Symantec DEF 14A 2007
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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20330 Stevens Creek Blvd.
Cupertino, California 95014
You are cordially invited to attend the 2007 Annual Meeting of Stockholders of Symantec Corporation to be held at Symantecs World Headquarters, 20330 Stevens Creek Boulevard, Cupertino, California 95014, on Thursday, September 13, 2007, at 8:30 a.m. (Pacific time). For your convenience, we are pleased to offer a live and re-playable webcast of the annual meeting on our website at www.symantec.com/invest.
At this years annual meeting, the agenda includes the annual election of directors, amendment and restatement of our 2000 Director Equity Incentive Plan, ratification of the selection of KPMG LLP as our independent registered public accounting firm for the current fiscal year, and one stockholder proposal, if properly presented at the meeting. The Board of Directors recommends that you vote FOR the election of the director nominees, FOR the amendment and restatement of our 2000 Director Equity Incentive Plan, FOR the ratification of the selection of KPMG LLP as our independent registered public accounting firm for the current fiscal year and AGAINST the stockholder proposal. Please refer to the proxy statement for detailed information on each of the proposals and the annual meeting.
All stockholders are cordially invited to attend the annual meeting in person. If you cannot attend the annual meeting, you may vote by telephone, over the Internet or by mailing a completed proxy card in the enclosed postage-paid envelope. Detailed voting instructions are also enclosed.
Each share of stock that you own represents one vote, and your vote as a stockholder of Symantec is very important. For questions regarding your stock ownership, you may contact our transfer agent, Computershare Investor Services, by email through their website at www.computershare.com/contactus or by phone at (877) 282-1168 (within the U.S. and Canada) or (781) 575-2879 (outside the U.S. and Canada). For questions related to voting, you may contact Georgeson Shareholder Communications, Inc., our proxy solicitor, at (877) 278-6774.
John W. Thompson
Chairman of the Board of Directors and
Chief Executive Officer
20330 Stevens Creek Blvd.
Cupertino, California 95014
To Our Stockholders:
You are cordially invited to attend our 2007 Annual Meeting of Stockholders, which will be held at 8:30 a.m. (Pacific time) on Thursday, September 13, 2007, at Symantec Corporations World Headquarters, 20330 Stevens Creek Boulevard, Cupertino, California 95014. For your convenience, we are pleased to offer a live and re-playable webcast of the annual meeting at www.symantec.com/invest.
We are holding the annual meeting for the following purposes, which are more fully described in the proxy statement:
1. To elect nine directors to Symantecs Board of Directors, each to hold office until the next annual meeting of stockholders and until his successor is elected and qualified or until his earlier resignation or removal;
2. To approve the amendment and restatement of our 2000 Director Equity Incentive Plan to increase the number of shares authorized for issuance thereunder from 100,000 to 150,000;
3. To ratify the selection of KPMG LLP as Symantecs independent registered public accounting firm for the 2008 fiscal year;
4. To consider and vote upon one stockholder proposal, if properly presented at the meeting; and
5. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.
Only stockholders of record as of the close of business on July 17, 2007 are entitled to notice of and will be entitled to vote at the annual meeting or any postponements or adjournment thereof. For 10 days prior to the annual meeting, a list of stockholders entitled to vote will be available for inspection at our World Headquarters. If you would like to view this stockholder list, please call our Investor Relations department at (408) 517-8324 to schedule an appointment.
BY ORDER OF THE BOARD OF DIRECTORS
Arthur F. Courville
Executive Vice President, General
Counsel and Secretary
July 27, 2007
2007 ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited on behalf of Symantec Corporations Board of Directors (the Board) for use at Symantecs 2007 Annual Meeting of Stockholders, to be held at Symantecs World Headquarters, 20330 Stevens Creek Boulevard, Cupertino, California 95014 on Thursday, September 13, 2007, at 8:30 a.m. (Pacific time), and any adjournment or postponement thereof. The company will provide a live and re-playable webcast of the 2007 annual meeting, which will be available on the events section of our investor relations website at www.symantec.com/invest.
This proxy statement and the accompanying form of proxy are first being mailed to stockholders of Symantec on or about August 6, 2007. Our annual report for our 2007 fiscal year is enclosed with this proxy statement. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the annual meeting. Please read it carefully.
About the Annual Meeting
Symantec is strongly committed to good corporate governance practices. These practices provide an important framework within which our Board and management can pursue our strategic objectives and ensure our long-term vitality for the benefit of our stockholders.
Corporate governance standards generally specify the distribution of rights and responsibilities of the board, management and stockholders, and spell out the rules and procedures for making decisions on corporate affairs. In general, the stockholders elect the board and vote on extraordinary matters; the board is responsible for the general governance of the company, including selection of key management; and management is responsible for running the day-to-day operations of the company.
Our corporate governance standards are available on the Investor Relations section of our website, which is located at www.symantec.com/invest, under Company Charters. These corporate governance standards are reviewed at least annually by our Nominating and Governance Committee, and changes are recommended to our Board for approval as appropriate. The fundamental premise of our corporate governance standards is the independent nature of our Board and its responsibility to our stockholders.
Through its continued listing requirements for companies with securities listed on the NASDAQ Global Select Market, The NASDAQ Stock Market (NASDAQ) requires that a majority of the members of our Board be independent, as defined under NASDAQs Marketplace Rules. Currently, nine of the ten members of our Board are independent directors and all standing committees of the Board are composed entirely of independent directors, in each case under NASDAQs independence definition. The NASDAQ independence definition includes a series of objective tests, such as that the director is not an employee of the company and has not engaged in various types of business dealings with the company. In addition, as further required by NASDAQ rules, the Board has made a subjective determination as to each independent director that no relationship exists which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, the directors reviewed and discussed information provided by the directors and the company with regard to each directors business and personal activities as they may relate to Symantec and our management. Based on this review and consistent with our independence criteria, the Board has affirmatively determined that the following directors are independent: Michael Brown, William T. Coleman, Frank E. Dangeard, David L. Mahoney, Robert S. Miller, George Reyes, David J. Roux, Daniel H. Schulman, and V. Paul Unruh.
The Board and its committees meet throughout the year on a set schedule, and also hold special meetings and act by written consent from time to time. After each regularly scheduled Board meeting, the independent members of our Board hold a separate closed meeting, referred to as an executive session, which is generally led by the Lead Independent Director. These executive sessions are used to discuss such topics as the independent directors deem necessary or appropriate. At least annually, the independent directors will hold an executive session to evaluate the Chief Executive Officers performance and compensation.
The Board held a total of 13 meetings during the fiscal year ended March 30, 2007. During this time, all directors (with the exception of Messrs. Reyes and Roux) attended at least 75% of the total number of meetings of the Board (during the period in which such director served). In addition, all directors (with the exception of Messrs. Reyes and Roux) attended at least 75% of the aggregate number of meetings held by the Board and the total number of meetings held by all committees of the Board on which such director served (during the period in which such director served).
Agendas and topics for Board and committee meetings are developed through discussions between management and members of the Board and its committees. Information and data that is important to the issues to be
considered are distributed in advance of each meeting. Board meetings and background materials focus on key strategic, operational, financial, governance and compliance matters applicable to us, including the following:
The Board and its committees are free to engage independent outside financial, legal and other advisors as they deem necessary to provide advice and counsel on various topics or issues, and are provided full access to our officers and employees.
The Lead Independent Director of the Board is chosen by the independent directors of the Board, and has the general responsibility to preside at all meetings of the Board when the Chairman is not present and executive sessions of the Board without management present. On April 22, 2003, Mr. Miller was elected as the Lead Independent Director.
An evaluation of Board operations and performance is conducted annually by the Nominating and Governance Committee to enhance Board effectiveness. Changes are recommended by the Nominating and Governance Committee for approval by the full Board as appropriate.
We have adopted a code of conduct that applies to all Symantec employees, officers and directors. We have also adopted a code of ethics for our Chief Executive Officer and senior financial officers, including our principal financial officer and principal accounting officer. Our Code of Conduct and Code of Ethics for Chief Executive Officer and Senior Financial Officers are posted on the Investor Relations section of our website, which is located at www.symantec.com/invest, under Company Charters. We intend to post or disclose at that location any amendments to or waivers from, a provision of our Code of Conduct and Code of Ethics for Chief Executive Officer and Senior Financial Officers that applies to any of our executive officers or directors and that relates to any element of the code of ethics, as defined under Item 406 of Regulation S-K.
There are three primary committees of the Board: the Audit Committee, Compensation Committee and Nominating and Governance Committee. The Board has delegated various responsibilities and authorities to these different committees, as described below and in the committee charters. The Board committees regularly report on their activities and actions to the full Board. Each member of the Audit Committee, Compensation Committee and Nominating and Governance Committee was appointed by the Board. Each of the Board committees has a written charter approved by the Board and available on our website at www.symantec.com/invest, under Company Charters.
* As described in Proposal No. 1 Election of Directors, Mr. Roux has not been nominated for election to the Board and will not serve on the Audit Committee following the 2007 Annual Meeting.
DIRECTOR NOMINATIONS AND COMMUNICATION WITH DIRECTORS
The Nominating and Governance Committee will consider candidates submitted by Symantec stockholders, as well as candidates recommended by directors and management, for nomination to the Board. The goal of the Nominating and Governance Committee is to assemble a Board that offers a variety of perspectives, knowledge and skills derived from high-quality business and professional experience. The Nominating and Governance Committee annually reviews the appropriate skills and characteristics required of directors in the context of the current composition of the Board, our operating requirements and the long-term interests of our stockholders. The Nominating and Governance Committee has generally identified nominees based upon suggestions by outside directors, management and executive recruiting firms.
The Nominating and Governance Committee considers candidates by first evaluating the current members of the Board who intend to continue in service, balancing the value of continuity of service with that of obtaining new perspectives, skills and experience. If the Nominating and Governance Committee determines that an opening exists, the Committee identifies the desired skills and experience of a new nominee, including the need to satisfy rules of the SEC and NASDAQ.
The Nominating and Governance Committee generally will evaluate each candidate based on the extent to which the candidate contributes to the range of talent, skill and expertise appropriate for the Board generally, as well as the candidates integrity, business acumen, diversity, availability, independence of thought, and overall ability to represent the interests of Symantecs stockholders. The Nominating and Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees. Although the Nominating and Governance Committee uses these and other criteria as appropriate to evaluate potential nominees, the Committee has no stated minimum criteria for nominees. We have from time to time engaged a search firm to identify and assist the Nominating and Governance Committee with identifying, evaluating and screening Board candidates for Symantec and may do so in the future.
The Nominating and Governance Committee will consider potential nominees properly submitted by stockholders. Stockholders seeking to do so should provide the information and follow the procedures set forth in our corporate Bylaws regarding director nomination proposals. The committee will apply the same criteria as it uses for candidates proposed by stockholders as it does for candidates proposed by management or other directors.
To be considered for nomination by the Nominating and Governance Committee at next years annual meeting of stockholders, submissions by security holders must be submitted by mail and must be received by the Corporate Secretary no later than April 8, 2008 to ensure adequate time for meaningful consideration by the committee. Each submission must include the following information:
Information regarding requirements that must be followed by a stockholder who wishes to make a stockholder nomination for election to the Board of Directors for next years annual meeting is described in this proxy statement under Additional Information Stockholder Proposals for the 2008 Annual Meeting.
