Director compensation
The G&SR 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 in 2010 for the non-employee directors were:
- 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 2009 Director Compensation Plan (Director Plan), which was approved by stockholders in April 2009. 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 (NQ) 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 termination of service following 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 has completed eight years of service prior to termination or the director’s termination was due to death, disability or ineligibility to stand for re-election 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.
TEXAS INSTRUMENTS | 59 | 2011 PROXY STATEMENT
Effective January 1, 2011, the compensation arrangements for the non-employee directors are:
- Annual retainer of $80,000 for board and committee service.
- Additional annual retainer of $30,000 for the chair of the Audit Committee.
- Additional annual retainer of $20,000 for the chair of the Compensation Committee.
- Additional annual retainer of $15,000 for the chair of the Governance and Stockholder Relations Committee.
- Annual grant of a 10-year option to purchase TI common stock with a grant-date value of approximately $100,000, determined using a Black-Scholes option-pricing model (subject to the board’s ability to adjust the grant downward).
- Annual grant of restricted stock units with a grant-date value of approximately $100,000 (subject to the board’s ability to adjust the grant downward).
- $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 will 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 70.
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 2010, that rate was 5.04 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 they receive.
We have arrangements with certain customers whereby our employees may purchase specific consumer products containing TI-manufactured components at discounted pricing. In addition, the TI Foundation has an educational and cultural matching gift program. In both cases, 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.
2010 director compensation
The following table shows the compensation of all persons who were non-employee members of the board during 2010 for services in all capacities to TI in 2010, except as otherwise indicated.
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Pension |
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Value and |
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Non-equity |
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Non-qualified |
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Fees Earned or |
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Stock |
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Option |
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Incentive Plan |
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Deferred |
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All Other |
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Paid in |
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Awards |
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Awards |
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Compensation |
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Compensation |
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Compensation |
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| Name (1) |
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Cash ($)(2) |
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($)(3) |
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($)(4) |
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($) |
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Earnings |
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($)(5) |
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Total ($) |
| J. R. Adams |
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$ |
26,668 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
655 |
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$ |
131,175 |
| R.W. Babb, Jr. |
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$ |
63,656 |
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$ |
47,880 |
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— |
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— |
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— |
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$ |
20 |
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$ |
111,556 |
| D. L. Boren |
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$ |
80,000 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
11,761 |
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$ |
195,613 |
| D. A. Carp |
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$ |
83,334 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
8,531 |
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$ |
195,717 |
| C. S. Cox |
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$ |
86,667 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
10,020 |
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$ |
200,539 |
| D. R. Goode |
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$ |
80,000 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
27,500 |
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$ |
211,352 |
| S. P. MacMillan |
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$ |
80,000 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
10,020 |
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$ |
193,872 |
| P. H. Patsley |
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$ |
100,000 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
14,420 |
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$ |
218,272 |
| W. R. Sanders |
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$ |
80,000 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
8,531 |
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$ |
192,383 |
| R. J. Simmons |
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$ |
90,000 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
10,020 |
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$ |
203,872 |
| C. T. Whitman |
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$ |
80,000 |
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$ |
57,625 |
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$ |
46,227 |
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— |
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— |
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$ |
20 |
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$ |
183,872 |
| (1) |
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Mr. Adams reached the age of 70 before the 2010 annual meeting and therefore was ineligible under the company’s by-laws to stand for re-election at the meeting. He ceased to be a director of the company on April 15, 2010. Mr. Babb was elected to the board effective March 15, 2010. Mr. Sanchez was elected to the board effective March 15, 2011, and accordingly received no compensation for services as a TI director in 2010. |
TEXAS INSTRUMENTS | 60 | 2011 PROXY STATEMENT
| (2) |
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Includes amounts deferred at the director’s election. |
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| (3) |
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Shown is the aggregate grant date fair value of awards granted in 2010 calculated in accordance with Financial Accounting Standards Board Accounting Standards CodificationTM Topic 718, Compensation-Stock Compensation (ASC 718). The discussion of the assumptions used for purposes of calculating the grant date fair value appears on pages 11-14 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2010. |
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The table below shows the aggregate number of shares underlying outstanding restricted stock units held by the named individuals as of December 31, 2010. |
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Restricted |
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Stock Units |
| Name |
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(in Shares) |
| J. R. Adams |
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10,000 |
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| R. W. Babb, Jr. |
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2,000 |
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| D. L. Boren |
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32,880 |
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| D. A. Carp |
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18,664 |
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| C. S. Cox |
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12,000 |
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| D. R. Goode |
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23,632 |
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| S. P. MacMillan |
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7,000 |
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| P. H. Patsley |
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12,000 |
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| W. R. Sanders |
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19,600 |
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| R. J. Simmons |
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18,000 |
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| C. T. Whitman |
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12,000 |
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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 58. |
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| (4) |
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Shown is the aggregate grant date fair value of awards granted in 2010 calculated in accordance with ASC 718. The discussion of the assumptions used for purposes of calculating the grant date fair value appears on pages 11-14 of Exhibit 13 to TI’s annual report on Form 10-K for the year ended December 31, 2010. |
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The table below shows the aggregate number of shares underlying outstanding stock options held by the named individuals as of December 31, 2010. |
| Name |
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Options (in Shares) |
| J. R. Adams |
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103,000 |
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| R. W. Babb, Jr. |
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— |
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| D. L. Boren |
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75,500 |
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| D. A. Carp |
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103,000 |
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| C. S. Cox |
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58,000 |
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| D. R. Goode |
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103,000 |
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| S. P. MacMillan |
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14,000 |
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| P. H. Patsley |
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58,000 |
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| W. R. Sanders |
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103,000 |
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| R. J. Simmons |
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103,000 |
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| C. T. Whitman |
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73,000 |
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The terms of these options are as set forth on page 58 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, and for options granted before 2010, the grant becomes fully exercisable upon a change in control of TI. |
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| (5) |
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Consists of (a) the annual cost ($20 per director) of premiums for travel and accident insurance policies, (b) contributions under the TI Foundation matching gift program of $10,000, $15,739, $10,000, $14,400, and $10,000 for Ms. Cox, Mr. Goode, Mr. MacMillan, Ms. Patsley and Ms. Simmons, respectively, and (c) 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, |
TEXAS INSTRUMENTS | 61 | 2011 PROXY STATEMENT
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.
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