so long as his employment with us does not terminate before the
end of the retention period, we will credit to an account
established for Mr. Fishman under our Deferred Compensation
Plan an amount equal to $5,000,000 plus the sum of the
following: for each of fiscal 2008, fiscal 2009 and fiscal 2010,
an amount equal to the annual bonus earned by Mr. Fishman
under our executive bonus plan with respect to such fiscal year,
in each case multiplied by two. The maximum amount that will be
credited for any particular fiscal year (after applying the
multiplier of two) is $5,000,000. No amounts will be paid to
Mr. Fishman under this agreement unless he is still
employed by us on November 14, 2010.
Our Compensation Committee approves our executive bonus plan for
each fiscal year and establishes, in its sole discretion, the
specific metrics applicable to the calculation of
Mr. Fishman’s annual bonus, which may vary from year
to year. Mr. Fishman’s annual bonus target percentage
under the executive bonus plan for each fiscal year in the
retention period is 160% of his then annual base salary.
If, before November 14, 2010, we terminate
Mr. Fishman’s employment without “cause” (as
defined in his employment agreement), Mr. Fishman
terminates his employment for “good reason” (as
defined in his employment agreement), or Mr. Fishman’s
employment terminates under circumstances that give rise to
severance payments under his change in control employee
retention agreement, then we will credit to an account
established for Mr. Fishman under our Deferred Compensation
Plan an amount (determined in accordance with his 2007 retention
agreement) that is equal to the amount that would have been
credited if he had remained employed through the end of the
retention period and earned annual target bonuses. If his
employment terminates due to death or disability,
Mr. Fishman will be entitled to a pro rata portion of the
bonus accrued under the 2007 retention agreement through the end
of the year in which his death or disability occurs. These
amounts will not be paid to Mr. Fishman if he receives the
severance benefits provided under his employment agreement.
Retention amounts payable under his 2007 retention agreement do
not accrue any investment earnings or interest until we credit
the retention amounts to an account established for
Mr. Fishman under our Deferred Compensation Plan. Amounts
credited to the account for Mr. Fishman will be paid to him
after his employment with us terminates, according to the terms
of our Deferred Compensation Plan, described above.
If payments to Mr. Fishman under his 2007 retention
agreement would trigger the provisions of Sections 280G and
4999 of the Internal Revenue Code, as amended, then we will pay
to Mr. Fishman an additional amount such that the net
amount Mr. Fishman retains after paying any excise tax and
any federal, state or local income or FICA taxes on such
additional amounts will be equal to the amount he would have
received if the taxes paid pursuant to Sections 280G and
4999 were not applicable.
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Potential
Payments Upon Termination or Change in Control
Payments upon a change in control for each officer named in the
Summary Compensation Table, with the exception of
Mr. Fishman, are calculated based upon the
change-in-control
employee retention agreements described above under
“— Retention, Employment and Other
Agreements.”
Upon a change in control approved by the Board, if we terminate
an executive officer’s employment for cause or if the
executive officer terminates his or her employment other than
for good reason, then the executive officer will receive his or
her full base salary and all other compensation through the date
of termination at the rate in effect at the time that the
termination notice is given and we will have no further
obligations to the executive officer. When the employment of an
executive officer (other than Mr. Fishman) terminates in a
situation that does not involve a change in control, the officer
is entitled to receive the same benefits as any other
terminating employee. This applies regardless of the reason for
termination.
We calculate payments upon a change in control for
Mr. Fishman based upon his employment and retention
agreements described above, under “— Retention,
Employment and Other Agreements.” If, before
November 14, 2010, we terminate Mr. Fishman’s
employment for cause or Mr. Fishman terminates his
employment voluntarily in a situation that does not involve a
change of control, then Mr. Fishman would receive his full
base salary and all other compensation through the date of
termination at the rate in effect at the time that the
termination notice is given and we will have no further
obligations to him.
