Texas Instruments



Director compensation
The Governance and Stockholder Relations Committee has responsibility for reviewing and making recommendations to the board on compensation for non-employee directors, with the board making the final determination. The committee has no authority to delegate its responsibility regarding director compensation. In carrying out this responsibility it is supported by TI’s Human Resources organization. The CEO, the senior vice president responsible for Human Resources and the Secretary review the recommendations made to the committee. The CEO also votes, as a member of the board, on the compensation of non-employee directors.
     The compensation arrangements for the non-employee directors are:

  • Annual retainer of $80,000 for board and committee service.
  • Additional annual retainer of $20,000 for the chair of the Audit Committee.
  • Additional annual retainer of $10,000 for each of the chairs of the Compensation Committee and the Governance and Stockholder Relations Committee.
  • Annual grant of a 10-year option to purchase 7,000 shares of TI common stock pursuant to the terms of the Texas Instruments 2003 Director Compensation Plan (Director Plan), which was approved by stockholders in April 2003. The exercise price of the option is the closing price of the company’s common stock on the date of the grant. These non-qualified options become exercisable in four equal annual installments beginning on the first anniversary of the grant and also will become fully exercisable in the event of a change in control (as defined in the Director Plan) of TI.
  • Annual grant of 2,500 restricted stock units pursuant to the terms of the Director Plan. The restricted stock units vest on the fourth anniversary of their date of grant and upon a change in control as defined in the Director Plan. If a director is not a member of the board on the fourth anniversary of the grant, restricted stock units will nonetheless settle on such anniversary date if the director had completed eight years of service prior to termination or the director’s termination was due to death, disability or ineligibility to stand for reelection under the company’s by-laws. The director may defer settlement of the restricted stock units at his or her election. Upon settlement, the director will receive one share of TI common stock for each restricted stock unit. Dividend equivalents are paid on the restricted stock units at the same rate as dividends on TI common stock.
  • $1,000 per day compensation for other activities designated by the chairman.

     The board has determined that grants of equity compensation to non-employee directors should be timed to occur when grants are made to our U.S. employees in connection with the annual compensation review process. Accordingly, equity grants to non-employee directors are made in January. Please see the discussion regarding the timing of equity compensation grants in the Compensation Discussion and Analysis on page 69.
     Directors are not paid a fee for meeting attendance, but we reimburse non-employee directors for their travel, lodging and related expenses incurred in connection with attending board, committee and stockholders meetings and other designated TI events. In addition, non-employee directors may travel on company aircraft to and from these meetings and other designated events. On occasion, directors’ spouses are invited to attend board events; the spouses’ expenses incurred in connection with attendance at those events are also reimbursed.
     Under the Director Plan, some directors have chosen to defer all or part of their cash compensation until they leave the board (or certain other specified times). These deferred amounts were credited to either a cash account or stock unit account. Cash accounts earn interest from TI at a rate currently based on Moody’s Seasoned Aaa Corporate Bonds. For 2008, that rate was 5.76 percent. Stock unit accounts fluctuate in value with the underlying shares of TI common stock, which will be issued after the deferral period. Dividend equivalents are paid on these stock units. Directors may also defer settlement of the restricted stock units that they receive.
     We have arrangements with certain customers whereby our employees may purchase specific consumer products containing TI-manufactured components at discounted pricing. Directors are entitled to participate on the same terms and conditions available to employees.
     Non-employee directors are not eligible to participate in any TI-sponsored pension plan.
     This year stockholders are asked to approve a new 2009 Director Compensation Plan. Information about that plan can be found beginning on page 88.

TEXAS INSTRUMENTS 2009 PROXY STATEMENT [ 59 ]

2008 director compensation
The following table shows the compensation of all persons who were non-employee members of the board during 2008 for services in all capacities to TI in 2008, except as otherwise indicated.

Change in
Pension
Value and
Non equity Non-qualified
Fees Earned or Stock Option Incentive Plan Deferred All Other
Paid in Awards Awards Compensation Compensation Compensation
Name (1) Cash ($)(2)       ($)(3)       ($)(4)       ($)       Earnings       ($)(5)       Total ($)
 
J. R. Adams $ 80,000 $    74,475 $    62,160 — — $ 655 $    217,290
D. L. Boren $ 83,333 $ 74,475 $ 62,160 — — $ 11,761 $ 231,729
D. A. Carp $ 90,000 $ 74,475 $ 62,160 — — $ 8,531 $ 235,166
C. S. Cox $ 80,000   $ 74,169 $ 62,633   — —   $ 20 $ 216,822
D. R. Goode $ 80,000 $ 74,475   $ 62,160 — — $ 11,761 $ 228,396
S. P. MacMillan $ 22,889 $ 45,500 $  — — — $ 20 $ 68,409
P. H. Patsley $ 100,000 $ 74,169 $ 62,633 —   — $ 20 $ 236,822
W. R. Sanders $ 80,250 $ 74,475 $ 62,160 — — $ 8,531   $ 225,416
R. J. Simmons $ 86,667 $ 74,475 $ 62,160 — — $ 20 $ 223,322
C. T. Whitman $ 81,000 $ 74,169 $ 62,633 — — $ 20 $ 217,822

(1)      Thomas J. Engibous, an executive officer of the company, retired as chairman of the board on April 17, 2008. Mr. Engibous received no additional compensation for his services as a director and is not a named executive officer as defined on page 61. Therefore, SEC rules do not require disclosure of his compensation.
 