Any stockholder who wishes to contact members of our Board may do so by mailing written communications to:
20330 Stevens Creek Boulevard
Cupertino, California 95014
Attn: Corporate Secretary
The Corporate Secretary will review all such correspondence and provide regular summaries to the Board or to individual directors, as relevant, will retain copies of such correspondence for at least six months, and make copies of such correspondence available to the Board or individual directors upon request. Any correspondence relating to accounting, internal controls or auditing matters will be handled in accordance with Symantecs policy regarding accounting complaints and concerns.
The Board does not have a formal policy with respect to Board member attendance at our annual meetings of stockholders, as historically very few stockholders have attended Symantecs annual meeting of stockholders. Four directors attended Symantecs 2006 Annual Meeting of Stockholders.
PROPOSAL NO. 1
Our Board currently consists of ten directors, nine of whom are nominated for election at the 2007 annual meeting, including eight independent directors and one member of our senior management. Each director is elected to serve a one-year term, with all directors subject to annual election. At the recommendation of the Nominating and Governance Committee, the Board has nominated the following nine persons to serve as directors for the term beginning at the annual meeting on September 13, 2007: Michael Brown, William T. Coleman, Frank E. Dangeard, David L. Mahoney, Robert S. Miller, George Reyes, Daniel H. Schulman, John W. Thompson and V. Paul Unruh. Mr. Dangeard was appointed to the Board in January 2007 and was recommended by the Nominating and Governance Committee after one of our non-management directors recommended him for its consideration. David J. Roux, a member of our Board of Directors since July 2005, has not been nominated for election at the 2007 annual meeting. The Board thanks Mr. Roux for his leadership and years of service to Symantec. Effective as of the opening of the polls at our annual meeting on September 13, 2007, our authorized number of directors will be reduced to nine.
Unless proxy cards are otherwise marked, the persons named as proxies will vote all proxies FOR the election of each nominee named in this section. Proxies submitted to Symantec cannot be voted at the 2007 annual meeting for nominees other than those nominees named in this proxy statement. However, if any director nominee is unable or unwilling to serve as a nominee at the time of the annual meeting, the persons named as proxies may vote for a substitute nominee designated by the Board. Alternatively, the Board may reduce the size of the Board. Each nominee has consented to serve as a director if elected, and the Board does not believe that any nominee will be unwilling or unable to serve if elected as a director. Each director will hold office until the next annual meeting of stockholders and until his successor has been duly elected and qualified or until his earlier resignation or removal.
The names of each nominee for director, their ages as of June 30, 2007, and other information about each nominee is shown below.
Mr. Thompson has served as Chairman of the Board and Chief Executive Officer since April 1999, and as President from April 1999 to January 2002. Mr. Thompson joined Symantec after 28 years at IBM Corporation, a global information technology company, where he held senior executive positions in sales, marketing and software development. In his last assignment, he was general manager of IBM Americas and a member of the companys Worldwide Management Council. Mr. Thompson is a member of the board of directors of Seagate Technology, Inc. and United Parcel Service, Inc.
Mr. Brown was appointed to the Board in July 2005 following the acquisition of Veritas Software Corporation. Mr. Brown had served on the Veritas board of directors since 2003. Mr. Brown is currently the Chairman of Line 6, Inc., a provider of musical instruments, amplifiers and audio gear that incorporate digital signal processing. From 1984 until September 2002, Mr. Brown held various senior management positions at Quantum Corporation, most recently as Chief Executive Officer from 1995 to 2002 and Chairman of the Board from 1998 to 2003. Mr. Brown is a member of the board of directors of Quantum Corporation, Nektar Therapeutics and two private companies.
Mr. Coleman was appointed to the Board in January 2003. Mr. Coleman is a Founder, Chairman of the Board and Chief Executive Officer of Cassatt Corporation, a provider of solutions to automate information technology operations. Previously Mr. Coleman was co-founder of BEA Systems, Inc., an enterprise application and service infrastructure software provider, where he served as Chairman of the Board from the companys inception in 1995 until August 2002, Chief Strategy Officer from October 2001 to August 2002, and Chief Executive Officer from 1995 to October 2001. Mr. Coleman is a member of the board of directors of Palm, Inc.
Mr. Dangeard joined Symantecs Board in January 2007. Mr. Dangeard has been the Chairman and Chief Executive Officer of Thomson S.A., a provider of digital video technologies, solutions and services, since September 15, 2004. From September 2002 to September 2004, Mr. Dangeard was Senior Executive Vice President of France Telecom and non-executive Chairman of Thomson. He joined Thomson in April 1997 as Senior Executive Vice President and became a member of the Thomson board of directors in March 1999 and was appointed vice chairman in July 2001. From September 1989 to April 1997, Mr. Dangeard was managing director of SG Warburg & Co. Ltd (later SBC Warburg) and from 1995, he was also chairman of SBC Warburg (France). Prior to that, he was a lawyer at Sullivan & Cromwell LLP in New York and London. Mr. Dangeard serves on the board of Electricite de France. He graduated from the ecole des Hautes Etudes Commerciales, from the Paris Institut dEtudes Politiques and from Harvard Law School.
Mr. Mahoney was appointed to the Board in April 2003. Mr. Mahoney previously served as co-Chief Executive Officer of McKesson HBOC, Inc., a healthcare services company, and as Chief Executive Officer of iMcKesson LLC, also a healthcare services company, from July 1999 to February 2001. Mr. Mahoney is a member of the board of directors of Corcept Therapeutics Incorporated, Tercica Incorporated and several non-profit organizations.
Mr. Miller was appointed to the Board in September 1994. Since January 2007, Mr. Miller has served as Executive Chairman of Delphi Corporation, an auto parts supplier. From July 2005 until January 2007, Mr. Miller served as Chairman and Chief Executive Officer of Delphi Corporation. From January 2004 to June 2006, Mr. Miller was non-executive Chairman of Federal Mogul Corporation, an auto parts supplier. From September 2001 until December 2003, Mr. Miller was Chairman and Chief Executive Officer of Bethlehem Steel Corporation, a large steel producer. Mr. Miller is a member of the board of directors of UAL Corporation and two private companies. Prior to joining Bethlehem Steel, Mr. Miller served as Chairman and Chief Executive Officer on an interim basis upon the departure of Federal-Moguls top executive in September 2000. Delphi Corporation and certain of its subsidiaries filed voluntary petitions for reorganization under the United States Bankruptcy Code in October 2005, and Federal Mogul Corporation and Bethlehem Steel Corporation and certain of their subsidiaries, filed voluntary petitions for reorganization under the United States Bankruptcy Code in October 2001.
Mr. Reyes has been a member of Symantecs Board since July 2000. Mr. Reyes became the Chief Financial Officer of Google Inc., an advertising and Internet search solutions provider, in July 2002. Prior to joining Google, he served as Interim Chief Financial Officer for ONI Systems Corporation, an optical networking company, from February 2002 until June 2002. Prior to ONI Systems, Mr. Reyes spent 13 years at Sun Microsystems, Inc., a provider of network computing products and services, where he served in a number of finance roles, with his last position as Vice President Treasurer from April 1999 to September 2001. Mr. Reyes is a member of the board of directors of BEA Systems, Inc.
Mr. Schulman has been a member of Symantecs Board since March 2000. Mr. Schulman has served as Chief Executive Officer of Virgin Mobile USA, a cellular phone service provider, since August 2001, and also served as a member of the board of directors of Virgin Mobile USA since October 2001. From May 2000 until May 2001, Mr. Schulman was President and Chief Executive Officer of priceline.com Incorporated, an online travel company, after serving as President and Chief Operating Officer from July 1999.
Mr. Unruh was appointed to the Board in July 2005 following the acquisition of Veritas. Mr. Unruh had served on Veritas board of directors since 2003. Mr. Unruh retired as Vice Chairman of the Bechtel Group, Inc., a global engineering and construction services company, in June 2003. During his 25-year tenure with Bechtel, Mr. Unruh held various positions in management including President of Bechtel Enterprises, Bechtels finance, development and ownership arm, from July 1997 to January 2001 and Chief Financial Officer from 1992 to 1996. Mr. Unruh is a member of the board of directors of Move, Inc., Heidrick & Struggles International, Inc. and two private companies.
The following table provides information for fiscal 2007 compensation for all non-employee directors of the company who served during the last fiscal year:
The policy of the Board is that compensation for independent directors should be a mix of cash and equity-based compensation. Symantec does not pay employee directors for Board service in addition to their regular employee compensation. Independent directors may not receive consulting, advisory or other compensatory fees from the company. The Compensation Committee, which consists solely of independent directors, has the primary responsibility to review and consider any revisions to directors compensation.
Director Stock Ownership Guidelines: To ensure that our directors interests are aligned with our stockholders, the Compensation Committee instituted new stock ownership guidelines in May 2007. The Committee eliminated the previous 12 month minimum holding period for equity grants, making the new guidelines as follows:
Annual Fees: In accordance with the recommendation of the Compensation Committee, the Board determined the non-employee directors compensation for fiscal 2007 as follows:
The payment of the annual cash retainer is subject to the terms of the 2000 Director Equity Incentive Plan, as amended, which requires that at least 50% of the annual retainer be paid in the form of unrestricted, fully-vested shares of Symantec common stock. The company pays the annual retainer and any additional annual payment to each director at the beginning of the fiscal year. Directors who join the company during the first six months of the fiscal year receive a prorated payment.
Effective for fiscal 2008, the Compensation Committee recommended, and the Board approved, an increase in the annual cash retainer for audit committee membership to $15,000 and the annual cash retainer for chairing the audit committee to $20,000.
Annual Equity Awards. Beginning in fiscal 2007 each non-employee member of the Board receives an annual award of Symantec restricted stock units having a fair market value on the grant date equal to $180,000, with this value prorated for new non-employee directors from the date of such directors appointment to our Board to the date of the first Board meeting in the following fiscal year. The restricted stock unit awards granted in fiscal 2007 were granted in September 2006, following our annual meeting, and vested in full on April 1, 2007, except for the grant to Mr. Dangeard which was made on January 24, 2007 upon his appointment to the Board and will vest in full on January 24, 2008. The restricted stock unit awards granted for fiscal 2008 were granted on May 2, 2007 and will vest in full in one year from the date of grant. Beginning in fiscal 2007, we no longer make annual option grants to our directors. Option grants made to our non-employee directors in fiscal 2006 and prior years were subject to a four-year vesting schedule. In the event of a merger or consolidation in which Symantec is not the surviving corporation or another similar change in control transaction involving Symantec, all unvested stock option and restricted stock unit awards made to non-employee directors under the programs described above will accelerate and shall vest in full.
Symantec stock ownership information for each of our directors is shown under the heading Security Ownership of Certain Beneficial Owners and Management in this proxy statement.
THE BOARD RECOMMENDS A VOTE FOR ELECTION OF
EACH OF THE NINE NOMINATED DIRECTORS.
The following table gives information about Symantecs common stock that may be issued upon the exercise of options, warrants and rights under all of Symantecs existing equity compensation plans as of March 30, 2007:
The 2001 Non-Qualified Equity Incentive Plan was terminated in September 2004 in connection with the adoption of the Symantec 2004 Equity Incentive Plan. As of March 30, 2007, options to purchase 1,304,551 shares were outstanding under this plan.
Terms of Options. Symantecs Compensation Committee determined many of the terms and conditions of each option granted under the plan, including the number of shares for which the option was granted, the exercise price of the option and the periods during which the option may be exercised. Each option is evidenced by a stock option agreement in such form as the Committee approved and is subject to the following conditions (as described in further detail in the plan):
Corporate Transactions. In the event of a change of control of Symantec (as defined in the plan), the buyer may either assume the outstanding awards or substitute equivalent awards. In the event the buyer fails to assume or substitute awards issued under the plan, all awards will expire upon the closing of the transaction.