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The following table quantifies the amount that would be payable
to officers named in the Summary Compensation Table upon
termination of their employment under circumstances other than
those described above. The amounts shown assume that the
terminations were effective on the last day of our fiscal year,
or November 1, 2008. The table does not include the
accumulated benefit under The Analog Devices B.V. Executive
Pension Plan or our Nonqualified Deferred Compensation Plan that
would be paid to the officers named in the Summary Compensation
Table described above under “Pension Benefits” and
“Nonqualified Deferred Compensation Plan,” except to
the extent that the officer is entitled to an additional benefit
as a result of the termination. In addition, the table does not
include the value of vested but unexercised stock options as of
November 1, 2008. The actual amounts that would be paid out
can only be determined at the time of the executive
officer’s termination of employment.
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Our stock option program is a broad-based, long-term employee
retention program that is intended to attract, retain and
motivate our employees, officers and directors and to align
their interests with those of our shareholders. We currently
have one plan, the 2006 Stock Incentive Plan, as amended, or the
2006 Plan, under which we grant equity awards. Under the 2006
Plan, we may grant options to purchase shares of our common
stock, stock appreciation rights, restricted stock, restricted
stock units and other stock-based awards to all employees,
officers, directors, consultants and advisors of Analog. A
majority of our employees participate in this plan. All options
have
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a term of ten years and generally vest in five equal
installments on each of the first, second, third, fourth and
fifth anniversaries of the date of grant. The 2006 Plan does not
permit us to grant options at exercise prices that are below the
fair market value of our common stock on the date of grant. We
believe that our option program is critical to our efforts to
create and maintain a competitive advantage in the extremely
competitive semiconductor industry.
We have set the fiscal 2009 maximum gross dilution percentage
related to our option program at 2.13%.
We can make stock option grants to executive officers and
directors only from shareholder-approved plans after the
Compensation Committee reviews and approves the stock option
grants. All members of the Compensation Committee are
independent directors, as defined by the rules of the NYSE.
The following tables provide information about option grants
during our last five fiscal years, option activity during fiscal
2008 and options outstanding as of November 1, 2008.
Summary
of Option Activity — Fiscal 2008
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In-the-Money
and Out-of-the-Money Option Information as of November 1,
2008
The following table provides information as of November 1,
2008 about the securities issued, or authorized for future
issuance, under our equity compensation plans, consisting of our
2006 Stock Incentive Plan, our 2001 Broad-Based Stock Option
Plan, our 1998 Stock Option Plan, our Restated
1994 Director Option Plan, our Restated 1988 Stock Option
Plan, our 1992 Employee Stock Purchase Plan, our 1998
International Employee Stock Purchase Plan and our Employee
Service Award Program.
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In December 2001, our Board of Directors adopted the 2001
Broad-Based Stock Option Plan, or the 2001 plan, under which we
were permitted to grant non-statutory stock options for up to
50,000,000 shares of common stock to employees, consultants
and advisors of Analog Devices and its subsidiaries, other than
executive officers and directors. The 2001 plan was filed most
recently as an exhibit to our Annual Report on
Form 10-K
for the fiscal year ended November 2, 2002 (File
No. 1-7819)
as filed with the SEC on January 29, 2003. In December
2002, our Board of Directors adopted an amendment to the 2001
plan to provide that the terms of outstanding options under the
2001 plan may not be amended to provide an option exercise price
per share that is lower than the original option exercise price
per share.
Our Board is authorized to administer the 2001 plan, which
includes authorization to adopt, amend and repeal the
administrative rules relating to the 2001 plan and to interpret
the provisions of the 2001 plan. Our Board of Directors may
amend, suspend or terminate the 2001 plan at any time. Our Board
of Directors has delegated to the Compensation Committee
authority to administer certain aspects of the 2001 plan.
Under the terms of our 2001 Broad-Based Stock Plan, our Board of
Directors and our Compensation Committee have the authority to
select the recipients of options under the 2001 plan and
determine (1) the number of shares of common stock covered
by options, (2) the dates upon which options become
exercisable (which is typically in three equal installments on
each of the third, fourth and fifth anniversaries of the date of
grant; four equal installments on each of the second, third,
fourth and fifth anniversaries of the date of grant; or five
equal installments on each of the first, second, third, fourth
and fifth anniversaries of the date of grant), (3) the
exercise price of options (but not less than the fair market
value of the common stock on the date of grant), and
(4) the duration of the options (but no more than
10 years).