(2) Includes amounts deferred at the director’s election.
 
(3)

Shown is the expense recognized in TI’s 2008 financial statements in accordance with Statement of Financial Accounting Standard (SFAS) 123(R) for all outstanding awards relating to the named individual. In accordance with SEC rules, no estimates were made for forfeitures in calculating these amounts. For individuals who have at least eight years of service, the SFAS 123(R) expense is recognized immediately; consequently, the table includes the full expense of the 2008 restricted stock grant. Except as noted below for Mr. MacMillan, for individuals who have less service, the SFAS 123(R) expense is recognized over a one-year period from date of grant; consequently, the table includes a portion of the expense for the 2007 and 2008 restricted stock grants. The SFAS 123(R) expense for Mr. MacMillan’s restricted stock unit grant, made upon his initial election to the board in September 2008, was recognized over the remainder of 2008. Ms. Simmons and Messrs. Adams, Boren, Carp, Goode and Sanders have at least eight years of service. For all directors except Mr. MacMillan, the grant date fair value of the restricted stock units granted in 2008 calculated in accordance with SFAS 123(R) is $74,475. The grant date fair value of Mr. MacMillan’s award calculated in the same manner is $45,500. The discussion of the assumptions used for purposes of calculating the SFAS 123(R) expense and the grant date fair value appears on pages 12-15 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2008.

The table below shows the aggregate number of shares underlying outstanding restricted stock units held by the named individuals as of December 31, 2008.


Restricted Stock
Name Units (in shares)
 
J. R. Adams 23,512     
D. L. Boren 27,880     
D. A. Carp 13,664     
C. S. Cox 7,000     
D. R. Goode 18,632     
S. P. MacMillan 2,000     
P. H. Patsley 7,000     
W. R. Sanders 14,600     
R. J. Simmons 13,000     
C. T. Whitman 7,000     

[ 60 ] TEXAS INSTRUMENTS 2009 PROXY STATEMENT


  Each restricted stock unit represents the right to receive one share of TI common stock. For restricted stock units granted prior to 2007, shares are issued at the time of mandatory retirement from the board (age 70) or upon the earlier of termination of service from the board after completing eight years of service or death or disability. For information regarding share issuances under restricted stock units granted after 2006, please see the discussion on page 59.
 
(4)       Shown is the expense recognized in TI’s 2008 financial statements in accordance with SFAS 123(R) for all outstanding grants relating to the named individual. In accordance with SEC rules, no estimates were made for forfeitures in calculating these amounts. For individuals who have at least eight years of service, the expense is recognized over a six-month period; consequently, the table includes the full expense of the 2008 stock option grant. For individuals who have less service, the table includes a portion of the expense for the 2007 and 2008 stock option grants. The grant date fair value of the options granted in 2008 calculated in accordance with SFAS 123(R) is $62,160. The discussion of the assumptions used for purposes of calculating the SFAS 123(R) expense and the grant date fair value appears on pages 12-15 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2008.
 
  The table below shows the aggregate number of shares underlying outstanding stock options held by the named individuals as of December 31, 2008.

Name        Options (in shares)
 
J. R. Adams  119,000
D. L. Boren    71,500
D. A. Carp  119,000  
C. S. Cox      44,000
D. R. Goode    119,000
S. P. MacMillan  —
P. H. Patsley  44,000
W. R. Sanders  119,000
R. J. Simmons  99,000
C. T. Whitman  59,000

The terms of these options are set forth on page 59 except that for options granted before November 2006, the exercise price is the average of the high and low price of the company’s common stock on the date of grant.

 
(5)       All Other Compensation in 2008 consists of the annual cost of premiums for travel and accident insurance policies and, for certain individuals, costs related to the Director Award Program. Each director whose service commenced prior to June 20, 2002, is eligible to participate in the Director Award Program, a charitable donation program under which we will contribute a total of $500,000 per eligible director to as many as three educational institutions recommended by the director and approved by us. The contributions are made following the director’s death. Directors receive no financial benefit from the program, and all charitable deductions belong to the company. In accordance with SEC rules, we have included the company’s annual costs under the program in All Other Compensation of the directors who participate. These costs include third-party administrator fees for the program and premiums on life insurance policies to fund the program. Messrs. Adams, Boren, Carp, Goode and Sanders participate in this program. The cost attributable to each of Messrs. Boren and Goode for their participation in the program was $11,741. For the other participating individuals, the attributable cost was below the $10,000 reporting threshold.



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