Term and Amendment of the Plan. The plan was terminated in September 2004, except that outstanding options granted thereunder will remain in place for the term of such options.
The purpose of this plan was to issue stock options in connection with Symantecs acquisition of URLabs in September 1999.
Eligibility for Participation. Employees, officers, consultants, independent contractors and advisors to Symantec, or of any subsidiary or affiliate of Symantec, are eligible to receive stock options under this plan. Options awarded to officers may not exceed in the aggregate 30% percent of all shares available for grant under the plan.
Terms of Options. Many of the terms of the options are determined by the Compensation Committee, and are generally the same in all material respects as the terms described above with respect to Symantecs 2001 Non-Qualified Equity Incentive Plan, except that the 1999 Acquisition Plan does not contain a provision for the expiration of employees options upon a termination for cause.
Term and Amendment of the Plan. The plan was terminated by the Board on October 18, 2005, except that outstanding options granted thereunder will remain in place for the term of such options.
PROPOSAL NO. 2
At the meeting, Symantecs stockholders will be asked to consider and vote upon a proposal to amend and restate Symantecs 2000 Director Equity Incentive Plan, as amended (the Director Plan), to increase the number of shares reserved for issuance thereunder by 50,000 shares, which would increase the total number of shares reserved for issuance under the Director Plan from 100,000 to 150,000. Each non-employee member of our Board has an interest in Proposal No. 2 since each such director is eligible to participate in the Director Plan.
The Board believes that the amendment to increase the shares of Symantec common stock available for issuance under the Director Plan is in the best interests of Symantec and its stockholders. The purpose of the Director Plan is to provide our non-employee members of the Board with an opportunity to receive all or a portion of the base retainer payable to such directors in the form of common stock of the company and thus provide directors with a means to acquire an equity interest in the company. By providing the directors with an incentive based on increases in the value of the companys stock, the directors interests are more closely aligned with the interests of the stockholders. The amount of the base retainer payable to members of the Board is currently set at $50,000 per year.
Currently, there are a total of 100,000 shares of Symantecs common stock reserved for issuance under the Director Plan. As of June 30, 2007, a total of 95,551 shares had been issued under the Director Plan to 17 persons, leaving 4,449 shares reserved for future issuance. During fiscal year 2007, 20,259 shares were issued to eligible directors under the Director Plan. As discussed under the Directors Compensation section of this proxy statement, not less than 50% of each directors annual retainer is paid in the form of Symantec common stock. Without the additional 50,000 shares that are the subject of this proposal, it is likely that there will not be sufficient shares available under the Director Plan to comply with this company policy.
The following summary of the principal provisions of the Director Plan, as proposed for approval, is qualified in its entirety by reference to the full text of the Director Plan, which is included as Annex A to this proxy statement.
General. The Director Plan was adopted by the Board on July 20, 2000 and approved by Symantecs stockholders in September 2000. The Director Plan was amended by the Board on July 20, 2004 to reflect the increase in the annual retainer from $25,000 to $50,000. The increase became effective as of April 3, 2004. On September 15, 2004, Symantecs shareholders approved amendments to the Director Plan to (i) increase the number of shares reserved for issuance thereunder by 50,000 shares (on a split-adjusted basis), which would increase the total number of shares reserved for issuance under the Director Plan from 50,000 to 100,000 (on a split-adjusted basis), and (ii) provide for a proportionate adjustment to the shares subject to the Director Plan upon any stock dividend, stock split or similar change in Symantecs capital structure. The purpose of the Director Plan is to provide members of the Board of Directors with an opportunity to receive all or a portion of the retainer payable to each director in common stock and thus provide directors of Symantec with a means to acquire an equity interest in Symantec and incentives based on increases in the value of Symantecs common stock.
Administration. The Director Plan permits either the Board or a committee appointed by the Board to administer the Director Plan (in either case, the Administrator). The Administrator has the authority to construe and interpret the Director Plan and the Administrator will ratify and approve all stock to directors under the Director Plan. Currently the Compensation Committee administrates the Director Plan.
Issuance of Stock. The Director Plan provides that each director may elect to receive up to 100% of the directors annual retainer in the form of Stock (defined below). Not less than 50% of the annual retainer will be paid in the form of an award of unrestricted, fully-vested shares of Symantec common stock (the Stock). Before the first meeting of the Board held in each fiscal year (the First Meeting), each director is required to specify the percentage, from 50% to 100%, of the retainer that is to be paid in Stock. If no election is made by a director, the director is deemed to have elected to receive 50% of the retainer in the form of Stock. The number of shares of Stock
to be issued annually to each director will equal the portion of the retainer for each year which a director elects to be paid in Stock, divided by the closing price of the Symantec common stock on the Nasdaq Global Select Market on the day immediately preceding the First Meeting. The shares are issued to the directors promptly following the First Meeting. Each director who is newly appointed to the Board during the first half of the Companys fiscal year is entitled to receive a pro rata portion of the retainer for the current fiscal year (based on the number of days remaining in such fiscal year, divided by 365 days). At the first Board meeting the newly appointed director is eligible to attend, the director is required to specify the percentage, from 50% to 100%, of the retainer that is to be paid in stock
Stock Reserved for Issuance. The Stock reserved for issuance under the Director Plan consists of authorized but unissued shares of Symantec common stock. Assuming the stockholders of the company approve the proposed amendments to the Director Plan, the aggregate number of shares of Stock that may be issued under the Director Plan is 150,000, which number will be proportionately adjusted upon any stock dividend, stock split or similar change in the companys capital structure.
Amendment and Termination of the Director Plan. The Board may amend, alter, suspend or discontinue the Director Plan at any time; provided, that no amendment which increases the number of shares of Stock issuable under the Director Plan shall be effective unless and until such increase is approved by the stockholders of the company.
THE FOLLOWING IS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY STATEMENT OF THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO DIRECTORS ASSOCIATED WITH STOCK ISSUED UNDER THE DIRECTOR PLAN.
A director will recognize taxable income at the time Stock is issued under the Director Plan equal to the fair market value of the Stock issued to the director. This amount must be treated as ordinary income and may be subject to income tax withholding by Symantec. Upon resale of the shares by a director, any subsequent appreciation or depreciation in the value of the Stock will be treated as long-term or short-term capital gain or loss.
Because the amount of Stock issued to directors under the Director Plan will depend on the portion of the retainer each director elects to have paid in the form of Stock and on the fair market value of Symantecs common stock at future dates, it is not possible to determine the benefits that will be received by Symantecs directors under the Director Plan. The following table summarizes the benefits that were received by all current directors who are not executive officers, as a group, in the 2007 fiscal year.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL NO. 2
PROPOSAL NO. 3
The Audit Committee has selected KPMG as Symantecs principal independent registered public accounting firm to perform the audit of Symantecs consolidated financial statements for fiscal year 2008. As a matter of good corporate governance, the Audit Committee has determined to submit its selection of independent audit firm to stockholders for ratification. In the event that this selection of KPMG is not ratified by a majority of the shares of common stock present or represented at the annual meeting and entitled to vote on the matter, the Audit Committee will review its future selection of KPMG as Symantecs independent registered public accounting firm.
The Audit Committee first approved KPMG as the companys independent auditors in September 2002, and KPMG audited Symantecs financial statements for Symantecs 2007 fiscal year. Representatives of KPMG are expected to be present at the meeting, in which case they will be given an opportunity to make a statement at the meeting if they desire to do so, and will be available to respond to appropriate questions.
The company regularly reviews the services and fees from its independent registered public accounting firm. These services and fees are also reviewed with the Audit Committee annually. In accordance with standard policy, KPMG periodically rotates the individuals who are responsible for the companys audit. Symantecs Audit Committee has determined that the providing of certain non-audit services, as described below, is compatible with maintaining the independence of KPMG.
In addition to performing the audit of the companys consolidated financial statements, KPMG provided various other services during fiscal years 2007 and 2006. Symantecs Audit Committee has determined that KPMGs provisioning of these services, which are described below, does not impair KPMGs independence from Symantec. The aggregate fees billed for fiscal years 2007 and 2006 for each of the following categories of services are as follows:
The categories in the above table have the definitions assigned under Item 9 of Schedule 14A promulgated under the Securities Exchange Act of 1934, and with respect to Symantecs 2007 and 2006 fiscal years, these categories include in particular the following components:
(1) Audit fees include fees for audit services principally related to the year-end examination and the quarterly reviews of Symantecs consolidated financial statements, consultation on matters that arise during a review or audit, review of SEC filings, audit services performed in connection with Symantecs acquisitions and statutory audit fees.
(2) Audit related fees include fees which are for assurance and related services other than those included in Audit fees.
(3) Tax fees include fees for tax compliance and advice.
(4) All other fees include fees for all other non-audit services, principally for services in relation to certain information technology audits.
An accounting firm other than KPMG performs internal audit services for the company. Another accounting firm provides the majority of Symantecs tax services.
The Audit Committees policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.
All of the services relating to the fees described in the table above were approved by the Audit Committee.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL NO. 3
PROPOSAL NO. 4
As You Sow, 311 California Street, Suite 510, San Francisco, California, 94104, on behalf of John Powers as trustee for Barbara Herrick and owner of at least $2,000 worth of our Common Stock, has informed us that it intends to present the following proposal at the Annual Meeting:
RESOLVED, that the shareholders of Symantec Corp. urge the board of directors to adopt a policy that company shareholders be given the opportunity at each annual meeting of shareholders to vote on an advisory resolution, to be proposed by the Symantecs management, to ratify the compensation of the named executive officers (NEOs) set forth in the proxy statements Summary Compensation Table (the SCT) and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.
Investors are increasingly concerned about mushrooming executive compensation that sometimes appears to be insufficiently aligned with the creation of shareholder value. Recent media attention on questionable dating of stock options grants by companies has also raised investor concerns.
The SEC has created a new rule, with record support from investors, requiring companies to disclose additional information about compensation and perquisites for top executives. The rule goes into effect this year. In establishing the rule the SEC made it clear that it is the role of market forces, not the SEC, to provide checks and balances on compensation practices.
We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not provide shareholders with enough mechanisms for providing input to boards on senior executive compensation. In contrast to U.S. practices, in the United Kingdom, public companies allow shareholders to cast an advisory vote on the directors remuneration report, which discloses executive compensation. Such a vote isnt binding, but gives shareholders a clear voice that could help shape senior executive compensation.
Currently U.S. stock exchange listing standards require shareholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Shareholders do not have any mechanism for providing ongoing feedback on the application of those general standards to individual pay packages. (See Lucian Bebchuk & Jesse Fried, PAY WITHOUT PERFORMANCE 49 (2004))
Similarly, performance criteria submitted for shareholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee members who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.
Accordingly, we urge Symantecs board to allow shareholders express their opinion about senior executive compensation by establishing an annual referendum process. The results of such a vote would, we think, provide Symantec with useful information about whether shareholders view the companys senior executive compensation, as reported each year, to be in shareholders best interests.
We urge shareholders to vote for this proposal.
The Board appreciates the underlying goal of the proposal, which is to provide stockholders with a means to convey their views regarding executive compensation to the company. However, our Board believes that passage of this proposal would actually provide a relatively ineffective and potentially counter-productive means for stockholders to express their views on this important subject, and is unnecessary because stockholders already have a
number of more effective ways to communicate their views on executive compensation directly to the Board, including members of the Compensation Committee.