Our Board of Directors is required to make appropriate
adjustments in connection with the 2001 plan to reflect any
stock split, stock dividend, recapitalization, liquidation,
spin-off or other similar event. The 2001 plan also contains
provisions addressing the consequences of any reorganization
event or change in control.
If Analog Devices is reorganized or acquired, then the 2001 plan
requires our Board of Directors to ensure that the acquiring or
succeeding entity assumes, or substitutes equivalent options
for, all of the outstanding options. If not, all then
unexercised options become exercisable in full and terminate
immediately before the reorganization or
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acquisition is consummated. If the options are assumed or
replaced with substituted options, then they would continue to
vest in accordance with their original vesting schedules. If the
reorganization event also constitutes a change in control of the
Company, then one-half of the shares of common stock subject to
then outstanding unvested options would become immediately
exercisable and the remaining one-half of the unvested options
would continue to vest in accordance with the original vesting
schedules of such options. However, any remaining unvested
options held by an optionee would vest and become exercisable in
full if, on or before the first anniversary of the change in
control, the optionee’s employment were terminated without
“cause” or for “good reason” (as those terms
are defined in the 2001 plan).
Since our adoption of the 2006 Plan, our Board determined that
we may make no further grants under the 2001 plan. If any option
previously granted under the 2001 plan expires or is terminated,
surrendered, canceled or forfeited after January 23, 2006,
the unused shares of common stock covered by that option will be
available for grant under the 2006 Plan.
In June 1998, the Board of Directors adopted our 1998
International Employee Stock Purchase Plan, or the International
Employee Stock Purchase Plan. The Board has amended the
International Employee Stock Purchase Plan several times, most
recently in December 2005. The International Employee Stock
Purchase Plan was intended to provide a method whereby employees
of subsidiary corporations of Analog residing in countries other
than the United States have the opportunity to acquire shares of
our common stock. There were a total of 1,000,000 shares of
our common stock authorized for issuance under the International
Employee Stock Purchase Plan, of which 747,647 shares had
been issued as of the date of this proxy statement.
The International Employee Stock Purchase Plan terminated on
June 1, 2008. During fiscal 2005, our Board of Directors
decided that the offering period which ended June 1, 2006,
was the last offering period under the International Employee
Stock Purchase Plan.
The International Employee Stock Purchase Plan permitted
eligible employees to purchase shares of our common stock during
offering periods that generally extended for twelve months. The
purchase price per share under the International Employee Stock
Purchase Plan was the lower of 85% of the composite closing
price of a share of our common stock as reported on the NYSE on
the offering commencement date or the offering termination date.
Under the International Employee Stock Purchase Plan, employees
could authorize ADI to withhold up to 10% of their annual base
salary (or, in the case of an offering of less than twelve
months, up to 10% of their base salary for each payroll period
in that offering period) to purchase shares under the
International Employee Stock Purchase Plan, subject to certain
limitations.
The Employee Service Award Program, or the Program, is designed
to recognize and thank employees for their long-term working
relationship with Analog. All regular employees other than
executive officers are eligible to receive these awards in the
form of our common stock. Our executive officers receive these
awards in cash instead of stock. We grant these awards to
employees starting with the employee’s tenth anniversary of
employment with us, and after the tenth anniversary, we grant
the awards at the end of each subsequent five-year period of
employment with us. The value of the award at the
employee’s tenth anniversary with us is $1,000 and the
value of the award increases by $500 at each subsequent
five-year service milestone. The number of shares awarded to an
eligible employee is equal to the dollar value of the award
divided by the closing per share price of our common stock as
reported on the NYSE on a specified date. Our Board may
terminate, amend or suspend the Program at any time at its
discretion.
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During fiscal 2008, Messrs. Champy, Saviers and Severino
served as members of our Compensation Committee. No member of
our Compensation Committee was at any time during fiscal 2008,
or formerly, an officer or employee of Analog Devices or any
subsidiary of Analog. No member of our Compensation Committee
had any relationship with us during fiscal 2008 requiring
disclosure under Item 404 of
Regulation S-K
under the Securities Exchange Act of 1934.
