UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material under §240.14a-12 |
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NXP Semiconductors N.V.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box): |
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No fee required. |
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Fee paid previously with preliminary materials. |
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 |
NOTICE OF AND AGENDA FOR 2022
ANNUAL GENERAL MEETING OF SHAREHOLDERS
April 11, 2022
Dear Shareholders:
I invite you to attend the 2022 Annual General Meeting of Shareholders (the Annual General Meeting or AGM) of NXP Semiconductors N.V.
(we, us, our or the Company), which will be held on Wednesday, June 1, 2022 at 9:00 a.m. Central European Time at the Head Office of the Company, High Tech Campus 60, 5656 AG, Eindhoven, The
Netherlands. If meeting restrictions are implemented related to the coronavirus pandemic, we will publish updates on our website at http://investors.nxp.com and will issue a press release.
At the Annual General Meeting, we will discuss, and the Companys shareholders will vote on, the following items of business:
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Item 1 |
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Adoption of the 2021 statutory annual accounts |
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Item 2 |
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Discharge the members of the Companys Board of Directors (the Board) for their responsibilities in the financial year ended December 31, 2021 |
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Item 3 |
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Re-appointment of nine current directors and appointment of one new director named in this proxy statement |
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Item 4 |
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Authorization of the Board to issue ordinary shares of the Company (ordinary shares) and grant rights to acquire ordinary shares |
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Item 5 |
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Authorization of the Board to restrict or exclude pre-emption rights accruing in connection with an issue of shares or grant of rights |
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Item 6 |
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Authorization of the Board to repurchase ordinary shares |
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Item 7 |
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Authorization of the Board to cancel ordinary shares held or to be acquired by the Company |
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Item 8 |
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Non-binding, advisory vote to approve Named Executive Officer compensation |
In addition to the above voting items we will have a discussion of the dividend and reservation policy and the implementation of
the Companys long-term strategy. We will also consider any other business that properly comes before the Annual General Meeting. None of the proposals require the approval of any other proposal to become effective. We intend that this notice
of the Annual General Meeting and the accompanying proxy materials will first be made available on our website on or about April 11, 2022. In accordance with Dutch corporate law and our Articles of Association, the record date for determining
those shareholders entitled to notice of, and to vote at, the Annual General Meeting has been set at May 4, 2022. We will begin mailing proxy materials to our shareholders on or about May 9, 2022.
At the Annual General Meeting we will also present the consolidated financial statements and independent auditors report for the fiscal year ended
December 31, 2021. If any other matters properly come before the Annual General Meeting the persons named in the proxy card will vote in their discretion the shares represented by all properly executed proxies.
Messrs. Kaeser, Goldman and Smitham are retiring from our Board at the expiration of their terms as of the end of the Annual General Meeting and are not standing for re-election. Messrs. Kaeser and Goldman joined the Board in connection with NXPs IPO in 2010 and Mr. Smitham served on the Board since NXPs merger with Freescale Semiconductor in 2015. These
individuals have guided NXP through pivotal milestones in our companys history, and on behalf of the Board, we want to express our appreciation for their significant contributions to NXP throughout their tenure.
NOTICE OF AND AGENDA FOR 2022
ANNUAL GENERAL MEETING OF SHAREHOLDERS (continued)
YOUR VOTE IS VERY IMPORTANT. Please read this proxy statement and the accompanying proxy materials. Whether or
not you plan to attend the Annual General Meeting, please submit your proxy card or voting instructions as soon as possible.
By order of the Board of Directors of
NXP Semiconductors N.V.,
Jennifer B. Wuamett
Secretary
Eindhoven, The Netherlands
Important Notice Regarding the
Availability of Proxy Materials for the Shareholder Meeting to be Held on June 1, 2022
This proxy statement and the accompanying proxy card are first
being made available on or about April 11, 2022. This proxy statement, our 2021 Annual Report on Form 10-K and the 2021 Statutory Annual Report are available on our website at
http://investors.nxp.com by clicking Corporate Governance, then Annual Meeting.
We Strongly Encourage You to Sign Up For Electronic Delivery of Proxy Materials
Shareholders may request proxy materials be delivered to them electronically by enrolling at
https://enroll.icsdelivery.com/nxpi. Not only will this result in faster delivery of the documents but also allows our shareholders to join us in our efforts to support a sustainable future and mitigate our impact on the environment.
TABLE OF CONTENTS (continued)
ii
TABLE OF CONTENTS (continued)
iii
GENERAL INFORMATION
The Board of Directors (the Board) of NXP Semiconductors N.V. (we, our, us, NXP or the Company)
is providing these proxy materials to you in connection with the Boards solicitation of proxies to be voted on at NXPs Annual General Meeting of Shareholders (the Annual General Meeting or the AGM) on Wednesday,
June 1, 2022. We are requesting your vote on the proposals described in this proxy statement.
NXP will pay the entire cost of soliciting proxies. Our
directors, officers and employees, without additional compensation, may solicit proxies or votes in person, by telephone or by electronic communication. We may also reimburse brokerage houses and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to beneficial owners of NXPs common shares, 0.20 par value (the common shares or ordinary shares). In addition, we have retained Mackenzie Partners, Inc. to assist in the solicitation of proxies for a fee of $18,500 plus
reasonable expenses.
All shareholders as of the close of business on May 4, 2022 (the Record Date) are authorized to attend the Annual General
Meeting and all of NXPs outstanding common shares owned as of the Record Date may be voted. As of March 24, 2022, there were 262,552,688 common shares issued and outstanding and there were no other voting securities outstanding. Persons
that wish to attend the AGM must notify the Board of their intention to do so no later than May 25, 2022, one week prior to the date of the meeting, by submitting their name and the number of ordinary shares (beneficially) owned to NXP
Semiconductors N.V., High Tech Campus 60, 5656 AG Eindhoven, The Netherlands, Attention: Secretary, or by sending an email with such information to nxp.agm@nxp.com. All attendees must be prepared to provide a valid proof of identity for admittance,
such as a drivers license or passport. The additional items that attendees must bring depends on whether they are shareholders of record, beneficial owners or proxy holders. Shareholders holding their shares through a broker must bring proof
of beneficial ownership as of the Record Date, such as an account statement reflecting their share ownership on or prior to the Record Date, a copy of the voting instruction form provided by their broker or similar evidence of ownership in order to
obtain admittance to the Annual General Meeting. No cameras or other recording equipment will be allowed in the meeting room. Failure to provide the requested documents at the door or failure to comply with the procedures for the AGM may prevent
shareholders from being admitted to the AGM.
If meeting restrictions are implemented related to the coronavirus pandemic, we may determine to implement meeting
restrictions or protocols or, if authorized by Dutch corporate law, hold a virtual general meeting of shareholders. If you are planning to attend the AGM, please check the http://investors.nxp.com website prior to the meeting date and note
the attendance requirements in the paragraphs above. We encourage you to monitor http://investors.nxp.com for updated information, and please check this website in advance of the AGM to confirm the status of the meeting. As always, we
encourage you to vote your shares prior to the AGM. We kindly refer to the section titled Voting Procedures below for more details on how to exercise your voting rights.
These proxy materials include this proxy statement and NXPs 2021 Annual Report on Form 10-K for the year
ended December 31, 2021, as filed with the U.S. Securities and Exchange Commission (SEC).
The Board recommends that you vote your shares as
follows:
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For the adoption of the 2021 statutory annual accounts as described in Item 1; |
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For the discharge of members of the Board for their responsibilities in the financial year 2021 as described in
Item 2; |
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For the re-appointment of nine directors and appointment of one new
director listed in Item 3 to the Board; |
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For the authorization of the Board to issue ordinary shares of the Company and grant rights to acquire ordinary
shares as described in Item 4; |
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For the authorization of the Board to restrict or exclude pre-emption
rights accruing in connection with an issue of shares or grant of rights as described in Item 5; |
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For the authorization of the Board to repurchase ordinary shares as described in Item 6;
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For the authorization of the Board to cancel ordinary shares held or to be acquired by the Company as described
in Item 7; and |
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For the approval, on a non-binding, advisory basis, of the compensation
of our Named Executive Officers as described in Item 8. |
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VOTING PROCEDURES
Beneficial Owners
If your
shares are held in a stock brokerage account or by a bank, trustee or other nominee, which we refer to as your broker, you are considered to be the beneficial owner of these shares, and these proxy materials are being forwarded to you by
your broker. As the beneficial owner, you have the right to direct your broker how to vote on your behalf, and you are also invited to attend the Annual General Meeting. Your broker will send you a voting instruction form to direct the broker how to
vote your shares. Since you are not the shareholder of record, you may not vote these shares in person at the Annual General Meeting unless you obtain a legal proxy from your broker giving you the right to vote the shares at the Annual General
Meeting. The majority of our shareholders are beneficial owners (i.e., hold their shares through a broker rather than directly in their own name). Please refer to the voting instruction form provided by your broker for specific voting
procedures.
Shareholders of Record
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Co., you are considered to be the shareholder of
record with respect to those shares and these proxy materials are being sent to you by us. As the shareholder of record, you have the right to vote your proxy directly to NXP by submitting a written proxy or to vote in person at the Annual General
Meeting. If you request printed copies of the proxy materials by mail, you will receive a proxy card. Please refer to the summary voting instructions and those included on your proxy card.
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InternetYou may vote by proxy on the Internet until 4:00 p.m. Eastern Time (10:00 p.m.
Central European Time) on May 31, 2022. The website for Internet voting is http://www.proxyvote.com. Easy-to-follow prompts allow you to vote your shares
and confirm that your instructions have been properly recorded. If you vote on the Internet, you can request electronic delivery of future proxy materials. |
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TelephoneYou may vote by proxy until 4:00 p.m. Eastern Time (10:00 p.m. Central
European Time) on May 31, 2022 by using the toll-free number listed on your proxy card. Easy-to-follow prompts allow you to vote your shares and confirm that
your instructions have been properly recorded. |
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MailMark, sign and date your proxy card and mail it to the address listed on the
card or NXP at High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary. In order for your vote to be counted, we must receive your proxy card no later than two days before the Annual General Meeting. |
Revocability of Proxy
If
you are a beneficial owner of shares, please refer to the instructions provided by your broker regarding how to change your vote.
If you are a shareholder of
record, you may revoke a proxy given to a representative of NXP in any of the following ways:
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by sending a written notice of revocation to NXP at High Tech Campus 60, 5656 AG Eindhoven, The Netherlands; Attention:
Secretary, which notice must be received before shares of such shareholder are voted at the Annual General Meeting; or |
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by properly submitting a later-dated, new proxy, which must be received before shares of such shareholder are voted at the
Annual General Meeting (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or |
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by attending the Annual General Meeting and voting in person. Attendance at the Annual General Meeting will not, however, in
and of itself, constitute a vote or revocation of a prior proxy. |
General Matters
Pursuant to Dutch law, (i) common shares which are represented by broker non-votes (i.e. common shares held by
brokers which are represented at the Annual General Meeting but which brokers are not empowered to vote on a particular proposal) and (ii) common shares represented at the Annual General Meeting, but which abstain from voting on any matter, are
not included in the determination of the common shares voting on such matter, and are only counted for quorum purposes.
If you do not submit specific voting
instructions to your broker, your broker will not have the ability to vote your shares in connection with proposals which are considered non-discretionary items for which brokerage firms require
your voting instructions to vote your shares.
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VOTING PROCEDURES (continued)
Each share will be entitled to one vote. According to the Companys Articles of Association, the chair of the
Annual General Meeting determines the method of voting, establishes the outcome of the votes taken, and determines the existence of a quorum and validity of proxies and ballots, and certifies the results of the voting.
The adoption of resolutions at the Annual General Meeting shall require that at least the majority of the issued and outstanding shares of the Companys issued
share capital is present or represented, excluding shares for which no vote can be cast pursuant to article 29, paragraph 2 of the Companys Articles of Association. Unless otherwise provided for in this proxy, resolutions can be
adopted with a simple majority of votes cast.
Other than the proposals described in this proxy statement and matters incident to the conduct of the Annual General
Meeting, we do not expect any matters to be presented for a vote at the Annual General Meeting. However, if you grant a proxy and additional matters are properly presented for a vote at the Annual General Meeting, the persons named as proxy holders,
Jennifer B. Wuamett or Timothy Shelhamer, will have the discretion to vote your shares on these additional matters. If for any unforeseen reason one or more of our nominees is not available as a candidate for director, the persons named as proxy
holders will vote your proxy for such other candidate or candidates as may be nominated by the Board and presented to the Annual General Meeting in accordance with Dutch law.
We expect to announce preliminary voting results at the Annual General Meeting. Final voting results will be published in a Current Report on Form 8-K filed with the SEC within four business days of the Annual General Meeting. If the final voting results are not available within four business days after the Annual General Meeting, we will provide the
preliminary results in the Current Report on Form 8-K and the final results in an amendment to the Current Report on Form 8-K within four business days after
the final voting results are known to us.
CORPORATE GOVERNANCE
NXP Semiconductors N.V. is the parent company of the NXP group. Our only material asset is our direct ownership of 100% of the share capital of NXP B.V., a Dutch private
company with limited liability (besloten vennootschap met beperkte aansprakelijkheid).
We were incorporated in the Netherlands as a Dutch private company
with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under the name KASLION Acquisition B.V. on August 2, 2006. On May 21, 2010, we converted into a Dutch public company with limited liability (naamloze
vennootschap) and changed our name to NXP Semiconductors N.V. In August 2010, we listed our common shares on the Nasdaq Global Select Market (Nasdaq).
We are subject to various corporate governance requirements and best practice codes, the most relevant being those in the Netherlands and the United States. The Dutch
Corporate Governance Code (the DCGC) applies to all Dutch companies listed on a government-recognized stock exchange, whether in the Netherlands or elsewhere. The DCGC is based on a comply or explain principle. Accordingly,
companies are required to disclose in their annual reports filed in the Netherlands whether or not they comply with the various rules of the DCGC and if they do not comply with those provisions, to give the reasons therefore. The DCGC contains
principles and best practice provisions for boards, shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards.
Our long-term strategy is to maximize value for our shareholders and other stakeholders and create strong cash flow generation by driving relative market share
leadership with profitable growth at 1.5 times the semiconductor market and exceeding customer expectations. We are committed to innovating for a better tomorrow for our customers, team members, communities, and society as a whole. Our purpose is
bringing together bright minds to create breakthrough technologies that make the connected world better, safer and more secure. The Board is committed to maintaining a dialogue with shareholders to ensure that they understand our differentiated
strategy and business model and have an opportunity to discuss and engage on a broad range of topics, including our strategy. The Board will review the implementation of our strategy at the AGM.
We conduct our operations in accordance with internationally accepted principles of good governance and best practice, while ensuring compliance with the corporate
governance requirements applicable in the countries in which we operate:
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We have a transparent corporate structure, with approval rights of our general meeting of shareholders for any significant
change in the identity or nature of our Company or business; |
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Each share of our common stock confers the right to cast one vote at the general meeting of shareholders;
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CORPORATE GOVERNANCE (continued)
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Our directors are appointed for one year terms; |
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We do not have a poison pill in place; |
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We only have outstanding common stock, and no preference shares are issued, and such shares cannot be issued without
majority shareholder approval; |
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Our share capital only exists of common shares and preference shares, no priority or other shares with special voting rights
are included in our share capital; |
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Any issuance of common or preference shares, for any reason, is subject to the approval of the general meeting of
shareholders; and |
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We allow special meetings of our shareholders to be called upon the written request of shareholders holding at least 10% of
our outstanding voting stock. |
The Board, as well as the management team and the NXP Ethics Committee, promote openness and engagement through
SpeakUp, a confidential reporting system described in more detail below. Furthermore, we maintain a Code of Conduct in order to promote a culture of good governance, excellence and consistency that applies to all of our directors, officers and
employees and complies with the requirements of the Sarbanes-Oxley Act of 2002, and the rules thereunder, as well as applicable Nasdaq listing standards. A copy of the Code of Conduct is available on our Investor Relations website at
http://investors.nxp.com under the Corporate Governance section. We will post any amendments to, or waivers from, our Code of Conduct (to the extent applicable to any director or any of our executive officers) on this website.
The Code of Conduct outlines our general commitment to be a responsible social partner and the way in which we attempt to interact with our stakeholders, including
shareholders, suppliers, customers, employees and the market. It covers our policy on a diverse array of subjects, including corporate gifts, privacy, child labor, International Labor Organization conventions, trade compliance, working hours, sexual
harassment, free-market competition, bribery and the integrity of financial reporting.
The Code of Conduct is built around the campaign Know Right, Do
Right and consists of a framework of a variety of controls, a strict non-retaliation policy, a training program for employees, the SpeakUp telephone line where people can report potential issues in a
confidential manner, a confidential investigation process, risk assessments, background checks and audits. Any reports related to the Code of Conduct are brought to the attention of our Ethics Committee to ensure that all reports are properly
investigated and addressed. Each quarter the Ethics Committee communicates to the Audit Committee a summary of all reports and investigations.
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG)
Enabling a better, safer, more secure, and sustainable world
As a company focused on innovation, we are known for our ability to solve problems and address societal challenges, and we have continued to advance the scope of our ESG
efforts to align with new challenges and opportunities. We recognize that stakeholder interest and expectations regarding our ESG efforts have evolved considerably over the last fifteen years. Today, we are focused on integrating ESG into our
business and leveraging our technology to enable a more sustainable world.
In our view, the rapid pace of technological change is not without its challenges, but we
look to the future with optimism. We believe in furthering our legacy of sustainable innovation and will continue to apply our technologies in ways that help advance global sustainability. We embrace the opportunity to inspire people and shape the
future while also positioning ourselves for sustained success.
We report our progress annually in our corporate sustainability report, which includes more details
about our commitment to sustainable practices, products that support a sustainable future, and transparency and accountability in our business and supply chain for focused ESG topics. Our corporate sustainability report is available on our website
(http://www.nxp.com/CSR). The corporate sustainability report is expressly not part of this proxy statement.
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ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
2021 ESG Highlights
Our ESG Goals
Our ESG mission is to enable
a better, safer, more secure, and sustainable world through innovation. That mission has given rise to a series of aspirational goals that inform our efforts and enable us to gauge our performance and celebrate our accomplishments.
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ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
ESG Performance & Reward Program
Beginning in 2022, NXP has incorporated Sustainability goals into our annual incentive plan. We anticipate that including key sustainability goals as part of our annual
incentive plan will enhance team member accountability regarding key aspects of our performance and our efforts to achieve continuous improvement.
Environment
Optimizing our resource use and consumption, minimizing waste, and
continuously improving
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Long-Term
Ambitions |
Carbon
Neutral by
2035 |
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Minimize Impact on
Global Water Supplies |
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Develop Collaborative
Circular Economy Solutions |
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Reduce Use of
Targeted Chemicals of
Concern |
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Collaborate with our
Suppliers to Reduce their Environmental Footprint |
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2027 Mid-Term Goals |
35% Reduction in Scope
1 & 2 Carbon Footprint
(2021 Baseline) |
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50%
Renewable Energy Use |
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60% of
Wastewater Recycled |
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90% Waste
Recycled |
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Work with Our Supply Chain
to Reduce Impacts and Measure Our Portion of
their Carbon Footprint |
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2021 Environmental
Performance |
11% Decrease in
Normalized Scope 1 & 2
Emissions from 2020 |
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31%
Renewable Energy Use |
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11% Decrease in
Normalized Water
Consumption from 2020 |
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76% Waste
Recycled |
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Successfully Identified Alternatives to Using
Phthalates in Dicing Tapes |
As an environmentally responsible manufacturer committed to continuous improvement, we strive to optimize our use of natural resources,
minimize releases to the environment, and achieve operational efficiencies. We maintain and implement an environmental management system and several programs to support these objectives. In accordance with criteria from the International
Organization of Standardization (ISO), our environmental management system is certified to ISO 14001 at all of our manufacturing sites.
Emissions
Our manufacturing sites generate Scope 1 (direct) and Scope 2 (indirect) Greenhouse Gas (GHG) emissions. We measure our carbon footprint according to the GHG Protocol, a
set of internationally recognized standards for quantifying and reporting GHG emissions. We report on all three of the protocols defined categories: Scope 1 (direct emissions), Scope 2 (indirect emissions, owned), and partial Scope 3 (business
travel and product transportation).
Electricity, Perfluorinated Compounds (PFCs), and heat transfer fluids (HTFs) are essential to
semiconductor manufacturing. We have set reduction goals for both Scope 1 & 2 because it is not currently feasible to eliminate these sources of emissions from our production processes. To keep ourselves accountable, our reduction goals are
aligned with the Science Based Targets initiative, which accepted our application in March 2022.1
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Science-based targets provide guidance to companies regarding their efforts to reduce emissions in line with goals of the
Paris Agreement. |
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ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
In 2021, the demand for our products increased 22% compared to 2020. That meant our electricity, PFC2, and HTF consumption increased, however, our normalized Scope 1 & 2 emissions decreased by 11% from 2020. Since 2011, we have lowered normalized emissions by 39% and absolute emissions by 28%.
Market-based emissions reflect actual data directly from energy providers.
Energy
Primary sources of energy for our manufacturing, testing, and office
sites come from the electrical grid, and purchase of renewable energy when available.
Electricity
Our product demand increased by 22% in 2021. As a result, our absolute electricity consumption increased by 5%, while our normalized electricity decreased by 14%
compared to 2020. In 2021, 31% of our overall electricity use was from renewable energy sources. We continue to look for new ways to increase our use of renewable energy sources through power purchase agreements.
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We use Intergovernmental Panel on Climate Change (IPCC) 2006 for PFC reporting, but will transition to IPCC 2019 in
2022. |
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ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
Water
Since drastically
reducing the amount of water used within our manufacturing processes is not currently feasible, we anticipate that our demand for water will increase in line with our increases in production. To reduce the amount of incoming water we consume, we
focus on a mid-term goal of increasing our water recycling rate to 60% by 2027.
In 2021, the demand for our products
increased 22% compared to 2020. As a result of this demand, our absolute water consumption increased by 9% compared to 2020, however, our normalized water consumption decreased by 11% from 2020. Our water conservation kept our absolute
water-consumption level low and helped us achieve a 14% decrease in normalized water consumption compared to 2011. Our rate of water recycling has increased by 17 percentage points, and in 2021 we recycled 45% of our water.
Waste
NXP continues to actively evolve our
approach to the sourcing, consumption, and disposal of materials critical to the manufacturing and testing of our products. In 2021, our production increased by 22% from 2020 and, as a result, our total waste generation increased by 18%. In 2021, we
recycled 76% of our total waste (non-hazardous and hazardous), an increase of 7 percentage points from 2020.
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ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
Human Capital Management
Our Team Members: The Heart of NXP
At NXP, our
diverse and talented team members drive the innovation that sets our company apart and fuels our success in the market.
Our Purpose
Bringing together bright minds to create breakthrough technologies that make the connected world better, safer, and more secure.
Our Values
Our values are our fundamental beliefs and guiding principles. They
speak to how we operate, how we engage, develop, and value our team members, and push the boundaries of creativity and innovation. We hold ourselves accountable to our values by including them in our performance evaluation process.
We have a long history of empowering our team members to develop their skill sets and expand their capabilities. When it comes to
engagement and development, we want our team members to grow, progress, and advance across job types, functions, organizations, geographies, and levels at a pace that is unique to them.
Our Policies and Programs
Across the globe, we have policies and programs to
find and retain the best talent possible. We focus on driving team member engagement; building thought leadership; embracing diversity, equality and inclusion; providing competitive and fair compensation and benefits; enabling talent development and
growth opportunities; investing in future talent; focusing on team member retention; and giving back to our communities.
We monitor our talent pool, turnover
trends, and analyze team member feedback. In addition, we are committed to having a diverse workforce, as evidenced by the many advancements weve made in this space over the last 18 months. We are progressing along our journey to further
foster a progressive and inclusive culture for our talented team members across the world.
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ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
Workforce Demographics
NXPs workforce includes direct labor (DL) and indirect labor (IDL). DL are those team members directly involved in manufacturing our
products and typically work in our factories, while IDL consists of individual contributors, managers, and executives in other functions such as research and development (R&D) and selling, general and administrative
(SG&A). At December 31, 2021, we had approximately 31,000 employees, which includes approximately 1,500 employees in our joint venture. Our NXP global workforce spans three regions encompassing 30+ countries and includes
approximately 9,300 team members dedicated to research and development of our products and solutions.
Focusing on Team Member Retention
In 2021,
workplaces across the globe were met with the challenge of team member turnover, with terms like The Great Resignation and The Big Quit coming to life to describe the economic trend that showed itself via mass voluntary
resignations.
While its true that NXP saw a year-over-year increase in team member turnover, we also saw voluntary turnover stabilize in March 2021, and has
remained relatively flat, and since down over the second half of 2021 versus the first half of 2021.
To address concern for retaining talent, we launched several initiatives and committed resources devoted to retention actions for
strategic roles and top-performing talent, as well as programs targeting all team members, including global flexible work arrangements, continuous focus on well-being, consistent communications, and business
updates. We also expanded our hiring practices and focused attention on our global manufacturing team members.
Driving Team Member Engagement
Engaging, developing, and valuing our team members is how we create long-term value for our stakeholders.
Engaging Team Members through Surveys
To
assess and improve team member engagement, NXP regularly conducts our global Winning Culture Survey. We invite NXP team members to share their level of agreement on a variety of factors, including engagement, strategy, culture, leadership,
continuous improvement, collaboration, execution, accountability, work environment, and support. Surveys are administered by a third party to ensure confidentiality.
10
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
The results of our end of 2020 survey tell us that our team members are engaged, feel pride in the company, and believe
that NXP is a great place to work, among other things:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Response Rate |
|
Engagement |
|
Great Place to Work |
|
Proud |
|
Valued |
|
|
|
|
|
90% |
|
84% |
|
82% |
|
89% |
|
81% |
Insights from our survey equip us to improve the team member experience and work on our policies and processes. Weve converted some
team member feedback into company and/or country-specific programs and made updates to our tools and resources. This includes focusing on the well-being of our team members and introducing global flexible work arrangements to help team members
achieve greater work/life balance.
External Awards & Recognition
NXP is honored to have received external awards and recognition for our commitment to human capital development. Some of the honors received include:
|
|
|
For the fourth year in a row (2022, 2021, 2020 and 2019), NXP received the Leading Employer Award in Austria and was
rated the number two semiconductor company in Austria by the Leading Employer Institute. |
|
|
|
NXP was recognized for its strong mentoring efforts and active participation in the Business Cross Mentoring program in
Austria, which supports women who are high-potential managers in technical domains with growing their skills and network. |
|
|
The Netherlands: For the second year in a row (2021 and 2020), NXP has been awarded the title of Most Attractive
Employer in the Netherlands by Randstad; in 2019, NXP was named a runner-up for the award. |
|
|
Mainland China and Taiwan: |
|
|
|
NXP was one of only seven companies to receive the 2021 Industrial Relations Excellence Award in Taiwan, recognizing our
collaborative and healthy working relationship with the union representing our employees. |
|
|
|
NXP received the 2021 Charity Award from the Economic Affairs Authority. |
|
|
Thailand: NXP was recognized by the Thailand Ministry of Public Health for integrating additional measures of health
and disease prevention in response to the COVID-19 pandemic. |
|
|
|
NXP was named a 2021 Best Place to Work in Austin by Comparably, which is given to companies based on team member
satisfaction ratings for leadership, diversity, meetings and more. |
|
|
|
NXP was named a 2021 JUST Company by JUST Capital, which ranks the performance of Americas largest publicly traded
companies on issues that matter most in defining just business behavior today. To finalize the list, JUST Capital tracked, analyzed, and ranked 954 companies, covering 20 issues and 330 unique data points. NXP ranked 115 of the total companies and 6th of the 31 semiconductor and equipment companies. |
Building Thought Leadership
Our talented, innovative team members accelerate breakthroughs that help advance our world.
11
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
Investing in R&D
Through our innovations, NXP products help to build future advancements in automotive, communication infrastructure, industrial, mobile, smart city, and smart home
technologies. We design purpose-built, rigorously tested technologies that enable devices to sense, think, connect and act intelligently to improve peoples daily lives.
Developing Thought Leaders
We are committed to
building thought leaders, which is evidenced by nearly 9,300 team members (representing 31% of our IDL workforce) who are specifically dedicated to R&D. Through broad exposure to job-based development
activities, we have been able to advance 11% of these team members in 2021 through internal promotions. In addition, we hired 1,523 new R&D team members, named 26 technical directors, seven program directors and four new fellows. Our consistent
focus on R&D and innovation resulted in NXP being awarded more than 1,150 individual patents during 2021.
Embracing Diversity,
Equality, and Inclusion
At NXP, we value diversity, equality and inclusion, and respect the unique talents, experiences, backgrounds, cultures, and ideas of
our team members. We invite everyone to be their authentic selves at work, without exception. This is what makes us who we are at NXP. As an ongoing demonstration of our commitment, we invest in initiatives and resources to drive cultural awareness
across the company, spearheaded by our Head of Diversity, Equality and Inclusion (DE&I).
NXP made significant progress on our DE&I journey in
2021. We started the year with increased transparency of our team member demographics by communicating our global gender and U.S. race and ethnicity representation data in our 2020 Corporate Sustainability Report, and defined internal goals to
increase representation over time. Additionally, our Head of DE&I met with each member of our Management Team, as well as the Human Resources and Compensation Committee of our Board of Directors to discuss the 2021 DE&I strategy and plans.
Our progress toward our representation goals was regularly reviewed with these leaders throughout the year.
To help define our aspirational and interim
representation goals, we developed a tool to analyze our representation results in comparison to our hiring and attrition trends and developed internal dashboards to help track progress towards our goals.
When it comes to hiring, we began requiring diverse candidate slates for management roles and increased our Employee Referral Program award amounts when qualified women
or, in the United States, under-represented minorities are hired via a referral for positions in specific countries.