An advisory vote is not an effective mechanism for conveying meaningful stockholder opinions regarding our executive compensation. The proposed advisory vote would benefit neither Symantec nor its stockholders because it would not provide the Compensation Committee with any meaningful insight into the specific views or concerns of stockholders regarding executive compensation that the Compensation Committee could address when considering remuneration practices for our executive officers. Instead, an advisory vote would require the Compensation Committee to speculate about the meaning of stockholder approval or disapproval. For example, a negative vote could signify that stockholders do not approve of the amount or type of compensation awarded or alternatively that stockholders do not approve of the format or level of disclosure in the summary compensation table and accompanying narrative disclosure.
Stockholders already have an effective mechanism for expressing their views about our executive compensation. An advisory vote is not necessary because our stockholders already have an efficient and effective method of communicating with our Board. Stockholders may contact directly any of our directors (including the members of our Compensation Committee), the Boards non-employee directors as a group or the Board generally, by writing to them (see Contacting the Board of Directors on page of this proxy statement). Direct communications between stockholders and the Board allow stockholders to voice specific observations or concerns and to communicate clearly and effectively with the Board. An advisory vote does not provide that level of a detailed communication.
Our compensation practices and programs are designed to serve the interests of our stockholders. Our Board believes that our compensation practices and programs serve the interests of our stockholders by resulting in compensation that is performance-based and by enabling us to hire and retain the best executives and motivate those executives to contribute to our future success. The Compensation Committee operates under a written charter adopted by the Board and is responsible for approving compensation awarded to the companys executive officers, including the Chief Executive Officer and the other named executive officers. No member of the Committee has any material relationship with the Company and each Committee member satisfies the independence requirements of both the Company and the Nasdaq Stock Market.
In short, the Board of Directors believes that its Compensation Committee is in the best position to decide on the levels and elements of executive compensation and that the advisory vote called for by this proposal would neither enhance the Boards processes in the area of executive compensation nor further good corporate governance.
THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD WILL BE VOTED AGAINST THIS PROPOSAL UNLESS
The names of our executive officers, their ages as of June 30, 2007, and their positions are shown below.
The Board chooses executive officers, who then serve at the Boards discretion. There is no family relationship between any of the directors or executive officers and any other director or executive officer of Symantec.
For information regarding Mr. Thompson, please refer to Proposal No. 1, Election of Directors, above.
Mr. Beer has served as our Executive Vice President and Chief Financial Officer since February 28, 2006. From September 1991 to February 2006, Mr. Beer held various management positions in finance and operations at American Airlines Inc., a passenger airline company, including leading the airlines European and Asia Pacific businesses. He most recently served as Senior Vice President and Chief Financial Officer of AMR Corporation and AMRs principal subsidiary, American Airlines, since January 2004. Mr. Beer holds a Bachelor of Science in aeronautical engineering from Imperial College, London University and a masters degree in business administration from Harvard Business School.
Mr. Butterfield has served as our Group President, Altiris Business Unit since April 2007 when we acquired Altiris, Inc. From February 2000 to April 2007, Mr. Butterfield served as the President and Chief Executive Officer of Altiris and as Chairman of the Board of Altiris from April 2004 to April 2007. Prior to joining Altiris, Mr. Butterfield served as Vice President, Sales for Legato Systems, Inc., a backup software company, from July 1999 to February 2000. From June 1996 to July 1999, Mr. Butterfield served as Executive Vice President of Worldwide Sales for Vinca, a fault tolerance and high availability company. From June 1994 to June 1996, Mr. Butterfield was the Regional Director of the Rocky Mountain Region for Novell, Inc., a provider of Internet business solutions. From January 1992 to June 1994, Mr. Butterfield was Vice President of North American Sales for WordPerfect Corporation, a software company. Mr. Butterfield also serves on the board of directors of Omniture, Inc. Mr. Butterfield holds a Bachelor of Science degree in Finance from Brigham Young University.
Ms. Chaffin has served as our Group President, Consumer Business Unit since April 2007. From May 2006 to April 2007, Ms. Chaffin served as our Executive Vice President and Chief Marketing Officer. Ms. Chaffin joined Symantec in May 2003 as Senior Vice President and Chief Marketing Officer. Prior to Symantec, Ms. Chaffin spent 21 years at Hewlett-Packard Company, a global provider of products, technologies, solutions and services, where she held a variety of marketing and business management positions and most recently served as Vice President of Enterprise Marketing and Solutions. Ms. Chaffin is a member of the Board of Directors of Informatica Corporation, an enterprise data integration software and services provider. She graduated summa cum laude from the University
of California, San Diego with a bachelors degree and earned a masters degree in business administration from the University of California, Los Angeles, where she was a Henry Ford Scholar.
Mr. Courville has served as our Executive Vice President since May 2006, General Counsel since February 2006 and as Secretary since 1999. He previously served as Senior Vice President, Corporate Legal Affairs from July 2005 to February 2006, and as Vice President and General Counsel from 1999 to July 2005. Mr. Courville joined Symantec in 1993, and was promoted to Director of the Legal Department in 1994. In 1997, Mr. Courville took the position of Director of Product Management for the Internet Tools Business Unit of Symantec, where he was responsible for all product management activities related to Java programming and HTML editing products. Mr. Courville later returned to the legal department as Senior Director before his appointment as Vice President and General Counsel in 1999. Before joining Symantec, Mr. Courville practiced law with the law firm of Gibson, Dunn & Crutcher. Mr. Courville holds a Bachelor of Arts in Economics from Stanford University, a law degree from Boalt Hall School of Law at the University of California, Berkeley and a Masters of Business Administration from the Haas School of Business at the University of California, Berkeley.
Mr. Hagerman has served as our Group President, Data Center Management since May 2006. Mr. Hagerman previously served as Senior Vice President, Data Center Management from July 2005 to May 2006. He joined Symantec through the companys acquisition of Veritas. At Veritas, Mr. Hagerman most recently served as Executive Vice President, Storage and Server Management from September 2004 to July 2005 and served as Executive Vice President, Strategic Operations from March 2003 to September 2004. He was Senior Vice President, Strategic Operations from August 2001 to March 2003 and was Vice President, Strategic Alliances from February 2001 to August 2001. Mr. Hagerman received a bachelors degree in Russian and Economics from Dartmouth College, a masters degree in International Relations from Cambridge University, and a Master of Business Administration from Stanford Graduate School of Business.
Mr. Harrington has served as our Senior Vice President, Finance, and Chief Accounting Officer since January 2007. In this capacity, Mr. Harrington serves as the Companys principal accounting officer. Mr. Harrington joined the Company as Senior Vice President, Finance Operations in May 2006. Prior to joining the Company, Mr. Harrington had served as Senior Vice President and Chief Financial Officer of BMC Software, Inc., a software solutions provider, from March 2004 to September 2005, and had served in a variety of senior finance roles at International Business Machines Corporation (IBM), a global information technology company, since 1981. As vice president of Finance for IBM Software Group, Mr. Harrington was the senior executive responsible for all financial and IT aspects of IBMs $13 billion software organization. Mr. Harrington also served as the Chief Accountant for IBM Corporation. In addition, he served as vice president, Finance for IBM Americas, responsible for all financial aspects of a $38 billion IBM division. Mr. Harrington also served in a range of finance leadership positions for IBMs Americas, Asia Pacific and European operations. Mr. Harrington earned a Bachelor of Arts in Political Science and a Masters in Business Administration from Brigham Young University.
Mr. Hughes has served as our Group President, Global Services since April 2007. He joined Symantec through the companys merger with Veritas in July 2005. At Veritas, Mr. Hughes most recently served as Executive Vice President, Global Services from October 2003 to July 2005. Mr. Hughes joined Veritas after a 10-year career at McKinsey & Co., a global management consulting service provider, where he most recently served as a Partner. During his 10-year career at McKinsey, he founded and led the North American Software Industry practice and worked as a consultant to senior executives across a range of industries on information-technology related issues. Mr. Hughes holds a Master of Business Administration degree from the Stanford Graduate School of Business, and a bachelors degree in electrical engineering and a masters degree in electrical engineering and computer science from Massachusetts Institute of Technology.
Mr. Kendra has served as Group President of the Security and Data Management Group since April 2007. In this role he leads product management, engineering, alliances and business development for a wide range of products that help customers to lower risk around security, compliance and data management. From May 2006 to April 2007, Mr. Kendra served as Symantecs Group President, Worldwide Sales and Services. During this time he led the successful integration of the Symantec and Veritas sales, channel and support organizations, one of the largest sales force mergers in the industry. Prior to this role, Mr. Kendra served as both Executive Vice President and Senior Vice President of Symantecs Worldwide Sales and Services organization. Mr. Kendra joined Symantec after
a 26-year career at IBM, a global information technology company where he was a member of IBMs senior leadership team. Here he held multiple roles, from overseeing the companys worldwide competitive and server sales to leading sales, services, marketing and channel operations for IBMs software business in Asia Pacific. Mr. Kendra is currently on the board of directors of RightNow Technologies and serves on their audit committee. He received a Bachelor of Arts in Business Administration from Indiana University in Bloomington, Indiana.
Ms. Ranninger has served as our Executive Vice President and Chief Human Resources Officer since May 2006. Ms. Ranninger previously served as Senior Vice President, Human Resources from January 2000 to May 2006. From September 1997 to January 2000, she held the position of Vice President, Human Resources. Prior to 1997, Ms. Ranninger served for over six years in the Legal Department. Before joining Symantec in 1991, Ms. Ranninger was a business litigator with the law firm of Heller Ehrman White & McAuliffe. Ms. Ranninger graduated magna cum laude from Harvard University with a bachelors degree, earned a bachelors degree in jurisprudence from Oxford University and a Juris Doctorate from Stanford University.
Mr. Salem has served as our Group President, Worldwide Sales and Marketing since April 2007. From May 2006 to April 2007, Mr. Salem served as our Group President, Consumer Products. Mr. Salem previously served as Senior Vice President, Consumer Products and Solutions from February 2006 to May 2006, Senior Vice President, Security Products and Solutions from January 2006 to February 2006, and as Senior Vice President, Network and Gateway Security Solutions from June 2004 to February 2006. Prior to joining Symantec, from April 2002 to June 2004, he was President and CEO of Brightmail Incorporated, an anti-spam software company that was acquired by Symantec. From January 2001 to April 2002, Mr. Salem served as Senior Vice President of Products and Technology at Oblix Inc., an identity-based security products developer, and from October 1999 to January 2001, he was Vice President of Technology and Operations at Ask Jeeves Inc., an online search engine provider. From 1990 to October 1999, Mr. Salem led the security business unit at Symantec. Mr. Salem received a Bachelor of Arts in computer science from Dartmouth College.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Symantec has adopted a policy that executive officers and members of the Board hold an equity stake in the company. The policy requires each executive officer to hold a minimum number of shares of Symantec common stock. Newly appointed executive officers are not required to immediately establish their position, but are expected to make regular progress to achieve it. The Compensation Committee reviews the minimum number of shares held by the executive officers and directors from time to time. The purpose of the policy is to more directly align the interests of executive officers and directors with our stockholders.
The following table sets forth information, as of June 30, 2007, with respect to the beneficial ownership of Symantec common stock by (i) each stockholder known by Symantec to be the beneficial owner of more than 5% of Symantec common stock, (ii) each member of the Board of Symantec, (iii) the named executive officers of Symantec included in the Summary Compensation Table appearing on page 39 of this proxy statement and (iv) all current executive officers and directors of Symantec as a group.
Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Percentage ownership is based on 881,372,834 shares of Symantec common stock outstanding as of June 30, 2007 (excluding shares held in treasury). Shares of common stock subject to stock options and restricted stock units vesting on or before August 29, 2007 (within 60 days of June 30, 2007) are deemed to be outstanding and beneficially owned for purposes of computing the percentage ownership of such person but are not treated as outstanding for purposes of computing the percentage ownership of others.
Section 16 of the Exchange Act requires Symantecs directors and officers, and any persons who own more than 10% of Symantecs common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by SEC regulation to furnish Symantec with copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms furnished to Symantec and written representations from the directors and executive officers, Symantec believes that all Section 16(a) filing requirements were met in fiscal year 2007, except that Kristof Hagerman filed one late Form 4 report with respect to one transaction, the sale of 1,361 shares of common stock.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION DISCUSSION & ANALYSIS (CD&A)
Our compensation philosophy is defined by two primary business objectives which are intended to enhance long-term stockholder value:
We believe that, given our executives ability to influence the companys performance, their compensation should be tied to the companys current and long term performance. Consistent with a pay-for-results philosophy, our compensation program for executives emphasizes pay at risk. Executives with greater responsibility and more direct ability to influence overall company performance have a greater portion of their pay at risk through short- and long-term incentive programs. This aligns our executives interests with our stockholders interests.
Our compensation programs are designed to recruit and retain talented and experienced executives who will lead the company in continuing to innovate, grow and attain market leadership, each of which helps enable us to deliver superior value to our stockholders. Our ability to retain the talented and experienced members of our management team, and to attract new talent, is critical to growing our business and driving stockholder value. We look to relevant market and industry practices to remain competitive with our compensation packages. We strive to balance our need to compete for talent with the need to maintain a reasonable and responsible cost structure and limit dilution to stockholders.
The Compensation Committee (the Committee), which is comprised of independent directors, establishes and oversees the overall strategy for employee compensation, including our executive compensation programs. The Committee regularly reviews our compensation policies and practices to ensure that they support our business strategy and serve the interests of our stockholders. The Committee strives to make our compensation competitive by benchmarking our practices and compensation levels against comparable companies. The Committee retains Mercer Human Resource Consulting, an outside consulting firm, to provide advice and ongoing recommendations on executive compensation matters. The Committee has directed the compensation consultant to work with our Chief Human Resources Officer and other members of management to obtain information necessary for them to form their recommendations and evaluate managements recommendations. The compensation consultants also meet with the Committee during the Committees regular meetings, and in executive session. For a description of the Committees functions and additional information about the Committee, see the Board Committees and Their Functions section (beginning on page 7).
The independent directors of the Board evaluate the CEOs performance and the Committee then reviews and recommends to the independent directors of the Board all compensation arrangements for the CEO. The Committee reviews the performance evaluations and compensation recommendations that the CEO submits for the other named executive officers and approves their compensation.
While the Committee determines our overall compensation philosophy, it looks to several of our executive officers and the compensation consultant retained by the Committee to make recommendations to the Committee that are guided by our compensation philosophy. As mentioned above, our CEO provides the Board and Committee with feedback on the performance of our executive officers, and makes compensation recommendations for the executives to the Committee for their approval. Our CEO, CFO, Chief Human Resources Officer, and Vice President, Legal, regularly attend the Committees meetings to provide their perspectives on competition in the industry and the needs of the business, information regarding the companys performance and other advice specific to their areas of expertise.
This Compensation Discussion & Analysis describes the overall compensation practices at Symantec and specifically describes the compensation for the following named executive officers for fiscal 2007:
The Committee relies on the following key principles, which reflect our compensation philosophy, to design our compensation programs:
Our compensation principles are implemented through several policies developed by the Committee. These policies guide the Committee in determining the mix and value of the compensation components for our named executive officers. Our compensation principles include:
Total Rewards: Elements of total rewards offered to our executive officers include base salary, short- and long-term incentives, health benefits, a deferred compensation program, and a consistent focus on professional growth and opportunities for challenges. We believe that opportunities for personal and professional growth enhance our leaderships employment satisfaction and increase their desire to stay with the Company over time.
In determining the mix of components and the value of each component, the Committee takes into account the executives role, the competitive market, individual and company performance, business unit performance, internal pay equity (i.e., ensuring that comparably situated executives are treated similarly) and historical compensation. Details of the various programs and how they support the overall business strategy are outlined in Compensation Components.
Pay for Results: Our executive compensation program is designed to reward executives for results. As described below, the pay mix for named executive officers emphasizes variable pay in the form of short and long term cash incentives and long-term equity awards. Short-term results are measured by annual financial performance, particularly revenue, earnings per share and, for our business unit leaders, business unit performance. Performance is rewarded in the long term through (a) share price appreciation of equity awards, and (b) cash payments for attainment of operating cash flow targets under the FY08 Long Term Incentive Plan described below.
Market Positioning: Our policy is to target the base salary and annual short-term cash incentive structure for named executive officers at the 65th percentile of the relevant market composite, as described below, with target long-term equity incentive opportunities and benefits for named executive officers at the 50th percentile of the relevant market composite. Upside opportunity in the short- and long-term incentive plans is available with
outstanding financial performance. The Committee has established this positioning approach in order to attract and retain talent that is capable of developing and executing aggressive strategies in our product markets. The Committee may set the actual components for an individual named executive officer above or below the positioning benchmark based on factors such as experience, performance achieved, specific skills or competencies, the desired pay mix (e.g., emphasizing short- or long-term results), and our budget.
Competitive Market Assessments: Market competitiveness is one factor that the Committee considers each year in determining an individual named executive officers salary, incentive opportunity, long-term equity awards and pay mix. The Committee relies on various data sources to evaluate the market competitiveness of each pay element, including publicly-disclosed data from a peer group of companies (see discussion below) and published survey data from a broader set of information technology companies that are similar in size and that the Committee and its advisors believe represent Symantecs competition in the broader talent market. The peer groups proxy statements provide detailed pay data for the top five positions in a select group of competitors for talent. Survey data provides compensation information from a broader group of information technology companies, with positions matched based on specific job scope and responsibilities. The Committee considers data from these data sources in developing a market composite for each named executive officers position.
The Executive Compensation Group within our Human Resources organization, led by our Chief Human Resources Officer, subscribes to several executive compensation data sources from which they compile survey data on information technology companies. The Executive Compensation group provides the Committee with various analyses of the survey compensation data for each executive position reviewed by the Committee. The Committee reviews compensation survey data of companies comparable to Symantec in various measures, such as gross revenue, number of employees, industry and geographic location.
Peer Group: Symantec is a prominent participant in the information technology industry. This industry is characterized by rapid rates of change, intense competition from small and large companies, and significant cross-over in leadership talent needs. As such, we compete for executive talent with leading software and services companies as well as in the broad information technology industry. Further, we believe that stockholders measure our performance against a wide array of technology peers. As such, the Committee uses a peer group of market-leader companies which consists of a broader group of high technology companies of a comparable size to us. A market leader is defined as a company with a history of above-median operating and stockholder performance, to reinforce our focus on being an industry leader. The Committee uses the peer group, as well as other relevant market data, to develop a market composite for purposes of establishing named executive officer pay levels (as described above). In addition, the peer group performance is used as input for setting performance targets for our annual incentive plan. For fiscal 2007 and 2008, the Committee, based on the advice of its consultant, included the following companies in the peer group: Adobe Systems, Analog Devices, Apple, Cisco Systems, Computer Associates, Electronic Arts, EMC, Freescale Semiconductor, Harris Interactive, Juniper Networks, Lexmark, Network Appliance, Oracle, Qualcomm, Seagate Technology, and Yahoo!. The Committee evaluates the peer group each year to determine its continued validity as a source of market and performance data.
Pay Mix: Consistent with a pay-for-results philosophy, our compensation program for named executive officers emphasizes pay at risk. The percentage of an named executive officers compensation opportunity that is at risk or variable instead of fixed is based primarily on his or her role at Symantec. Named executive officers with greater responsibility and more direct ability to influence overall company performance have a greater portion of their pay at risk through short- and long-term incentive programs. This is achieved by having higher target short-term incentive opportunities and higher equity grant levels relative to base salary than employees who are not senior executives.
Form and Mix of Long-Term Equity Incentive Compensation: We currently use two forms of equity for long-term equity incentive compensation: stock options and restricted stock units (RSUs). (See Equity Incentive Awards below for more information regarding the specific features of each form). For fiscal 2007 and 2008, we increasingly granted equity compensation to senior executives in the form of RSUs, as opposed to options. For fiscal 2007, named executive officers who received equity incentive compensation awards received approximately 66% to 73% of the value of such compensation in the form of RSUs. Mr. Thompson declined his long term equity incentive grant in fiscal 2007, and Mr. Beer received his long term equity incentive grant in fiscal 2006, at the time he joined
the company. For fiscal 2008, named executive officers who have received equity incentive compensation awards to date received approximately 50% of the value of such compensation in the form of RSUs. Mr. Thompson again declined his long term equity incentive grant in fiscal 2008. These percentages are based on the fair value of the shares of common stock underlying the RSUs on the date of grant and the grant date fair value of the options using the Black-Scholes option pricing method. The awards made to named executive officers other than the CEO were finally determined by the Committee based on recommendations made by the CEO. In determining his recommendations, the CEO may consider factors such as the individuals length of tenure at the company, industry experience, current pay mix, long-term equity and cash awards previously granted to the individual, retention considerations, business unit performance (as applicable), individual performance, and other factors.
Compensation for our named executive officers includes the following components:
The annual base compensation for our named executive officers is structured to ensure that we are able to attract and retain executives capable of achieving our strategic and business objectives. The Committee reviews named executive officers salaries annually as part of its overall competitive market assessment and may make adjustments based on positioning relative to market, individual role and contribution levels, and our overall salary budget. The Committee reviews the CEOs salary in executive session (i.e., without any executives present), and changes are considered in light of market pay assessments and the Committees annual CEO performance evaluation. In setting the base salaries for the other named executive officers, the Committee also considers the recommendations of the CEO based upon his annual review of their performance.
The Executive Annual Incentive Plans for our executive officers are adopted pursuant to the Senior Executive Incentive Plan (SEIP) approved by our stockholders in 2003. The Executive Annual Incentive Plans adopted under the SEIP are annual cash incentive plans that reward named executive officers (and other participants) for generating strong financial results for our company in the short term. To support collaboration within the senior leadership, all named executive officers earn an incentive based on performance against pre-determined corporate goals described further below. The Committee may choose to measure the named executive officers against specific business unit or individual performance targets as well.
Executive Annual Incentive Plan Target Opportunities: Under the Executive Annual Incentive Plans for a given fiscal year, each named executive officer has an award opportunity, expressed as a percentage of base salary with threshold and target levels. The award opportunity is determined based on a market composite, the desired pay mix, internal equity (treating comparably situated executives similarly), and the role of the named executive officer. For fiscal 2007, the target opportunity for the CEO was 125% of his base salary and 80% of base salary for the other named executive officers (other than Ms. Chaffin, for whom the target opportunity was 60% of base salary). For fiscal 2008, the target opportunity for the CEO will be 125% of his base salary and 80% of base salary for all other named executive officers. Each named executive officer must achieve threshold performance for each metric established in the named executive officers executive annual incentive plan in order to receive payment for such metric. The Executive Annual Incentive Plan limits each named executive officers award opportunity to $5 million during any fiscal year, but the award opportunity is otherwise uncapped. The Committee believes this feature motivates participants to drive for superior results.