During fiscal 2008, none of our executive officers served as a
member of the board of directors or compensation committee (or
other committee serving an equivalent function) of any entity
that had one or more executive officers serving as a member of
our Board of Directors or Compensation Committee.
The Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with our management. Based on this review and discussion, the
Compensation Committee recommended to our Board of Directors
that the Compensation Discussion and Analysis be included in
this proxy statement.
By the Compensation Committee of the Board of Directors of
Analog Devices, Inc.
James A. Champy, Chairman
F. Grant Saviers Paul J. Severino
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Our Audit Committee has selected the firm of Ernst &
Young LLP, independent registered public accounting firm, as our
auditors for the fiscal year ending October 31, 2009.
Although shareholder approval of the selection of
Ernst & Young LLP is not required by law, our Board of
Directors believes that it is advisable to give shareholders an
opportunity to ratify this selection. If this proposal is not
approved by our shareholders at the 2009 annual meeting, our
Audit Committee will reconsider its selection of
Ernst & Young LLP.
Representatives of Ernst & Young LLP are expected to
be present at the 2009 annual meeting. They will have the
opportunity to make a statement if they desire to do so and will
also be available to respond to appropriate questions from
shareholders.
Our Board of Directors recommends that you vote FOR the
ratification of the selection of Ernst & Young LLP as
our independent registered public accounting firm for the 2009
fiscal year.
Mark Filiberto, Palm Garden Partners LP, 1981 Marcus Avenue,
Suite C114, Lake Success, New York 11042, has submitted the
following proposal for inclusion in our proxy statement for our
2009 Annual Meeting of Shareholders, and has notified us of his
intent to present this proposal for consideration at the 2009
Annual Meeting of Shareholders. Mr. Filiberto has advised
us that he is the beneficial owner of approximately
750 shares of Analog Devices common stock.
RESOLVED, shareowners ask that our Company take the steps
necessary to reorganize the Board of Directors into one class
with each director subject to election each year and to complete
this transition within one-year.
Our current practice, in which only a few directors stand for
election annually, is not in the best interest of our Company
and its stockholders. Eliminating this staggered system would
require each director to stand for election annually and would
give stockholders an opportunity to register their view on the
performance of each director annually. Electing directors in
this manner is one of the best methods available to stockholders
to ensure that the Company will be managed in a manner that is
in the best interest of stockholders.
Arthur Levitt, Chairman of the Securities and Exchange
Commission,
1993-2001
said: In my view it’s best for the investor if the entire
board is elected once a year. Without annual election of each
director shareholders have far less control over who represents
them. Source: “Take on the Street” by Arthur Levitt.
The Council of Institutional Investors www.cii.org recommends
adoption of annual election of each director. This proposal
topic also won up to 86% support (based on yes and no votes) at
the following companies in 2008 (respective proponents listed):
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The merits of this Elect Each Director Annually proposal should
be considered in the context of the need to initiate
improvements in our company’s corporate governance and in
individual director performance. For instance in 2008 the
following governance and performance issues were identified:
“D” in governance.
“High Governance Risk Assessment.”
“High Concern” in Executive Pay.
Additionally:
1) Call a special shareholder meeting by 10% of
shareholders.
2) Cumulative voting.
3) To fill board vacancies.
4) Act by written consent.
The above concerns shows there is need for improvement. Please
encourage our board to respond positively to this proposal:
Elect
Each Director Annually —
Yes on 3
The Board of Directors has carefully considered this proposal
and determined that its adoption is not in the best interests of
the Company or its shareholders at the present time. The
Nominating and Corporate Governance Committee and the Board
regularly review the Company’s corporate governance
policies, structures and practices and recommend changes when
appropriate. For example, the Board recently took action to
amend the Company’s governing documents to implement the
election of directors by a majority vote in uncontested
elections, as previously suggested by a shareholder. The Board
believes that a classified board structure — where
directors are divided into three classes and elected to
staggered three-year terms — continues to be in the
best interests of the Company and its shareholders.