To gain a better understanding of whats
contributing to the attrition of women globally and minority team members within the United States, we implemented an exit interview process where team members at specified job levels are given the opportunity to provide direct feedback to the Head
of DE&I prior to exiting the company.
Additionally, we participated in the Bloomberg Gender Equality Index for the first time to demonstrate our commitment to
promoting gender equality and an inclusive workplace, to help establish a comparable data set within our industry.
We also announced our global Diversity, Equality
and Inclusion Policy, which outlines our key belief that every team member should be treated with respect. We do not tolerate discrimination based on race, national origin, social origin, color, gender, religion, age, pregnancy, sexual orientation,
physical or mental disability, or political affiliation, among other things. Nor do we tolerate physical, verbal, sexual or psychological harassment, bullying, abuse, or threats of any kind. We have also increased our DE&I communications and
programming, including the launch of Inclusion Insights a new practice of starting our formal meetings with a brief discussion focused on inclusion, regular contributions to our weekly company-wide newsletter, and through our Inclusive
Language Project and Employee Resource Group (ERG) engagement activities.
We increased our ERG footprint by establishing a new chapter of Equalour LGBTQ ERG
in Europe and created two new ERGs: No eXtra Planet (which focuses on environmental sustainability) and Interconnection (which supports team members in Europe from multicultural backgrounds). We now have eight primary ERGs, with representation in
Asia, Europe, Mexico, and the United States.
12
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
Approach
NXPs approach to diversity, equality and inclusion is centered around leadership commitment and accountability; building and sustaining a qualified, diverse talent
pipeline and equitable processes; and fostering an inclusive culture and a sense of belonging to attract and retain the best talent by welcoming and embracing our team members diversity and fostering respect for everyones differences,
leveraging the diversity of thought and life experiences and cultivating a collaborative work environment where team members feel valued and are comfortable being their true selves.
We also support and adhere to all diversity-related legal and compliance requirements, which vary by country. In the United States, for example, we partner with an
outside law firm to achieve these goals.
Representation Goals
To support our diversity, equality and inclusion approach and demonstrate our commitment to transparency and accountability, we have established aspirational 2025
DE&I goals to improve our gender representation globally and minority race and ethnicity representation in the United States.
We continue to focus on hiring,
development, and retention across all global sites to meet our 2025 representation goals among our team member population:
|
|
|
|
|
|
|
|
|
|
2025
Diversity, Equality and Inclusion Goals |
|
|
|
|
|
40% Women in
Overall Global Workforce |
|
30% Women in Global Indirect Labor Workforce |
|
20% Women in
Executive Positions |
|
25% Women in R&D Positions |
|
50% Minority Representation in the United States |
|
|
|
2021
Diversity, Equality and Inclusion Performance |
|
|
|
|
|
37% |
|
24% |
|
13% |
|
17% |
|
49% |
In a competitive hiring market, our overall team member population grew by nearly 8% compared to 2020. Of this increased population, with
the exception of the representation of women in executive positions, we saw a 1% increase for each of the goals in 2021 when compared to 2020. While we present gender representation headcount (HC) data by men and women, we acknowledge this is not
fully encompassing of all gender identities.
Gender Representation
At NXP, women represent 37% of our global workforce (up 1% year-over-year), and we continue to strive for noticeable improvements in hiring women across all global
sites. Additionally, we are committed to increasing, developing, and promoting more women into technical and leadership positions within our organizations.
13
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
To that end, we monitor gender statistics globally, across all roles, and look for continuous improvements, which
include an evaluation of the practices at the country level. Each country leadership team focuses on how to ensure we are making improvements, where needed.
Race and Ethnicity Representation
In the United States, we monitor race and ethnicity representation to ensure we are attracting,
retaining and developing diverse team members, acknowledging the unique nature of the United States workforce dynamics.
A breakdown of NXPs United States
population, as of December 31, 2021:
|
|
|
|
|
Race and Ethnicity (United States Only) |
|
Representation |
|
White (Not Hispanic or Latino) |
|
|
51 |
% |
Asian (Not Hispanic or Latino) |
|
|
20 |
% |
Hispanic or Latino |
|
|
15 |
% |
Undeclared |
|
|
7 |
% |
Black or African American (Not Hispanic or Latino) |
|
|
5 |
% |
Two or More Races (Not Hispanic or Latino) |
|
|
1 |
% |
Native American or Alaska Native (Not Hispanic or Latino) |
|
|
0.6 |
% |
Native Hawaiian or Other Pacific Islander (Not Hispanic or
Latino) |
|
|
0.2 |
% |
Providing Competitive and Fair Compensation and Benefits
NXPs competitive compensation and benefits programs are designed to attract the best talent and drive the best performance across all areas of our diverse
workforce.
Compensation
NXP provides
team members with total rewards packages consisting of base salary, short-term incentives, and equity-based long-term incentives for some team members as well as competitive benefits aimed at supporting team members financial, physical, and
mental well-being.
Rewarding performance is a critical foundation for our overall program. NXP is committed to managing all reward-based compensation programs,
including merit increases, annual incentive program (AIP) payouts and long-term incentive awards, to deliver on our pay-for-performance philosophy.
NXP has policies and procedures in place to promote pay equity, and diligent reviews are performed twice a year alongside the rewards processes. We also developed a
proactive process to evaluate each reward-based compensation program in real-time and provide leaders with feedback to ensure fair and equitable compensation while decisions are being made. We continue to use analytical tools to assess potential
compensation recommendations that need further review prior to these recommendations becoming effective in order make appropriate adjustments and promote pay equity. We use this process globally to evaluate these compensation-related decisions based
on a variety of factors, including gender and, in the United States, race and ethnicity.
NXP relies on third-party data to establish fair, equitable and competitive
compensation and benefits programs. We then empower leaders to recognize both individual and team accomplishments through a variety of compensation programs. Rewards decisions are linked to a team members performance evaluation. A formal
assessment of both specific achievements, and the individuals demonstrated behaviorsconsistent with our valuesto deliver those achievements, is performed annually.
Benefits
NXP helps our team members maintain
their health and financial well-being by supplying benefits that may include an employee stock purchase plan, life insurance, business travel accident insurance, personal accident insurance, paid maternity and paternal leave, personal time off,
tuition reimbursement and other employee assistance programs.
14
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
In addition, we offer a global Flexible Work Arrangement program, which offers eligible team members the ability to work
a combination of on-site and remotely. Although our way of working focuses on meaningful face-to-face interactions, we have
incorporated flexibility into our work arrangements in a way that allows us to maintain the focus on strong and effective teamwork, collaboration, and community.
In
some countries, we also support part-time work schedules, helping to support the overall well-beingand greater work-life balancefor our team members.
Enabling Talent Development & Growth Opportunities
NXP has a long history of empowering our team members to develop their skill sets and expand their capabilities.
NXP is committed to continuous learning, including mechanisms for learning through
on-the-job development experiences (70%), through others (20%), and through formal education (10%). By utilizing the 70/20/10 model, learning can achieve new levels
through experience, collaboration, and education. Using a blend of internally designed and externally sourced courses and learning resources, we offer our team members around the globe a variety of training programs that provide real-time learning
opportunities in support of key business processes, requirements, and initiatives. We also provide a library of on-demand skills development and microlearning resources to all our team members.
Investing in Future Talent
NXPs strong
commitment to our internship programs is a key contributor to developing the new generation of talent, including engineers, in our industry and company.
Interns
Our internship programs focus on the students technical advancement and skills development that are
needed as they prepare to enter the professional workforce. In 2021, despite the challenges of the COVID-19 pandemic, we continued to welcome university students to NXP through a virtual internship program,
allowing us to keep building the talent pipeline despite the global challenges we faced.
In 2021, NXP granted more than 800 internships to university students and
converted 40% of our interns into an NXP team member.
New College Graduates
Our internship programs build a highly capable and energetic new college graduate pipeline. In 2021, we were pleased to welcome approximately 644 new college graduates,
an increase over the 470 new college graduates we hired in 2020. These hires represent 24% of our overall IDL hiring activity, in which 30% of the new college graduate hires were women.
University Partnerships and Engagement
Through our partnerships with universities across the world, we fund and support advanced research programs and projects that demonstrate our commitment to investing in
the future of not only technology, but also the students knowledge and skills. Quite often, these partnerships translate into new and exciting solutions for our customers and markets.
To drive deeper awareness and engagement with our university partnerships, NXP created a University Relations Council, whose goal is to drive a coherent and aligned
approach towards university partnerships by linking recruitment, global sales and marketing, and R&D programs.
15
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
Our 2021 university funding and commitment was diverse and allowed us to support advanced research programs and
sponsorships, including the following:
|
|
Nearly 80 university projects: in countries across the globe, including Austria, Belgium, Czechia, France, Germany,
Ireland, Netherlands, Poland, Romania, Sweden, Switzerland and the United Kingdom, among others, led by NXP, with support from most business lines and functions. |
|
|
+70 projects with the Semiconductor Research Consortium (SRC): projects engaged NXP liaisons in Canada and the United
States with university professors and students on advanced silicon design, production, and manufacturing processes. In addition, these programs provided students with a path for technology transfer and expertise for the industry.
|
|
|
EcoCar: a US Department of Energy program, allowed NXP to work with 12 universities across the United States to
develop more economic, environmentally friendly, and connected vehicles. NXP looks forward to the finals ceremony and the selection of winners in 2022. |
|
|
2021 NXP Cup: invites participants to an autonomous robotics and automotive challenge. Participants design and build
a car, design the software program, and race a pro-level autonomous car against other teams while aiming for the fastest time and precise maneuvering. The 2021 virtual event engaged more than 100 university
teams in Europe. The virtual and live finals event drew more than 3,000 views on YouTube. |
|
|
2021 NXP Hover Games 2 Challenge: incorporates NXP technology in drones to help others during an emergency. We
engaged more than 630 participants, of which 30% were students, with strong participation from India and the United States. |
|
|
2021 NXP Smart Car Race Design Challenge: the Indian engineering student community focused two days on artificial
intelligence in mobility, where students were invited to showcase and race their driverless car prototypes on a virtual racetrack, using skills in the areas of coding, AI algorithms, sign recognition, sensor, motion detection camera vision, image
processing and more. More than 620 students registered for the event from more than 24 states and 87 universities. Seventeen teams of 57 students were short-listed for the two-day grand finale of live races,
with an in-depth evaluation from external judges. |
Giving Back to our Communities
At NXP, we believe in making a positive difference in the communities in which we live and work. We are committed to supporting these efforts across the globe
and encourage our team members to give generously of their time, resources, and talents to impact our communities. Many major NXP sites have their own volunteer and donation programs that focus on education, poverty, hunger, health, and well-being
within their respective communities.
Social Responsibility
NXP recognizes that our operations can impact the human rights of our team members, workers in our supply chain, and the people in our host communities. We endeavor to
demonstrate respect for human rights through our everyday activities and decision-making as we aim to identify and address adverse human-rights impacts.
To identify
potentially adverse human-rights impacts, we use input from internal and external resources to inform our approach and responses, which is an integral part of our business decision-making and risk-management systems.
16
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
Supply Chain Due Diligence
NXP works with suppliers to help them achieve and maintain our standards and expectations. Our preference is to work with suppliers to address potential deficiencies,
develop, and implement a corrective action plan. In 2021, our due-diligence supplier audits identified 160 nonconformances, in which we closed 143, resulting in an 89% closure rate. We began our supplier audit
program in 2013 and have since audited 156 suppliers.
The number of audits naturally increases the overall total number of nonconformances. Our approach is to divide the number of
nonconformances per number of audits, as well as the number of priority violations per number of audits. While the number of nonconformances increased compared to 2020, we saw a decrease in 2021 compared to 2020, for both ratios.
17
ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) (continued)
In 2018, we set a goal to close 80% of our supplier nonconformances within the
90-day timeframe. In 2021, we set a new goal at an 85% closure rate. We chose this 5% increase after reviewing improvements in closure-rate performance from audits performed in 2019 and 2020. The closure rate
for 2021 was 89%, compared to 97% in 2020. The 8% drop was primarily due to almost double the number of audits completed in 2021 compared to 2020. The lower closure rate is also attributable to the demand on the supply-chain during the ongoing
pandemic and production ramp up to overcome the semiconductor shortage. These two trends created challenges in working hours and labor supply at our suppliers in 2021.
Health & Safety
NXP is committed to ensuring a safe and healthy workplace for our team members, partners, and visitors. We ensure the health and safety of our team members by using
advanced management systems and certifications. All manufacturing sites, and our corporate headquarters, are certified to the ISO 45001 standard for Occupational Health and Safety and are audited both externally and internally for third-party
certification.
We maintained our historic low injury rate (TCIR) of 0.08 in 2021, which remains well below the semiconductor-industry averages published by the
Semiconductor Industry Association (SIA) and the European Semiconductor Industry Association (ESIA), which ranges from 0.35 to 0.89. NXPs low injury rate is attributed to the robust Health & Safety programs we have in place at all of
our manufacturing sites.
18
AGM PROPOSALS
ITEM 1: ADOPTION OF THE 2021 STATUTORY ANNUAL ACCOUNTS
The Company has prepared two sets of financial statements, one based on accounting principles generally accepted in the United States of America (US GAAP)
and filed with the SEC in the 2021 Annual Report on Form 10-K, and one based on Dutch law and International Financial Reporting Standards as adopted by the European Union (the Statutory Annual
Accounts).
For internal and external reporting purposes, the Company prepares financial statements based on US GAAP. However, as a public limited
liability company incorporated under the laws of the Netherlands, the Company is required by Dutch law to prepare the 2021 Statutory Annual Accounts and submit them to the Annual General Meeting for adoption. The report of Ernst & Young
Accountants LLP (E&Y) for the fiscal year ended December 31, 2021, and the 2021 Statutory Annual Accounts is included in the 2021 statutory annual report (the Statutory Annual Report), is published on the
Companys website (http://investors.nxp.com) and also is available at the principal offices of the Company.
THE BOARD
RECOMMENDS A VOTE FOR THE ADOPTION OF THE 2021 STATUTORY ANNUAL ACCOUNTS.
ITEM 2: DISCHARGE
OF THE BOARD OF DIRECTORS FOR THEIR RESPONSIBILITIES IN THE 2021 FINANCIAL YEAR
It is proposed to discharge the members of the Board, in accordance with
Dutch law, for the performance of their respective duties in the financial year 2021. The proposed discharge only covers the matters that are disclosed in the Statutory Annual Report or otherwise publicly disclosed at the time the resolution to
discharge is adopted.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO DISCHARGE THE BOARD FOR THEIR RESPONSIBILITIES IN THE
FINANCIAL YEAR ENDED DECEMBER 31, 2021.
19
ITEM 3: (RE-)APPOINTMENT OF
DIRECTORS
The Company has a one-tier board structure, consisting of one or more executive directors and non-executive directors. The Board currently consists of twelve directors, one executive director and eleven non-executive directors. The number of executive and non-executive directors is determined by the Board.
Messrs. Kaeser, Goldman and Smitham are retiring from our Board at the
expiration of their terms as of the end of the Annual General Meeting and are not standing for re-election. If each nominated director discussed below is appointed at the AGM, the Board will consist of ten
directors.
Under our Articles of Association and Dutch corporate law, the directors are collectively responsible for the management, general and financial affairs
and policy and strategy of our Company. Our executive director (who serves as our President and Chief Executive Officer) is responsible for the day-to-day management of
the Company and for the preparation and execution of Board resolutions, to the extent these tasks are not delegated to a committee of the Board. Our Chief Executive Officer or all directors acting jointly may represent the Company with third
parties.
Consistent with our Articles of Association and Dutch law, the executive director
and non-executive directors are appointed by the general meeting of shareholders upon a binding nomination by the Board. The Board has nominated the nine directors listed below for re-appointment and one new director listed below for appointment to be elected to serve until their term expires at the end of the 2023 Annual General Meeting of Shareholders, or until their appointment is
terminated in accordance with the Articles of Association. The binding nominations by the Board are made in accordance with Section 14.4 of the Articles of Association. The shareholders at an annual general meeting may at all times overrule the
binding nature of such a nomination by a resolution adopted by at least a two thirds majority of the votes cast, provided such majority represents more than half of our issued and outstanding share capital. If the nomination is not overruled, the
nominated member of the Board shall be appointed. If the nomination is overruled, the Board may then make a new nomination. If a nomination has not been made or has not been made in due time, this shall be stated in the notice and the general
meeting of shareholders shall be free to appoint a member of the Board at its discretion. The latter resolution of the general meeting of shareholders must also be adopted by at least two thirds majority of the votes cast, provided such majority
represents more than half of our issued share capital.
Our directors are appointed for one year and will be, if nominated by the Board, re-electable each year at a general meeting of shareholders. Our directors may be suspended or dismissed at any time by the general meeting of shareholders. A resolution to suspend or dismiss a director must be
adopted by at least a two thirds majority of the votes cast, provided such majority represents more than half of our issued share capital unless the proposal to suspend or dismiss a director is made by the Board, in which case resolutions shall be
adopted by a simple majority of votes cast. An executive director can also be suspended by the Board.
If appointed, each directors term begins at the annual
general meeting at which he or she is appointed and, unless such director resigns or is dismissed at an earlier date, his or her term of office ends immediately after the next annual general meeting held after his or her appointment.
The Board and the Nominating, Governance and Sustainability Committee have carefully considered the experience, structure, culture, diversity, operation, interactions,
collaboration and performance of the current Board; the talents, expertise and contributions of individual directors; the growth and creation of shareholder and other stakeholder value under the Boards leadership; the continued evolution of
the Company; the Boards critical role in continuing to develop and lead the strategic direction of the Company; the continued change and consolidation in the semiconductor industry; anticipated future challenges and opportunities facing the
Company; and the Boards ongoing commitment to ensuring the long-term sustainability of the Company to the benefit of shareholders and other stakeholders.
The
Board and the Nominating, Governance and Sustainability Committee also believe that, at the current time, fostering continuity on the Board by nominating our Chair of the Board and eight other current directors
for re-appointment and one new director for appointment is instrumental to the ongoing execution of our mission and strategy as well as the delivery of sustainable long-term value to shareholders
while also serving the interests of our other stakeholders. Based on these considerations, among others, NXPs Board recommends a vote FOR the appointment of each director. The persons named as proxies intend to vote the
proxies for the election of these nominees to the Board.
Each of the proposed appointments is considered a separate voting item under Dutch law. Information
concerning each of the ten nominated directors is set forth below. All nominees consented to act as directors if appointed at the AGM. This Item 3 comprises the explanatory notes to the agenda of the Annual General Meeting as
referred to in Section 25.5 of the Articles of Association.
20
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS (continued)
In accordance with the recommendation of the Nominating, Governance and Sustainability Committee, the Board has
unanimously adopted resolutions to nominate the persons set forth below for director. Our nominees for director, their ages, principal occupations or positions, experience and the year first elected as a director, are described below. As part of our
board refreshment process, a third party search firm provided a pool of candidates to the Nominating, Governance and Sustainability Committee for consideration. From this pool of candidates the Nominating, Governance and Sustainability
Committee determined, according to the process described below, that the new nominee for director had the appropriate qualifications and experience and would positively contribute to the mix of talent, experience and perspective on the Board. None
of the nominees are related by blood, marriage or adoption to each other or to any other director or to any executive officer of NXP or its subsidiaries. Except for Mr. Kurt Sievers, who is currently executive director, President and Chief
Executive Officer, no nominee for director has been an employee of the Company within the past five years.
Board Diversity Matrix
(As of April 11, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of Principal Executive Offices: |
|
|
The Netherlands |
|
|
|
Foreign Private Issuer |
|
|
No |
|
|
|
Disclosure Prohibited under Home Country Law |
|
|
No |
|
|
|
Total Number of Directors |
|
|
12 |
|
|
|
|
|
|
|
|
Female |
|
|
Male |
|
|
Non-Binary |
|
|
Did Not Disclose Gender |
|
|
|
|
|
|
Part I: Gender Identity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors |
|
|
4 |
|
|
|
8 |
|
|
|
0 |
|
|
|
0 |
|
|
Part
II: Demographic Background |
|
|
|
|
|
|
African American or Black |
|
|
0 |
|
|
|
1 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
White |
|
|
4 |
|
|
|
7 |
|
|
|
0 |
|
|
|
0 |
|
Note that the table above, in accordance with NASDAQ disclosure requirements, describes the board diversity characteristics of the
members of the Board as of the date of this proxy statement, including the current members of the Board who will depart the Board at this years Annual General Meeting and excluding the new director nominee.
21
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS (continued)
THE BOARD RECOMMENDS A VOTE FOR THE APPOINTMENT OF EACH NOMINEE FOR DIRECTOR LISTED
BELOW.
Nominees for Director
Kurt Sievers
Executive Director,
President & CEO of NXP
|
|
|
|
|
Kurt Sievers (1969, German) is executive director, president
and chief executive officer since May 2020, after a successful track record as the president of NXP, overseeing all the companys business lines, since 2018. Mr. Sievers joined NXP in 1995, and rapidly moved through a series of
Marketing & Sales, Product Definition & Development, Strategy and General Management leadership positions across a broad number of market segments. He has been a member of the executive management team since 2009, where he has been
instrumental in the definition and implementation of the NXP High-Performance Mixed Signal strategy. In 2015, Mr. Sievers was influential in the merger of NXP and Freescale Semiconductor.
Mr. Sievers serves on the board of the German National Electrical and Electronics Industry
Association (ZVEI), the Global Semiconductor Alliance (GSA) and Capgemini S.E. Mr. Sievers is president of ESIA (European Semiconductor Industry Association). He chaired the advisory board of the international trade-fair Electronica until June
2021. He also serves as a board member of AENEAS, an industrial association for application and technology research in Europe on nano-electronics. Mr. Sievers serves as a member of the Asia-Pacific-Committee of German Business (APA) and as a
member of the Board at the German Asia-Pacific Business Association (OAV), acting as the spokesperson for the Republic of Korea.
Mr. Sievers earned a masters degree in physics and information technology from Augsburg University, Germany.
|
|
Executive Director
Director since 2020
Age 53
Other Current Public Boards: Capgemini S.E. Key Qualifications and
Expertise: International Experience
Executive Leadership
Industry and Technology Experience
Strategic Planning, Growth, Mergers & Acquisition
Manufacturing and Operations
Human Capital/Talent Development
IT and Cybersecurity |
Sir Peter Bonfield CBE FREng
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Sir Peter Bonfield (1944, British) was appointed a non-executive director and chair of our board of
directors in August 2010. Prior to that, Sir Peter was the chair of the supervisory board of NXP B.V. from September 29, 2006. Sir Peter served as chief executive officer and chair of the executive committee for British Telecom plc from 1996 to
2002 and prior to that was chair and chief executive officer of ICL plc (now Fujitsu Services Holdings Ltd.). Sir Peter also worked in the semiconductor industry during his tenure as a divisional director at Texas Instruments Incorporated, for whom
he held a variety of senior management positions around the world. In addition, Sir Peter has served as a director of twelve large technology companies. Sir Peter currently holds non-executive
directorships at Taiwan Semiconductor Manufacturing Company Limited, Darktrace plc and Imagination Technologies, is board Mentor at CMi in London and formerly served on the board of directors of Mentor Graphics Corporation. He is advisor to
Longreach LLP in Hong Kong, Alix Partners UK LLP in London and is a fellow of The Royal Academy of Engineering. Sir Peter was named Outstanding Director for 2019 by the Financial Times. |
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Chair of the Board
Independent Director
Director since 2010; Director of an NXP affiliated entity since September
2006* Age 77
Board Committees:
Human Resources and Compensation Committee
Nominating, Governance and Sustainability Committee
Other Current Public Boards:
Taiwan Semiconductor Manufacturing Company Limited
Darktrace plc
Key Qualifications and Expertise:
International Experience
Executive Leadership
Industry and Technology Experience
Strategic Planning, Growth, Mergers & Acquisition
Corporate Governance, Legal, Global Compliance Experience
Human Capital/Talent Development |
* |
Until August 2010, when NXP Semiconductors N.V. became a publicly listed Nasdaq, company, Sir Peter Bonfield (since
September 2006) was a director of certain NXP subsidiaries. According to the Dutch corporate governance code and EC Recommendation 2005/162/EC, the tenure of Sir Peter Bonfield, calculated as from August 2010 when the current NXP Semiconductors N.V.
became listed on Nasdaq, would be 11.9 years. |
22
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS (continued)
Annette Clayton
Chief Executive Officer and President, Schneider Electric North America
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Annette Clayton (1964, American) was appointed a non-executive director
of our board of directors effective May 26, 2021. Ms. Clayton is the chief executive officer and president of Schneider Electric North America, a region of Schneider Electric, a multinational firm specializing in energy management and
automation solutions. Through December 2018, Ms. Clayton also held the title of chief supply chain officer for the Group and led the transformation of its $13 billion global supply chain operation for seven years and from 2011 to 2016 led
the environmental and social governance function. She is also a member of the companys executive committee. From 2006 to 2011, Ms. Clayton led Dell Inc.s supply chain transformation and oversaw the global manufacturing and
fulfillment operation. She was also responsible for the Americas commercial order management and customer care operations. From 1983 to 2006 Ms. Clayton worked at General Motors Corporation in senior management roles in engineering and
production, including president, Saturn Corporation. Ms. Clayton chairs the National Electrical Manufacturers Association and is a member of the board of directors of the National Association of Manufacturers. She serves on the board of Duke
Energy Corporation and the Schneider Ventures boards of AlphaStruxure, Uplight Inc., QMerit, EnergySage, and previously served on the board of Polaris Inc until April 2021. |
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Independent
Director Director since 2021
Age 58
Board Committees:
Human Resources and Compensation Committee
Other Current Public Boards:
Duke Energy Corporation
Key Qualifications and Expertise:
International Experience
Executive Leadership
Industry and Technology Experience
Strategic Planning, Growth, Mergers & Acquisition
Corporate Governance, Legal, Global Compliance Experience
Manufacturing and Operations
Risk Management
Human Capital/Talent Development
IT and Cybersecurity
ESG Expertise |
Anthony Foxx
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Anthony Foxx (1971, American) was appointed a non-executive director of
our board of directors effective May 26, 2021. From October 2018 to January 2022, Mr. Foxx served as the chief policy officer and senior advisor to the president and chief executive officer of Lyft. Prior to joining Lyft, Inc.,
Mr. Foxx served as a managing partner of related infrastructure, the infrastructure development group of Related Companies, a real estate firm, from December 2017 to October 2018. From July 2013 to January 2017, Mr. Foxx served
as the seventeenth United States Secretary of Transportation. Mr. Foxx served as the mayor of Charlotte, North Carolina from 2009 to 2013 and as a Charlotte City council member at-large representative
from 2005 to 2009. Mr. Foxx also has held a variety of legal positions in the public and private sectors. Mr. Foxx serves on the board of directors of Martin Marietta Materials, Inc., CDW Corporation and Shelter Acquisition Corporation I.
He holds a Doctor of Law (J.D.) from New York University School of Law, and a Bachelor of Arts (B.A.), History, from Davidson College. |
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Independent
Director Director since 2021
Age 50
Board Committees:
Nominating, Governance and Sustainability Committee
Other Current Public Boards:
CDW Corporation
Martin Marietta Materials Inc.
Shelter Acquisition Corporation I
Key Qualifications and Expertise:
Executive Leadership
Industry and Technology Experience
Strategic Planning, Growth, Mergers & Acquisition
Financial, Audit & Accounting Expertise
Risk Management
ESG Expertise |
23
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS (continued)
Chunyuan Gu
President of Asia, the Middle East and Africa regions of ABB Ltd (retired)
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Chunyuan Gu (1958, Swedish) is nominated as a non-executive director of our board of directors.
Mr. Gu has over 30 years of experience working at ABB Ltd, a global pioneering technology leader in electrification and automation serving customers in utility, industry, transportation and infrastructure. Mr. Gu began his career at ABB
Corporate Research in Sweden in 1989, and has held various roles and functions in R&D, manufacturing operations and general management. Since 2020, Mr. Gu serves in an advisory capacity as chair of the board of ABB (China) Ltd. From
2017-2019, Mr. Gu was a member of the ABB group executive committee and president of the Asia, the Middle East and Africa region. From 2014-2017, Mr. Gu served as president and CEO of ABB China. Since 2020, Mr. Gu has served as a non-executive director of CLP Holdings Limited. Since 2021, Mr. Gu has served as senior advisor at Blackstone Ltd. Mr. Gu holds a bachelor of engineering from Shanghai Jiao Tong University and a PhD,
school of aeronautics from the Royal Institute of Technology, Stockholm. He is a fellow of IVA, the Royal Swedish Academy of Engineering Sciences. |
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Independent Director Nominee
Age 63
Other Current Public Boards: CLP Holdings Limited Key Qualifications and
Expertise: International Experience
Executive Leadership
Industry and Technology Experience
Manufacturing and Operations
Risk Management
Human Capital/Talent Development
ESG Expertise |
Lena Olving
President and CEO of Mycronic AB (retired)
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Lena Olving (1956, Swedish) was appointed a non-executive director of our board of directors in June 2019. She served as president and CEO of Mycronic AB (listed on Nasdaq OMX Stockholm) from 2013 and 2019, a Swedish high-tech equipment company serving
the electronics industry. Before that Ms. Olving worked at Saab AB, a listed Defence and Security company, as deputy CEO and chief operating officer. Her earlier career also includes various managerial positions within Volvo Car Corporation, in
total 25 years, of which 5 years in Asia Pacific and 7 years in the executive management team.
Ms. Olving is a board member of Assa Abloy AB, Vestas Wind Systems A/S Investment AB Latour, Munters Group AB, chair of Academic Work Holding AB, chair of the board
at the Royal Swedish Opera and ScandiNova Systems AB and board member of Stena Metall AB. Ms. Olving has declined re-election as board member at Munters Group AB, and her current board service will end in
May 2022. She is a fellow of IVA, the Royal Swedish Academy of Engineering Sciences. She holds a Master of Science in Mechanical Engineering from Chalmers in Gothenburg, Sweden.