Executive Annual Incentive Plan Performance Target Setting: Executive Annual Incentive Plan performance targets are established on or about the beginning of each plan year. Our management develops proposed goals with reference to a variety of factors, including our historical performance, internal budgets, market and peer performance, and expectations for our performance. The Committee reviews, adjusts as necessary, and approves the goals, the range of performance, and the weighting of the goals. Following the end of each fiscal year, the Committee reviews our actual performance against the performance measures established in the fiscal years Executive Annual Incentive Plans, determines the extent of achievement and approves annual cash incentives, if
warranted. The determination of named executive officer incentives is formulaic, though the Committee has the discretion to reduce awards. It did not exercise such discretion for fiscal 2007.
The performance measures in the FY07 Executive Annual Incentive Plans for the named executive officers were non-GAAP earnings per share (EPS) and revenue achievement, and were weighted equally. We used these two measures because:
The Committee believed that it was reasonably likely that the company would achieve the target levels of profitability for fiscal 2007. For each goal, the Committee established a threshold and target performance level that represents 50% and 100% of target funding levels, respectively. If results for a goal are below threshold, the funding level for that goal is 0%, and participants will be paid no incentive for that goal. At target, the goal is funded 100%. Above target, the payout for revenue achievement increases by 10% of the target opportunity for each additional 1% above target revenue achievement levels. Results above target EPS provide an additional 10% payout for each approximate increment of $0.019 in EPS for fiscal 2007. The Committee did not choose to include separate business unit or individual measures for the named executive officers in fiscal 2007.
For fiscal 2008, the Committee has decided to include a business unit contribution margin, in addition to revenue and EPS, as a performance metric for Group Presidents responsible for a business unit and other senior business unit leaders. This new performance metric will have a 30% weighting, with the revenue and EPS metrics each having a 35% weighting. The Committee believes that including a business unit performance target for the named executive officers who lead our business units, in addition to corporate level targets, will enhance line-of-sight and drive behavior aligned with both enterprise and business unit results. The Committee believes that it is reasonably likely that the company will achieve the target levels of profitability for fiscal 2008. The Committee uses peer group and survey data as input in determining the target bonus levels for our Executive Annual Incentive Plans.
The primary purpose of our equity incentive awards is to align the interests of the named executive officers with those of the stockholders by rewarding the named executive officers for creating stockholder value over the long-term. By compensating our executives with the companys equity, our executives hold a stake in the companys financial future. The gains realized in the long term depend on our executives ability to drive the financial performance of the company. Equity incentive awards are also a useful vehicle for attracting and retaining executive talent in our competitive talent market.
Our 2004 Equity Incentive Plan provides for the award of stock options, stock appreciation rights, restricted stock, and restricted stock units. We granted named executive officers stock options and restricted stock units (RSUs) in fiscal 2007 (as described in more detail below).
We seek to provide equity incentive awards which are competitive with companies in our peer group and the other information technology companies that the Committee includes in its market composite. As such, we establish target equity incentive award grant guideline levels for the named executive officers based on market pay assessments. When making annual equity awards to named executive officers, we consider corporate results during the past year, the role, responsibility and performance of the individual named executive officer, the competitive market assessment described above, prior equity awards, and the level of vested and unvested equity awards then held by each participating officer. In making equity awards, we generally take into consideration gains recognizable by the executive from equity awards made in prior years.
On April 25, 2006, the Committee approved a competitive equity grant for the CEO of options to acquire 400,000 shares of common stock and 100,000 RSUs. On May 1, 2007, the Committee approved an equity grant for the CEO of options to acquire 225,000 shares of common stock and 65,000 RSUs. In each case, Mr. Thompson
declined the equity grant in full and indicated to the Committee that he believed previous stock option grants made to him by the Committee were sufficient to achieve the Committees objectives of retaining him, aligning his financial interests with those of stockholders, and focusing him on improving the Companys overall financial results.
Burn Rate and Dilution: We closely manage how we use our equity to compensate employees. Gross burn rate is defined as the total number of shares granted under all of our equity incentive plans during a period divided by the average number of shares of common stock outstanding during that period and expressed as a percentage. Net burn rate is defined as the total number of shares granted under all of our equity incentive plans during a period, minus the total number of shares returned to such plans through awards cancelled during that period, divided by the average number of shares of common stock outstanding during that period, and expressed as a percentage. Overhang is defined as the total number of shares underlying options and awards outstanding plus shares available for issuance under all of our equity incentive plans at the end of a period divided by the average number of shares of common stock outstanding during that period and expressed as a percentage of . For fiscal 2007, our gross burn rate was 2.2%, our net burn rate was 0.3%, and our overhang was 16.8%.
The Committee targets an annual gross burn rate of approximately 3% to allow for effective attraction, retention and motivation of senior management and the broader employee base, while staying within parameters acceptable to stockholders. For grants in fiscal 2007, the Committee approved a pool of 24,270,000 shares, or 2.3% of common shares outstanding (based on the number of shares of common stock outstanding at the end of the 2006 fiscal year). For grants in fiscal 2008, the Committee approved a pool of 25,555,381 shares, or 2.8% of common shares outstanding (based on the number of shares of common stock outstanding at the end of the 2007 fiscal year). The Committee determines the percentage of equity to be made available for our equity programs with reference to the companies in our market composite. In addition, the Committee considers the accounting costs reflected in our financial statements when establishing the forms of equity to be granted and the size of the overall pool available. The forms of equity selected are intended to be cost-efficient, and the overall cost is considered within acceptable levels for internal budgets.
Stock Options: The Committee believes that options provide an incentive for executives to drive long-term share price appreciation through the development and execution of effective long-term strategies. Stock option value is only realized if the trading price of our common stock increases, and option holder interests are therefore aligned with stockholder interests. Stock options are issued with exercise prices at 100% of the fair market value to assure that executives will receive a benefit only when the trading price increases. Option awards generally have value for the executive only if the executive remains employed for the period required for the shares to vest. Options granted in fiscal 2007 vest 25% after the first year and on a monthly basis thereafter for the next 36 months, and, if not exercised, expire in a maximum of seven years (or earlier in the case of termination of employment). Vesting options over four years provides retention value, and is in line with market practices among companies in our market composite and other option recipients within the company. (Details of stock options granted to the named executive officers in fiscal 2007 are disclosed in the Grants of Plan-Based Awards table included on page 40.)
Restricted Stock Units (RSUs): RSUs represent the right to receive one share of Symantec common stock for each RSU upon the settlement date, which is the date on which certain conditions, such as continued employment with us for a pre-determined length of time, are satisfied. In fiscal 2007, we elected to substitute a significant percentage of the named executive officers equity incentive award value, which had historically been provided with only stock options, with RSUs. This change was made to enhance the retention of named executive officers and balance the more volatile rewards associated with stock options. The Committee believes that RSUs align the interests of the named executive officers with the interests of the stockholders because the value of these awards appreciate if the trading price of our common stock appreciates, and also have retention value, which supports continuity in the senior management team. RSUs provided to executive officers as part of the annual equity grant in fiscal 2007 do not vest until two years after the grant date, at which point they are fully vested and settled in our stock. For fiscal 2008, the Committee determined that approximately 50% of the named executive officers equity incentive award value would be in the form of RSUs and approximately 50% would be in the form of stock options. These percentages are based on the fair value of the shares of common stock underlying the RSUs on the date of grant and the grant date fair value of the options using the Black-Scholes option pricing method. The vesting and settlement of the RSUs granted to our named executive officers in fiscal 2008 is 50% after the first year and 50%
after the second year. The two year vesting schedule for the RSUs was designed to offer a balance to the four year vesting period for stock options and the three year performance cycle for the LTIP awards described below. The combination of these three components provides an ongoing retention and performance incentive for our senior management. The Committee may provide for alternative vesting schedules as deemed needed to support the business and its overall objectives related to executive compensation. (Details of RSUs granted to the named executive officers in fiscal 2007 are disclosed in the Grants of Plan-Based Awards table on page 40.)
Equity Grant Practices: The Committee generally approves grants to the named executive officers at its first meeting of each fiscal year. The grant date for all stock options granted to employees, including the named executive officers, is the 10th day of the month following the meeting. The exercise price for stock options is the closing price of our common stock, as reported on the Nasdaq Global Select Market, on the date of grant. The Committee does not coordinate the timing of equity awards with the release of material nonpublic information. The Committee may approve grants to named executive officers at other times during the year, in which case, the grant date is the 10th day of the month following the date on which the Committee approves the grant and the exercise price of any options so granted is the closing price on the grant date. RSUs may be granted from time to time throughout the year, but all RSUs generally vest on either June 1 or December 1 for administrative reasons.
In May 2007, the Committee approved our FY08 Long Term Incentive Plan (LTIP), which became effective on April 1, 2007. Under the terms of the LTIP, executives will be eligible to receive performance-based compensation based upon the level of attainment of target cash flow through the companys fiscal year ending March 31, 2008. For the 2008 fiscal year, the named executive officers who are eligible to receive long-term cash and equity incentive awards are targeted to receive approximately 20% of the value of such long-term compensation from the LTIP, 40% from options and 40% from RSUs. These percentages are based on the fair value of the shares of common stock underlying the RSUs on the date of grant and the grant date fair value of the options using the Black-Scholes option pricing method. The long-term incentive will be measured at the end of the performance period (i.e., the end of fiscal 2008) and paid following the last day of the second fiscal year following the end of the performance period. The applicable metric under the LTIP is the companys operating cash flow. By basing the LTIP on operating cash flow, the plan focuses on specific, measurable corporate goals and provides performance-based compensation based upon the actual achievement of the goals. For our named executive officers, the target LTIP awards range from 68% to 100% of current base salary. A participant is eligible for 25% of the target LTIP award if at least 85% of budgeted operating cash flow is attained with respect to the performance period and for up to 200% of the Target LTIP Award if at least 120% of budgeted operating cash flow is attained with respect to the performance period. A participant must be an employee of the company on the payment date to receive the payment. Subject to certain exceptions, a participant who terminates his or her employment with the company before the payment date will not be eligible to receive the payment or any prorated portion thereof. The Committee implemented the LTIP in order to provide an ongoing retention and performance incentive by balancing option and RSU vesting periods (four and two years respectively) with another component which will enhance retention of senior managers. The LTIP will provide another tie between compensation and performance. The Committee believes that it is reasonably likely that the company will achieve the operating cash flow target for fiscal 2008.
Certain business conditions may warrant using additional compensation approaches to attract, retain or motivate executives. Such conditions include acquisitions and divestitures, attracting or retaining specific or unique talent, and recognition for exceptional contributions. In these situations, the Committee considers the business needs and the potential costs and benefits of special rewards. For example, the Committee approved sign-on bonuses to James Beer and Tom Kendra pursuant to the executives offer letter with Symantec. See Potential Payments Upon Termination or Change in Control below. Historically, the Committee has used cash or RSUs to address these types of situations. The Veritas acquisition in 2005 was an example of a business situation that warranted retention considerations. The complexity of the integration process and the resulting reorganization of the management structure created the need to ensure the continuity of the leadership team. All of the former Veritas named executive officers who remained with Symantec received cash retention incentives that vested one third in
January 2006, one third in July 2006 and the final one third vested in January 2007. Pursuant to the retention plan for legacy Veritas executives, Kristof Hagerman received a total of $1.1 million. The legacy Symantec named executive officers, except for the CEO, who remained with the company vested in their cash retention awards, granted under their FY06 Executive Supplemental Incentive Plans, in July 2006. Under the terms of these plans, the executive officers were eligible to receive performance-based incentive bonuses equivalent to the bonuses payable under, and upon terms substantially similar to, Symantecs FY06 Executive Annual Incentive Plans. Under the terms of his FY06 Executive Supplemental Incentive Plan, Mr. Kendra was entitled to receive a minimum bonus of $750,000. Pursuant to their FY06 Executive Supplemental Incentive Plans, in July 2006 Mr. Kendra and Ms. Chaffin received cash payments of $750,000 and $243,000, respectively. John Thompson, as CEO, had the discretion to recommend to the Committee that any bonus be decreased to zero or increased by up to 50%, based on his assessment of the contribution made by each executive to the ongoing integration effort. The Committee increased Ms. Chaffins bonus of $180,000 by 35% at Mr. Thompsons recommendation, increasing her bonus by $63,000 to $243,000.