The Company’s current classified board structure is in line
with the laws of the Commonwealth of Massachusetts, which
provide that all publicly held Massachusetts companies
automatically have a classified board unless the board or
shareholders elect otherwise. The Board agrees with the
Commonwealth’s presumption that a classified board
structure can protect a company, including from unfavorable,
unsolicited takeover attempts. In light of (i) the ongoing
crisis in global credit and financial markets which has
contributed to depressed company stock prices, as well as
(ii) the Board’s redemption of the Company’s
“poison pill” in January 2006, an action taken
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as part of the Board’s continuing efforts to employ best
practices in corporate governance, maintaining a classified
board is an important part of the Company’s overall
takeover defenses. These protections benefit shareholders not
only because they allow management to stay focused on the
long-term economic well-being of the Company, but because they
provide the Company with leverage to increase shareholder value
in a takeover scenario. Without a classified board, a potential
acquirer could replace a majority of the Board with its own
slate of nominees and gain control of the Company at a single
annual meeting without negotiating with the Board or paying a
control premium to shareholders. Maintaining a classified board
can prevent such an unsolicited takeover attempt and preserve
the Board’s ability to negotiate favorable terms for the
Company’s shareholders in a potential takeover situation.
A classified board also provides stability and continuity of
leadership by ensuring that at least two-thirds of the directors
have prior experience and familiarity with the Company’s
industry, business and long-term strategies. Moreover, such a
structure permits a meaningful assessment of the qualifications
of the nominees for election each year and therefore allows the
Nominating and Corporate Governance Committee to seek candidates
who can add to the diversity of ideas and perspectives across
the Board as a whole, which can provide a more orderly evolution
of the Board. All members of the Board, regardless of when or
how frequently they are elected, owe fiduciary duties of care
and loyalty to the Company and to its shareholders, so a
classified board structure does not change a director’s
accountability to the Company and its shareholders.
The Board of Directors believes that a classified board
structure is in the best interests of the Company and its
shareholders. A classified board provides stability and
significant protections, including protection against an
unfavorable takeover. As part of its total commitment to good
corporate governance, the Board will continue to review whether
changing this structure would be advantageous to the Company and
its shareholders. At this time, no such change is desirable.
The Board of Directors recommends a vote
“AGAINST” this Proposal. Proxies solicited by the
Board of Directors will be so voted unless shareholders
otherwise specify in their proxies.
Our Board of Directors does not know of any other matters that
may come before the 2009 annual meeting. However, if any other
matters are properly presented at the 2009 annual meeting, it is
the intention of the persons named as proxies to vote, or
otherwise act, in accordance with their judgment on such matters.
If you own your shares of common stock of record, you may vote
your shares over the Internet at www.proxyvote.com or
telephonically by calling
1-800-690-6903
and by following the instructions on the enclosed proxy card.
Proxies submitted over the Internet or by telephone must be
received by 11:59 p.m. EST on March 9, 2009.
If the shares you own are held in “street name” by a
bank or brokerage firm, your bank or brokerage firm will provide
a vote instruction form to you with this proxy statement, which
you may use to direct how your shares will be voted. Many banks
and brokerage firms also offer the option of voting over the
Internet or by telephone, instructions for which would be
provided by your bank or brokerage firm on your vote instruction
form.
Management hopes that shareholders will attend the meeting.
Whether or not you plan to attend, you are urged to vote your
shares over the Internet or by telephone, or complete, date,
sign and return the enclosed proxy card in the accompanying
postage-prepaid envelope. A prompt response will greatly
facilitate arrangements for the meeting and your cooperation
will be appreciated. Shareholders who attend the meeting may
vote their stock personally even though they have previously
sent in their proxies.
Table of Contents
 ANALOG DEVICES, INC. ATTN: INVESTOR RELATIONS DEPT. ONE TECHNOLOGY WAY NORWOOD, MA 02062 VOTE BY INTERNET – www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on March 9, 2009. 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 TELEPHONE – 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on March 9, 2009. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
THIS PROXY CARD IS VALID ONLY WHEN
SIGNED AND DATED.
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