In January 2018, Ms. Olving was presented H.M., The Kings Medal of the 12th size with
blue ribbon for outstanding efforts within Swedish business sector. In October 2019, she was awarded IVAs Gold Medal for pioneering and outstanding leadership within the tech sector. |
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Independent Director
Director since 2019
Age 65
Board Committees:
Human Resources and Compensation Committee
Other Current Public Boards:
Assa Abloy AB
Investment AB Latour
Vestas Wind Systems A/S
Munters Group AB (ending May 2022)
Key Qualifications and Expertise:
International Experience
Executive Leadership
Industry and Technology Experience
Strategic Planning, Growth, Mergers & Acquisition
Financial, Audit & Accounting Expertise
Manufacturing and Operations
Risk Management
Human Capital/Talent Development
IT and Cybersecurity |
24
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS (continued)
Julie Southern
Chief Commercial Officer, Virgin Atlantic Airways Ltd. (retired)
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Ms. Julie Southern (1959, British) was appointed a non-executive
director of our board of directors in October 2013. She was with Virgin Atlantic Limited (UK) from 2000 to May 2013. From 2010 to 2013 Ms. Southern was chief commercial officer and from 2000 to 2010 she was chief financial officer of Virgin
Atlantic. Prior to joining Virgin Atlantic, she was group finance director at Porsche Cars Great Britain and finance and operations director at W H SmithH J Chapman & Co Ltd. Prior to that, she was a chartered accountant at Price
Waterhouse Coopers. Ms. Southern currently holds non-executive directorships at Rentokil-Initial plc, Ocado Group plc and easyJet plc, and is chair of the respective audit committees. Ms. Southern is
a member of the remuneration committees at Rentokil-Initial, Ocado and easyJet, and is the senior independent director at easyJet. Previously, Ms. Southern held directorships at Stagecoach Group plc (2016-2018), DFS Furniture plc (2015-2019)
and Cineworld Group plc (2015-2019). |
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Independent Director
Director since 2013
Age 62
Board Committees:
Audit Committee (Chair)
Other Current Public Boards:
Rentokil-Initial Plc
easyJet plc
Ocado Group plc
Key Qualifications and Expertise:
Executive Leadership
Strategic Planning, Growth, Mergers & Acquisition
Financial, Audit & Accounting Expertise
Human Capital/Talent Development |
Jasmin Staiblin
Chief Executive Officer of Alpiq (retired)
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Jasmin Staiblin (1970, German) was appointed a non-executive director
of our board of directors in June 2019. She served between 2013 and 2018 as chief executive officer of Alpiq, a leading Swiss energy services provider and power producer in Europe. She successfully led the company through a major transformation in a
fundamentally changing energy market. She began her career in 1997 at the ABB Group, the Swedish-Swiss global technology company, starting in ABBs group research center. From 1999 to 2005 she served in various global functions and as a member
of the management team for ABBs power technologies division. She held the position of chief executive officer of ABB Switzerland from 2006 to 2012. Ms. Staiblin is a board member of Georg Fischer AG, Schaffhausen and Zurich Insurance
Group Ltd and chair of the supervisory board of Rolls-Royce Power Systems AG and MTU Friedrichshafen GmbH. She formerly served on the board of Rolls-Royce plc. Ms. Staiblin studied Physics and Electrical Engineering at the Karlsruhe Institute
of Technology, Germany and the Royal Institute of Technology in Stockholm, Sweden. She completed her studies with a Degree in Physics and has a Master of Science in electrical engineering. |
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Independent Director
Director since 2019
Age 52
Board Committees:
Audit Committee
Other Current Public Boards:
Georg Fischer AG
Zurich Insurance Group Ltd.
Key Qualifications and Expertise:
International Experience
Executive Leadership
Industry and Technology Experience
Strategic Planning, Growth, Mergers & Acquisition
Corporate Governance, Legal, Global Compliance Experience
Financial, Audit & Accounting Expertise
Manufacturing and Operations
Risk Management
Human Capital/Talent Development
IT and Cybersecurity |
25
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS (continued)
Gregory Summe
Managing Partner of Glen Capital Partners
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Gregory L. Summe (1956, American) was appointed a non-executive
director of our board of directors effective December 7, 2015.Mr. Summe is the managing partner of Glen Capital Partners, an investment fund. Recently, he was the co-chair and co-founder of NextGen Acquisition Corp. I & II. Previously, Mr. Summe was the managing director and vice chair of Global Buyout at The Carlyle Group, a leading global private equity firm, from 2009 to
2014. Prior to joining Carlyle, he was the chair and chief executive officer of PerkinElmer, Inc., a global leader in Health Sciences, a company he led from 1998 to May 2009. He also served as a senior advisor to Goldman Sachs Capital Partners, from
2008 to 2009. He was a director of Freescale Semiconductor from 2010 until its merger with NXP in 2015 and served as chair of the Freescale board from 2014-2015. Prior to PerkinElmer, Mr. Summe was with AlliedSignal, now Honeywell
International, serving as the president of General Aviation Avionics, president of the Aerospace Engines Group and president of the Automotive Products Group. Before joining AlliedSignal, he was the general manager of Commercial Motors at General
Electric and was a partner with the consulting firm of McKinsey & Company, Inc. Mr. Summe holds B.S. and M.S. degrees in electrical engineering from the University of Kentucky and the University of Cincinnati, and an M.B.A. with
distinction from the Wharton School at the University of Pennsylvania. He is in the University of Kentuckys Hall of Distinction. Mr. Summe also serves on the board of directors of the State Street Corporation, Avantor Corporation and
Virgin Orbit Holdings. and formerly served on the boards of directors of NextGen Acquisition Corp. I and NextGen Acquisition Corp II. |
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Independent Director
Director since 2015
Age 65
Board Committees:
Nominating, Governance and Sustainability Committee (Chair)
Other Current Public Boards:
State Street Corporation
Virgin Orbit Holdings, Inc.
Avantor Corporation
Key Qualifications and Expertise:
International Experience
Executive Leadership
Industry and Technology Experience
Strategic Planning, Growth, Mergers & Acquisition
Corporate Governance, Legal, Global Compliance Experience
Financial, Audit & Accounting Expertise
Manufacturing and Operations
Risk Management
Human Capital/Talent Development |
Karl-Henrik Sundström
CEO of Stora Enso (retired)
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Karl-Henrik Sundström (1960, Swedish) was appointed a
non-executive director of our board of directors in June 2019. He served as CEO of Stora Enso from 2014 until his retirement in 2019. He joined Stora Enso in August 2012 as CFO and member of the group
leadership team. In June 2013 he took on the role as executive vice president for division Paper and Wood Products. Prior to joining Stora Enso, Mr. Sundström held the role of CFO of NXP Semiconductors N.V. (2008-2012). Before that, he
held several managerial positions in Ericsson, including CFO. He is a member of the board of Vestas AS, Mölnlycke AB and vice chair of Boliden AB, chair of the tax delegation for Swedish Business and Commerce, chair of the Climate Leadership
Coalition and member of the board of the Marcus Wallenberg Foundation. Mr. Sundström participated in an Advanced Management Program at Harvard Business School in 1997 and holds a degree in Business Administration, Finance and Accounting
from the Uppsala University, Sweden. |
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Independent Director
Director since 2019
Age 62
Board Committees:
Audit Committee
Human Resources and Compensation Committee
Other Current Public Boards:
Boliden AB
Vestas Wind Systems A/S
Key Qualifications and Expertise:
International Experience
Executive Leadership
Industry and Technology Experience
Strategic Planning, Growth, Mergers & Acquisition
Corporate Governance, Legal, Global Compliance Experience
Manufacturing and Operations
Financial, Audit & Accounting Expertise
Risk Management
IT and Cybersecurity
ESG Expertise |
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ITEM 3: (RE-)APPOINTMENT OF DIRECTORS (continued)
Nominee Skills and Experience
Our director nominees have a wide variety of relevant skills, professional experience and backgrounds, and collectively bring to our Board diverse viewpoints and
perspectives that strengthen its ability to represent the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers. The chart below illustrates broad categories of skills and expertise that our non-executive director nominees offer which we believe contribute to the effective leadership and exercise of oversight responsibilities by the Board.
International Experience: living
and working in various regions, in the USA, Europe and/or Asia, and/or experience with businesses with substantial international operations
Executive Leadership: executive management experience with large or international organizations
Industry and Technology Experience: experience with and
understanding of the technology industry, including the semiconductor and automotive industries
Strategic Planning, Growth, Mergers & Acquisition:
planning knowledge of corporate strategy and strategic planning, and experience with mergers, acquisitions, and other strategic transactions
Corporate Governance, Legal, Global Compliance Experience: knowledge of corporate governance issues applicable to SEC registered companies listed on
the Nasdaq, and experience within international regulatory affairs or legal sectors
Financial,
Audit & Accounting Expertise: financial, audit & accounting expertise and experience with corporate finance, including financial experts as named in the company filings and experience as a
CFO, Auditor, and Corporate Treasurer and public company CEO
Manufacturing and
Operations: experience with sophisticated large-scale international manufacturing operations
Risk Management: experience in assessing and managing enterprise risks
Human Capital/Talent Development: experience with human resources
management and culture development in large international organizations, in particular in overseeing succession planning, talent development and executive compensation programs
IT and Cybersecurity: experience in understanding and
managing information technology and cybersecurity threats
ESG Expertise: experience in understanding and addressing strategic environmental, social and governance issues
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ITEM 3: (RE-)APPOINTMENT OF DIRECTORS (continued)
Director Independence
NXPs Board has determined that all non-executive director nominees, as well as our current directors who are not standing
for re-election, are independent under the applicable Nasdaq listing standards, the Rules of Procedure (as defined below), as well as practice 2.1.8 of the DCGC. The current executive director,
Mr. Sievers, as our President and Chief Executive Officer, is not an independent director under the above standards. If each nominated director is appointed at the AGM, the full Board (including both
non-executive directors and our executive director) will consist of 90% independent directors.
As of April 11, 2022,
our non-executive director nominees who are nominated for re-appointment have an average tenure of 4.6 years, and six of our independent nominees, including our new
independent nominee for director, have been members of the Board for four years or less.
28
HOW OUR BOARD GOVERNS AND IS GOVERNED
Rules Governing the Board
The Board has adopted written Rules Governing the Board (the Rules of Procedure) governing its performance, its decision making, its composition, the tasks
and working procedures of the committees and other matters relating to the Board, the Chief Executive Officer, the non-executive directors and the committees established by the Board. In accordance with our
Rules of Procedure, resolutions of our Board will be adopted by a simple majority of votes cast in a meeting at which at least the majority of its members is present or represented. Each director has the right to cast one vote. In a tie vote, the
proposal will be rejected.
In addition to the Rules of Procedure, the Board has adopted charters of its committees, to which the plenary Board, while retaining
overall responsibility, has assigned certain tasks: the Audit Committee, the Nominating, Governance and Sustainability Committee, and the Human Resources and Compensation Committee. Each committee reports to the plenary Board. The Articles of
Association, Rules of Procedure and the committee charters are posted on our Investor Relations website at http://investors.nxp.com under the Corporate Governance section. Copies of our corporate governance materials are also
available to shareholders who request them. Requests must be in writing and sent to: NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary.
The Board is assisted by the Secretary. The Secretary sees to it that correct procedures are followed and that the Board acts in accordance with its statutory
obligations and its obligations under the Articles of Association. Furthermore, the Secretary assists the Chair of the Board (the Chair) in the functioning of Board business (information, agenda, evaluation, introductory program). The
Secretary, in this capacity, is appointed and dismissed by the Board. Shareholders or other interested parties who wish to communicate with the Board, including the Chair and the non-executive directors
individually or as a group, may send correspondence in care of the Secretary at NXPs principal offices at High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands. Our Secretary will receive all communications sent to this address, and will
provide all substantive communications to the Chair, excluding simple administrative requests that are appropriately addressed by the Secretary.
Our non-executive directors oversee the general affairs of the Company and supervise and provide general advice to the executive director. Furthermore, the non-executive directors
perform such acts that are delegated to them pursuant to our Articles of Association or by our board regulations. One of the non-executive directors has been appointed Chair and another non-executive director has been appointed Vice-Chair of the Board.
Under the Rules of Procedure, Board members
must comply with any provisions on the maximum number of directorships and board memberships as decided by the Nominating, Governance and Sustainability Committee. Currently, the Nominating, Governance and Sustainability Committee has determined
that members of the Board shall have no more than four board memberships in public companies in addition to service on the Board of NXP, and not more than two of such board memberships if they are an executive officer.
Each director owes a duty to us to properly perform the duties assigned to him or her and to act in the corporate interest of our Company. Under Dutch law, the corporate
interest extends to the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers.
Board Leadership and Role in Risk Oversight
Our Chair works closely with our Chief Executive Officer to set the agenda for Board meetings and to
facilitate information flow between the Board and management. Sir Peter Bonfield currently serves as the Chair. The Chair presides at the Board meetings, as well as regularly scheduled executive sessions of the
non-executive directors.
Our independent directors regularly meet in executive session without executive directors or
management present. Additionally, the Board and each committee have the power to hire, at the expense of the Company, independent legal, financial or other advisors as they may deem necessary, without consulting or obtaining the approval of any
officer of the Company in advance.
29
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
The Board believes that its current structure continues to provide robust and highly effective oversight based on, among
other factors:
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The nine non-executive directors nominated for
(re-) appointment are independent; the sole board member who is not independent is the executive director (the President and CEO); |
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Robust Corporate Governance principles, which are reviewed annually; |
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A Chair with deep experience in and knowledge of our business and industry with a demonstrated unique and successful
strategic vision, including leading our Board during our successful transformation from a mid-size specialty semiconductor supplier to a top 10 global supplier
(non-memory or foundry), with clear market share leadership in the Automotive semiconductor market. Our Chair continues to be actively focused on his role of providing the overall strategic leadership for the
Company, consistent with Dutch law and the Companys organizational documentsa role that the Board believes remains critically important as our industry continues to experience significant change and disruption at a rapid rate; |
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The Audit, Human Resources and Compensation, and Nominating, Governance and Sustainability Committees all are composed
entirely of independent directors (as defined in the applicable Nasdaq listing standards and within the meaning of the DCGC); |
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Approval of any appointment of members to the Audit, Human Resources and Compensation, and Nominating, Governance and
Sustainability Committees must include at least a majority of the independent directors; |
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All Board committees operate pursuant to written charters and conduct annual self-assessments; |
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The independent directors of the Board and its committees receive extensive information and input from multiple layers of
management and external advisors, engage in detailed discussion and analysis regarding matters brought before them (including in executive session) and consistently and actively engage in the development and approval of significant corporate
strategies; |
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The Board and its committees have unrestricted access to management; |
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The Board and its committees can retain, at Company expense, any advisors they deem necessary with respect to any matter
brought before them; and |
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In 2021, the Board held four executive sessions of non-management members,
and its committees collectively held 21 sessions. |
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Meetings of NXPs Board
The Board met 5 times in 2021. In addition to these meetings, directors attended meetings of individual Board committees of which they were members. Each of the
directors attended at least 75% of the aggregate of the Board meetings and meetings of committees of which they were a member during the periods for which they served in 2021. NXP does not have a formal policy regarding Board members
attendance at annual general meetings, but all of our Board members are invited to attend the Annual General Meeting. In 2021, Sir Peter Bonfield, Chair of the Board, as well as Kurt Sievers participated in the Annual General Meeting via
teleconference due to restrictions on in person attendance because of COVID-19.
The Rules of Procedure require the
independent directors to meet in executive session from time to time, and at least twice annually, without any members of management present. During 2021, the independent directors of the Board met in executive session 4 times.
NXPs Board Committees
The standing committees of the Board are the Audit Committee, the Human Resources and Compensation Committee, and the Nominating, Governance and Sustainability
Committee.
All members of the Audit, Human Resources and Compensation, and Nominating, Governance and Sustainability Committees are independent directors, as
defined in the applicable Nasdaq listing standards, applicable SEC rules and the Rules of Procedure, which includes the requirements of the DCGC. Board approval of any director appointment to the Audit, Human Resources and Compensation, and
Nominating, Governance and Sustainability Committees must include at least a majority of the independent directors, as defined in the applicable Nasdaq listing standards.
30
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
Audit Committee
Our Audit Committee is a separately-designated standing committee established in accordance with Section 3(a)(58)(A) of the U.S. Securities Exchange Act of 1934, as
amended (the Exchange Act), and currently consists of Ms. Southern (Chair), Ms. Staiblin and Mr. Sundström, each of whom are independent for purposes of the Nasdaq listing standards, our Rules of Procedure and Rule 10A-3 of the Exchange Act.
Subject to the requirement under Dutch law that independent auditors be appointed by the
shareholders at a general meeting of shareholders, the Audit Committee has ultimate authority and direct responsibility to appoint, compensate, retain, oversee, evaluate and, where appropriate, replace the independent auditors. In addition, the
Audit Committee reviews the performance and independence of the independent auditors and also oversees internal audit activities, compliance with the Code of Conduct, related-party transactions and legal matters, including litigation and
intellectual property disputes.
Our Audit Committee reviews our annual audited financial statements and quarterly unaudited financial statements and certain other
public disclosures prior to publication. The Audit Committee also meets periodically with senior management to discuss risk assessment and risk management policies.
The Board has determined that all Audit Committee members are able to read and understand fundamental financial statements in accordance with Nasdaq listing standards
and that all three current members of the Audit Committee meet the SECs definition of audit committee financial expert as that term is defined in Item 407(d) of Regulation S-K. As
noted above, all Audit Committee members are independent for purposes of Nasdaq listing standards, our Rules of Procedure, and Rule 10A-3 of the Exchange Act. For a description of the education and
experience of each of the members of the Boards Audit Committee please refer to the Nominees for Director section above.
The Audit Committee meets
at least quarterly, and as often as it deems necessary to fulfill its responsibilities.
Number of meetings in 2021: 10.
This committee operates under a written charter adopted by our Board. The charter complies with SEC regulations and Nasdaq listing standards. The charter is reviewed and
reassessed regularly to ensure continued compliance with these requirements. The charter is available for public viewing on our website at http://investors.nxp.com, under the Corporate Governance section.
Human Resources and Compensation Committee
Our Human Resources and Compensation Committee currently consists of Mr. Smitham (Chair), Sir Peter Bonfield, Mses. Clayton and Olving and
Mr. Sundström. As previously noted, Mr. Smitham is retiring from our Board at the expiration of his term at the end of the AGM and his service on the Human Resources and Compensation Committee will cease after the AGM. Our Board has
determined that all of the members of the Human Resources and Compensation Committee are independent for purposes of Nasdaq listing standards, our Rules of Procedure and Rule 10C-1 of the Exchange Act.
Pursuant to its charter and the authority delegated to it by our Board, the Human Resources and Compensation Committee is responsible for overseeing our compensation and employee benefit plans and practices, including formulating, evaluating and
approving the compensation of our executive officers, including the compensation of our Chief Executive Officer, and for overseeing all compensation programs involving the issuance of our equity securities. In addition, the Human Resources and
Compensation Committee is responsible for overseeing the Companys strategy, initiatives and programs related to the Companys culture, talent management and talent development, including but not limited to talent acquisition, talent
retention, talent development and succession, employee engagement, diversity, equality and inclusion. For more information regarding the Human Resources and Compensation Committee and the determination of executive compensation, see the
Executive Compensation section below. The Human Resources and Compensation Committee meets as often as it deems necessary, but not less than four times a year.
Number of meetings in 2021: 7.
This committee operates under a written charter
adopted by our Board. The charter complies with SEC regulations and Nasdaq listing standards. The charter is reviewed and reassessed regularly to ensure continued compliance with these requirements. The charter is available for public viewing on our
website at http://investors.nxp.com, under the Corporate Governance section.
31
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
Nominating, Governance and Sustainability Committee
Our Nominating, Governance and Sustainability Committee currently consists of Mr. Summe (Chair), Sir Peter Bonfield, Messrs. Foxx, Goldman and Kaeser. As
previously noted, Messrs. Goldman and Kaeser are retiring from our Board at the expiration of their terms at the end of the AGM and their service on the Nominating, Governance and Sustainability Committee will cease after the AGM. Our Board has
determined that all of the members of the Nominating, Governance and Sustainability Committee are independent for purposes of Nasdaq listing standards and our Rules of Procedure. Pursuant to its charter and the authority delegated to it by our
Board, the Nominating, Governance and Sustainability Committee is responsible for determining selection criteria and appointment procedures for members of our Board, periodically assessing the scope and composition of our Board and evaluating the
performance of its individual members. In addition, the Nominating, Governance and Sustainability Committee oversees the Companys corporate sustainability policies and programs.
The Nominating, Governance and Sustainability Committee will consider timely written proposals for nomination from shareholders and will evaluate a shareholders
prospective board nominee in the same manner that it evaluates other nominees, but only if it receives the request to consider such matter no later than on the 60th day prior to the day of the
Annual General Meeting. The Nominating, Governance and Sustainability Committee from time to time engages consultants or third-party search firms to assist in identifying and evaluating potential nominees. A shareholder who wishes to recommend a
prospective Board nominee for the committees consideration may write to us at NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary. For more information regarding shareholder proposals and
nominations see Future Shareholder Proposals and Nominations for the 2023 Annual General Meeting. The Nominating, Governance and Sustainability Committee meets as often as it deems necessary to fulfill its responsibilities, but not less
than four times a year.
Number of meetings in 2021: 4.
This committee operates
under a written charter adopted by our Board. The charter complies with SEC regulations and Nasdaq listing standards. The charter is reviewed and reassessed regularly to ensure continued compliance with these requirements. The charter is available
for public viewing on our website at http://investors.nxp.com, under the Corporate Governance section.
Information about each of the standing
committees is provided on the following page and pages 34-36 provide an additional discussion of committee responsibilities in relation to risk oversight.
32
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
|
|
|
|
|
|
|
AUDIT COMMITTEE |
|
|
Members Ms. Southern (Chair)
Ms. Staiblin Mr. Sundström |
|
KEY OVERSIGHT RESPONSIBILITIES INCLUDE, BUT ARE NOT LIMITED TO:
The integrity of the Companys financial statements
and its accounting and financial reporting processes The effectiveness of the Companys internal control over financial reporting
Compliance with applicable legal and regulatory
requirements
Oversight of information technology risks, including
cybersecurity
The qualifications, independence and performance of the
independent registered public accounting firm for U.S. public reporting purposes and the Companys external auditor for purposes of Dutch law
The Internal Audit group
The Companys processes and procedures related to
risk assessment and risk management Related party transactions |
Number of
meetings during 2021: |
|
10 |
|
|
|
|
|
|
|
HUMAN RESOURCES AND COMPENSATION COMMITTEE |
|
|
|
|
Members
Mr. Smitham (Chair)
Sir Peter Bonfield Ms. Clayton
Ms. Olving Mr. Sundström |
|
KEY OVERSIGHT RESPONSIBILITIES INCLUDE, BUT ARE NOT LIMITED TO:
CEO and senior management compensation, including the
corporate goals and objectives relevant to such compensation and evaluating performance in light of those goals and objectives
Board and committee compensation
Relationship between the Companys compensation
policies and practices and risk management Management Team succession plans
Compensation and benefits-related disclosures and equity
compensation plans in which executives participate Various human capital management topics, including diversity, equality and inclusion, workforce trends and surveys, as well as University Relations Program
|
Number of
meetings during 2021: |
|
7 |
|
|
|
|
|
|
|
NOMINATING, GOVERNANCE AND SUSTAINABILITY COMMITTEE |
|
|
|
|
Members
Mr. Summe (Chair) Sir Peter Bonfield
Mr. Foxx Mr. Goldman
Mr. Kaeser |
|
KEY OVERSIGHT RESPONSIBILITIES INCLUDE, BUT ARE NOT LIMITED TO:
Corporate
governance matters
Nomination or re-nomination of
director candidates and approval of other annual shareholders meeting agenda items
The annual self-evaluation of the Board and its committees
Review NXP
top identified risks and make proposals to the Board on oversight
Initiatives and reporting on Environment, Social and Governance
|
Number of
meetings during 2021: |
|
4 |
33
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
Setting and Overseeing Strategy
The Board actively determines the Companys strategy and continues to focus on those strategies designed to ensure the continued durability and sustainability of
the Company, while creating long-term value for our shareholders, and serving the interests of our other stakeholders. The Board and its committees regularly and extensively reviewed during their meetings throughout 2021 the Companys strategy,
the Companys primary risks as well as the design and operation of the internal control systems to ensure it supports the long-term growth and sustainability of the Company and reflects, among other considerations, market challenges and
opportunities, and the interests of shareholders and other stakeholders. This has substantially impacted the long-term value creation strategy as referred to in practice 1.1.1 of the DCGC as further outlined in the Sustainability section and in the
Companys Corporate Social Responsibility Report. In addition to quarterly updates on the business performance and detailed presentations by the various business managers, the Board, as part of its annual meeting schedule, spent a full meeting
in November to review and discuss the mid- to long-term strategy of the Company.
The Board is committed to maintaining a
dialogue with shareholders to ensure that they understand our differentiated strategy and business model and have an opportunity to discuss and engage on a broad range of topics, including our strategy. The Board will also review the implementation
of our strategy at our annual general meeting of shareholders, giving attendees the opportunity to discuss our annual Dutch board report and the accompanying financial statements prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS). We also regularly discuss our strategy in shareholder engagement sessions.
Risk Oversight
Our management is directly responsible for executing the Companys risk management processes. Our Board is responsible for overseeing
these risk management processes. In exercising its oversight, the Board and, as appropriate, the relevant Board committees, assesses the material risks facing the Company and evaluate managements plans for managing material risk exposures. The
Company conducts a formal annual risk assessment to identify, analyze and report on enterprise risks. The results of this risk assessment are reported to and discussed with the Board.
Our Board performs this oversight function through periodic reports from management and Board committees. While our Board generally has ultimate oversight responsibility
of the Companys risk management processes, it has delegated to its committees the responsibility to oversee risk management processes associated with their respective areas of responsibility and expertise. For example, the Audit Committee has
oversight responsibility for the Companys internal audit function, compliance with the Code of Conduct, internal controls and financial reporting practices, information technology and cybersecurity risks, litigation, and compliance processes.
The Human Resources and Compensation Committee has oversight responsibility for the Companys executive talent management and succession planning, including executive succession, and risks related to the Companys compensation policies and
practices, as described in more detail in the Compensation Practices and Risk section of the Compensation Discussion and Analysis. The Nominating, Governance and Sustainability Committee has oversight responsibility for the Companys compliance
with its corporate governance principles, CEO succession planning, the Companys policies and practices relating to significant issues of sustainability environmental social and governance issues of concern and proposes recommendations to the
Board for updates to risk oversight responsibilities of the committees and the Board. The Board receives regular reports from each committee chair regarding the committees considerations and actions. The Board also receives regular updates
from management on the Companys business operations, financial results and strategy and, as appropriate, discusses and provides feedback with respect to risks related to these topics. Annually, the Board holds strategic planning sessions with
senior management to discuss strategies, key challenges, and risks and opportunities for our business.
NXP, similar to other semiconductor companies, operates in a
complex and rapidly changing environment that involves many risks. In addition to general market, research and development, and economic risks, the Company faces potential risks related to its industry; information technology and cybersecurity; data
privacy; financial controls and reporting; legal, regulatory and compliance; finances and taxation; global operations; environment and social responsibility; product portfolio and commercialization; and supply risks, among others. As a company
committed to operating ethically and with integrity, we proactively seek to manage and, where possible, mitigate risks to help ensure compliance with applicable rules and regulations, maintain integrity and continuity in our operations and business
and protect our assets. Risk management is an enterprise-wide objective subject to oversight by the Board and its committees.
It is the responsibility of management
and employees to implement and administer risk-management processes to identify material risks to our business. In addition, management must assess, manage and monitor those risks, all while maintaining flexibility in how we operate. To further
embed risk management and compliance into our culture, we implement relevant policies and procedures and train employees on the specifics of such policies and procedures. All of our committees have regular access to management and the Board and
committees also schedule sessions without members of management present.
34
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
The purpose of our enterprise risk management (ERM) is to timely identify, evaluate, prioritize, respond to,
and manage material business risks impacting NXP Semiconductors strategic objectives.
The objectives of ERM are to:
|
|
Enhance our understanding of risks across the organization and their impact on our strategy |
|
|
Improve our ability to respond to risks, particularly those that could result in a strategic impact event
|
|
|
Ensure there is an effective system of management for key risks |
|
|
Prioritize and align risk management efforts and resources effectively |
|
|
Provide reasonable assurance, in line with the three lines of defense model, to stakeholders that we have a system in place
to manage risk, comply with legal requirements and safeguard the integrity of the Companys financial reporting and related disclosures. |
Key
ERM activities include:
|
|
Assessment (identification and evaluation of risks) |
|
|
Response (building capabilities, mitigation) |
|
|
Management Assurance (effective management methods, clear accountabilities) |
|
|
Monitoring (audit, inquire, verify) |
|
|
Communication (internally and externally) |
|
|
Periodically evaluate effectiveness method |
The procedures reflect a plan for reasonable coverage of the potential risks. Despite the thoroughness of the process unforeseen events that impact the strategy may
happen.
Risk management governance
The Board of Directors oversees
NXPs processes and procedures related to risk assessment and risk management, reviews NXP top identified risks and the Nominating, Governance and Sustainability Committee makes proposals to the Board on oversight.
Our management team oversees, identifies and manages the top risks NXP faces in executing its strategy, defines the risk appetite and manages risks consistently with the
risk appetite. The Enterprise Risk Management (ERM) function enables management to make risk management more efficient and effective by providing and maintaining a risk management framework, a risk monitoring mechanism and facilitation
of the execution of the ERM process to mitigate the risks to levels consistent with the risk appetite of NXP. We believe that our risk appetite is consistent with our peers in the semiconductor industry and a reflection of the risk in the
semiconductor industry. This risk appetite varies depending on the different identified risks and therefore the level of mitigation can be different. For mitigation of the operational, financial disclosure and compliance risk we merely rely on our
framework of business controls, processes, authorizations. We also follow the tone at the top principle, which says that, when management upholds honesty, integrity, and ethics, employees are more likely to do the same. This top-down approach is especially relevant to mitigation of more strategic risks.