All named executive officers are eligible to participate in our 401(k) plan (which includes our matching contributions), health and dental coverage, life insurance, disability insurance, paid time off, and paid holidays on the same terms as are available to all employees generally. These rewards are designed to be competitive with overall market practices, and are in place to attract and retain the talent needed in the business. In addition, selected officers may be eligible to participate in the deferred compensation plan, and to receive other benefits described below.
Deferred Compensation: Symantecs named executive officers are eligible to participate in a nonqualified deferral plan. The deferral plan provides the opportunity to defer up to 75% of base salary and 100% of cash bonuses for payment at a future date. This plan is provided to be competitive in the executive talent market, and to provide executives with a tax-efficient alternative for receiving earnings. None of the named executive officers currently participate in this plan.
Additional Benefits: Other benefits available to named executive officers are company-paid life insurance, payments of taxes incurred as a result of the payment of temporary living benefits, relocation assistance, reimbursement for up to $10,000 for financial planning services and personal travel for the CEO on Company aircraft. The Committee believes that these perquisites allow the named executive officers to focus more of their time and attention on their employment, which benefits the Company, and that they are provided in the marketplace for executive talent. The value of the perquisites we provide are taxable to the named executive officers and the incremental cost to us for providing these perquisites is reflected in the Summary Compensation Table. (These benefits are disclosed in the All Other Compensation column of the Summary Compensation Table on page 39).
Change in Control Agreements: Our Executive Retention Plan provides participants with accelerated vesting of equity awards in the event the individuals employment is terminated without cause, or is constructively terminated, within 12 months of a change in control of the Company (as defined in the plan). The intent of the plan is to enable named executive officers to have a balanced perspective in making overall business decisions, and to be competitive with market practices. The Committee believes that change in control benefits, if structured appropriately, serve to minimize the distraction caused by a potential transaction and reduce the risk that key talent would leave the Company before a transaction closes. We do not provide for gross-ups of excise tax values under Section 4999 of the Internal Revenue Code. Rather, we allow the named executive officer to reduce the benefit received or defer the accelerated vesting of options to avoid excess payment penalties. Details of each individual named executive officers benefits, including estimates of amounts payable in specified circumstances, are disclosed under Potential Payments Upon Termination or Change in Control below.)
We use several additional policies to ensure that the overall compensation structure is responsive to stockholder interests and competitive with the market. Specific policies include:
To ensure that our executive management teams interests are aligned with our stockholders, we instituted stock ownership requirements in October 2005. Minimum ownership levels are based on the executives salary grade:
Each person holding one of the positions listed above is required to acquire and thereafter maintain the stock ownership required within four years of becoming an executive of the Company (or four years following the adoption date of these guidelines).
Stock options and unvested restricted stock or restricted stock units do not count toward stock ownership requirements. Until an executive meets the applicable stock ownership requirement, the executive is encouraged to retain a percentage of any shares received as a result of the exercise of any stock option or other equity award, net of the applicable exercise price and tax withholdings.
As of June 20, 2007, our CEO had reached the stated ownership requirements. Other named executive officers have yet to reach the required ownership levels, but are within the four-year window since adoption of the plan. See the table below for individual ownership levels relative to the executives ownership requirement.
Our Insider Trading Policy requires that our Chief Executive Officer, Chief Financial Officer, and each of our directors conduct open market transactions in our securities only through use of stock trading plans adopted pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934. Rule 10b5-1 allows insiders to sell and diversify their holdings in our stock over a designated period by adopting pre-arranged stock trading plans at a time when they are not aware of material nonpublic information about us, and thereafter sell shares of our common stock in accordance with the terms of their stock trading plans. All other executives are strongly encouraged to trade using 10b5-1 plans.
Under Section 162(m) of the Internal Revenue Code, we may not receive a federal income tax deduction for non-performance driven compensation paid to the Chief Executive Officer and the next three most highly compensated executive officers to the extent that any of these persons receives more than $1,000,000 in compensation in any one year. We believe that all of the stock options granted to the executive officers under our 1996 Equity Incentive Plan and 2004 Equity Incentive Plan qualify under Section 162(m) as performance-based compensation. RSU grants are not performance-based, and therefore are not deductible. However, deductibility is not the sole factor used by the Committee in ascertaining appropriate levels or manner of compensation and
corporate objectives may not necessarily align with the requirements for full deductibility under Section 162(m). Accordingly, we may enter into compensation arrangements under which payments are not deductible under Section 162(m). For example, certain payments under our incentive plans and compensation resulting from stock awards to Mr. Thompson prior to the adoption of the stockholder approved incentive plan may not be deductible under Section 162(m).
The members of Symantecs Compensation Committee during fiscal year 2007 were Messrs. Schulman, Brown, Coleman and Mahoney. None of the members of Symantecs Compensation Committee in fiscal year 2007 was at any time during fiscal year 2007 or at any other time an officer or employee of Symantec or any of its subsidiaries, and none had or have any relationships with Symantec that are required to be disclosed under Item 404 of Regulation S-K. None of Symantecs executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our Board or Compensation Committee during fiscal year 2007.
The information contained in the following report of Symantecs Compensation Committee is not considered to be soliciting material, filed or incorporated by reference in any past or future filing by Symantec under the Securities Exchange Act of 1934 or the Securities Act of 1933 unless and only to the extent that Symantec specifically incorporates it by reference.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis (CD&A) contained in this proxy statement. Based on this review and discussion, the Compensation Committee has recommended to the Board that the CD&A be included in this proxy statement and incorporated into our Annual Report on Form 10-K for the fiscal year ended March 30, 2007.
William T. Coleman
David L. Mahoney
Daniel H. Schulman (Chair)
The following table shows for the fiscal year ended March 30, 2007, compensation awarded to or paid to, or earned by, the Companys Chief Executive Officer, Chief Financial Officer and its three other most highly compensated executive officers at March 30, 2007 (the Named Executive Officers).
Summary Compensation Table for Fiscal 2007
The following table shows for the fiscal year ended March 30, 2007, certain information regarding grants of plan-based awards to the Named Executive Officers from the 2004 Plan:
Grants of Plan-Based Awards in Fiscal 2007
The following table shows for the fiscal year ended March 30, 2007, certain information regarding outstanding equity awards at fiscal year end for the Named Executive Officers.
Outstanding Equity Awards At 2007 Fiscal Year-End
The following table shows for the fiscal year ended March 30, 2007, certain information regarding option exercises and stock vested during the last fiscal year with respect to the Named Executive Officers:
Potential Payments Upon Termination or Change-In-Control
Set forth below is a description of the plans and agreements that could result in potential payouts to the named executive officers in the case of their termination of employment and/or a change in control of Symantec.
In January 2001, the Board approved the Symantec Executive Retention Plan, to deal with employment termination resulting from a change in control of the company. The plan was modified by the Board in July 2002, April 2006 and June 2007. Under the terms of the plan, all equity compensation awards (including, among others, options and restricted stock units) granted by the company to the companys Section 16(b) officers (including the named executive officers) would become fully vested and, if applicable, exercisable upon a change in control of the company (as defined in the plan) followed by termination without cause or constructive termination by the acquirer within 12 months after the change in control.
In accordance with an Employment Agreement dated April 11, 1999 between Mr. Thompson and Symantec, the Board granted Mr. Thompson an initial base salary of $600,000 and agreed that his base salary will be reviewed on an annual basis by the Compensation Committee (and may be increased from time to time in the discretion of the Board), but in no event will be reduced below $600,000 during Mr. Thompsons term of employment with the company. In the event Mr. Thompson resigns with good reason (i.e., material reduction in responsibilities, position or salary) or is terminated without cause (as defined in the agreement), he is entitled to a severance payment equal to twice his annual base salary, the vesting of his outstanding options will be accelerated by two years and he will be entitled to reimbursement of COBRA premiums for the maximum period permitted by law. We also began maintaining a $5 million term executive life insurance policy on Mr. Thompson for the benefit of his family and coverage under our long term disability plan that would pay Mr. Thompson up to $20,000 per month following the 180th day after any disability.
The following table summarizes the value of the payouts to Mr. Thompson pursuant to Mr. Thompsons employment agreement and the Symantec Executive Retention Plan, assuming a qualifying termination as of March 30, 2007:
In the event that Mr. Thompsons employment is terminated due to his death or disability, the vesting of his outstanding options will be accelerated by two years. Additionally, in the case of his death, his designated beneficiary will be entitled to a single lump sum death benefit of $5 million (in accordance with Symantecs life insurance plan), and in the case of his disability, he will be entitled to disability payments of up to $20,000 a month after 180 days of continued disability (in accordance with Symantecs long term disability plan). If Mr. Thompson had died or if the Board had determined that he was disabled as of March 30, 2007, his beneficiaries would have received $5 million, or he would have thereafter begun receiving payments of $25,000 per month for 60 months followed by payments of $10,000 per month for 36 months, as the case may be, under these arrangements.
On February 10, 2006, Symantec entered into an employment letter agreement with James Beer. Pursuant to that agreement, Mr. Beer was granted an annual base salary of $650,000 and an annual bonus target of 80% of his annual base salary. Mr. Beer also received one-time bonus awards in the total amount of $2 million, payable within 30 days after his commencement of employment with Symantec. In addition, Mr. Beer received a separate one-time bonus award of $500,000, which was payable within 30 days of August 28, 2006. Under the terms of the agreement, Symantec also granted to Mr. Beer an option to purchase 300,000 shares of the companys common stock and 100,000 restricted stock units. Mr. Beer is eligible to participate in Symantecs employee and executive benefit programs, including Symantec Executive Retention Plan. The employment letter agreement also provides for severance in the event Mr. Beers employment is terminated without cause within the first three years of employment, which severance is comprised of an amount equal to 12 months of his base salary at the time of termination and full vesting of his initial grant of 100,000 restricted stock units. The payment of the foregoing severance benefits is subject to Mr. Beers returning a release of claims against Symantec.
The following table summarizes the value of the payouts to Mr. Beer pursuant to Mr. Beers employment letter agreement and the Symantec Executive Retention Plan, assuming a qualifying termination as of March 30, 2007:
Symantec entered into an employment agreement, dated December 15, 2004, as amended, with Kristof Hagerman, which became effective upon such closing on July 2, 2005. Under the terms of this employment agreement, Mr. Hagerman was awarded an annual base salary of $440,000 and an annual target bonus with a target payout of not less than 60% of his base salary. Mr. Hagerman was granted a stock option to acquire 87,500 shares of Symantec common stock at an exercise price of $21.22 (the closing price of Symantec common stock on the last trading day prior to the date the option was granted.) These options are scheduled to vest over a four-year period starting with Mr. Hagermans first day of employment with Symantec, with 25% of each option vesting after one year and the balance of the option vesting in 36 successive equal monthly installments. Mr. Hagerman is also
eligible to participate in Symantecs employee benefit plans and programs, and is entitled to all perquisites of other Symantec executives at his grade level. If the employment of Mr. Hagerman is terminated by Symantec without cause (as defined in such executives agreement) or is terminated due to death or permanent disability, or if Mr. Hagerman resign with good reason (i.e. material reduction in responsibilities, position or salary), then such executive is entitled to the following:
On January 14, 2004, Symantec entered into an offer letter with Thomas W. Kendra. Pursuant to that agreement, Mr. Kendra was granted an annual base salary of $325,000, which shall not be reduced during his employment with Symantec, and an annual bonus target of 60% of his annual base salary. Mr. Kendra also received a one-time bonus in the amount of $285,000 that was paid within 30 days of his hiring. Under the terms of the agreement, Symantec also granted to Mr. Kendra an option to purchase 300,000 shares of the companys common stock (on a split-adjusted basis). Mr. Kendra is eligible to participate in all employee benefit plans and perquisites applicable to an employee of his grade level.