A risk owner performs an assessment and
prioritizes the most likely and impactful risk elements and takes appropriate measures to mitigate the risk within the given appetite. The Internal Audit function, as part of annual audit plan approved by the Audit Committee, provides assurance of
effectiveness of NXPs risk management. A structured risk management process is put in place to identify and manage the most crucial risks for NXP, taking into account both internal and external information sources. The ERM process contains the
following elements:
|
|
Yearly interviews with all NXP Management Team (MT) members, starting from the strategy and seeking their
insight in the most important risks for NXP |
|
|
Assessment of a consolidated risk list on both likelihood and impact by different layers in the organization
|
35
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
|
|
Based on likelihood and impact, the top risk list is (re-)confirmed by the MT and
reported to the Board of Directors |
|
|
Risk owners drive required mitigation actions to ensure the risk meets the risk specific appetite |
|
|
Corrective actions are taken where necessary as a result of evaluation of the controls by internal audit and/or
self-assessments |
|
|
Effectiveness of the controls are measured by specified risk indicators, updated on at least a quarterly basis
|
|
|
Risk status and controls in place are discussed each quarter in Board or the selected board committee meetings
|
|
|
At least once per year, the risk process is reviewed with the Board of Directors regarding effectiveness and improved where
needed. |
Information Technology Risks
The Companys
Audit Committee has oversight responsibility for reviewing the effectiveness of NXPs governance and management information technology risks, including those relating to business continuity, cybersecurity, malware, regulatory compliance and
data management. NXP senior leadership briefs the Audit Committee quarterly on information security matters and briefs the full Board on information security matters at least annually. NXP is certified and externally audited to ISO 27001 with
certain additional certifications such as Common Criteria 6+, PCI DSS and GSMA Security for focused functions, and we maintain information security risk insurance coverage. We have multiple cybersecurity training initiatives as part of our
information security training and compliance program. We deploy simulated attacks and related trainings at least quarterly. We deliver a Cyber Security orientation to all of our new employees and maintain a library of cyber security learning
sessions available to our team members.
NXP uses a multi-layer approach to identify and mitigate information security risks. On a tactical level, NXP maintains a
24x7 Security Operating Center (SOC) that actively monitors for and identifies cyber security threats and initiates appropriate mitigation processes. The SOC reports to Computer Security Incident Response Team (CSIRT). When needed a task force
containing Security, IT, Communications, Legal and Business representatives is established. This task force leads mitigation activities where the potential threat or risk is elevated. In addition to SOC the NXP IT Service Desk and NXP team members
are trained to identify Cyber Security issues and to escalate them to correct owners. On a strategic level, NXPs information technology risk management program is a component of the ERM process described above. NXPs Chief Information
Security Officer manages the information security risks identified in the ERM process, performing an initial risk assessment, prioritizing the most likely and impactful risk elements and recommending appropriate measures to mitigate the risk. This
assessment and recommended mitigation strategies are validated and refined by senior leadership and reviewed in quarterly meetings with the Audit Committee and annually with the full Board.
The Board, in turn, directly or through its committees, oversees managements implementation of risk management. We have approved a robust Code of Conduct and other
related policies, and the Board and its committees rigorously review with management actual and potential significant risks at least on a quarterly basis.
Board Education
Individual members of the Board participate in director education seminars, conferences and other
director education programs presented by external and internal resources, on matters that relate to, among other topics, compensation, governance, board processes, risk oversight, business, industry, audit and accounting, credit and financial,
regulatory and other current issues. In August 2021, the two newly appointed members of the Board participated in an induction program, where they received a number of presentations on various topics by members of management.
36
HOW OUR DIRECTORS ARE SELECTED AND EVALUATED
Consideration of Director Nominees
For purposes of identifying individuals qualified to become members of the Board, the Nominating, Governance and Sustainability Committee considers the following general
criteria, among others, in nominating director candidates. These criteria reflect the traits, abilities and experience that the Board looks for in determining candidates for election:
|
|
Directors shall have relevant expertise and experience and be able to offer advice and guidance to the President and CEO
based on that expertise and experience; |
|
|
Directors shall have the ability to exercise sound business judgment; |
|
|
Directors shall represent diverse viewpoints; the personal backgrounds and qualifications of the directors, considered as a
group, should provide the Company with a significant composite mix of experience, knowledge and abilities; and |
|
|
Unless otherwise approved by the Board, directors shall not be a member of the board of directors or an officer or employee
of a competitor (or an affiliate of a competitor) of the Company. |
In addition to the criteria set forth above, and any others the Nominating,
Governance and Sustainability Committee or the Board may consider, a majority of the Boards members must be independent, as that term may be defined from time to time by the applicable Nasdaq listing standards, the Rules of
Procedure, as well as practice 2.1.8 of the DCGC, including that an independent director must be free of any relationships which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director.
As needed, the Nominating, Governance and Sustainability Committee may identify new potential director nominees by, among other
means, requesting current directors and executive officers and external advisors to notify it if they become aware of persons meeting the criteria described above who would be suitable candidates for service on the Board. The committee also may, as
needed, engage one or more firms that specialize in identifying director candidates.
As appropriate, the Nominating, Governance and Sustainability Committee will
review publicly available information regarding a potential candidate, request information from the candidate, review the candidates experience and qualifications, including in light of any other candidates the committee might be considering,
and conduct, together with other members of the Board, one or more interviews with the candidate. Committee members or their designees also may contact one or more references provided by the candidate or may contact other members of the business
community or persons who may have first-hand knowledge of the candidates talents and experience.
Diversity
The Board is committed to supporting, valuing and leveraging diversity, including gender and ethnic/cultural diversity, in its composition, among other
qualities that the Board believes serve the best interests of the Company and its stakeholders. As part of these efforts, the Board, while taking into account the overall profile and selection criteria for appointments of suitable candidates, has
proposed a slate of nominees to the Board in which at least 40% of director nominees are women and that includes one or more director nominees from an underrepresented ethnic group. The Board aims to continue in its efforts to have a diverse gender
and ethnic composition as it continues its board refreshment process.
Board Refreshment
The Board, with the support of the Nominating, Governance and Sustainability Committee, maintains an orderly, robust process for Board refreshment and succession that is
aimed at maintaining an appropriate balance with respect to the expertise, experience and diversity on the Board. The Board and its Nominating, Governance and Sustainability Committee regularly evaluates the Board composition with respect to, among
other matters, director independence, skills, experience, expertise, diversity and other factors to ensure the Board remains well-qualified to provide effective oversight of the Company and management. The Board and the Nominating, Governance and
Sustainability Committee regularly consider the Companys strategy, performance, operations, relevant industry and market conditions, and current and anticipated needs in terms of particular areas of experience and expertise (e.g., risk
oversight, industry, science), among many other factors, to inform these refreshment practices.
37
HOW OUR DIRECTORS ARE SELECTED AND EVALUATED (continued)
The Board also remains focused on committee composition and refreshment. In August 2018, the Board refreshed the chairs
of the then two Board committees (the Audit Committee and the Nominating and Compensation Committee) and, following the installment of the Nominating and Governance Committee in September 2019, the Board refreshed the composition of all three
committees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the Rules of Procedure, a conflict of interest must be reported to the Board and the Board shall determine the consequences of such conflict, if any. In case of a
conflict of interest, the director concerned is not allowed to participate in discussions or vote on such matter. If all directors have a conflict of interest, the resolution concerned will be voted on by shareholders at the general meeting of
shareholders.
Other than the compensation items described below, no decisions to enter into material transactions in which there were conflicts of interest with
directors occurred during the financial year 2021.
38
HOW OUR DIRECTORS ARE COMPENSATED
Non-Employee Director Compensation for 2021
The Human Resources and Compensation Committee has responsibility for reviewing and considering any revisions to compensation for
non-executive directors. The Board reviews the Human Resources and Compensation Committees recommendations and makes the final recommendation to the general meeting of shareholders regarding compensation
for non-executive directors. It is our policy to reimburse all directors for reasonable expenses incurred in performing their duties as a director.
Cash Compensation
Sir Peter Bonfield, receives an
annual fixed fee of 275,000 for serving as non-executive director and Chair of the Board. The other non-executive
directors receive an annual fixed fee of $85,000. Members of the Audit Committee, Human Resources and Compensation Committee and Nominating, Governance and Sustainability Committee receive an additional annual fixed fee of $15,000 and the Chairs of
each of these committees receive an additional annual fixed fee of $15,000.
Equity Compensation
In 2021, each non-executive director received an annual restricted share unit award with a grant value of $225,000. The awards
were granted at the same time as the NXP annual equity grants for NXP employees in November, and the restricted share units fully vest on the earlier of the first anniversary of the date of grant or the next annual general meeting of shareholders.
Unvested portions of their equity award are forfeited upon the termination of a non-executive directors service on the Board, except in the case of termination of service upon death or at the request of
the Board, in which case the unvested portion is fully accelerated.
Share Ownership Guidelines
Members of our Board are subject to share ownership guidelines. Non-executive directors are prohibited from selling any shares of
the Company until they own shares that are valued at no less than five times the annual cash fixed fee paid to the director. Our executive director and President and CEO is subject to the share ownership guidelines described in Item 9 below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Fees Earned or Paid in Cash ($)(1) |
|
|
Stock Awards ($)(2) |
|
|
Total ($) |
|
Sir Peter Bonfield |
|
$ |
354,995 |
|
|
$ |
220,289 |
|
|
$ |
575,284 |
|
Annette Clayton(3) |
|
$ |
60,000 |
|
|
$ |
220,289 |
|
|
$ |
280,289 |
|
Anthony Foxx(3) |
|
$ |
60,000 |
|
|
$ |
220,289 |
|
|
$ |
280,289 |
|
Kenneth A. Goldman |
|
$ |
100,000 |
|
|
$ |
220,289 |
|
|
$ |
320,289 |
|
Josef Kaeser |
|
$ |
100,000 |
|
|
$ |
220,289 |
|
|
$ |
320,289 |
|
Lena Olving |
|
$ |
100,000 |
|
|
$ |
220,289 |
|
|
$ |
320,289 |
|
Peter Smitham |
|
$ |
115,000 |
|
|
$ |
220,289 |
|
|
$ |
335,289 |
|
Julie Southern |
|
$ |
115,000 |
|
|
$ |
220,289 |
|
|
$ |
335,289 |
|
Jasmin Staiblin |
|
$ |
100,000 |
|
|
$ |
220,289 |
|
|
$ |
320,289 |
|
Gregory Summe |
|
$ |
115,000 |
|
|
$ |
220,289 |
|
|
$ |
335,289 |
|
Karl-Henrik Sundström |
|
$ |
115,000 |
|
|
$ |
220,289 |
|
|
$ |
335,289 |
|
1. |
Messrs. Foxx, Goldman, Kaeser, Smitham, Summe and Sundström and Mses. Clayton, Olving, Southern and Staiblins
cash compensation and Sir Peter Bonfields committee fees are determined in dollars and paid in Euros using the exchange rate at the time of payment. Sir Peter Bonfields annual fixed fee is determined and paid in Euros; his fee has been
converted to dollars using an exchange rate of 1.1818. |
2. |
On November 2, 2021, Sir Peter Bonfield, Messrs. Foxx, Goldman, Kaeser, Smitham, Summe and Sundström and Mses.
Clayton, Olving, Southern and Staiblin each received an annual restricted share unit (RSU) grant of 1,090 under the terms of the NXP Semiconductors N.V. 2019 Omnibus Incentive Plan and the Director Restricted Stock Unit Award Agreement.
The values in this column represent the grant date fair value of the RSU awards calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, CompensationStock Compensation
(ASC 718). See Note 2 Significant Accounting Policies Share-based compensation and Note 17Share-based compensation, both found in Part II, Item 8, Financial Statements and Supplementary Data in
the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2021 for additional information. As of December 31, 2021, Sir Peter Bonfield, Messrs.
Foxx, Goldman, Kaeser, Smitham, Summe and Sundström and Mses. Clayton, Olving, Southern and Staiblin each held 1,090 RSUs and no non-employee director held options. |
3. |
Ms. Clayton and Mr. Foxx were appointed as non-executive directors at
the 2021 AGM held on May 26, 2021. |
39
ITEM 4: AUTHORIZATION OF THE BOARD TO ISSUE ORDINARY SHARES AND GRANT
RIGHTS TO ACQUIRE ORDINARY SHARES
The Board considers it in the best interest of the Company and its stakeholders for the Board to be able to react in a
timely manner when strategic business opportunities arise that require the issuance of ordinary shares.
At the 2021 AGM, the shareholders authorized the Board to
issue ordinary shares and to grant rights to acquire ordinary shares equal to 10% of the issued share capital for a period of 18 months, effective from May 26, 2021 until November 26, 2022, and to exclude
pre-emptive rights in connection with such issue or grant of rights. It is proposed to renew the authorization to issue ordinary shares and to grant rights to acquire ordinary shares for a new period of 18
months, effective from June 1, 2022 until December 1, 2023, and up to 10% of the issued share capital. The Companys issued share capital as of March 24, 2022 was 274,519,638 ordinary shares.
Although we presently do not have specific plans to issue ordinary shares for any purpose, the Board believes that it is advisable and in the best interest of our
shareholders to provide this general authorization in order to avoid the delay and expense of obtaining shareholder approval at a later date, and to provide us with greater flexibility to pursue financing opportunities, such as the issuance of
convertible notes, or acquisitions when market conditions are favorable.
The issuance of a large number of ordinary shares could be dilutive to existing
shareholders or reduce the trading price of our shares on Nasdaq. Therefore, in accordance with standard Dutch practice, it is proposed to grant the Board the authorization to issue ordinary shares and grant rights to acquire ordinary shares (up to
10% of the issued share capital as per June 1, 2022) for a period of 18 months, effective from June 1, 2022 until December 1, 2023, within the limits provided in the Articles of Association, which authorization can be used for general
purposes. If this proposal is approved the prior authorization (from the 2021 AGM) will immediately expire.
THE BOARD RECOMMENDS A VOTE
FOR THE PROPOSAL TO AUTHORIZE THE BOARD TO ISSUE ORDINARY SHARES AND GRANT RIGHTS TO ACQUIRE ORDINARY SHARES.
ITEM 5: AUTHORIZATION OF THE BOARD TO RESTRICT OR EXCLUDE PRE-EMPTION RIGHTS ACCRUING IN CONNECTION WITH AN ISSUE OF SHARES OR GRANT OF RIGHTS
To the extent that the Board issues ordinary shares or grants rights to acquire ordinary shares under the authorization as set out in Item 4, it is proposed to authorize
the Board for a period of 18 months, effective from June 1, 2022 until December 1, 2023, to restrict or exclude pre-emption rights accruing in connection with such issuance or grant.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AUTHORIZE THE BOARD TO RESTRICT OR EXCLUDE
PRE-EMPTION RIGHTS ACCRUING IN CONNECTION WITH AN ISSUE OF SHARES OR GRANT OF RIGHTS.
40
ITEM 6: AUTHORIZATION OF THE BOARD TO REPURCHASE ORDINARY SHARES OF
THE COMPANY
At the 2021 AGM, shareholders authorized the Board to acquire ordinary shares in the Companys capital for a period of 18 months. It is
proposed to renew this authorization for a period of 18 months from the Annual General Meeting, as set out below.
The purpose of this Item is to create flexibility
to return capital to the shareholders and to cover obligations of the Company to deliver ordinary shares. In addition to being a means to return value to shareholders, repurchases of shares of the Companys own share capital could be used by
the Board to demonstrate a commitment to the Companys business and confidence in the long-term growth of NXP, provide increased liquidity for investors and cover obligations under the Companys share-based compensation plans. Since 2017,
the Company has returned $12.752 billion to shareholders through previously announced share repurchases and dividend payments, reducing our diluted share count by approximately 20 percent, or 70.1 million shares.
The number of ordinary shares to be repurchased, if any, and the timing and manner of any repurchases will be determined after taking into consideration, amongst other
things, prevailing market conditions and available resources. Under Dutch law, the number of shares held by the Company and its subsidiaries may not exceed 50% of the issued share capital.
As of March 24, 2022 the Company holds 11,966,950 treasury shares or 4.4 percent of the issued share capital. The Board considers it desirable to create the
flexibility to continue with share repurchases. As such, it is proposed to the shareholders to authorize the Board for a period of 18 months, with effect from the Annual General Meeting, to repurchase ordinary shares up to 10% of the issued share
capital as per the date of the Annual General Meeting. Shares may only be repurchased pursuant to this authorization so long as the total number of shares held by the Company in treasury does not exceed 20% of the Companys issued share
capital. The repurchases may take place on the open market, through privately negotiated repurchases, in self-tender offers, or through accelerated repurchase arrangements. Such repurchases may be made at prices ranging between 0.01 and a price equal to 110% of the market price of the ordinary shares on Nasdaq, market price being the average of the closing prices for the ordinary shares on Nasdaq on the five trading days
prior to the date of the acquisition, provided that (i) for self-tender offers, the market price shall be the volume weighted average price (VWAP) for the ordinary shares on Nasdaq during a period, determined by the Board, of no
less than one trading day and no greater than five trading days prior to the expiration of the tender offer, and (ii) for accelerated repurchase arrangements, the market price shall be the VWAP for the ordinary shares on Nasdaq over the term of
the arrangement. If this authorization is granted, the existing authorization as granted in 2021 will cease to apply as per the moment this authorization takes effect.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AUTHORIZE THE BOARD TO REPURCHASE THE COMPANYS ORDINARY SHARES.
ITEM 7: AUTHORIZATION OF THE BOARD TO CANCEL THE COMPANYS ORDINARY SHARES HELD OR TO BE ACQUIRED
It is proposed to authorize the Board to cancel any or all ordinary shares in the share capital of the Company held or repurchased by the Company resulting
in a reduction of the Companys issued ordinary shares. The cancellation may be executed in one or more tranches. The number of ordinary shares that will be cancelled (whether or not in a tranche) will be determined by the Board, with a maximum
equal to the number of ordinary shares held or repurchased by the Company in its issued share capital.
Pursuant to Dutch law, cancellation may not be effected
earlier than two months after the resolution to cancel ordinary shares is adopted and publicly announced; this will apply for each tranche. The purpose of this proposal is to authorize the cancellation of ordinary shares held by the Company or that
have been acquired in accordance with Item 6, to the extent that such ordinary shares shall not be used to cover obligations under share-based remuneration or other obligations.
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AUTHORIZE THE BOARD TO CANCEL THE COMPANYS ORDINARY SHARES HELD OR TO BE
ACQUIRED.
41
ITEM 8: NON-BINDING, ADVISORY
VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
We are providing the following non-binding, advisory vote to
approve the compensation of our Named Executive Officers as required under Section 14A of the Exchange Act. We are requesting our shareholders to approve, on a non-binding, advisory basis, the
compensation of our Named Executive Officers as disclosed in the Compensation Discussion & Analysis (CD&A), related compensation disclosure tables and narrative disclosures of this proxy statement.
For the reasons more fully discussed in the CD&A, the Board unanimously recommends a vote For the following resolution:
RESOLVED, that the shareholders approve, on a non-binding, advisory basis, the compensation of the Named Executive
Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the accompanying compensation tables and related narrative disclosure in this proxy
statement.
You may vote For or Against this proposal, or you may abstain from voting. Although the vote on this Item 8 is advisory and
non-binding, the Human Resources and Compensation Committee and the Board will review the voting results on the proposal and will consider shareholder views in connection with our executive compensation
program. For shareholders to adopt the non-binding resolution approving the compensation of our Named Executive Officers, a majority of the votes cast must vote For this proposal. Abstentions and
broker non-votes will be entirely excluded from the vote and will have no effect on the outcome of this proposal. The Board has determined that the current frequency of our say-on-pay advisory vote shall be annually, and the next say-on-pay advisory vote will be held at our
2023 AGM.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE NON-BINDING, ADVISORY
VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION.
EXECUTIVE OFFICERS
|
|
Kurt Sievers (1969, German). Mr. Sievers is executive director, president and chief
executive officer since May 2020, after a successful track record as the president of NXP, overseeing all the companys business lines, since 2018. Mr. Sievers joined NXP in 1995, and rapidly moved through a series of Marketing &
Sales, Product Definition & Development, Strategy and General Management leadership positions across a broad number of market segments. He has been a member of the executive management team since 2009, where he has been instrumental in the
definition and implementation of the NXP High-Performance Mixed Signal strategy. In 2015, Mr. Sievers was influential in the merger of NXP and Freescale Semiconductor. Mr. Sievers serves on the board of the German National Electrical and
Electronics Industry Association (ZVEI), the Global Semiconductor Alliance (GSA) and Capgemini S.E.. Mr. Sievers is president of ESIA (European Semiconductor Industry Association). He chaired the advisory board of the international trade-fair
Electronica until June 2021. He also serves as a board member of AENEAS, an industrial association for application and technology research in Europe on nano-electronics. Mr. Sievers serves as a member of the Asia-Pacific-Committee of German
Business (APA) and as a member of the board at the German Asia-Pacific Business Association (OAV), acting as the spokesperson for the Republic of Korea. |
Mr. Sievers earned a masters degree in physics and information technology from Augsburg University, Germany.
|
|
Bill Betz (1977, American). Mr. Betz is executive vice president, chief financial
officer and a member of the management team. In this role, he is responsible for all aspects of the companys financial and accounting functions including treasury, investor relations, audit, tax and mergers and acquisitions. Mr. Betz has
more than 20 years of finance experience in the semiconductor industry with a strong track record focused on results. Prior to joining NXP in 2013 he held several financial leadership positions with Fairchild Semiconductors, LSI Logic and Agere
Systems. Prior to being named CFO in October 2021, Mr. Betz was senior vice president, business planning & analytics and finance business group controller for NXPs business lines and shared service centers, and led the corporate
financial planning, analysis and business intelligence teams. Mr. Betz holds a Master of Business Administration from the University of Chicago Booth School of Business and a Bachelor of Science in Business Administration from West Virginia
University. |
|
|
Christopher Jensen (1969, American). Mr. Jensen is executive vice president, chief
human resources officer and a member of the management team and has served in this role since June 2020. In this role, he is responsible for all aspects of the Companys global human resources function, the Companys people strategy and
fostering an inclusive culture to achieve NXPs business objectives. |
42
EXECUTIVE OFFICERS (continued)
|
Mr. Jensen has been with NXP since the merger with Freescale in 2015 and was integral to the cultural integration of the two companies. He has extensive experience in leading the various
functions across human resources, with strength in change management, compensation and benefits design, and mergers and acquisitions. Prior to Freescale, Mr. Jensen held executive human resources positions at Applied Materials and Tandem
Computers. Mr. Jensen also serves as an adjunct professor at Baylor University, teaching in their Executive MBA Program. |
|
|
Andrew Micallef (1965, American). Mr. Micallef is executive vice president of
global operations at NXP and a member of the management team. He joined NXP in May 2021 and is responsible for creating and executing NXPs end-to-end
manufacturing, quality and supply chain strategies. Mr. Micallef has more than 20 years of semiconductor industry experience, including senior operational roles overseeing manufacturing, procurement, supply chain management, logistics, quality,
product and test engineering, information technology and facilities. Prior to NXP, Mr. Micallef was chief operations officer for Marvell. Prior to that, he held operations leadership roles at Intersil Corporation, Audience, LSI Corporation and
Agere Systems. |
|
|
Stephen Owen (1960, Dutch). Mr. Owen is executive vice president, global
sales & marketing and member of the management team. He has extensive experience in developing business internationally and served in various marketing and sales leadership positions at NXP and Philips since 1998. |
|
|
Jennifer Wuamett (1965, American). Ms. Wuamett is executive vice president, general
counsel, corporate secretary and chief sustainablity officer, she has served as executive vice president, general counsel and corporate secretary since September 2018 and as chief sustainablility officer since March 2022. In these roles Ms. Wuamett
is responsible for worldwide legal, governance, compliance and intellectual property matters for NXP and is also responsible for oversight of NXPs ESG and risk programs. Previously, Ms. Wuamett served as senior vice president and deputy
general counsel at NXP. Prior to that, she was Freescales senior vice president, general counsel and secretary and served in various other positions at Freescale and Motorola beginning in 1997. |
43
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information regarding beneficial ownership of our common shares as of March 24, 2022, by:
|
|
each person or entity who is known by us to beneficially own more than 5% of our common shares; |
|
|
each of our current directors and director nominees; |
|
|
each of the Named Executive Officers; and |
|
|
all of our current directors and executive officers as a group. |
Percentage computations are based on 262,552,688 common shares outstanding as of March 24, 2022 and excludes 11,966,950 treasury shares held by the Company.
Beneficial ownership is determined in accordance with the rules of the SEC. Each person named in the table has sole voting and investment power with respect to all of
the securities shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. Unless otherwise indicated, the address of each person named in the table is c/o NXP Semiconductors N.V., High Tech Campus 60, 5656
AG, Eindhoven, The Netherlands.
|
|
|
|
|
|
|
|
|
Name of Beneficial Owner |
|
Common Shares Beneficially Owned |
|
|
% of Common Shares Beneficially Owned |
|
BlackRock,
Inc.1 |
|
|
23,360,361 |
|
|
|
8.90 |
% |
FMR
LLC2 |
|
|
19,543,266 |
|
|
|
7.44 |
% |
JPMorgan Chase & Co.3 |
|
|
17,256,841 |
|
|
|
6.57 |
% |
Kurt Sievers |
|
|
141,114 |
|
|
|
* |
|
Sir Peter Bonfield |
|
|
15,192 |
|
|
|
* |
|
Annette Clayton |
|
|
|
|
|
|
* |
|
Anthony Foxx |
|
|
|
|
|
|
* |
|
Kenneth A.
Goldman4 |
|
|
19,240 |
|
|
|
* |
|
Chunyuan Gu |
|
|
|
|
|
|
|
|
Josef Kaeser |
|
|
10,028 |
|
|
|
* |
|
Lena Olving |
|
|
1,641 |
|
|
|
* |
|
Peter Smitham |
|
|
5,792 |
|
|
|
* |
|
Julie Southern |
|
|
9,039 |
|
|
|
* |
|
Jasmin Staiblin |
|
|
3,623 |
|
|
|
* |
|
Gregory
Summe5 |
|
|
13,494 |
|
|
|
* |
|
Karl-Henrik Sundström |
|
|
1,647 |
|
|
|
* |
|
William
Betz6 |
|
|
2,702 |
|
|
|
* |
|
Andrew Micallef |
|
|
|
|
|
|
* |
|
Stephen Owen |
|
|
30,264 |
|
|
|
* |
|
Jennifer
Wuamett7 |
|
|
45,008 |
|
|
|
* |
|
Peter
Kelly8 |
|
|
205,739 |
|
|
|
* |
|
Directors and current executive officers as a group (18
individuals)9 |
|
|
298,784 |
|
|
|
* |
|
* |
Represents less than 1%. |
1. |
Information about the number of common shares owned by BlackRock, Inc. (Blackrock) on December 31, 2021,
is based solely on a Schedule 13G/A filed by Blackrock with the SEC on February 13, 2022. Blackrocks address is 55 East 52nd Street, New York, NY 10055. Blackrock beneficially owned an aggregate of 23,360,361 common shares, has sole power
to vote 20,813,424 shares and the sole power to dispose of 23,360,361 shares of our common stock. |
2. |
Information about the number of common shares owned by FMR LLC (FMR) is based solely on a Schedule 13G/A filed
by FMR LLC with the SEC on February 9, 2022, reporting share ownership as of December 31, 2021. The address of FMR is 245 Summer Street, Boston, Massachusetts 02210. |
44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (continued)
|
FMR, along with certain of its subsidiaries and affiliates, and other companies, beneficially owned an aggregate of 19,543,266 common shares, has sole power to vote 1,803,913 shares and the sole
power to dispose of 19,543,266 shares of our common stock. Abigail P. Johnson is a Director, the Chairman, and the Chief Executive Officer of FMR. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or
through trusts, of Series B voting common shares of FMR, representing 49% of the voting power of FMR. The Johnson family group and all other Series B shareholders have entered into a shareholders voting agreement under which all Series B
voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders voting agreement, members of the
Johnson family may be deemed to form a controlling group with respect to FMR. |
3. |
Information about the number of common shares owned by JPMorgan Chase & Co. (JPMorgan) on
December 31, 2021, is based solely on a Schedule 13G filed by JPMorgan with the SEC on January 26, 2022. JPMorgans address is 383 Madison Avenue New York, NY 10017. JPMorgan beneficially owned an aggregate of 17,256,841 common
shares, has sole power to vote 15,834,435 shares and the sole power to dispose of 16,988,614 shares of our common stock, as well as the shared power to vote 164,468 shares and the shared power to dispose of 263,569 shares of our common stock.
|
4. |
Includes 12,448 shares held indirectly by the Goldman-Valeriote Family Trust and 3,000 shares held indirectly by MNM
Holdings LLC. |
5. |
Includes 3,000 shares held indirectly by the G L Summe Irrevocable Trust. |
6. |
Includes 365 shares held indirectly by custodial account for child. |
7. |
Includes 8,394 shares that may be acquired upon exercise of stock options that are currently exercisable.
|
8. |
Includes 141,346 shares that may be acquired upon exercise of stock options that are currently exercisable.
|
9. |
Includes 8,394 shares that may be acquired upon exercise of stock options that are currently exercisable.
|
45
EXECUTIVE COMPENSATION
Compensation Discussion & Analysis
This Compensation Discussion and Analysis (CD&A) describes our 2021 executive compensation program for the following executive officers (collectively,
the Named Executive Officers or NEOs):
|
|
|
Name |
|
Title |
Kurt Sievers |
|
Executive Director and President and Chief Executive Officer |
William Betz |
|
Executive Vice President and Chief Financial Officer (as of October 12, 2021) |
Andrew
Micallef |
|
Executive Vice President Global Operations |
Stephen Owen |
|
Executive Vice President Sales and Marketing |
Jennifer
Wuamett |
|
Executive Vice President, General Counsel and Chief Sustainability Officer |
Peter Kelly |
|
Former Chief Financial Officer |
NXP pays for the performance and contributions of our NEOs through an integrated compensation program with a variety of components. The
NEOs, under the leadership of our Executive Director and President and Chief Executive Officer (our CEO) and the other members of the Board, are held accountable for delivering results, while simultaneously creating a culture of
innovation and customer focus. This CD&A explains our strategy in incentivizing, compensating and rewarding our NEOs. We are providing an overview of the philosophies, principles, and practices that we employ, as governed by the Board of
Directors of NXP (the Board). The compensation of our CEO is determined by the Board in accordance with the principles set forth in the remuneration policy for executive and non-executive directors
previously approved by our general meeting of shareholders, as required under Dutch corporate law.
2021 Was An Exceptional Year
Semiconductors are entering a new cycle of growth driven by in-car electronics, AI-IoT devices, cloud processing, automation, 5G and connectivity features that make the world smarter and more sustainable. NXPs strategy continues to focus on strong corporate governance and innovative
system solutions that enable our customers success and drive long-term, profitable growth and shareholder value.
Kurt Sievers, President
and CEO
In 2021, the world, and especially the semiconductor market, experienced supply chain disruptions and, at the same time, an extraordinary demand resurgence.
We also relied on the resilience and adaptability of our workforce to operate very effectively in the continued uncertainties of the ongoing COVID-19 pandemic.
2021 Financial and Operational Context
Our focus is to invest in solutions
that will drive long-term, profitable growth, superior free cash flow and robust capital returns to our shareholders. Our strategy is to attain high relative market share positions within our target end markets, enabling our customers to succeed.
Our financial performance in 2021 was strong despite continued COVID-19 pandemic and supply chain challenges. Overcoming these challenges we:
|
|
Delivered Strong Year-on-Year Revenue
Growth: Revenue was $11.06 billion, up 28.5% year-on-year |
|
|
Continued to Drive Robust Profitability: GAAP gross profit was $6.07 billion, up 43.3% year-on-year, equating to a GAAP gross margin of 54.8%, up 566 bps from 2020. Non-GAAP gross profit was $6.21 billion, up 41% year-on-year, equating to a non-GAAP gross margin* of 56.1%, up 500 bps from 2020. We continued to invest in our people and technology
portfolio so as to deliver unique and differentiated products enabling our customers success. GAAP operating expenses were $3.48 billion, down 11.4 %
year-on-year or 31.5 % of revenue. Non-GAAP operating expenses* were $2.56 billion, up 17.9% year-on-year or 23.2 % of revenue consistent with our stated long term non-GAAP financial model. Taken together GAAP operating
profit was $2.58 billion, up 517.9% year-on-year, equating to a GAAP operating margin of 23.3%, up 1,849 bps from 2020, and our
non-GAAP operating profit* was $3.64 billion, up 63.4% year-on-year, equating to a
non-GAAP operating margin* of 32.9%, up 704 bps points from 2020. |
|
|
Generated Strong Cash Flow: Full-year cash flow from operations was $3.08 billion, with net capex investments of
$766 million, resulting in non-GAAP free cash flow of $2.31 billion up 10.4% year-on-year or 21% of revenue*
|
46
EXECUTIVE COMPENSATION (continued)
|
|
Returned Consistent and Robust Capital to Shareholders: Consistent with our stated long-term goal to return excess
free cash flow to our owners, in 2021 NXP returned $4.58 billion to shareholders through previously announced share repurchases (20.6 million shares for a total cost of $4.02 billion) and cash dividends ($562 million), reducing our diluted
share count by approximately 2.9%. |
* |
non-GAAP gross margin, non-GAAP operating
expenses, non-GAAP operating profit, non-GAAP operating margin and non-GAAP free cash flow are financial measures that do not
comply with US GAAP. Appendix A to this Proxy Statement quantifies and reconciles these measures to the comparable US GAAP financial measure. |
Accelerating Profitable Growth
In 2021, our extraordinary accomplishments
supported our overall strategy and product portfolio, including the following:
|
|
|
|
|
AUTOMOTIVE |
|
|
Delivered NXPs S32G2 vehicle network processors and
the S32R294 radar processor on TSMCs advanced 16 nanometer (nm) FinFET process technology |
|
|
Combined NXPs vehicle networking, gateway and i.MX 8 Series processors to enable enhanced services, convenience and
over-the-air updateable vehicles |
|
|
Continued innovation for clean, sustainable and power-efficient electronic vehicles with NXPs complete and highly
scalable BMS and Inverter Solutions, bringing down costs, proving safety and increasing performance with extended range and fast charging |
|
|
NXPs BMS solution powered a large eBus fleet in China, electric bikes launch in India and energy storage projects in
the United States |
|
|
|
|
|
INDUSTRIAL AND IOT |
|
|
Expanded our EdgeVerse portfolio with crossover applications
processors as well as next-generation i.MX 9 series of high-performance intelligent applications processors |
|
|
Continued innovation across our Wi-Fi 6 / BLE SoC portfolio with new highly
integrated Wi-Fi 6 solutions across embedded processing portfolio |
|
|
|
|
|
MOBILE |
|
|
Combined NXPs Ultra-Wideband (UWB) and
Bluetooth® technologies to provide greater location accuracy for Samsung Galaxy SmartTag+ |
|
|
|
|
|
COMMUNICATION INFRASTRUCTURE |
|
|
Announced RF solutions for 5G massive MIMO that combine the high efficiency of GaN with the compactness of multi-chip
modules |
47
EXECUTIVE COMPENSATION (continued)
Our People: The Heart of NXP
|
|
We maintained our significant investment in R&D, especially focused on preserving critical R&D talent to continue
delivering projects and setup future growth |
|
|
We successfully transitioned two retiring, named executive officers, with one coming through an external hire and one
through our internal succession planning process |
|
|
We maintained strong leadership of our workforce, whether working in our essential operations or remotely, to support and
minimize the disruption of our talent |
|
|
We continued to take targeted actions to ensure talent continuity, recognizing that a loss of our key management and other
team members, or an inability to attract qualified new employees, could affect our business in a highly competitive environment |
Safety and
wellbeing of our team members, customers and suppliers
|
|
We executed world-class health and safety protocols at all NXP sites to mitigated the safety risks to our team members who
were onsite running our fabrication plants and R&D laboratories during this time |
|
|
We continued our commitment to open communications with team members |
|
|
We launched a Team Member Wellbeing series that focused specifically on areas of physical, emotional and personal wellbeing
for our team members across the world |
Shareholder Engagement and Results of 2021 Advisory Vote
on Executive Compensation
At our annual general meeting of shareholders held on May 26, 2021, we received approximately 65% of the votes in favor of
the proposal to approve our NEOs compensation, on a non-binding, advisory basis. While this represented an improvement from our 2020 results, we are continuing our efforts to increase the overall
shareholder support for our compensation program. We recognize the importance of engaging with our shareholders to ensure that we understand their concerns about our compensation program philosophy and design.
Our investor outreach efforts were aimed at supporting two major goals. First, we maintained a consistent, proactive and timely engagement with current and potential
shareholders to present our long-term strategy, the tangible proof points and measurement of our execution and our resulting financial performance. These engagements are undertaken throughout the year by a combination of our CEO, CFO and other
executives. During 2021, notwithstanding the ongoing remote working situation that applied to both NXP and its shareholders, our management team held over 250 unique virtual investor meetings. Additionally, we held our triennial Investor Day in
November 2021, where members of our management presented a compelling roadmap for profitable growth to 55 analysts and investors attending in-person, as well as over 300 unique investors attending virtually.
Second, we facilitated on-going dialog between the governance and stewardship groups of our major shareholders and key members of our board of directors. These discussions focused on company management
oversight, corporate governance, human capital management and environmental, social and governance (ESG) topics.
As a result, following our 2021 AGM, our Chair of
the Board, the Vice-Chair of the Board and the Chairs of the Compensation and Nominating and Governance committees met with governance and investment stewardship teams of ten of our major shareholders, representing approximately 40% of outstanding
shares, providing an opportunity for these shareholders to speak directly to our board leadership. In these discussions, our Board members sought ideas and feedback on environmental, social and governance-related matters as well as NXPs
executive compensation program.
What We Heard
The shareholders expressed
appreciation for the opportunity to dialogue directly with board members on governance and sustainability issues. A majority of investors expressed support for NXP to issue carbon neutral goals. The consistent feedback was that we should establish a
long-term goal combined with specific intermediate targets annually. Several shareholders specifically noted that they preferred these goals to be set/verified under the Science Based Targets initiative.
48
EXECUTIVE COMPENSATION (continued)
A majority of investors supported or suggested that we include ESG metrics in our compensation plans and noted they
favor giving companies flexibility in choosing appropriate metrics and whether to include ESG metrics as components of short or long term compensation. The investors also asked that we provide transparent disclosure on why we select certain metrics
and how they relate to our business so they could evaluate for appropriateness to our business.
We also discussed the design and payout ranges of our
performance-based long term incentive equity program, which uses three-year relative total shareholder return as the performance measure. Target shares are earned if our share price return is at the median of our compensation peer group. Initial or
threshold payouts begin by achieving at least the second quartile performance. A minority of the shareholders provided feedback that we should consider adding another metric to this program, expressing a preference for compensation programs with
multiple metrics.
The shareholders with whom we connected generally provided positive feedback on our overall ongoing executive compensation program design and
found that we have an appropriate balance of short and long-term rewards, with sufficient performance related elements.
In addition to specific comments on
executive compensation, shareholders noted that we made significant progress in 2021 to advance our disclosures regarding human capital as well as diversity, equality and inclusion and expressed a continued interest in understanding important
information about our workforce including:
|
|
Diversity, equality and inclusion goals and statistics |
|
|
How we invest in our current and future talent |
|
|
How we monitor and manage retention |
We have included an explanation of these topics in the Human Capital Management section of this proxy statement beginning on page 9. More details about
these topics are included in our 2021 NXP Corporate Sustainability Report which can be found on our website at http://nxp.com/CSR. The contents of our website and our Corporate Sustainability Report are referenced for general information only
and are not incorporated by reference in this proxy statement.
How We Responded
Our Board and the Human Resources and Compensation Committee of the Board (the HRCC or the Committee) thoughtfully considered and evaluated
important information gathered from our shareholder engagement process and, together with feedback and input from our independent executive compensation consultant, decided upon a course of action considering all relevant stakeholders. Based on this
process we made three modifications to our executive compensation programs and disclosure practices as described below.
2021 Modifications to Our Executive
Compensation Programs and Disclosure Practices
|
1. |
Starting in 2022 we have introduced a sustainability component including environment and people related metrics into our
short term annual incentive plan to reinforce our corporate commitment in these areas. As a large, multinational company, we know that our operations are strengthened when we leverage the diversity of thought and cultures of our workforce. We are
also committed to reducing the environmental impact of our operations, being good stewards of our planet and doing our part to create a more sustainable world. We are dedicated to measurable year-on-year progress. Therefore, the HRCC approved the introduction of a sustainability component which contains multiple metrics and targets in service of supporting our long term environmental and people
related aspirations. The HRCC set the weighting of the sustainability component at 20% of our Annual Incentive Plan. We will discuss this sustainability component further later in this CD&A. |
|
2. |
We reduced the share realization of our 2021 PSU awards from 50% to 25% of target at the 25th percentile relative total shareholder return, which is the minimum payout threshold for this program. This further reinforces our pay for performance philosophy by reducing the threshold payment
amount if we underperform our peers. While we also considered adding other performance metrics to our performance-based equity program, the HRCC determined to continue using Relative Total Shareholder Return (RTSR) as the single metric
in order to keep the program simple to communicate and to align most effectively with the long-term shareholder interests. |
|
3. |
We enhanced the disclosure in this proxy statement to more transparently describe the basis for decisions we make around
our compensation programs and expanded the disclosures around our human capital programs. |
49
EXECUTIVE COMPENSATION (continued)
Other compensation program elements that are discussed later remained unchanged and had received positive support from
our shareholders. This includes our continued standard practice of determining equity award sizes for all NEOs based on prevailing market practice in our compensation peer group and determining appropriate annual incentive plan measures based upon
the companys business focused targets.
Ongoing Shareholder Engagement
We will continue a regular, proactive shareholder engagement approach with portfolio managers, sector equity analysts and governance teams. We believe that regular
engagement with our shareholders is important and will allow us to continue to understand and respond to their questions and concerns on a more real-time basis. Throughout this process, we will seek to gain feedback and answer shareholder questions
on our business strategy, compensation practices, governance topics, ESG and other related issues.
Compensation
Philosophy
As previously described in the Corporate Governance section of this proxy statement, our long-term strategy is to maximize value
for shareholders and other stakeholders of the Company. By driving revenue growth, strong gross margin and enhancing the product portfolio as well as developing, rewarding and retaining a highly engaged workforce, we have shown a strong return for
shareholders. Our purpose is bringing together bright minds to create breakthrough technologies that make the connected world better, safer, and more secure, a mission inspired by our innovation and customer focus. We have directly and deliberately
linked NEO pay to stakeholder interests including shareholders. This will be discussed in detail in following sections of this CD&A.
We operate globally and our
executives are located in multiple countries. As a result, our pay philosophy considers both the overall importance of consistency across the world and specific competitive pay practices in the local country where our executive talent resides. Our
overarching pay strategy is to:
Pay for Performancedelivering highly competitive overall pay for market leading performance.
Our executive compensation program is designed to:
✓ |
Align to stakeholder interests, including shareholders, customers, employees, suppliers, as well as local and
international communities where we operate, by delivering short and long term corporate strategic goals |
✓ |
Enable NXP to attract, retain, motivate, and grow highly qualified talent with competitive and comprehensive programs
|
✓ |
Create, develop, and reward our smart, dedicated, hard-working and innovative team members |
✓ |
Reward both collective and individual performance |
✓ |
Ensure fiscally sound practices while maximizing the value of the various compensation programs to individuals and NXP
|
✓ |
Align to and reward demonstration of corporate values in support of our strong corporate culture |
✓ |
Focus our innovations and rewards on our commitment to environmental and social good |
Key Practices in Determining Executive Compensation
The compensation of our CEO is determined by the Board, in accordance with the principles set forth in the remuneration policy for executive and non-executive directors previously approved by our general meeting of shareholders, as required under Dutch corporate law.
50
EXECUTIVE COMPENSATION (continued)
The compensation of our other NEOs is also governed by the Board with specific actions taken to ensure the direct
connection of rewards to key performance outcomes aligning executive pay to short and long-term stakeholder interests. Overall, our programs are competitive in the marketplace and highly incentive-based, with a large percentage of overall
compensation at-risk earned via our short- and long-term incentive programs based on overall Company and individual performance.
|
|
|
|
|
What We Do |
|
|
|
What We Do NOT Do |
|
|
|
|
|
✓ Emphasize pay for performance
✓ Tie
a significant majority of our executives pay to Company performance and use both long- and short-term performance metrics
✓ Cap
annual incentive and performance share unit plan payouts at 200% of target
✓ Include
a double-trigger provision under our cash and equity incentive plans in the event of a change-in-control
✓ Maintain meaningful stock ownership guidelines for executives and directors
✓ Use
an independent executive compensation consultant to guide the compensation plans
✓ Evaluate
competitive market practices to establish program design and targeted payout amounts
✓ Conduct
an annual risk assessment of our compensation programs
✓ Maintain
a robust claw back policy covering cash and equity incentive plan awards for directors, including the executive director and CEO
✓ Follow
principles of our shareholder approved executive and non-executive director remuneration policy
✓ Conduct
board-level outreach to shareholders to elicit feedback on our compensation program
✓ PSUs
potentially earned is capped at 100% of target if total shareholder return for the performance period is negative, regardless of the Companys relative performance compared to the Peer Group |
|
|
|
× Provide
for guaranteed salary increases or payouts for performance-based awards
× Provide
dividends or dividend equivalents on unearned performance share units
× Provide
for excise tax gross-ups resulting from M&A activity or terminations
× Provide
for excessive separation payments, liberal definitions of change in control, or single-trigger cash severance upon a change in control
× Provide
above market returns on deferred compensation plans
× Permit
short sales, hedging, and transactions involving derivatives of our stock
× Provide
personal loans, guarantees or other similar arrangements to executives
× Allow
the pledging of Company stock by directors, executive officers, and certain other employees
× Re-price or buyout options without shareholder approval |
51
EXECUTIVE COMPENSATION (continued)
Key Components of Our Executive Compensation Program
|
|
|
|
|
Pay Component
|
|
Approach and Structure |
|
Connection to Our Compensation Philosophy
and 2021 Key Points
|
Base Salary (see page
54) |
|
Provides a competitive fixed component of cash compensation
Based on an individuals role, experience, capability, and
contributions Reviewed annually against competitive benchmarks in local
markets |
|
Attracts, retains, motivates, and enables us to develop highly qualified
executive leaders Key Point: Limited salary increases for NEOs
including Mr. Betz upon promotion to CFO and Ms. Wuamett, our EVP General Counsel, to better align with market levels |
Annual Incentive Plan (AIP)
(see page 55) |
|
Variable, at-risk compensation
Rewards achievement of business/function, and/or overall corporate results
against key Company near-term goals Performance measures and targets
evaluated semi-annually and set by the Board In 2021, the program focused on
absolute revenue growth and non-GAAP gross margin |
|
Rewards Company performance against challenging short-term targets, with
appropriate and capped rewards for outstanding performance Key Point:
2021 2H performance targets were raised to reflect the market discussed further on page 56
Key Point: The revenue performance metric was changed to an absolute
revenue target Key Point: 2022 performance measures will include a
sustainability component focusing on environmental and people initiatives |
Performance-Based Restricted Stock Units (PSU)
(see page 59) |
|
Meaningfully incents management to execute on our longer-term business
objectives Drives long-term shareholder value creation
Vesting based on 3-year cliff using 3-year RTSR measured against a defined compensation peer group |
|
Aligns with shareholder interests by driving superior performance against
longer-term corporate financial, operational, and strategic goals Key
Point: Target awards represent 70% of long-term incentive compensation value at time of award
Key Point: Payout is capped at 200% for top quartile performance and
capped at 100% if RTSR is negative regardless of relative ranking Key
Point: The percent of target PSUs awarded at second quartile performance was reduced from 50% to 25% |
Restricted Stock Units (RSU)
(see page 59) |
|
Aligns executives interests with those of shareholders
Helps the Company retain key talent
Vests ratably over 3 years |
|
Aligns with shareholder interests, while also establishing retention of our
highly qualified executive talent over time Key Point: Target awards
represent 30% of long-term incentive compensation at time of award |
Benefits and Other Compensation (see
page 61) |
|
Generally, delivers local programs, consistent with other executives, to plan
for various life events Supports the varying needs of executives operating
in a complex, global environment Allows executives to maximize time and
attention on activities driving company performance |
|
Attracts, retains, motivates, and enables us to develop highly qualified
executive leaders while providing a competitive overall total rewards program
Key Point: Benefits and other compensation are generally consistent with
those offered to other executives within the same country of residence as the NEO. We do not offer excessive perquisites to our NEOs |
52
EXECUTIVE COMPENSATION (continued)
A Large Majority of Our NEOs Target Pay is At-Risk
Our performance-based culture and pay for performance philosophy strongly align the interests of our NEOs with those of our stakeholders. As shown in the following
charts, our 2021 target executive compensation program was heavily weighted towards at-risk compensation. Our CEO has 93% of his target compensation at risk with variable components. More than 65% is directly
linked to performance of the company and himself through the value of his target AIP and performance-based equity awards. Our other executive officers who are NEOs, excluding our former CFO, also have 84% of their target compensation at risk and 63%
of their compensation linked directly to performance.
These figures include annualized salary, target AIP and annual equity award grant values. Figures exclude the items outlined in the
Summary Compensation Table as All Other Compensation. The average NEO figures exclude the CEO and former CFO.
Peer Group Analysis and Benchmarking
Competitive data associated with our Peer Group is evaluated annually by the HRCC to:
|
|
Use as the basis for setting target total compensation |
|
|
Drive appropriate pay levels to attract, retain, motivate, and develop our executive team |
|
|
Ensure that we provide market competitive programsboth individually and in aggregate |
|
|
Calibrate relative shareholder return for purposes of determining the vesting of performance-based stock unit plans (see
further discussion later in this proxy) |
In addition to our Peer Group, the HRCC, along with Mercer, the HRCCs independent executive
compensation consultant, and management, reviews compensation information from published surveys to assess select roles and provide a broader view of the local and global competitive marketplace. From time to time, we evaluate information on pay
levels and plan designs from other comparable companies that we believe are important for a more comprehensive understanding of our industry and/or broader technology market practices.
This market research is used to inform program design principles along with the amount for each pay program and the overall total package. The HRCC uses competitive
benchmark data focusing on the median of the Peer Group to inform various compensation related decisions including base salary, incentive targets and target equity award levels. While this benchmark information is used as a guideline, it is not used
as a specific target. Other factors are also considered in making final decisions for each pay component such as experience, performance, role complexity, leadership capability, impact.
The HRCC reviews the Peer Group regularly to ensure the most appropriate information is used in making executive compensation decisions. For 2021, the HRCCin
conjunction with Mercer and managementreviewed NXPs peer group (the Peer Group) for use in understanding market competitive pay levels for various executive positions, as well as other competitive compensation practices and
plan design components. To determine the companies to include in the Peer Group, a variety of factors were considered by the HRCC, including revenue, market capitalization, enterprise value, similarities to the industries in which we operate, and
the overlapping labor market for top management talent. As a result of this review, the HRCC made no changes to the Peer Group for 2021.
53
EXECUTIVE COMPENSATION (continued)
For 2021, our Peer Group consisted of the following companies:
|
|
|
PEER GROUP
|
Advanced Micro Devices
|
|
Microchip Technology |
Analog Devices |
|
Micron Technology |
Applied Materials |
|
NVIDIA |
ASML Holding |
|
ON Semiconductor |
Broadcom |
|
QUALCOMM |
Corning |
|
STMicroelectronics |
Infineon Technologies |
|
Seagate Technology |
Lam Research |
|
TE Connectivity |
Marvell Technology |
|
Texas Instruments |
Maxim Integrated Products*
|
|
Western Digital |
* |
The Peer Group was determined by the HRCC prior to the completion of the acquisition of Maxim Integrated Products by
Analog Devices. |
2021 Compensation Decisions
Below we provide more details about each pay component and how the related amounts were determined.
Base Salary
Base salary represents annual fixed compensation and is a standard
element of our executive compensation program necessary to attract and retain talent. The HRCC reviews base salaries annually and approves each NEOs base salary after assessing the following:
|
|
The individuals role, performance and contributions, experience, and internal equity considerations relative to other
executives with similar roles and responsibilities |
|
|
The competitive landscape, including the compensation practices of the companies in our Peer Group and, where appropriate,
survey data from a broader index of comparable public companies |
|
|
Our business strategy and compensation philosophy |
|
|
Past actions related to base salary and whether any further change is warranted |
After thoughtful consideration of these factors, the HRCC determined the following annualized base salaries for each of the NEOs, only two of which increased on an
annualized basis from 2020.
|
|
|
Name |
|
Annualized Base Salary as of December 31,
2021 |
Kurt Sievers |
|
$1,181,800
(1,000,000) |
William
Betz |
|
$450,000 |
Andrew Micallef |
|
$500,000 |
Stephen
Owen |
|
$531,810
(450,000) |
Jennifer Wuamett |
|
$515,000 |
Peter Kelly |
|
$750,000 |
Note: The average exchange rate of 1.1818 (internal annual average rate) was used to convert from Euros to USD for Messrs. Sievers and
Owen who are both paid in Euros.
54
EXECUTIVE COMPENSATION (continued)
Effective from April 1, 2020 to December 31, 2020, as a response to the COVID 19 pandemic, Messrs. Sievers,
Owen and Kelly and Ms. Wuamett agreed to a voluntary 25% reduction in base pay. In 2021, for Messrs. Sievers, Owen and Kelly, the base salary was unchanged from 2020 other than to reflect the termination of the voluntary reduction. During the
HRCCs annual review process in May 2021, Ms. Wuametts salary was increased from $470,000 to $515,000 effective July 1, 2021 based on the competitive marketplace and her experience.
In the case of new placements, whether newly hired or internally promoted, the HRCC engages in a specific analysis and discussion to establish the initial pay level.
Mr. Micallef was newly hired to replace the retiring Executive Vice President Global Operations in May of 2021. His annualized base salary was determined to be $500,000 upon hire. Mr. Betz was internally promoted on October 12, 2021
to replace Mr. Kelly as Chief Financial Officer resulting from our succession planning process. Given that he is a new CFO and will be developing into his role, the Committee determined an appropriate annualized base salary to be $450,000. This
base salary level will be reviewed along with the other NEOs annually and will be adjusted as appropriate to reflect growth in the role and the competitive market.
Between October 12, 2021 until his retirement on February 28, 2022, Mr. Kelly remained an employee of the Companys subsidiary under the terms and
conditions of Mr. Kellys already existing employment agreement which sets his base pay at $750,000 and his annual incentive plan target at 100%. During this time, he provided transitional support to Mr. Betz in order to ensure the
smooth transition of this crucial role. Other than agreements established while Mr. Kelly was CFO, no additional arrangements were entered with Mr. Kelly with regards to his retirement from the Company.
Annual Incentive Program
The Annual Incentive Plan (AIP) is the
primary incentive vehicle that we use to drive performance on a short term basis. The AIP focuses on performance metrics critical to NXPs success that are measured on a six monthly basis. These metrics and goals and their associated
performance ranges are established near the start of each six month performance period and approved by the HRCC. The AIP is a plan under the Companys 2019 Omnibus Incentive Plan as approved by shareholders in 2019.
The HRCC reviews and approves the AIP program and targets taking into consideration:
|
|
Each NEOs role, experience and expected contributions |
|
|
The competitive market for determining targets as a percentage of base salary |
|
|
The measures that best reflect the companys short-term strategy and performance expectations in the fiscal year and
their alignment to stakeholder interests |
The 2021 AIP targets approved for Messrs. Sievers, Owen, Kelly and Ms. Wuamett remained unchanged
from 2020. The AIP target for Mr. Betz reflects his promotion as CFO and for Mr. Micallef, his appointment as Executive Vice President Global Operations.
|
|
|
Name |
|
AIP Target (% of Base Salary) |
Kurt Sievers |
|
150% |
William
Betz |
|
80% |
Andrew Micallef |
|
80% |
Stephen
Owen |
|
80% |
Jennifer Wuamett |
|
80% |
Peter Kelly |
|
100% |
For 2021, our AIP had two financial components weighted equally at 50% each. The overall payout opportunity is capped at 200% of target.
The two financial measures were:
|
|
Revenue Growth: NXP is a market leader in multiple end markets, and our continued
success is dependent on our ability to grow our revenue in these markets. Management and the HRCC reviewed the approach used in 2020 which focused on relative revenue growth and evaluated our growth as a percentage of the overall market. This
approach used external market share statistics in |
55
EXECUTIVE COMPENSATION (continued)
|
comparing NXP revenue to our strategic end markets via the focused Total Available Market as defined by World Semiconductor Trade Statistics. The HRCC determined that this market data reflected
an overall growth in the semiconductor market that was concentrated largely outside of NXPs end markets. Therefore in 2021, we implemented a straightforward metric related to absolute revenue targets to deliver shareholder value rather than a
relative market share revenue growth which was used only in 2020. Specifically, the revenue metric is the fully reported GAAP result as publicly reported for the two quarters comprising the performance period. |
|
|
Non-GAAP Gross Margin Expansion: Non-GAAP gross margin forms the cornerstone to driving our overall profitability. Successfully delivering differentiated new products that drive value to our customers is critical to driving profitable growth. This
is consistent with the measure used in 2019 and 2020 representing continued focus on gross margin. Non-GAAP Gross Margin is a non-GAAP financial measure. We calculate Non-GAAP gross margin by adjusting Gross Margin to exclude the effects of purchase price accounting, restructuring, stock-based compensation, merger-related costs, and other incidentals. These measures should not be
considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. |
The semiconductor
industry, especially in the markets NXP serves, historically has experienced cyclical performance. Starting in 2020, NXP developed performance targets for each half of the year to be measured and judged independently for purposes of the Annual
Incentive Plan. In 2020, the performance targets for both of the half year performance periods of the AIP were set by the Board in February 2020. 2020 was significantly impacted by the COVID 19 pandemic. In the first half 2020, we saw dramatic
market downturns substantially the result of the pandemic. In keeping with our strong pay for performance philosophy, the measures that were set forth at the beginning of the year were not adjusted for market conditions or the impact of COVID-19. Despite overcoming challenges and building a recovery trajectory in the second half of 2020, we did not payout short term incentives to our NEOs as the threshold performance established prior
to the pandemic were not changed. We believe our NEOs are ultimately responsible for delivering results despite economic and environmental conditions.
In 2021,
taking the cyclical nature of the industry along with the continued uncertainties of COVID 19 and supply chain challenges, NXP set performance targets for the performance periods at the start of the performance period (January 1 June 30,
2021 (1H 2021 Performance Period) and July 1 December 31, 2021 (2H 2021 Performance Period), rather than on an annual basis at the start of the year. The HRCC, in addition to setting the specific first half
year targets, set directional goals for both performance periods at the beginning of the year. They then established the specific performance targets for the second half of the year after the first performance period ended. The performance targets
set for each half were intended to improve on the performance of the previous years half yearly performance. The revenue targets for 1H 2021 and 2H 2021 were approximately 24% and 9% improvements over previous year halves actual
performance respectively. The adjusted gross margin targets for 1H 2021 and 2H 2021 were approximately 7% and 7.5% improvements over previous year halves actual performance, respectively, in a challenging supply chain environment. In addition,
1H 2021 revenue targets were set to ensure that we maintained the performance of 2H 2020 even though a typical revenue pattern suggests 1H to be lower than 2H of the previous year. Setting targets for each half year at the beginning of the
performance periods is reflective of the nature of business performance and allows us to better align rewards to realistic performance expectations considering the dynamics of the market. This approach allows the HRCC to consider many factors
including significant uncontrollable impacts like COVID as well as potential market recoveries like were seen in the latter part of 2021.