The following table summarizes the value of the payouts to Mr. Kendra pursuant to the Symantec Executive Retention Plan, assuming a qualifying termination as of March 30, 2007:
The following table summarizes the value of the payouts to Ms. Chaffin pursuant to the Symantec Executive Retention Plan, assuming a qualifying termination as of March 30, 2007:
In 2007, Symantec adopted a written Related-Person Transactions Policy that sets forth the companys policies and procedures regarding the identification, review, consideration and approval or ratification of related-persons
transactions. For purposes of our policy only, a related-person transaction is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which Symantec and any related person are participants involving an amount that exceeds $120,000. Transactions involving compensation for services provided to Symantec as an employee, director, consultant or similar capacity by a related person are not covered by this policy. A related person is any Symantec executive officer, director, or more than 5% stockholder, including any of their immediate family members, and any entity owned or controlled by such persons.
Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transactions to the Nominating and Governance Committee for consideration and approval or ratification. The presentation must include a description of, among other things, the material facts, the interests, direct and indirect, of the related persons, the benefits to Symantec of the transaction and whether any alternative transactions were available. To identify related-person transactions in advance, Symantec employs an internal departmental canvassing process based on information supplied by its executive officers and directors. In considering related-person transactions, the Committee takes into account the relevant available facts and circumstances including, but not limited to (a) the risks, costs and benefits to Symantec, (b) the impact on a directors independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated, (c) the terms of the transaction, (d) the availability of other sources for comparable services or products and (e) the terms available to or from, as the case may be, unrelated third parties or to or from employees generally. In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations and approval. The policy requires that, in determining whether to approve, ratify or reject a related-party transaction, the Committee look at, in light of known circumstances, whether the transaction is in, or is not inconsistent with, the best interests of Symantec and its stockholders, as the Committee determines in the good faith exercise of its discretion.
The Nominating and Governance Committee has pre-approved the following types of related person transactions, even if the aggregate amount involved exceeds $120,000: (a) any transaction with another company at which a related person is a director or an employee if the aggregate amount involved does not exceed the greater of $2,000,000, or three percent of that companys total annual gross revenues, provided that the transaction involves the purchase of either companys goods and services and the transaction is subject to usual trade terms and is in the ordinary course of business and the related person is not involved in the negotiation of the transaction; (b) any compensation paid to a director if the compensation is required to be reported in Symantecs proxy statement under Item 402 of Regulation S-K; (c) any transaction where the related persons interest arises solely from the persons position as a director of the company that is a party to the transaction; or (d) any transaction where the related persons interest arises solely from the ownership of the companys common stock and all holders of the companys common stock received the same benefit on a pro rata basis (e.g. dividends).
Symantecs Certificate of Incorporation and Bylaws contain provisions that limit the liability of its directors and provide for indemnification of its officers and directors to the full extent permitted under Delaware law. Under Symantecs Certificate of Incorporation, and as permitted under the Delaware General Corporation Law, directors are not liable to Symantec or its stockholders for monetary damages arising from a breach of their fiduciary duty of care as directors, including such conduct during a merger or tender offer. In addition, Symantec has entered into separate indemnification agreements with its directors and officers that could require Symantec, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. Such provisions do not, however, affect liability for any breach of a directors duty of loyalty to Symantec or its stockholders, liability for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, liability for transactions in which the director derived an improper personal benefit or liability for the payment of a dividend in violation of Delaware law. Such limitation of liability also does not limit a directors liability for violation of, or otherwise relieve Symantec or its directors from the necessity of complying with, federal or state securities laws or affect the availability of equitable remedies such as injunctive relief or rescission.
The information contained in the following report of Symantecs Audit Committee is not considered to be soliciting material, filed or incorporated by reference in any past or future filing by Symantec under the Securities Exchange Act of 1934 or the Securities Act of 1933 unless and only to the extent that Symantec specifically incorporates it by reference.
The Audit Committee is comprised solely of independent directors, as defined in the Marketplace Rules of The NASDAQ Stock Market, and operates under a written charter which was most recently amended by the Board on July 19, 2005. The Audit Committee oversees Symantecs financial reporting process on behalf of the Board. Management has primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in Symantecs Annual Report on Form 10-K for the fiscal year ended March 30, 2007 with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements.
The Audit Committee reviewed with Symantecs independent registered public accounting firm, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of Symantecs accounting principles and such other matters as are required to be discussed with the Audit Committee under Statement on Auditing Standards No. 61, Communications with Audit Committees. In addition, the Audit Committee has discussed with the independent registered public accounting firm the registered public accounting firms independence from management and Symantec, including the matters in the written disclosures required by professional standards. The Audit Committee also received and reviewed the independence letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1.
The Audit Committee discussed with Symantecs internal accountants and independent registered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal accountants and independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of Symantecs internal controls, and the overall quality of Symantecs financial reporting.
The Audit Committee also received the report of management contained in Symantecs Annual Report on Form 10-K for the fiscal year ended March 30, 2007, as well as KPMGs Report of Independent Registered Public Accounting Firm included in Symantecs Annual Report on Form 10-K related to its audit of (i) the consolidated financial statements and financial statement schedule, (ii) managements assessment of the effectiveness of the internal control over financial reporting and (iii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee Symantecs efforts related to its internal control over financial reporting and managements preparations for the evaluation in fiscal 2008.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board has approved) that the audited financial statements be included in Symantecs Annual Report on Form 10-K for the fiscal year ended March 30, 2007 for filing with the SEC.
By: The Audit Committee of the Board of Directors:
David L. Mahoney
Robert S. Miller
David J. Roux
V. Paul Unruh (Chairman)
Requirements for Stockholder Proposals to be Brought Before an Annual Meeting. Symantecs bylaws provide that, for stockholder nominations to the Board or other proposals to be considered at an annual meeting, the stockholder must have given timely notice thereof in writing to the Corporate Secretary at Symantec Corporation, 20330 Stevens Creek Boulevard, Cupertino, California 95014, Attn: Corporate Secretary.
To be timely for the 2008 annual meeting, a stockholders notice must be delivered to or mailed and received by the Corporate Secretary of the company at the principal executive offices of the company between June 15, 2008 and July 15, 2008. A stockholders notice to the Corporate Secretary must set forth as to each matter the stockholder proposes to bring before the annual meeting the information required by Symantecs bylaws.
Requirements for Stockholder Proposals to be Considered for Inclusion in the Companys Proxy Materials. Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at Symantecs 2008 annual meeting must be received by the company not later than April 8, 2008 in order to be considered for inclusion in Symantecs proxy materials for that meeting.
Symantec will mail without charge, upon written request, a copy of Symantecs Annual Report on Form 10-K for fiscal year 2007, including the financial statements, schedule and list of exhibits, and any exhibit specifically requested. Requests should be sent to:
20330 Stevens Creek Boulevard
Cupertino, California 95014
Attn: Investor Relations
The Annual Report is also available at www.symantec.com.
Symantec has adopted a procedure approved by the SEC called householding. Under this procedure, Symantec is delivering to stockholders who reside at the same address and have the same last name a single copy of our annual report and proxy statement, unless Symantec has received contrary instructions from the affected stockholder. Each stockholder who participates in householding will continue to receive a separate proxy card. This procedure reduces our printing costs and postage fees, and helps protect the environment as well. Stockholders may revoke their consent at any time by contacting Broadridge ICS, either by calling toll-free (800) 542-1061, or by writing to Broadridge ICS, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717.
Upon written or oral request, Symantec will promptly deliver a separate copy of the proxy statement to any stockholder at a shared address to which a single copy of either of those documents was delivered. To receive a separate copy of the annual report or proxy statement, you may write or call Symantecs Investor Relations Department at 20330 Stevens Creek Boulevard, Cupertino, California 95014, Attention: Investor Relations, telephone number (408) 517-8324.
Any stockholders of record who share the same address and currently receive multiple copies of Symantecs proxy statement who wish to receive only one copy in the future can contact Symantecs Investor Relations Department at the address or telephone number listed above to participate in the householding program.
A number of brokerage firms have instituted householding. If you currently hold your Symantec shares in street name, please contact your bank, broker or other holder of record to request information about householding.
The Board does not presently intend to bring any other business before the meeting and, so far as is known to the Board, no matters are to be brought before the meeting except as specified in the notice of the meeting. As to any business that may arise and properly come before the meeting, however, it is intended that proxies, in the form enclosed, will be voted in respect thereof in accordance with the judgment of the persons voting such proxies.
1. Purpose. The purpose of this Symantec Corporation 2000 Directors Equity Incentive Plan (the Plan) is to provide members of the Board of Directors (the Board) of Symantec Corporation (the Company) with an opportunity to receive Common Stock of the Company for all or a portion of the retainer payable to each Director of the Company (the Retainer).
2. Stock Issuance. Subject to the approval of this Plan by the Stockholders of the Company, not less than 50% of the Retainer payable to each Director of the Company, currently set at $50,000 per year, shall be payable in the form of an award of unrestricted, fully-vested shares of Common Stock of the Company (the Stock).
3. Election by Directors. Each Director shall, at the first meeting of the Board held after Stockholder approval of this Plan and thereafter at the first meeting of the Board held in each fiscal year beginning with fiscal year 2002, elect to receive up to all of the Retainer payable to such Director in the form of Stock. Each Director shall specify what portion, from 50% to 100%, of the Retainer shall be paid to such Director in Stock; provided, that if no election is made by a Director at such meeting, such Director shall be deemed to have elected to receive 50% of the Retainer in Stock.
4. Amount of Stock. The number of shares of Stock to be issued each year to each Director pursuant to this Plan shall be the portion of the Retainer for such year which the Director has elected (or deemed to have elected) to be paid in Stock, divided by the fair market value of the Common Stock of the Company on the date such election is made (or deemed to have been made) by such Director (the Fair Market Value).
5. Number of Shares. The total number of shares reserved for issuance under the Plan shall be 150,000 shares of Common Stock. In the event that the number of outstanding shares of the Companys Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of shares reserved for issuance under this Plan, and (b) the Stock subject to outstanding awards under this Plan, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a share of Stock will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction of a share or will be rounded up to the nearest whole share, as determined by the Administrator (defined below).
6. Administration of Plan. This Plan shall be administered by the Board of Directors of the Company or by a committee of at least two Board members to which administration of the Plan is delegated by the Board (in either case, the Administrator). The Administrator shall ratify and approve all awards of Stock to the Directors pursuant to this Plan. All questions of interpretation, implementation, and application of this Plan shall be determined by the Administrator. Such determinations shall be final and binding on all persons.
7. Amendment to the Plan. The Board may at any time amend, alter, suspend or discontinue this Plan. No amendment, alteration, suspension or discontinuance shall require shareholder approval unless such amendment would increase the number of shares of Stock issuable under this Plan.