For 2H 2021, the HRCC
increased the 2H 2021 financial goals upon reviewing the exceptional recovery of the semiconductor market. The semiannual performance periods enabled us to gauge performance and respond to volatility in the market without having to make disruptive mid-cycle modifications. It also allowed for greater transparency on the progress towards the goals communicated to our employees. For employees other than our NEOs and other members of the management team, payouts
were made twice in October for the 1H 2021 Performance Period and April 2022 for the 2H Performance Period. For our NEOs and management team, the payout continued to be made on an annual basis in April 2022 using the formula below.
The AIP payments for our NEOs were calculated as follows (unless otherwise noted below):
* |
Bonusable salary was determined based on year end base salary prorated for the time worked or for the amount already paid
prior to promotion during the year. |
56
EXECUTIVE COMPENSATION (continued)
The following table shows the measures and payout factors at each performance level for the Corporate Financial
Performance Component of our 2021 AIP approved by the Board at the beginning of each performance period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 AIP Framework, Performance Targets & Results |
|
|
Measures |
|
2020 Results |
|
Threshold (25%) |
|
Target (100%) |
|
Stretch (200%) |
|
Weighting |
|
2021 Result |
|
Measure Realization |
|
|
|
|
|
|
|
|
|
1H 2021 |
|
Revenue ($ millions) |
|
$3,838 |
|
$4,025 |
|
$4,775 |
|
$5,525 |
|
50% |
|
$5,163 |
|
151.8% |
|
Non-GAAP Gross Margin Expansion |
|
50.5% |
|
53.0% |
|
54.0% |
|
55.0% |
|
50% |
|
55.2% |
|
200.0% |
|
1H Performance Period Payout Factor |
|
|
|
175.9% |
|
|
|
|
|
|
|
|
|
2H
2021 |
|
Revenue ($ millions) |
|
$4,774 |
|
$4,500 |
|
$5,200 |
|
$5,900 |
|
50% |
|
$5,900 |
|
200.0% |
|
Non-GAAP Gross Margin Expansion |
|
51.6% |
|
54.5% |
|
55.5% |
|
56.5% |
|
50% |
|
56.9% |
|
200.0% |
|
2H Performance Period Payout Factor |
|
|
|
|
|
|
|
|
|
|
|
|
|
200.0% |
|
|
|
|
|
Average Performance Factor |
|
187.95% |
NXPs performance in 2021 was a significant and remarkable rebound from the impact of the
COVID-19 pandemic downturn which impacted our strategic end markets and our performance in 2020, where the company made no payments under our AIP. During 2021, both revenue and
non-GAAP gross margin performance were the best delivered in NXP history. Revenue was up 28.5% year over year, with sequential and annual growth in each of the four quarters of 2021. Non-GAAP gross margin expansion was exceptional, increasing 500 basis points year-on-year versus 2020. We believe the structure of AIP
helped motivate our NEOs, management team and employees to build this momentum.
While the AIP for 2021 was split into two distinct six month performance periods,
our NEOs only received one annual incentive payment in April 2022, i.e. after certification of the second half performance period. This was determined most appropriate in holding NEOs accountable for the full year and provided the HRCC with the
ability to apply discretion to payouts, likely downward, in the event of a disconnect between performance in the two distinct performance periods. It also provided for an additional element of retention for our NEOs as they play a vital role in
leading the organization throughout the year. Below are the AIP payments that will be made to our NEOs in April 2022.
|
|
|
Name |
|
2021 AIP Payment |
Kurt Sievers |
|
$3,331,790 |
William Betz(1) |
|
$525,000 |
Andrew Micallef(2) |
|
$488,105 |
Stephen
Owen |
|
$799,630 |
Jennifer Wuamett |
|
$774,354 |
Peter Kelly |
|
$1,409,625 |
1. |
Because Mr. Betz was not part of the management team during the 1H Performance Period, $165,000 of the amount above
was received in October 2021 based on the 1H Performance Period Payout Factor and his salary, AIP target and individual performance before he was CFO. His 2H Performance Period payment is based on the 2H Performance Period Payout Factor
and his new salary and AIP target as CFO. |
2. |
Mr. Micallef joined the company in May 2021. In order to have his 2021 AIP payment be reflective of when he was an
employee of the company, his AIP payment was determined as follows: an amount equal to the 1H Performance Period Payout Factor multiplied by his AIP target and his prorated salary for the 1H performance period plus an amount equal to the 2H
Performance Payout Period Factor multiplied by his AIP target and his 2H performance period salary. |
57
EXECUTIVE COMPENSATION (continued)
As previously discussed, the HRCC has approved including a sustainability component in our Annual Incentive Program
starting in 2022. The financial targets will continue to focus on non-GAAP revenue and gross margin set on a semiannual basis. This practice helped to communicate more transparently with employees as well as
build momentum toward exceeding expectations. The new sustainability component will consist of environment and people metrics related to increasing renewable electricity, reducing carbon emissions, updating water recycling goals, ensuring employee
safety, increasing female representation and advancing desired culture. The sustainability component will be evaluated on an annual basis and paid with the 2H financial payment. Below is the 2022 AIP framework.
Long-Term Incentive (LTI) Program
A fundamental underpinning of our LTI program design is to align our NEOs and other key strategic decision makers interests with those of our shareholders.
Our NEOs are critical to NXPs long-term success, including driving our vision, strategy, and corporate culture. As a result, we tie 70% of our NEOs target LTI to NXPs relative stock price performance.
In establishing the LTI program for 2021, consistent with 2019 and 2020, the HRCC considered the following:
|
|
Expected long-term contribution of each role and individual |
|
|
Competitive market practice for each role as compared to our Peer Group and general competitive talent market practice
|
|
|
Connection to shareholder interests through recognizing stock price appreciation |
|
|
Simplicity in the number of measures |
|
|
Importance of establishing and retaining our high performing executive team |
|
|
Appropriate balance between time-based and performance-based LTI |
58
EXECUTIVE COMPENSATION (continued)
NXP granted the following types of LTI awards to our NEOs in 2021:
|
|
|
|
|
|
|
LTI Award
Type |
|
Target Weighting |
|
Vesting Schedule |
|
Vesting Provisions |
PSUs |
|
70% |
|
100% after year 3 to the extent earned once results have been certified by the Committee |
|
Performance-based contingent on NXPs RTSR performance against the Peer Group with a vesting range
of 0 200% |
RSUs |
|
30% |
|
1/3rd per year starting on the first anniversary of the grant date |
|
Service-based |
PSUs: For all grants made under our 2021
LTI program, the number of shares earned will be contingent upon NXPs RTSR performance versus the Peer Group from November 2, 2021 through November 1, 2024. The peer group used for this purpose is the same Peer Group described above
in the section Peer Group Analysis and Benchmarking except for the removal of Maxim Integrated Products.
RTSR is a powerful measure that aligns
directly with shareholder interests via stock price appreciation and returns to shareholders via dividends. It also reflects the important performance factors influencing our relative performance including financial performance as well as other
considerations such as items discussed in the Governance and Sustainability sections of this proxy statement. The HRCC determined to continue RTSR as the sole measure used in assessing PSU performance after considering shareholder feedback and
reviewing other options as well as the prevailing market practice. The number of PSUs ultimately earned at the end of the three-year performance period will be based on the payout schedule in the table below, with the overall payout opportunity
capped at 200% of target for performance at or above the 75th percentile of the Peer Group. Prevailing market practice within our Peer Group shows similar payout structure to that presented in the table below with target vesting earned by achieving
median performance.
For the awards granted in 2021, the Committee evaluated the full payout structure, considered shareholder feedback and determined that the
percentage of target PSUs awarded at second quartile performance should be reduced from 50% to 25%. This reduction further reinforces our pay for performance compensation philosophy by further reducing compensation in the event of relative
underperformance.
|
|
|
|
|
|
|
|
|
NXP Relative TSR
Percentile Rank vs. Peer Group |
|
% of Target PSUs Vesting in 2020 |
|
% of Target PSUs Vesting in
2021 |
Maximum |
|
75th Percentile or GreaterTop Quartile |
|
200% |
|
200% |
Target |
|
50th PercentileThird
Quartile |
|
100% |
|
100% |
Threshold |
|
25th PercentileSecond
Quartile |
|
50% |
|
25% |
|
|
Less than 25th
PercentileFirst Quartile |
|
0% |
|
0% |
For performance between the levels shown in the preceding table, the percentage of target PSUs that will vest will be determined using
linear interpolation. The final number of PSUs earned will be capped at 100% of target if NXPs total shareholder return for the performance period is negative, regardless of the Companys relative performance compared to the Peer Group.
RSUs: The RSUs granted to our NEOs vest
1/3rd per year starting on the first anniversary of the grant date. We believe that RSUs provide an important long-term retention incentive for our NEOs and further align their interests with
those of our shareholders, but in accordance with our pay for performance philosophy, we limit the time-based RSUs to 30% of the LTI awards.
2021 Target LTI
Awards
Following thoughtful consideration of all relevant factors, the HRCC approved the individual annual LTI grant values to our NEOs in November 2021 as
follows to be earned over the next three years. These grants were made in the customary granting cycle for NEOs and other employees. The grants are fully outlined in the Grants of Plan Based Awards on page 68.
For the annual LTI award granted to our CEO, the HRCC considered many important factors including:
|
|
Record breaking performance in 2021 |
59
EXECUTIVE COMPENSATION (continued)
|
|
Effective transition in leadership and in establishing the new leadership team |
|
|
Exceptional leadership in advancing NXPs strategy |
|
|
Extraordinary professionalism in handling the COVID-19 pandemic impacts especially
regarding employee safety, engagement, and wellbeing |
|
|
Customer support and collaboration through supply chain challenges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
2021 Annual LTI Grant Value ($) |
|
|
70% PSUs
($) |
|
|
PSUs Granted (at Target)
(#) |
|
|
30% RSUs
($) |
|
|
RSUs Granted (#) |
|
Kurt
Sievers |
|
$ |
14,000,000 |
|
|
$ |
9,800,000 |
|
|
|
47,444 |
|
|
$ |
4,200,000 |
|
|
|
20,334 |
|
William
Betz |
|
$ |
2,500,000 |
|
|
$ |
1,750,000 |
|
|
|
8,473 |
|
|
$ |
750,000 |
|
|
|
3,631 |
|
Andrew
Micallef |
|
$ |
1,900,000 |
|
|
$ |
1,330,000 |
|
|
|
6,439 |
|
|
$ |
570,000 |
|
|
|
2,760 |
|
Stephen
Owen |
|
$ |
2,500,000 |
|
|
$ |
1,750,000 |
|
|
|
8,473 |
|
|
$ |
750,000 |
|
|
|
3,631 |
|
Jennifer
Wuamett |
|
$ |
2,200,000 |
|
|
$ |
1,540,000 |
|
|
|
7,456 |
|
|
$ |
660,000 |
|
|
|
3,196 |
|
Mr. Sievers was awarded a total of $14 million in LTI in 2020, including a promotional grant upon his promotion to CEO and
during the annual granting process in November 2020. The Committee determined that maintaining the same level was appropriate given his extraordinary leadership during 2021 to reach exceptional financial performance and overcome challenges. In
addition to his annual LTI grant, Mr. Micallef also received a $1,000,000 RSU new hire grant (equal to 4,750 shares) in August 2021 that is not reflected above. Mr. Kelly did not receive any new equity grants during 2021.
The number of shares awarded under the LTI program are determined by taking the target annual LTI award value and dividing it by the grant date closing price. For the
annual LTI awards on November 2, 2021, the grant date closing price was $206.56. The amounts reported in the 2021 Summary Compensation Table include the grant date fair values (i.e., accounting values) of the awards.
Executive Share Ownership Guidelines
In addition to our strong pay-for-performance philosophy and overall executive
compensation program design, we further align our executives interests with those of our shareholders through the NXP Executive Equity Ownership Policy (the EOP). The EOP applies to all NEOs as well as other senior executives of
the Company. All the NEOs are in compliance with their respective ownership guideline.
|
|
|
EOP Level |
|
NXP EOP Policy |
President & CEO |
|
6.0x base salary |
Management Team: Section 16 Officers |
|
3.0x base salary |
Board of
Directors |
|
5.0x annual cash retainer |
Compliance Window |
|
5 years |
Policy if EOP not
met |
|
Retain 100% of the net shares received from LTI grants until EOP is met, with HRCC discretion to assess special situations on a case-by-case basis |
Shares Counted towards EOP |
|
Shares directly or beneficially owned; unvested time-based restricted stock units (RSUs) |
Other Practices & Guidelines
Retirement Benefits
As approved by the HRCC, the Company provides retirement
benefits to help the Company attract and retain the most highly talented senior executives. Our NEOs participate in various pension and retirement arrangements consistent with other employees in their respective jurisdictions of employment. In
addition, Mr. Owen receives a cash payment in lieu of participation in a defined benefit pension arrangement. Due to legislative changes in the Netherlands effective January 1, 2015, a new pension arrangement applies providing these cash
payments. The values of all retirement related payments made to our NEOs are included in the Summary Compensation Table on page 66.
60
EXECUTIVE COMPENSATION (continued)
Other Benefits and Perquisites
Our NEOs participate in medical and dental insurance, life insurance, short- and long-term disability programs, leave of absence, and other similar policies on the same
terms as our other employees in their country of residence except our CEO is provided with an international medical insurance policy, reflective of the international travel required in his position.
We also provide limited perquisites and personal benefits based on considerations unique to each NEOs position and location. These additional arrangements can
include one or more expenses such as tax preparation, car lease, security, housing, relocation allowances, and mobility arrangements which are broadly in line with those typical for global executives. The values of all perquisites and other personal
benefits provided to our NEOs are included in the All Other Compensation column of the Summary Compensation Table on page 66.
Consistent with
regulatory requirements, the Companys policy forbids personal loans, guarantees or similar arrangements to members of our Board and NEOs, and consequently no loans, guarantees or similar arrangements were granted.
Employment Arrangements of Named Executive Officers
We have employment agreements with all of our NEOs. The key practices related to these agreements were outlined on page 51. We do not provide excessive separation
payments, any excise tax gross ups or single trigger change in control arrangements.
Mr. Sievers
In connection with Mr. Sievers nomination as Executive Director and President and Chief Executive Officer, Mr. Sievers and the Company entered into a
management agreement (the Management Agreement) and NXP Semiconductors Germany GmbH, a wholly owned indirect affiliate of the Company, and Mr. Sievers entered into an addendum to Mr. Sievers existing employment agreement
(the Secondment Addendum and together with the Management Agreement, are the CEO Agreements). A copy of the CEO Agreements can be found on Form 8-K filed by the Company on March 9,
2020.
The CEO Agreements provide that effective May 27, 2020,Mr. Sievers serves as Executive Director and President and Chief Executive Officer until the
date of the following annual general meeting, and will be extended if NXPs general meeting reappoints Mr. Sievers as Executive Director and President and CEO of NXP. Under the CEO Agreements, Mr. Sievers receives a gross annual base
salary of 1 million and is eligible for payment under the AIP, with a target cash incentive percentage of 150% of his annual base salary and the maximum annual incentive opportunity equal
to 200% of the at target incentive opportunity. The actual amount payable to Mr. Sievers as an annual incentive bonus is dependent upon the achievement of performance targets which are set by the HRCC and which are expected to be substantially
the same as the targets established under the plan for other executives. Depending on performance, the actual amount payable as an annual cash bonus to Mr. Sievers may be less than, greater than or equal to the stated target bonus (and could be
zero).
Considering Mr. Sievers tenurehe has been employed at NXP since 1995the HRCC considered it reasonable to provide in the CEO agreements
that in the event that Mr. Sievers employment is terminated at the initiative of the Company and other than for cause, Mr. Sievers will be entitled to a severance amount of two times the gross annual base salary and a pro-rata payment of the annual cash bonus, depending on achievement of the pay-out conditions and the period in which Mr. Sievers has performed actual work for the
Company. One additional element the HRCC took into account was that Mr. Sievers, being employed by the Companys German subsidiary NXP Semiconductors Germany GmbH, in the absence of the severance arrangements in the CEO Agreements, would
be entitled to a severance amount that could be as high as four times his base salary, according to German employment law, in the absence of the lesser severance arrangements in the CEO Agreements.
Mr. Sievers is subject to non-competition provisions that remain in effect for a period of one year following the
termination of his employment agreement.
Mr. Betz
On
October 12, 2021, NXP USA, Inc. (NXP USA), a wholly owned indirect subsidiary of the Company, entered into an employment agreement with William Betz setting forth the terms and conditions of his employment as our Executive Vice
President and Chief Financial Officer, including his base salary, annual incentive target and participation in certain benefits plans, policies and programs applicable to other NXP executives and officers. Either Mr. Betz or NXP USA may
terminate Mr. Betzs employment for any reason upon three months
61
EXECUTIVE COMPENSATION (continued)
written notice, and NXP USA may terminate his employment immediately under certain conditions involving misconduct. In the event that NXP USA terminates Mr. Betzs employment absent
certain conditions involving misconduct, Mr. Betz is entitled to receive a lump sum cash severance payment of one years base salary and pro rata payment of the annual incentive bonus for the period that Mr. Betz performed actual
work, to the extent the conditions for a bonus payout have been met. In the event Mr. Betzs employment is terminated within twelve months following a change of control or if Mr. Betz resigns for good reason within twelve
months following a change of control, in either case not under certain conditions involving misconduct, then Mr. Betz is entitled to the change of control arrangements approved from time to time by the Companys HRCC, as described below.
All severance payments are contingent on Mr. Betz signing and not revoking a release of claims. Mr. Betz is subject to non-competition and non-solicitation
restrictions for twelve months and customary prohibitions on disclosing confidential information following the termination of his employment for any reason.
Mr. Micallef
Effective May 10, 2021, NXP USA, entered into an
employment agreement with Andrew Micallef setting forth the terms and conditions of his employment as Executive Vice President Global Operations, including his base salary, annual incentive target and participation in certain benefits plans,
policies and programs applicable to other NXP executives and officers. Either Mr. Micallef or NXP USA may terminate Mr. Micallefs employment for any reason upon three months written notice, and NXP USA may terminate his
employment immediately under certain conditions involving misconduct. In the event that NXP USA terminates Mr. Micallefs employment absent certain conditions involving misconduct, Mr. Micallef is entitled to receive a lump sum cash
severance payment of one years base salary and pro rata payment of the annual incentive bonus for the period that Mr. Micallef performed actual work, to the extent the conditions for a bonus payout have been met. In the event
Mr. Micallefs employment is terminated within twelve months following a change of control or if Mr. Micallef resigns for good reason within twelve months following a change of control, in either case not under certain
conditions involving misconduct, then Mr. Micallef is entitled to the change of control arrangements approved from time to time by the Companys HRCC, as described below. All severance payments are contingent on Mr. Micallef signing
and not revoking a release of claims. Mr. Micallef is subject to non-competition and non-solicitation restrictions for twelve months and customary prohibitions on disclosing confidential information
following the termination of his employment for any reason.
Mr. Owen
On March 18, 2013, Mr. Owen entered into an employment agreement with the Company providing Mr. Owens base salary and bonus and certain benefits and
perquisites as described above. Mr. Owens agreement provides that Dutch labor law governs the entitlement, if any, of a severance payment in the event of termination of employment. Mr. Owen is subject to non-competition provisions that remain in effect for a period of one year following the termination of his employment agreement.
Ms. Wuamett
On August 25, 2021, NXP USA entered into an employment
agreement with Jennifer Wuamett, the Companys Executive Vice President and General Counsel. The employment agreement documents the terms and conditions of her employment as Executive Vice President and General Counsel, a position she has held
since September 1, 2018, including her base salary, annual incentive target and participation in certain benefits plans, policies and programs applicable to other NXP executives and officers. Either Ms. Wuamett or NXP USA may terminate Ms.
Wuametts employment for any reason upon three months written notice and NXP USA may terminate her employment immediately under certain conditions involving misconduct. In the event that NXP USA terminates Ms. Wuametts employment
absent certain conditions involving misconduct, Ms. Wuamett is entitled to receive a lump sum cash severance payment of one years base salary and pro rata payment of the annual incentive bonus for the period that Ms. Wuamett performed actual
work, to the extent the conditions for a bonus payout have been met. In the event Ms. Wuametts employment is terminated within twelve months following a change of control or if Ms. Wuamett resigns for good reason within twelve
months following a change of control, in either case not under certain conditions involving misconduct, then Ms. Wuamett is entitled to the change of control arrangements approved from time to time by the Companys HRCC, as described
below. All severance payments are contingent on Ms. Wuamett signing and not revoking a release of claims. Ms. Wuamett is subject to non-competition and
non-solicitation restrictions for twelve months and customary prohibitions on disclosing confidential information following the termination of her employment for any reason.
Mr. Kelly
On June 19, 2012, the Company entered into an agreement
with Mr. Kelly, as amended on August 17, 2018, providing Mr. Kellys base salary, bonus and certain benefits and perquisites as described above. Mr. Kellys employment agreement also provides him with severance upon a
qualifying termination of employment. Upon his retirement on February 28, 2022 no severance payments will be made under this agreement. Mr. Kelly is subject to non-competition provisions that remain
in effect for a period of one year following the termination of his employment agreement.
62
EXECUTIVE COMPENSATION (continued)
Key Policies and Practices
Claw back Policy
AIP payments and LTI grants are subject to the claw back
provisions mandated pursuant to Dutch corporate law for our board of directors, including the CEO. Under this provision, the Company is entitled to recover any performance-based compensation awarded in full or in part to the extent that such payment
was made based on incorrect information regarding the performance against pre-established goals or about the circumstances from which the entitlement to the award was made dependent.
Derivatives Trading, Hedging, and Pledging Policies
NXP employees and
directors are prohibited at all times from, either directly, or indirectly, purchasing financial instruments (including pre-paid variable forward contracts, equity swaps, collars, and exchange funds), or
otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of NXP securities. No NXP employee or director may engage in hedging, pledging, hypothecating (including holding in margin
accounts), or short selling NXP securities, or causing any other person to do so.
Change of Control Policy
The Board believes that having a clear, consistent policy that determines the appropriate treatment of our NEOs in the event of a change of control of the Company is in
the best interest of NXP. This ensures our executives are able to fully focus on the potential transaction in the best interest of the shareholders, without concern for their own disposition. The change of control benefits for our NEOs are described
in the table and narrative under the Potential Payments Upon Termination of Change of Control Table section of this proxy on page 72. All NEOs have a double-trigger provision such that, if they are involuntarily terminated without cause
or leave with good reason (as defined in the applicable agreement) within 12 months following a change of control, they will receive the following benefits:
|
|
Severance payment of a minimum of 24 months of base pay and 2 times target bonus or the local regulatory program in their
country of residence, whichever is higher |
|
|
Accelerated vesting of outstanding unvested equity in accordance with the applicable equity plan or award agreement
|
|
|
For those NEOs who are either citizens of the United States or reside in the United States, 12 months of benefits
continuation |
|
|
Our NEOs are not entitled to excise tax gross-ups in connection with these payments
|
Compensation Practices and Risk
The HRCC has oversight responsibility for evaluating risks related to the Companys compensation policies and practices. The Committee believes our compensation
programs balance an appropriate mix of short- and long-term performance objectives, cash- and equity-based compensation, and risks and rewards for our employees. Our programs incorporate key design features to mitigate the likelihood of excessive
risk-taking behavior, including:
|
|
Reasonable performance goals are established by the HRCC for AIP, our short-term cash incentive program, incorporating top-line (e.g., revenue growth) and bottom-line (e.g., adjusted gross margin) business performance factors |
|
|
All eligible NXP employees, including NEOs, are measured against the same business performance factors for AIP
|
|
|
Our short-term cash incentive programs include maximum payout limitations of 200% and the maximum individual bonus payment
under AIP is two times the applicable bonus target |
|
|
Long-term incentive awards for our NEOs contain a mix of performance-based and time-based vesting, and the performance-based
awards granted since 2018 measure relative total shareholder return performance over a three-year performance period |
|
|
Our performance-based restricted share units have a maximum performance factor of 200% |
Additionally, we have a strong internal control environment, including a written Code of Conduct and ethics and compliance training for all employees including our NEOs.
Based on a review of our compensation program design, the HRCC believes that there are no significant risks and our policies and practices do not create risks that are reasonably likely to have a material negative impact on our Company.
63
EXECUTIVE COMPENSATION (continued)
Governance
The HRCC oversees the compensation and benefits programs for our NEOs and is comprised solely of independent, non-employee
members of the Board. The HRCC works very closely with its independent compensation consultant and with management to examine the effectiveness of the Companys executive compensation program throughout the year. The HRCC Charter, which may be
accessed at http://investors.nxp.com, details full authority and responsibility.
The Role of the Human Resources and Compensation Committee
The HRCC is accountable for ensuring that the links between our executive compensation program and our business goals are responsible, appropriate, and strongly aligned
with shareholders and other stakeholders interests. Under the responsibility of and as assigned by the Board, the HRCC annually establishes the compensation levels of our NEOs and reports to the full Board for their approval considering
several factors, including:
|
|
Each NEOs role, responsibilities, experience, capability, and performance |
|
|
NEO succession planning, excluding CEO, and important talent management activities |
|
|
Human capital statistics and activities below NEOs |
|
|
Compensation practices of the companies in our Peer Group |
|
|
Survey data from a broader group of comparable public companies (where appropriate) |
|
|
Relationship between the Companys compensation policies and practices and risk management |
The HRCC is also responsible to review the remuneration of the non-executive directors, and recommend from time to time to the
Board an amendment concerning the remuneration to be resolved by the General Meeting of Shareholders including retainers, fees and equity grants.
The Nominating,
Governance and Sustainability Committee is accountable for corporate governance matters and initiatives and reporting on environment, social and governance (ESG). Under the responsibility of and as assigned by the Board, the key focus areas for the
Nominating, Governance and Sustainability Committee in these activities are: managing CEO and Board succession, nominating director candidates, evaluating organization effectiveness, and reviewing NXP top identified risks and make proposals to the
Board on oversight.
Further, the compensation of our CEO is determined by the Board in accordance with the principles set forth in the remuneration policy for
executive and non-executive directors previously approved by our general meeting of shareholders, as required under Dutch corporate law.
The Role of Management
Our CEO makes key pay recommendations for his direct
management team to the HRCC. In addition, staff from NXPs Human Resources organization provides support to the HRCC on various compensation and benefits issues, including market practices, Company policies, and recommendations for program
changes. Our CEO and NXPs other executive officers do not make recommendations to or participate in the deliberations of the HRCC regarding the CEOs own compensation.
The Role of the Independent Consultant
The HRCC has retained Mercer since 2014
to serve as its executive compensation consultant. Mercer provides advice directly to the HRCC. Other teams within Mercer and its affiliates perform services for us as described below. The individuals supporting the HRCC did not perform any services
for us other than as directed by the HRCC.
During fiscal 2021, Mercer advised the HRCC on a variety of subjects such as compensation plan design and trends, pay for
performance analytics, external competitive compensation reference points, and other such matters. Mercer reports directly to the HRCC, participates in meetings as requested and communicates with the HRCC Chair between meetings, as necessary. The
HRCC has the sole authority to:
|
|
Modify or approve Mercers compensation |
64
EXECUTIVE COMPENSATION (continued)
|
|
Determine the nature and scope of its services |
|
|
Evaluate its performance |
|
|
Terminate the engagement and hire a replacement or additional consultant at any time |
As noted above, in 2021 other teams within Mercer or its affiliates provided services at the request of management to the Company not related to advising the HRCC on
executive officer and director compensation matters. Fees paid to Mercer and its affiliates for services provided in 2021 related to executive and director compensation totaled approximately $310,000. Fees paid to Mercer and its affiliates
for actuarial valuations of pension plans, market compensation survey data and consulting services related to broad-based employee benefit plans totaled approximately $160,000. In addition, Mercer acts as the broker of record for broad-based
employee benefit plans in various countries in which we operate. As broker of record they received commissions directly from the benefit providers of approximately $1,100,000. In addition, in 2021, the Company paid Marsh, an affiliate of
Mercer, approximately $100,000 for fees related to insurance brokerage services unrelated to employee benefit programs and site services. Additionally, as part of its insurance brokerage services, Marsh receives insurance premium payments from
the Company which Marsh pays to insurance carriers on behalf of the Company. Because these other services were in the ordinary course of business, the HRCC did not specifically approve such services, although the HRCC reviewed these other services
in connection with their independence review. Mercer informed us that it has safeguards and procedures in place to maintain independence in its executive compensation consulting practice. These safeguards include a rigidly enforced code of conduct,
a policy against investing in client organizations and separation between Mercers executive compensation consulting and their other administrative and consulting business units from a leadership, performance measurement and compensation
perspective. Specifically, Mercer has adopted Global Business Standards for Executive Compensation to manage actual or perceived conflicts of interest and ensure the integrity of their advice. It addresses how they manage the executive
compensation consulting relationship, ensure the quality of consulting services and structure their business to prevent conflicts of interest. Mercers executive compensation consultants are not managed or rewarded based upon client revenue
from other lines of business or other Marsh & McLennan (MMC) companies other than to the extent all employees benefit from overall success of MMC. The HRCC has assessed the independence of Mercer under NASDAQ listing standards and
has concluded that no conflict of interest exists.
Human Resources and Compensation Committee Report
We, the Human Resources and Compensation Committee of the Board of Directors of NXP Semiconductors N.V., have reviewed and discussed the CD&A set
forth above with management of the Company, and based on such review and discussion, recommended to the Board that the CD&A be included in this proxy statement.
NXP Human Resources and Compensation Committee:
Peter Smitham, Chair
Sir Peter Bonfield
Annette Clayton
Lena Olving
Karl-Henrik Sundström
65
EXECUTIVE COMPENSATION (continued)
Summary Compensation Table
The following table presents information regarding compensation of each of the NEOs for services rendered during the prior three fiscal years. A description of our
compensation policies and practices as well as a description of the components of compensation payable to our NEOs is included above under Compensation Discussion and Analysis.
|
|
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|
|
|
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|
|
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|
|
|
|
|
|
Name and Principal Position |
|
Year |
|
|
Salary ($)1,2 |
|
|
Stock Awards ($)3 |
|
|
Nonequity Incentive Plan Compensation ($)1,4 |
|
|
Change in Pension
Value & Nonqualified Deferred Compensation Earnings ($)1,5 |
|
|
All other Compensation ($)1,6 |
|
|
Total ($) |
|
Kurt Sievers7 Executive Director, President and Chief Executive Officer |
|
|
2021 |
|
|
|
1,181,800 |
|
|
|
16,314,944 |
|
|
|
3,331,790 |
|
|
|
|
|
|
|
83,358 |
|
|
|
20,911,892 |
|
|
|
2020 |
|
|
|
759,968 |
|
|
|
16,063,333 |
|
|
|
|
|
|
|
2,293,073 |
|
|
|
136,928 |
|
|
|
19,253,302 |
|
|
|
2019 |
|
|
|
745,465 |
|
|
|
7,564,222 |
|
|
|
|
|
|
|
970,378 |
|
|
|
39,453 |
|
|
|
9,319,518 |
|
William Betz Executive Vice President and Chief Financial Officer |
|
|
2021 |
|
|
|
351,115 |
|
|
|
2,913,589 |
|
|
|
525,000 |
|
|
|
|
|
|
|
22,435 |
|
|
|
3,812,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew Micallef Executive Vice President Global Operations |
|
|
2021 |
|
|
|
317,308 |
|
|
|
3,193,031 |
|
|
|
488,105 |
|
|
|
|
|
|
|
|
|
|
|
3,998,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Owen Executive Vice President Global Sales and Marketing |
|
|
2021 |
|
|
|
531,810 |
|
|
|
2,913,589 |
|
|
|
799,630 |
|
|
|
|
|
|
|
135,904 |
|
|
|
4,380,933 |
|
|
|
2020 |
|
|
|
417,251 |
|
|
|
2,935,370 |
|
|
|
|
|
|
|
|
|
|
|
148,828 |
|
|
|
3,501,449 |
|
|
|
2019 |
|
|
|
504,450 |
|
|
|
2,909,363 |
|
|
|
|
|
|
|
|
|
|
|
165,659 |
|
|
|
3,579,472 |
|
Jennifer Wuamett Executive Vice President, General Counsel and Chief Sustainability Officer |
|
|
2021 |
|
|
|
494,654 |
|
|
|
2,564,043 |
|
|
|
774,354 |
|
|
|
|
|
|
|
17,000 |
|
|
|
3,850,051 |
|
|
|
2020 |
|
|
|
382,779 |
|
|
|
2,582,960 |
|
|
|
|
|
|
|
|
|
|
|
16,873 |
|
|
|
2,982,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter Kelly8 Former Chief Financial Officer |
|
|
2021 |
|
|
|
752,884 |
|
|
|
|
|
|
|
1,409,625 |
|
|
|
|
|
|
|
42,585 |
|
|
|
2,205,094 |
|
|
|
2020 |
|
|
|
610,817 |
|
|
|
3,522,411 |
|
|
|
|
|
|
|
|
|
|
|
54,726 |
|
|
|
4,187,954 |
|
|
|
2019 |
|
|
|
750,000 |
|
|
|
3,491,327 |
|
|
|
|
|
|
|
|
|
|
|
77,667 |
|
|
|
4,318,994 |
|
1 |
All amounts presented in the Summary Compensation Table, and in the supporting tables that follow, are expressed in U.S.
dollars. Certain amounts payable to Messrs. Sievers and Owen were paid in euros. The exchange rate used for the purpose of the Summary Compensation Table and the supporting tables that follow is the average monthly rates for the full year: (i)
1.1818 for 2021, (ii) 1.1412 for 2020, and (iii) 1.1210 for 2019. |
2 |
For Messrs. Sievers, Kelly and Owen and Ms. Wuamett, the 2020 salaries listed reflect a 25% voluntary reduction in
their base salary from April 1, 2020 to December 31, 2020. The increased salary in 2021 in the table above for Messrs. Sievers, Owen and Kelly is a reflection of the termination of the voluntary reduction in base salary on
December 31, 2020 the annualized salary remained 1 million, 450,000 and $750,000, respectively, in 2021.
|
3 |
These amounts represent the aggregate weighted grant date fair value of RSU and PSU awards in the fiscal years shown. The
stock award value is calculated in accordance with ASC 718. See Note 2Summary of Significant Accounting Policies Share-based compensation and Note 17Share-based compensation, both found
in Part II, Item 8, Financial Statements and Supplementary Data in the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2021 for
additional information. For a description of the grant terms, see the footnotes of the Grants of Plan-Based Awards table below. Assuming maximum achievement of performance metrics in the performance period, using the Companys closing stock
price on the date of grant and 200% of the target shares, the maximum values of the 2021 PSUs at the date of grant are as follows: Mr. Sievers$19,600,065; Mr. Betz$3,500,366; Mr. Micallef$2,660,080;
Mr. Owen$3,500,366; and Ms. Wuamett$3,080,223. The realized value of these awards, if any, will not be determined until November 2024 based on the comparative RTSR over the performance period. |
4 |
The payout amount for 2021 represents 187.95% of the NEOs target AIP, the average of the 175.9% of the target
incentive amount for the first half of 2021 and 200% of the target incentive amount for the second half of 2021 as discussed in the section Annual Incentive Program above. The amounts reported for 2021 will be paid in April 2022. Because
the payout date has not yet occurred, the amounts listed above are the amounts that have been accrued as annual incentive bonus for each NEO, except for $165,000 that was paid to Mr. Betz in October 2021 because Mr. Betz was not part of
the management team during the 1H Performance Period. No incentive awards were earned in 2020 or 2019 under the Annual Incentive Plan due to a failure to meet the minimum performance thresholds determined in the plan. |
5 |
The amounts shown in this column represent the actuarial change in the present value of accrued benefit for the defined
benefit plan of Mr. Sievers, as described in the Pension Benefits table below. Based on the actuarial assumptions, primarily the discount rate, used to value Mr. Sievers accumulated benefit in 2021, the value of
Mr. Sieverss pension decreased by $341,078 from 2020. NXP does not maintain defined benefit plans except for those in countries where it is standard practice. Mr. Sievers is the only NEO who participates in a defined benefit pension
plan in connection with his employment with our German subsidiary. |
66
EXECUTIVE COMPENSATION (continued)
6 |
The 2021 amounts shown in the All Other Compensation column include the incremental cost to the Company of the following:
|
Mr. Sieversamounts paid by the Company for international insurance, executive physical, tax return preparation, a
company car ($27,018), and tax gross-up payments associated with the services included in All Other Compensation($41,544).
Mr. Betzamounts paid by the Company for tax return preparation and Company 401(k) contributions ($14,500), and a tax gross-up payment for the tax return preparation services.
Mr. Owenamounts paid by the Company for tax
return preparation, mobility allowance, retirement allowance ($91,968) and Company contributions and premiums related to a defined contribution plan, and tax gross-up payments related to the defined benefit
premiums paid on his behalf.
Ms. Wuamettamounts paid by the Company for executive physical and Company 401(k) contributions ($14,500).
Mr. Kellyamounts paid by the Company for tax return preparation, Company 401(k) contributions ($14,500) and a tax gross-up payment for the tax return preparation services.
7 |
Mr. Sievers was promoted to CEO of the Company in May 2020. His salary and incentive target annual cash incentive
opportunity were changed to reflect his new, increased role. He also received a stock award in conjunction with his promotion as well as an annual grant at our normal time of granting to all selected employees including NEOs. The 2021 annual grant
is reflective of the strategic role, his handling of COVID-19 and the need to ensure his long-term retention as well as alignment to company shareholder interests. |
8 |
Mr. Kelly served as our Chief Financial Officer until October 12, 2021. Until his retirement on
February 28, 2022, Mr. Kelly remained in service as an Executive Vice President, reporting to Kurt Sievers, under the terms and conditions of Mr. Kellys existing employment agreement. In this role, Mr. Kelly provided advice
and assistance to Mr. Sievers and transition assistance and support to Mr. Betz. |
67
EXECUTIVE COMPENSATION (continued)
Grants of Plan-Based Awards Table
The following table sets forth certain information regarding grants of plan-based awards to each of our NEOs for 2021 under our compensation programs and plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
Name |
|
Plan
Name |
|
|
Grant
Date |
|
|
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) |
|
|
|
|
|
Estimated Future Payouts Under Equity Incentive Plan Awards(2) |
|
|
All Other Stock Awards: Number of Shares or Stock Units
(#)(3) |
|
|
Grant Date Fair Value
of Stock and Option Awards ($)(4) |
|
|
Threshold ($) |
|
|
Target
($) |
|
|
Maximum ($) |
|
|
|
|
|
Threshold (#) |
|
|
Target
(#) |
|
|
Maximum (#) |
|
Kurt Sievers |
|
|
2021 AIP |
|
|
|
|
|
|
|
443,175 |
|
|
|
1,772,700 |
|
|
|
3,545,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,861 |
|
|
|
47,444 |
|
|
|
94,888 |
|
|
|
|
|
|
|
12,205,443 |
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,334 |
|
|
|
4,109,501 |
|
William Betz |
|
|
2021 AIP (1st Half) |
|
|
|
|
|
|
|
20,625 |
|
|
|
82,500 |
|
|
|
165,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 AIP (2nd Half) |
|
|
|
|
|
|
|
45,000 |
|
|
|
180,000 |
|
|
|
360,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,118 |
|
|
|
8,473 |
|
|
|
16,946 |
|
|
|
|
|
|
|
2,179,764 |
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,631 |
|
|
|
733,825 |
|
Andrew Micallef |
|
|
2021 AIP |
|
|
|
|
|
|
|
63,462 |
|
|
|
253,846 |
|
|
|
507,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 OIP |
|
|
|
8/3/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,750 |
|
|
|
978,738 |
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,610 |
|
|
|
6,439 |
|
|
|
12,878 |
|
|
|
|
|
|
|
1,656,497 |
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,760 |
|
|
|
557,796 |
|
Stephen Owen |
|
|
2021 AIP |
|
|
|
|
|
|
|
106,362 |
|
|
|
425,448 |
|
|
|
850,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,118 |
|
|
|
8,473 |
|
|
|
16,946 |
|
|
|
|
|
|
|
2,179,764 |
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,631 |
|
|
|
733,825 |
|
Jennifer Wuamett |
|
|
2021 AIP |
|
|
|
|
|
|
|
103,000 |
|
|
|
412,000 |
|
|
|
824,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,864 |
|
|
|
7,456 |
|
|
|
14,912 |
|
|
|
|
|
|
|
1,918,131 |
|
|
|
|
2019 OIP |
|
|
|
11/2/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,196 |
|
|
|
645,912 |
|
Peter
Kelly(5) |
|
|
2021 AIP |
|
|
|
|
|
|
|
187,500 |
|
|
|
750,000 |
|
|
|
1,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
Future payouts under the Annual Incentive Program (AIP) are shown in USD from 25% if threshold is met but not exceeded,
target if performance target is achieved at 100% and a maximum of 200% of target AIP using the salary and target AIP as of December 31, 2021 per the terms of the 2021 AIP as described above. Actual 2021 AIP payments are listed in the Summary
Compensation Table. |
2 |
The amounts with a grant date of November 2, 2021 represent the number of PSUs granted to Sievers, Betz, Micallef,
Owen and Wuamett as part of the 2021 annual grant under the NXP Semiconductors N.V. 2019 Omnibus Incentive Plan (2019 OIP). Each PSU, which cliff vests on the third anniversary of the date of grant, entitles the grant recipient to receive from 0 to
2 common shares for each of the target units awarded based on the relative total shareholder return (TSR) of the Companys share price as compared to the Peer Group. See Long-term Incentive (LTI) Program above for a more detailed descriptions
of the terms of these awards. |
3 |
The amounts with a grant date of November 2, 2021 represent the number of RSUs granted to Sievers, Betz, Micallef,
Owen and Wuamett as part of the 2021 annual grant under the 2019 OIP. The amount with a grant date of August 3, 2021 represents the number of RSUs granted to Mr. Micallef as a new hire award under the 2019 OIP. These awards vest in equal
installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. See Long-term Incentive (LTI) Program for a more detailed descriptions of the terms of these awards.
|
4 |
Amounts in this column represent the weighted average grant date fair value of awards granted in fiscal year 2021
calculated in accordance with ASC 718. With respect to the PSUs, in accordance with SEC rules, amounts reflect the fair value at the grant date determined using a Monte-Carlo simulation model and based upon a discounted cash flow analysis of
the probability-weighted payoffs of a share-based payment assuming a variety of possible stock price paths. It represents the estimate of aggregate compensation cost to be recognized over the requisite service period determined as of the grant date
under ASC 718 resulting in a per share grant date value of $257.26 for grants on November 2, 2021. The fair value for RSUs is determined by using the grant date closing price corrected for future dividend payments resulting in fair value of $
202.10 per share for grants on November 2, 2021 and $206.05 for the grant on August 3, 2021. |
|
The Monte Carlo Simulation value used in calculating the value of PSUs was determined based on the following: the
valuation date was November 2, 2021. The NXP share price on the grant date was $206.56. The performance period was November 2, 2021 to November 1, 2024. PSUs are subject to a relative TSR performance hurdle, where vesting is dependent
on NXPs TSR performance relative to its Peer Group. TSR is based on the average closing share price over the 20 trading days prior to the start of the Performance Period compared to the average closing share price over the 20 trading days up
to and including the end of the Performance Period. Dividends were assumed to be re-invested on the ex-dividend date. |
5 |
No equity grants were awarded to Mr. Kelly in 2021. |
68
EXECUTIVE COMPENSATION (continued)
Outstanding Equity Awards at
Year-End Table
The following table summarizes the number of securities underlying outstanding equity awards for each
of our NEOs as of December 31, 2021, using the year end closing stock price of $227.78.
|
|
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|
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|
|
|
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|
|
|
|
|
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|
|
Option Awards |
|
|
Share Awards |
|
Name |
|
Number
of Securities Underlying Unexercised Options Exercisable
(#) |
|
|
Option
Exercise Price
($) |
|
|
Option Expiration
Date |
|
|
Number of
Shares or Units of
Stock That Have Not Vested
(#) |
|
|
Market Value of
Shares or Units of Stock That
Have Not Vested
($) |
|
|
Equity Incentive
Plan Awards: Number
of Unearned Shares, Units or
Other Rights That
Have Not Vested (#) |
|
|
Equity Incentive
Plan Awards: Market or
Payout Value of
Unearned Shares, Units or Other
Rights That Have Not Vested
($)(1) |
|
(a) |
|
(b) |
|
|
(e) |
|
|
(f) |
|
|
(g) |
|
|
(h)(1) |
|
|
(i) |
|
|
(j)(1) |
|
Kurt Sievers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,682 |
(7) |
|
|
1,294,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,207 |
(8) |
|
|
1,186,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,514 |
(9) |
|
|
3,761,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,334 |
(10) |
|
|
4,631,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,770 |
(12) |
|
|
9,058,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,223 |
(13) |
|
|
4,150,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,795 |
(14) |
|
|
13,164,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,444 |
(15) |
|
|
10,806,794 |
|
William Betz |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
692 |
(7) |
|
|
157,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,314 |
(9) |
|
|
299,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,631 |
(10) |
|
|
827,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,076 |
(12) |
|
|
472,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,971 |
(14) |
|
|
448,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,473 |
(15) |
|
|
1,929,980 |
|
Andrew Micallef |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,750 |
(11) |
|
|
1,081,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,760 |
(10) |
|
|
628,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,439 |
(15) |
|
|
1,466,675 |
|
Stephen Owen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,186 |
(7) |
|
|
497,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,754 |
(9) |
|
|
855,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,631 |
(10) |
|
|
827,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,296 |
(12) |
|
|
3,484,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,136 |
(14) |
|
|
2,992,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,473 |
(15) |
|
|
1,929,980 |
|
Jennifer Wuamett |
|
|
8,394 |
(2) |
|
|
86.25 |
|
|
|
12/7/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,749 |
(7) |
|
|
398,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,303 |
(9) |
|
|
752,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,196 |
(10) |
|
|
727,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,237 |
(12) |
|
|
2,787,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,559 |
(14) |
|
|
2,632,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,456 |
(15) |
|
|
1,698,328 |
|
Peter Kelly |
|
|
40,000 |
(3) |
|
|
23.49 |
|
|
|
10/25/2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,247 |
(4) |
|
|
39.58 |
|
|
|
10/24/2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,401 |
(5) |
|
|
64.18 |
|
|
|
10/23/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,698 |
(6) |
|
|
73.00 |
|
|
|
10/29/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,623 |
(7) |
|
|
597,467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,504 |
(9) |
|
|
1,025,921 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,356 |
(12) |
|
|
4,181,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,763 |
(14) |
|
|
3,590,496 |
|
|
1 |
Market value is calculated based on the closing price of NXPs common stock on December 31, 2021 as reported on
the Nasdaq equaling $227.78. |
|
2 |
Options granted under the terms and conditions of the Global NXP Stock Option Program 2015/16 on December 7, 2015.
The option vested in equal installments on October 29, 2016, 2017, 2018 and 2019. |
|
3 |
Options granted under the terms and conditions of the Global NXP Stock Option Program 2012/13 on October 25, 2012.
The option vested in equal installments on the first, second, third and fourth anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
69
EXECUTIVE COMPENSATION (continued)
|
4 |
Options granted under the terms and conditions of the Global NXP Stock Option Program 2013/14 on October 24, 2013.
The option vested in equal installments on the first, second, third and fourth anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
|
5 |
Options granted under the terms and conditions of the Global NXP Stock Option Program 2014/15 on October 23, 2014.
The option vested in equal installments on the first, second, third and fourth anniversary of the date of grant. |
|
6 |
Options granted under the terms and conditions of the Global NXP Stock Option Program 2015/16 on October 29, 2015.
The option vested in equal installments on the first, second, third and fourth anniversary of the date of grant. |
|
7 |
RSUs granted under the terms and conditions of the 2019 Omnibus Incentive plan on October 29, 2019. The restricted
stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
|
8 |
RSUs granted under the terms and conditions of the 2019 Omnibus Incentive plan on July 28, 2020 in connection with
Mr. Sievers promotion. The restricted stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
|
9 |
RSUs granted under the terms and conditions of the 2019 Omnibus Incentive plan on October 27, 2020. The restricted
stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
|
10 |
RSUs granted under the terms and conditions of the 2019 Omnibus Incentive plan on November 2, 2021. The restricted
stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
|
11 |
RSUs granted under the terms and conditions of the 2019 Omnibus Incentive plan on August 3, 2021 as a new hire grant
to Mr. Micallef. The restricted stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
|
12 |
PSUs granted under the terms and conditions of 2019 Omnibus Incentive plan on October 29, 2019. These awards vest
100% on the third anniversary of the date of grant subject to performance achievement based on relative TSR compared to the Peer Group. In accordance with SEC requirements, as results as of December 31, 2021 indicate achievement between
threshold and target performance, the amounts reflected above are the target amounts. Based on actual performance as of December 31, 2021, the performance would be approximately 74% of target resulting in a vesting of 29,304, 1,530, 11,271 and
13,525 shares for Messrs. Sievers, Betz, Owen and Kelly, respectively and 9,017 shares for Ms. Wuamett. After the end of the performance period, NXPs TSR will be compared to those of the peers pursuant to the Relative TSR performance and
payout scale to determine the level of vesting, which will be certified by or on behalf of the Board. |
|
13 |
PSUs granted under the terms and conditions of 2019 Omnibus Incentive plan on July 28, 2020 in connection with
Mr. Sieverss promotion. This award vests 100% on October 28, 2022 subject to performance achievement based on relative TSR compared the Peer Group. Maxim Integrated Products was part of the peer group. Upon the completion of the
acquisition of Maxim Integrated Products acquisition by Analog Devices, the Committee determined to allow the period of time in the program to be a determining factor for the performance awards granted. In accordance with SEC requirements, as
results as of December 31, 2021 indicate achievement between threshold and target performance, the amounts reflected above are the target amounts. Based on actual performance as of December 31, 2021, the performance would be at
approximately 74% of target resulting in a vesting of 13,427 shares. After the end of the performance period, NXPs TSR will be compared to those of the peers pursuant to the Relative TSR performance and payout scale to determine the level of
vesting, which will be certified by or on behalf of the Board. |
|
14 |
PSUs granted under the terms and conditions of 2019 Omnibus Incentive plan on October 27, 2020. These awards vest
100% on October 26, 2023 subject to performance achievement based on relative TSR compared to the Peer Group. Maxim Integrated Products was part of the peer group. Upon the completion of the acquisition of Maxim Integrated Products acquisition
by Analog Devices, the Committee determined to allow the period of time in the program to be a determining factor for the performance awards granted. In accordance with SEC requirements, as results indicate achievement between threshold and target
performance, the amounts reflected above are the target amounts. Based on actual performance as of December 31, 2021, the performance would be approximately 95% of target resulting in a vesting of 54,753, 1,867, 12,445 and 14,933 shares for
Messrs. Sievers, Betz, Owen and Kelly, respectively and 10,951 shares for Ms. Wuamett. After the end of the performance period, NXPs TSR will be compared to those of the peers pursuant to the Relative TSR performance and payout scale to
determine the level of vesting, which will be certified by or on behalf of the Board. |
|
15 |
PSUs granted under the terms and conditions of 2019 Omnibus Incentive plan on November 2, 2021. These awards vest
100% on November 1, 2024 subject to performance achievement based on relative TSR compared to the Peer Group. Maxim Integrated Products will be excluded from the calculation of relative total shareholder return since its acquisition occurred
prior to the start of the performance period. In accordance with SEC requirements, as results indicate achievement between threshold and target performance, the amounts reflected above are the target amounts. Based on actual performance as of
December 31, 2021, the performance would be approximately 92% of target resulting in a vesting of 43,698, 7,804, 5,931, 7,804 shares for Messrs. Sievers, Betz, Micallef and Owen respectively and 6,867 shares for Ms. Wuamett. After the end
of the performance period, NXPs TSR will be compared to those of the peers pursuant to the Relative TSR performance and payout scale to determine the level of vesting, which will be certified by or on behalf of the Board.
|
70
EXECUTIVE COMPENSATION (continued)
Option Exercises and Stock Vested Table
The following table shows the value realized for stock options that were exercised and restricted stock unit and performance stock unit awards vested during 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Option Awards |
|
|
Stock Awards |
|
|
Number of Shares
acquired on exercise (#) |
|
|
Value Realized
on exercise ($)(1) |
|
|
Number of shares
acquired on vesting (#) |
|
|
Value Realized
on vesting ($)(2) |
|
Kurt Sievers |
|
|
35,886 |
|
|
|
4,370,315 |
|
|
|
242,171 |
|
|
|
49,612,289 |
|
William Betz |
|
|
2,529 |
|
|
|
317,324 |
|
|
|
11,533 |
|
|
|
2,354,640 |
|
Andrew Micallef |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Owen |
|
|
|
|
|
|
|
|
|
|
83,033 |
|
|
|
17,028,058 |
|
Jennifer Wuamett |
|
|
|
|
|
|
|
|
|
|
71,088 |
|
|
|
14,578,693 |
|
Peter Kelly |
|
|
|
|
|
|
|
|
|
|
123,332 |
|
|
|
25,300,812 |
|
1 |
The value realized is calculated by multiplying (i) the number of shares acquired under the option exercise by
(ii) the difference between the market price of the Companys common shares at the time of exercise and the exercise price of the options. |
2 |
The value realized is calculated by multiplying (i) the number of shares released upon the RSU or PSU award vesting
by (ii) the closing price of the Companys common shares on the day prior to the vest date, or the previous business day if the market was closed on the day prior to the vest date. This amount includes the restricted share units and
performance share units granted in previous years that vested in 2021 according to the terms and conditions of the applicable equity award agreements including performance share units granted on July 26, 2018 which vested in 2021 at a 135%
achievement realization. |
Pension Benefits
The following table sets forth certain information with respect to the potential benefits to Mr. Sievers as of December 31, 2021. No other NEO participates in a
Company-sponsored defined benefit pension plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Plan Name |
|
Number of Years
Credited Service (#) |
|
|
Present Value of
Accumulated Benefit
($) |
|
|
Payments During
Last Fiscal Year ($) |
|
Kurt Sievers |
|
Germany DBP |
|
|
23 |
|
|
$ |
6,206,265 |
|
|
|
|
|
In connection with Mr. Sievers employment by our German subsidiary, NXP Semiconductors Germany GmbH, he participates in the
Defined Benefit Plan offered by that subsidiary (the Germany DBP). This Germany DBP is closed to new employees but was available to all eligible employees of that subsidiary until December 31, 2006. The value in this table has been
converted from Euros using the rate of 1.1818, the average euro to U.S. dollar conversation rate for 2021.
Under the Germany DBP, participants receive notional
contributions that are credited to their personal pension accounts in an amount of 11% of monthly base salary in excess of a calculated social security contribution ceiling that does not factor in the 2003 exceptional adjustment step (leading to a
2021 ceiling value of 6,350/month), less the additional contribution paid by the employer in the staff pension insurance. Contributions and returns on investments accumulated at retirement
(normal retirement age is defined as between 60 67) are converted into an annuity based on fixed standard actuarial factors as mentioned in the plan rules. The Germany DBP also provides for certain disability, widow(er) and orphan
beneficiary pension benefits.
In calculating the amounts shown in the column titled Present Value of Accumulated Benefit in the table above, we
calculated the amounts reflected for Mr. Sievers in accordance with ASC 715 using the following assumptions: a calculation date of December 31, 2021, a 1.20% discount rate, a 1.75% pension increase rate, retirement occurring at age
63, and applicability of the Heubeck-Richttafeln 2018 G mortality table.
71
EXECUTIVE COMPENSATION (continued)
Potential Payments upon Termination or Change of Control
The following table shows the estimated value of potential payments that each NEO would be entitled to receive upon termination of employment in connection with specific
events. The amounts shown below assume that the termination of employment or change of control occurred on December 31, 2021. Where benefits are based on the market value of NXPs common stock, the table below uses the closing price of
NXPs common stock as reported on the Nasdaq on December 31, 2021 ($227.78 per share). To the extent applicable, the terms and conditions of our employment, change of control and severance agreements with our NEOs, are discussed above
under Employment Arrangements of Named Executive Officers and Compensation Discussion and AnalysisKey Policies and Practices; Change of Control.
Amounts shown below are in USD and do not include (i) benefits earned during the term of the NEOs employment that are available to all benefit-eligible
salaried employees, (ii) the value of vested equity awards and (iii) the value of retirement benefits that are reported in the tables above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Payment Type |
|
Involuntary Separation / Termination at the Convenience of the
Company(1) |
|
|
Death(2) |
|
|
Disability(3) |
|
|
Change of Control with Termination within 12 months(4) |
|
|
Retirement(5) |
|
|
Involuntary Termination for Cause or Voluntary Resignation(6) |
|
Kurt Sievers |
|
Equity Related Payments |
|
|
16,207,914 |
|
|
|
43,032,881 |
|
|
|
16,207,914 |
|
|
|
43,032,881 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Cash Payments |
|
|
5,695,390 |
|
|
|
3,331,790 |
|
|
|
5,695,390 |
|
|
|
9,240,790 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Total |
|
|
21,903,304 |
|
|
|
46,364,671 |
|
|
|
21,903,304 |
|
|
|
52,273,671 |
|
|
|
0 |
|
|
|
0 |
|
William Betz |
|
Equity Related Payments |
|
|
862,375 |
|
|
|
3,835,360 |
|
|
|
862,375 |
|
|
|
3,835,360 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Cash Payments |
|
|
810,000 |
|
|
|
360,000 |
|
|
|
360,000 |
|
|
|
1,980,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Benefits Continuation |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
21,125 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Total |
|
|
1,672,375 |
|
|
|
4,195,360 |
|
|
|
1,222,375 |
|
|
|
5,836,485 |
|
|
|
0 |
|
|
|
0 |
|
Andrew Micallef |
|
Equity Related Payments |
|
|
410,460 |
|
|
|
3,061,591 |
|
|
|
410,460 |
|
|
|
3,061,591 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Cash Payments |
|
|
988,105 |
|
|
|
488,105 |
|
|
|
488,105 |
|
|
|
2,288,105 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Benefits Continuation |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
21,425 |
|
|
|
0 |
|
|
|
|
|
|
|
Total |
|
|
1,398,565 |
|
|
|
3,549,696 |
|
|
|
898,565 |
|
|
|
5,371,121 |
|
|
|
0 |
|
|
|
0 |
|
Stephen Owen |
|
Equity Related Payments |
|
|
3,942,644 |
|
|
|
9,359,480 |
|
|
|
3,942,644 |
|
|
|
9,359,480 |
|
|
|
3,942,644 |
|
|
|
0 |
|
|
|
Cash Payments |
|
|
1,756,888 |
|
|
|
799,630 |
|
|
|
1,756,888 |
|
|
|
2,714,146 |
|
|
|
799,630 |
|
|
|
0 |
|
|
|
Total |
|
|
5,699,532 |
|
|
|
10,159,110 |
|
|
|
5,699,532 |
|
|
|
12,073,626 |
|
|
|
4,742,274 |
|
|
|
0 |
|
Jennifer Wuamett |
|
Equity Related Payments |
|
|
3,291,877 |
|
|
|
7,991,206 |
|
|
|
3,291,877 |
|
|
|
7,991,206 |
|
|
|
1,780,101 |
|
|
|
0 |
|
|
|
Cash Payments |
|
|
1,289,354 |
|
|
|
774,354 |
|
|
|
774,354 |
|
|
|
2,628,354 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Benefits Continuation |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
21,910 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Total |
|
|
4,581,231 |
|
|
|
8,765,560 |
|
|
|
4,066,231 |
|
|
|
10,641,470 |
|
|
|
1,780,101 |
|
|
|
0 |
|
Peter Kelly |
|
Equity Related Payments |
|
|
4,514,827 |
|
|
|
8,105,779 |
|
|
|
4,514,827 |
|
|
|
8,105,779 |
|
|
|
4,514,827 |
|
|
|
0 |
|
|
|
Cash Payments |
|
|
2,909,625 |
|
|
|
1,409,625 |
|
|
|
2,909,625 |
|
|
|
4,409,625 |
|
|
|
1,409,625 |
|
|
|
0 |
|
|
|
Benefits Continuation |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
15,453 |
|
|
|
0 |
|
|
|
0 |
|
|
|
Total |
|
|
7,424,452 |
|
|
|
9,515,404 |
|
|
|
7,424,452 |
|
|
|
12,530,857 |
|
|
|
5,924,452 |
|
|
|
0 |
|
1 |
In the event of an involuntary separation or termination at the convenience of the Company (other than for cause, as
defined in the applicable employment agreement and equity plan or award agreement), estimated value of payments includes the following: |
Cash Payments: All NEOs would receive the 2021 AIP payment earned. Amount for Mr. Sievers also includes two times his gross annual base salary
as specified in the Secondment Addendum, which is subject to signing a general release of claims; amount for Mr. Owen also includes an estimate of what the Company would be required to pay to the executive per the local labor laws as specified
in their respective employment agreement; amount for Messrs. Betz and Micallef and Ms. Wuamett also includes one times gross annual base salary as specified in their employment agreement, which is subject to signing a general release of
claims in favor of NXP; amount for Mr. Kelly also includes one times gross annual base salary and target annual AIP payment as specified in his employment agreement, which is subject to signing a general release of claims in favor of NXP.
Equity Related Payments:
RSUs: Amounts
represent the value of the accelerated vesting of the 2019, 2020 and 2021 RSU awards prorated from the grant date to termination date as per the terms of the equity award documents.
PSUs: Amounts represent the value of the 2019, 2020 and 2021 PSU awards prorated from the grant date to termination date as per the terms of the
equity award documents using the share delivery factor based on actual performance results as of December 31, 202174% for the 2019 PSUs; 95%
72
EXECUTIVE COMPENSATION (continued)
for the 2020 PSUs; and 92% for 2021 PSUs. The prorated portion of the PSUs would not be delivered until the PSUs original vesting date (as stated in the applicable equity award agreement)
and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance goals during the awards original performance period.
2 |
In the event of death while still employed by NXP, estimated value of payments includes the following:
|
Cash Payments: All NEOs would receive the 2021 AIP payment earned.
Equity Related Payments:
Effective
August 30, 2018, the Nominating and Compensation Committee of NXP, approved a death benefit for members of NXPs Management Team (MT), which includes the NEOs, whereby, unless otherwise provided in a separate employment
agreement, in the event of death of a MT member while employed at NXP, all outstanding and unvested equity awards at the time of death will vest as soon as administratively practicable thereafter, except that in the case of PSU awards, such vesting
will be subject to the performance targets being met.
RSUs: Amounts represent the value of the accelerated vesting of the 2019, 2020 and 2021
RSU awards.
PSUs: Amounts represent the value of the 2019, 2020 and 2021 PSU awards as per the terms of the equity award documents using the
share delivery factor based on actual performance results as of December 31, 202174% for the 2019 PSUs; 95% for the 2020 PSUs; and 92% for 2021 PSUs. The PSUs would not be delivered until the PSUs original vesting date (as stated in
the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance goals during the awards original performance period.
3 |
In the event of disability while still employed by NXP, estimated value of payments includes the following:
|
Cash Payments: All NEOs would receive the 2021 AIP payment earned. Amount for Mr. Sievers also includes two times his
gross annual base salary as specified in the Secondment Addendum, which is subject to signing a general release of claims; amount for Mr. Owen also includes an estimate of what the Company would be required to pay to the executive per the local
labor laws as specified in their respective employment agreement; no additional payment would be made for Messrs. Betz and Micallef and Ms. Wuamett amount for Mr. Kelly represents one times gross annual base salary and target annual
AIP payment as specified in his employment agreement, which is subject to signing a general release of claims in favor of NXP.
Equity Related
Payments:
RSUs: Amounts represent the value of the accelerated vesting of the 2019, 2020 and 2021 RSU awards prorated from the grant date
to termination date as per the terms of the equity award documents.
PSUs: Amounts represent the value of the 2019, 2020 and 2021 PSU awards
prorated from the grant date to termination date as per the terms of the equity award documents using the share delivery factor based on actual performance results as of December 31, 202174% for the 2019 PSUs; 95% for the 2020 PSUs; and
92% for 2021 PSUs. The prorated portion of the PSUs would not be delivered until the PSUs original vesting date (as stated in the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and
certification by or on behalf of the Board of the relevant performance goals during the awards original performance period.
4 |
In the event of a termination within 12 months following a change of control either by the Company or by the NEO for good
reason, in either case not under certain conditions involving misconduct (also known as double trigger), estimated value of payments includes the following (amounts assume that both the change of control and termination occur on December 31,
2021): |
Cash Payments: All NEOs would receive the 2021 AIP payment earned. Amounts also include two times gross annual base
salary and two times target annual AIP payment for each NEO as specified in the Change of Control Severance Policy.
Equity Related Payments:
RSUs: Amounts represent the value of the accelerated vesting of the 2019, 2020 and 2021 RSU awards as per the terms of the equity award documents.
PSUs: Amounts represent the value of the 2019, 2020 and 2021 PSU awards as per the terms of the equity award documents using the share
delivery factor based on actual performance results as of December 31, 202174% for the 2019 PSUs; 95% for the 2020 PSUs; and 92% for 2021 PSUs. In the case of a change of control, the performance period would end effective as of the date
of the change of control, assumed here as December 31, 2021, and the share delivery factor would be determined as of that date, subject to determination and certification by or on behalf of the Board.
Benefits Continuation: Amounts represent an approximate cost for benefits continuation as specified in the Change of Control Severance Policy for Messrs.
Betz, Micallef and Kelly and Ms. Wuamett, who are US citizens or residents.
5 |
In the case of retirement, as defined in the 2019, 2020 and 2021 equity award agreements and described below, estimated
value of payments includes the following (only for Messrs. Owen and Kelly, Owen and Ms. Wuamett in the case of the 2019 equity awards who would be are eligible for retirement as of December 31, 2021): |
Cash Payments: Messrs. Owen and Kelly would receive the amount of their 2021 AIP payment.
Equity Related Payments:
RSUs: Amounts
represent the value of the accelerated vesting of the 2019, 2020 and 2021 RSU awards prorated from the grant date to termination date as per the terms of the equity award documents.
PSUs: Amounts represent the value of the 2019, 2020 and 2021 PSU awards prorated from the grant date to termination date as per the terms of the
equity award documents using the share delivery factor based on actual performance results as of December 31, 202174% for the 2019 PSUs; 95% for the 2020 PSUs; and 92% for 2021 PSUs. The prorated portion of the PSUs would not be delivered
until the PSUs original vesting date (as stated in the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance
goals during the awards original performance period.
Retirement is generally defined in the 2019 equity award agreements as the
participants termination of employment where a participant is eligible to receive an immediate (early) retirement benefit under a local (early) retirement plan. If the participant is residing in the U.S. or absent local regulations or customs
then retirement is defined as the participants termination of employment where the participant has attained both five (5) years of service with NXP and age fifty-five (55).
Retirement is defined in the 2020 and 2021 equity award agreements and the 2021 AIP as the participants termination of employment where the
participant has attained both five (5) years of service with NXP and age sixty (60).
6 |
All unvested equity will be cancelled. No cash payments would be made. |
73
EXECUTIVE COMPENSATION (continued)
Our equity awards agreements contain non-solicitation and non-competition provisions that are effective for 12 months following the termination of employment. Except as described above, unvested equity awards lapse if a participants employment terminates and such
participant is no longer employed by NXP. If there is a violation by the participant of any provisions contained in the applicable equity award, plan or grant letter, then the equity award lapses on the date of such violation. The equity award
agreements also require participants to execute and deliver a general release of claims upon termination.
CEO
Pay Ratio Disclosure
The annual total compensation for the median employee of NXP (other than our Chief Executive Officer) in 2021 was $50,138 . The
annual total compensation for our Chief Executive Officer was $20,911,892. We used the total compensation for Mr. Sievers, our CEO, as reported in the 2021 Summary Compensation Table. Based on this information, the ratio of the
annual total compensation of our CEO to the annual total compensation of the median employee was approximately 417:1.
We have a global workforce operating in
over 30 countries. The countries that have predominantly manufacturing activities are in China, Malaysia, Taiwan and Thailand with total headcount of 15,826 or approximately 51% of our global population. These four countries have an average
headcount of 3,957 and an average base pay of $20,985 as compared to a global average of $83,809 excluding those locations.
We have determined a new
median employee in 2021. To identify the median employee, we used the following methodology:
|
|
We identified our median employee by considering an employee population as of December 31, 2021 |
|
|
To determine the median employee, we used a consistently applied compensation measure that included the total of annual base
pay, local allowances, AIP Bonus at target or 2021 target sales incentive plan and the approved value of the annual equity awards granted during 2021 |
|
|
We applied the exchange rate we utilize in our HR system as of December 31, 2021 which is the average monthly rate for
the full year |
|
|
Salaries were annualized for all employees who were hired or were on an unpaid leave during the fiscal year
|
To determine the pay ratio:
|
|
We calculated the compensation elements for the median employee in accordance with the requirements of item 402(c)(2)(x) of
the SECs Regulation S-K |
|
|
For the median employees total compensation we used a reasonable estimate of pension benefits. |
The median employee resides in the United States in a fabrication equipment operator role.
Human Resources and Compensation Committee Interlocks and Insider Participation
During 2021, Mr. Smitham (Chair), Sir Peter Bonfield, Ms. Clayton and Olving and Mr. Sundström served on the Human Resources and Compensation
Committee. Other than Mr. Sundström, none of the members of the Human Resources and Compensation Committee is or has been an executive officer or employee of NXP. Mr. Sundström held the role as CFO of NXP Semiconductors N.V.
(20082012). None of our executive officers serves on the board of directors or compensation committee of a company which has an executive officer who serves on our Board or Human Resources and Compensation Committee.
74
EXECUTIVE COMPENSATION (continued)
Equity Compensation Plan Information
The following table summarizes NXPs compensation plan information (including individual compensation arrangements) as of the fiscal year ended December 31,
2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Category |
|
Number of securities to be issued upon exercise of outstanding options, warrants
and rights (a) |
|
|
Weighted- average exercise price of outstanding options, warrants and rights ($)(b)1 |
|
|
Number of securities remaining available for future issuance under equity compensation
plans (excluding securities reflected in column (a)(c)) |
|
Equity compensation plans approved by security holders |
|
|
6,845,497 |
2 |
|
|
56.09 |
|
|
|
34,124,231 |
3 |
Equity compensation plans not approved by security holders |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,845,497 |
|
|
|
56.09 |
|
|
|
34,124,231 |
|
1. |
Shares of common stock issuable upon vesting of RSU and PSU awards have been excluded from the calculation of the weighted
average exercise price. |
2. |
Represents 458,212 shares of common stock subject to outstanding stock options and 6,387,285 shares of common stock that
may be issued upon vesting of outstanding RSU and PSU awards (PSU awards are assumed at maximum performance level), in each case pursuant to equity awards issued under the Companys equity compensation plans. |
3. |
Includes 23,774,851 shares of common stock available for future issuance under the NXP 2019 Omnibus Incentive Plan and
10,349,380 shares of common stock available for future issuance under NXPs Employee Stock Purchase Plan. |
75
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Party Transactions
There were no transactions or series of similar transactions, since January 1, 2021, to which we were a party or will be a party other than compensation
arrangements which are described under Executive Compensation, in which:
|
|
the amount involved exceeded or will exceed $120,000; and |
|
|
a director or director nominee, executive officer, holder of more than 5% of our common shares or any immediate family
member of a director, director nominee or executive officer had or will have a direct or indirect material interest. |
Statement of Policy Regarding Transactions with Related Persons
The Board has adopted a written policy that requires our Audit Committee to review and approve or ratify all related party transactions that involve a value of $120,000
or more (excluding employment relationships). The Human Resources and Compensation Committee is responsible for reviewing and approving or ratifying any employment relationship with a related party that involves compensation of $120,000 or more. In
determining whether to approve or ratify, as applicable, a related party transaction, these committees are guided by our Code of Conduct which, among other things, requires that business decisions and actions be based on the best interests of NXP
and not be motivated by personal considerations or relationships.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the audited financial statements with NXPs management and its independent auditor, Ernst & Young
Accountants LLP (E&Y). The Audit Committee has also discussed with E&Y the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. In
addition, E&Y provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountants communications with the audit committee concerning independence,
and the Audit Committee discussed with E&Y its independence from NXP and its management. The Audit Committee has also considered whether the provision of other non-audit services by E&Y to NXP is
compatible with the auditors independence and has concluded that it is.
In reliance on these reviews and discussions, the Audit Committee recommended to the
Board, and the Board approved, the 2021 Statutory Annual Accounts and the inclusion of the audited financial statements in NXPs Annual Report on Form 10-K for the year ended December 31, 2021, for
filing with the SEC.
AUDIT COMMITTEE
Julie Southern, Chair
Jasmin Staiblin
Karl-Henrik Sundström
76
THE COMPANYS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Independent Registered Public Accounting Firm
At the Companys 2020 Annual General Meeting the shareholders approved the Boards recommendation of E&Y as its independent registered public accounting
firm, as referred to in Article 32 of the Companys Articles of Association, for the fiscal years ending December 31, 2020 through December 31, 2022. The next approval of our auditor will be voted on by shareholders at the Annual
General Meeting in 2023.
Representatives of E&Y will participate in the 2022 AGM, will be available to respond to appropriate questions from our stockholders
and may make a statement if they desire to do so.
The aggregate fees for professional services rendered by E&Y to NXP were $6.4 million for 2021 and
$5.3 million for 2020.
Auditors Fees
The following table summarizes the fees for professional audit services provided by E&Y for the audit of the Companys annual financial statements for the years
ended December 31, 2021 and December 31, 2020 as well as the fees billed for other services rendered by E&Y during these periods.
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
Fees |
|
2021
(in millions) |
|
|
2020
(in millions) |
|
Audit Fees(1) |
|
$ |
5.9 |
|
|
$ |
4.4 |
|
Audit-Related Fees(2) |
|
|
0.4 |
|
|
|
0.2 |
|
Tax Fees(3) |
|
|
0.1 |
|
|
|
0.2 |
|
All Other Fees(4) |
|
|
|
|
|
|
0.5 |
|
Total Fees |
|
$ |
6.4 |
|
|
$ |
5.3 |
|
(1) |
Audit fees relate to professional services rendered in connection with the audit of NXPs annual financial statements
and internal control over financial reporting, quarterly review of financial statements, and audit services provided in connection with other statutory and regulatory filings |
(2) |
Audit-related fees relate to professional services that are reasonably related to the performance of the audit or review
of NXPs financial statements. |
(3) |
Tax fees relate to tax compliance services, including the preparation of original and amended tax returns and claims for
refund, and other tax advice and tax planning services, including assistance with transfer pricing documentation. |
(4) |
All other fees relate all other services provided, including permissible people advisory services. |
Audit Committee Pre-Approval Policies
The Audit Committee has adopted rules for the pre-approval by the Audit Committee of all services to be provided by the
external auditor. Proposed services may be pre-approved at the beginning of the year by the Audit Committee (annual pre-approval) or may be pre-approved during the year in respect of a particular engagement
(specific pre-approval). The pre-approval is based on a detailed, itemized list of services to be provided, designed to ensure that there is no
management discretion in determining whether a service has been approved and to ensure the Audit Committee is informed of each service it is pre-approving. Unless covered by the pre-approved services, each proposed service requires specific pre-approval during the year.
Any pre-approved services where the fee for the engagement is expected to exceed pre-approved cost levels or budgeted amounts will also require specific pre-approval. During 2021, there were no services provided to the Company by the external auditors which were not pre-approved by the Audit
Committee.
In 2021, the external auditor attended all formal meetings of the Audit Committee. The findings of the external auditor, the audit approach and the risk
analysis are also discussed at these meetings. The external auditor also refers in its reporting to the Audit Committee of the Board to the financial reporting risks and issues that were identified during the audit, internal control matters, and any
other matters, as appropriate, requiring communication under the auditing standards generally accepted in The Netherlands and the United States.
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who
own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of such securities. To our knowledge, based solely on a review of such reports filed with the SEC
and written representations that no other reports were required during 2021, we believe that all required reports were timely filed, except for, due to an administrative error, two Form 5s: one for Karl-Henrik Sundström to report a small
acquisition of shares acquired in a dividend reinvestment plan administered by his broker and one for Kenneth Goldman to report a gift of shares.
77
FUTURE SHAREHOLDER PROPOSALS AND NOMINATIONS FOR THE 2023 ANNUAL
GENERAL MEETING
Any shareholder desiring to present a resolution for inclusion in the Companys proxy statement for the 2023 Annual General Meeting of
Shareholders must deliver such resolution to the board of directors at the address below no later than December 12, 2022 (120 days before the anniversary date of the release of this proxy statement). Only those resolutions that comply with the
requirements of Rule 14a-8 under the Exchange Act will be included in the Companys proxy statement for the 2023 Annual General Meeting of Shareholders.
Shareholders may present resolutions that are proper subjects for consideration at an annual meeting, even if the resolution is not submitted by the deadline for
inclusion in the proxy statement. In order for resolutions of shareholders made outside of Rule 14a-8 under the Exchange Act to be considered timely within the meaning of Rule 14a-4(c) under the Exchange Act with respect to the 2023 Annual General Meeting of Shareholders, such resolutions must be received by the Board at the address below by February 25, 2023. Shareholder resolutions
should be sent to NXPs Secretary at NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary.
In addition, our
articles of association provide that one or more holders of shares representing solely or jointly at least such part of the issued share capital as required by Dutch corporate law, may present a resolution for consideration at the 2023 Annual
General Meeting of Shareholder by delivering such resolution to the Board of Directors at the address below no later than sixty days prior to the date of the 2023 Annual General Meeting of Shareholders. Notice of such matter will be placed on the
notice convening the 2023 Annual General Meeting of Shareholders.
OTHER MATTERS
We have provided to you with this proxy statement a copy of our Annual Report on Form 10-K for the year ended December 31,
2021, including audited financial statements. Copies of these materials are also available online through the SEC at www.sec.gov. We may satisfy SEC rules regarding delivery of proxy materials, including this proxy statement and the Annual Report on
Form 10-K, by delivering a single set of proxy materials to an address shared by two or more holders of ordinary shares, unless contrary instructions are received prior to the mailing date. This delivery
method can result in meaningful cost savings for us. We undertake to deliver promptly upon written or oral request at the address or phone number below a separate copy of the proxy materials to a shareholder at a shared address to which a single
copy of the proxy materials was delivered. Similarly, if you share an address with another shareholder and have received multiple copies of our proxy materials, you may write or call us at the address or phone number below to request delivery of a
single copy of the proxy materials in the future. If you hold ordinary shares and prefer to receive separate copies of the proxy materials either now or in the future, please contact Broadridge at
(866) 540-7095 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717.
Our
2021 Statutory Annual Report and Annual Report on Form 10-K for the fiscal year ended December 31, 2021, including audited financial statements, as filed with the SEC, is available to shareholders free of
charge on our Investor Relations website at http://investors.nxp.com or by writing us at NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary.
As of the date of this proxy statement, we are not aware of any other matters to be brought before the Annual General Meeting other than those referred to in this proxy
statement. However, if any other matters are properly presented for action, in the absence of instructions to the contrary, it is the intention of the persons named in the accompanying proxy to vote in their discretion the ordinary shares
represented by all properly executed proxies.
78
APPENDIX A: Financial ReconciliationGAAP to non-GAAP (unaudited)
|
|
|
|
|
($ in millions) |
|
Full Year 2021 |
|
Revenue |
|
|
11,063 |
|
GAAP gross profit |
|
|
6,067 |
|
PPA effects |
|
|
(74 |
) |
Restructuring |
|
|
|
|
Stock-based compensation |
|
|
(45 |
) |
Merger-related costs |
|
|
|
|
Other incidentals |
|
|
(19 |
) |
Other adjustments |
|
|
|
|
|
|
|
|
|
Non-GAAP gross profit |
|
|
6,205 |
|
|
|
|
|
|
GAAP Gross Margin |
|
|
54.8 |
% |
Non-GAAP Gross Margin |
|
|
56.1 |
% |
GAAP research and development |
|
|
(1,936 |
) |
Restructuring |
|
|
(1 |
) |
Stock-based compensation |
|
|
(165 |
) |
Merger-related costs |
|
|
|
|
Other incidentals |
|
|
(2 |
) |
|
|
|
|
|
Non-GAAP research and development |
|
|
(1,768 |
) |
|
|
|
|
|
GAAP selling, general and administrative |
|
|
(956 |
) |
PPA effects |
|
|
(5 |
) |
Restructuring |
|
|
|
|
Stock-based compensation |
|
|
(143 |
) |
Merger-related costs |
|
|
|
|
Other incidentals |
|
|
(12 |
) |
|
|
|
|
|
Non-GAAP selling, general and administrative |
|
|
(796 |
) |
|
|
|
|
|
GAAP amortization of acquisition-related intangible assets |
|
|
(592 |
) |
PPA effects |
|
|
(592 |
) |
|
|
|
|
|
Non-GAAP amortization of acquisition-related intangible
assets |
|
|
|
|
|
|
|
|
|
GAAP other income (expense) |
|
|
|
|
|
|
|
|
|
Non-GAAP other income (expense) |
|
|
|
|
|
|
|
|
|
GAAP operating income (loss) |
|
|
2,583 |
|
PPA effects |
|
|
(671 |
) |
Restructuring |
|
|
(1 |
) |
Stock-based compensation |
|
|
(353 |
) |
Merger-related costs |
|
|
|
|
Other incidentals |
|
|
(33 |
) |
Other adjustments |
|
|
|
|
|
|
|
|
|
Non-GAAP operating income (loss) |
|
|
3,641 |
|
|
|
|
|
|
GAAP Operating Margin |
|
|
23.3 |
% |
Non-GAAP Operating Margin |
|
|
32.9 |
% |
GAAP financial income (expense) |
|
|
(403 |
) |
PPA effects |
|
|
|
|
Non-cash interest expense on convertible Notes |
|
|
|
|
Foreign exchange gain (loss) on debt |
|
|
(1 |
) |
Gain (loss) on extinguishment of long-term debt |
|
|
(22 |
) |
Changes in fair value of warrant liability |
|
|
|
|
Other financial expense |
|
|
(15 |
) |
|
|
|
|
|
Non-GAAP Financial income (expense) |
|
|
(365 |
) |
|
|
|
|
|
A-1
|
|
|
|
|
Free Cash Flow (unaudited) |
|
|
|
|
($ in millions) |
|
Full Year 2021 |
|
Net cash provided by (used for) operating activities |
|
|
3,077 |
|
Net capital expenditures on property, plant and equipment |
|
|
(766 |
) |
Non-GAAP free cash flow |
|
|
2,311 |
|
Non-GAAP free cash flow as a percent of Revenue |
|
|
21 |
% |
|
|
|
|
|
Non-GAAP Financial Measures
In managing NXPs business on a consolidated basis, management develops an annual operating plan, which is approved by our Board of Directors, using non-GAAP financial measures. In measuring performance against this plan, management considers the actual or potential impacts on these non-GAAP financial measures from actions
taken to reduce costs with the goal of increasing our gross margin and operating margin and when assessing appropriate levels of research and development efforts. In addition, management relies upon these
non-GAAP financial measures when making decisions about product spending, administrative budgets, and other operating expenses. We believe that these non-GAAP financial
measures, when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Companys results of operations and the factors and trends affecting NXPs
business. We believe that they enable investors to perform additional comparisons of our operating results, to assess our liquidity and capital position and to analyze financial performance excluding the effect of expenses unrelated to operations,
certain non-cash expenses and share-based compensation expense, which may obscure trends in NXPs underlying performance. This information also enables investors to compare financial results between
periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management.
These non-GAAP financial measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The presentation of these and other similar
items in NXPs non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent, or unusual.
The non-GAAP information excludes the amortization of acquisition related intangible assets, the purchase accounting effect on
inventory and property, plant and equipment, merger related costs (including integration costs), certain items related to divestitures, share-based compensation expense, restructuring and asset impairment charges,
non-cash interest expense on convertible notes, extinguishment of debt, and foreign exchange gains and losses.
Forward-looking Statements
This document includes forward-looking
statements which include statements regarding NXPs business strategy, carbon emissions, energy consumption, water consumption, and other environmental targets, external ESG commitments, and workplace diversity goals as well as any other
statements which are not historical facts. By their nature, forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. These
factors, risks and uncertainties include the following: the duration and spread of the COVID-19 outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions
can resume; market demand and semiconductor industry conditions; the ability to successfully introduce new technologies and products; the demand for the goods into which NXPs products are incorporated; trade disputes between the U.S. and
China, potential increase of barriers to international trade and resulting disruptions to NXPs established supply chains; the ability to generate sufficient cash, raise sufficient capital or refinance corporate debt at or before maturity to
meet both NXPs debt service and research and development and capital investment requirements; the ability to accurately estimate demand and match manufacturing production capacity accordingly or obtain supplies from third-party producers; the
potential impact of the outbreak of COVID-19 on NXPs business, operations, results of operations, financial condition, workforce or the operations or decisions of customers, suppliers or business customers; the
A-2
access to production capacity from third-party outsourcing partners and any events that might affect their business or NXPs relationship with them including the outbreak of COVID-19 or the
requirements to suspend activities with customers or suppliers because of changing import and export regulations; the ability to secure adequate and timely supply of equipment and materials from suppliers; the ability to avoid operational problems
and product defects and, if such issues were to arise, to correct them quickly; the ability to form strategic partnerships and joint ventures and to successfully cooperate with alliance partners; the ability to win competitive bid selection
processes; the ability to develop products for use in customers equipment and products; the ability to successfully hire and retain key management and senior product engineers; and, the ability to maintain good relationships with NXPs
suppliers. In addition, this document contains information concerning the semiconductor industry and NXPs market and business segments generally, which is forward-looking in nature and is based on a variety of assumptions regarding the ways in
which the semiconductor industry and NXPs market and business segments may develop. NXP has based these assumptions on information currently available, if any one or more of these assumptions turn out to be incorrect, actual results may differ
from those predicted. While NXP does not know what impact any such differences may have on its business, if there are such differences, its future results of operations and its financial condition could be materially adversely affected. There can be
no assurances that a pandemic, epidemic or outbreak of a contagious diseases, such as COVID-19, will not have a material and adverse impact on our business, operating results and financial condition in the future. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak to results only as of the initial publication date of this document. Except for any ongoing obligation to disclose material information as required by the United States federal
securities laws, NXP does not have any intention or obligation to publicly update or revise any forward-looking statements after we distribute this document, whether to reflect any future events or circumstances or otherwise. For a discussion of
potential risks and uncertainties, please refer to the risk factors listed in our SEC filings. Copies of our SEC filings are available on our Investor Relations website, www.nxp.com/investor or from the SEC website, www.sec.gov.
A-3
SCAN TO VIEW MATERIALS & VOTE w NXP SEMICONDUCTORS N.V. VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above HIGH TECH CAMPUS 60
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VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY NXP SEMICONDUCTORS N.V. The Board of Directors recommends you vote FOR the For Against Abstain following proposals: 1. Adoption of the 2021 Statutory Annual Accounts 2. Discharge
of the members of the Board for their For Against Abstain responsibilitiesinthefinancialyearendedDecember31,2021 3a. Re-appoint Kurt Sievers as executive director 4. Authorization of the Board to issue ordinary shares of the Company and grant rights
to acquire ordinary shares 5. Authorization of the Board to restrict or exclude 3b. Re-appoint Sir Peter Bonfield as non-executive director pre-emption rights accruing in connection with an issue of shares or grant of rights 3c. Re-appoint Annette
Clayton as non-executive director 6. Authorization of the Board to repurchase ordinary shares 3d. Re-appoint Anthony Foxx as non-executive director 7. Authorization of the Board to cancel ordinary shares held or to be acquired by the Company 3e.
Appoint Chunyuan Gu as non-executive director 8. Non-binding, advisory approval of the Named Executive Officers compensation 3f. Re-appoint Lena Olving as non-executive director 3g. Re-appoint Julie Southern as non-executive director 3h.
Re-appoint Jasmin Staiblin as non-executive director 3i. Re-appoint Gregory Summe as non-executive director 3j. Re-appoint Karl-Henrik Sundström as non-executive director Please sign exactly as your name(s) appear(s) hereon. When signing as
attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized
officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting: The Notice and Proxy Statement and Annual Report
are available at www.proxyvote.com. D78474-P71070 NXP Semiconductors N.V. Annual General Meeting of Shareholders June 1, 2022 9:00 AM CET This proxy is solicited by the Board of Directors The undersigned shareholder(s) hereby appoint(s) Jennifer
Wuamett and Timothy Shelhamer, or either of them, as proxies, each with the power to appoint (his/her) substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common
stock of NXP Semiconductors N.V. that the shareholder(s) is/are entitled to vote at the Annual General Meeting of Shareholders to be held at 9:00 AM, Central European Time on June 1, 2022, at the Companys Head Office, High Tech Campus 60, 5656
AG Eindhoven, The Netherlands, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of
Directors recommendations. (Continued and to be signed on the other side)