ON Semiconductor Corporation
Shareholder Annual Meeting in a DEF 14A on 04/06/2021   Download
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DEF 14A 1 d848112ddef14a.htm DEF 14A DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.             )

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Preliminary Proxy Statement

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Definitive Proxy Statement

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Soliciting Material under Sec. 240. 14a-12

ON Semiconductor Corporation

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders:

The 2021 Annual Meeting of Stockholders of ON Semiconductor Corporation will be held at its principal executive office, located at 5005 East McDowell Road, Phoenix, Arizona 85008, on Thursday, May 20, 2021 at 8:00 a.m., local time, for the following purposes:

 

Items of Business

 

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To elect ten directors nominated by our Board of Directors

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To vote on an advisory (non-binding) resolution to approve the compensation of our named executive officers

 

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To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2021

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To approve an amendment to the ON Semiconductor Corporation 2000 Employee Stock Purchase Plan

 

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To approve amendments to the ON Semiconductor Corporation Amended and Restated Stock Incentive Plan

 

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To transact such other business as may properly come before the meeting and any adjournment or postponement of the meeting

 

 

Record Date

The Board of Directors of ON Semiconductor Corporation has fixed the close of business on March 23, 2021 as the record date for determination of stockholders entitled to notice of and to vote at the 2021 Annual Meeting of Stockholders or any adjournment or postponement thereof. For 10 days prior to the 2021 Annual Meeting of Stockholders, a list of stockholders entitled to vote at such meeting will be available for inspection in the office of the Law Department of ON Semiconductor Corporation, located at 5005 East McDowell Road, Phoenix, Arizona 85008, between the hours of 8:30 a.m. and 5:00 p.m., local time, each weekday. Such list will also be available at the 2021 Annual Meeting of Stockholders. Directions to the meeting location and related information may be found on our website at www.onsemi.com/annualmeeting.

 

Proxy Voting

Your vote is very important to us. We are providing access to our proxy materials online under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, instead of mailing a paper copy of this proxy statement and our 2021 annual report to stockholders, we are mailing a notice to many of our stockholders that contains instructions on how to access documents online and how stockholders can receive a paper copy of our materials, including this proxy statement, our 2021 annual report to stockholders and a proxy card. Those stockholders who do not receive a notice, including stockholders who have previously requested to receive paper copies of our proxy materials, will receive a paper copy of our proxy materials by mail unless they have previously requested delivery of such materials electronically.

Sincerely yours,

 

 

LOGO

Hassane S. El-Khoury

President and Chief Executive Officer

April 6, 2021

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR

THE STOCKHOLDERS MEETING TO BE HELD ON MAY 20, 2021.

The Company’s proxy statement for the 2021 Annual Meeting of Stockholders, its annual report

to stockholders for the fiscal year ended December 31, 2020 and the proxy card are available at

www.onsemi.com/annualdocs.


 

TABLE OF CONTENTS

 

PROXY STATEMENT      1  
2021 Annual Meeting of Stockholders      1  
Proxy Materials Are Available on the Internet      1  
Voting Your Shares      1  
Proof of Ownership Required for Attending Meeting in Person      2  
Proposals and Board Recommendations      2  
Record Date and Quorum      3  
Required Vote      3  
Revocation of Proxies      3  

MANAGEMENT PROPOSALS

  

 

3

 

Proposal No. 1: Election of Directors      3  
Director Nominees      4  
Proposal No. 2: Advisory (Non-Binding) Resolution to Approve Named Executive Officer Compensation      17  
Proposal No. 3: Ratification of Selection of Independent Registered Public Accounting Firm      18  

Proposal No. 4: Approval of an Amendment to the ON Semiconductor Corporation

2000 Employee Stock Purchase Plan

     20  

Proposal No. 5: Approval of Amendments to the ON Semiconductor Corporation

Amended and Restated Stock Incentive Plan

     24  

THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

  

 

32

 

Board Refreshment and Diversity      32  
Considerations for Independence Determinations      32  
Committees of the Board      34  
2020 Compensation of Directors      40  
Majority Voting for Directors      42  
Other Board Matters      42  
Stockholder Rights Plan      43  
Corporate Governance Principles      43  
Ethics and Corporate Social Responsibility      46  
Code of Business Conduct      48  
Legal Compliance      48  

COMPENSATION DISCUSSION AND ANALYSIS

  

 

49

 

COMPENSATION COMMITTEE REPORT

  

 

67

 

COMPENSATION OF EXECUTIVE OFFICERS

  

 

67

 

Summary Compensation Table      68  
Grants of Plan-Based Awards in 2020      70  
2020, 2019 and 2018 Awards of Equity      71  
Compensation for Our Chief Executive Officer      74  
Other Material Factors — Summary Compensation Table and Grants of Plan-Based Awards in 2020 Table      75  
Outstanding Equity Awards at Fiscal Year-End 2020      76  
2020 Option Exercises and Stock Vested      77  
Employment, Severance and Change in Control Arrangements      77  
Potential Payments Upon Termination of Employment or Change in Control      80  

ON SEMICONDUCTOR 2020 PAY RATIO DISCLOSURE

  

 

87

 

HEDGING RESTRICTIONS

  

 

88

 

 

ON Semiconductor Corporation 2021 Proxy Statement     i



 

LOGO

5005 East McDowell Road

Phoenix, Arizona 85008

PROXY STATEMENT

This proxy statement and the accompanying notice and proxy card are furnished in connection with the solicitation by the Board of Directors (the “Board” or “Board of Directors”) of ON Semiconductor Corporation (“we,” “ON Semiconductor” or the “Company”) of proxies to be used at our 2021 Annual Meeting of Stockholders to be held on Thursday, May 20, 2021 at 8:00 a.m., local time, at our principal executive office, located at 5005 East McDowell Road, Phoenix, Arizona 85008, and at any adjournment or postponement thereof (the “Annual Meeting”). We made this proxy statement available to stockholders beginning on or about April 6, 2021.

2021 Annual Meeting of Stockholders

Date and Time: Thursday, May 20, 2021, at 8:00 a.m., local time

Location: 5005 East McDowell Road, Phoenix, Arizona 85008

Record Date: The Board of Directors has fixed the close of business on March 23, 2021 as the record date for determination of stockholders entitled to notice of and to vote at the Annual Meeting (the “Record Date”).

Proxy Materials Are Available on the Internet

In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”), we are furnishing proxy materials to our stockholders primarily via the internet instead of mailing printed copies of those materials to each stockholder. Unless you elected to receive printed copies of our proxy materials in prior years, you will receive a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) by mail, or if you so elected, by electronic mail. The Internet Notice will tell you how to access and review our proxy materials and how to vote your shares after you have reviewed our proxy materials. If you received the Internet Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions included in the Internet Notice.

The Internet Notice is first being sent, and the proxy statement and form of proxy card relating to the Annual Meeting are first being made available, to stockholders on or about April 6, 2021.

Voting Your Shares

Whether or not you plan to attend the Annual Meeting, the Board encourages you to vote your shares as more fully described below and in the proxy card.

If you are the “record holder” of your shares, meaning that you hold the shares in your own name and not through a bank or brokerage firm (each, a “Broker”), you may vote in one of the following four ways:

 

ON Semiconductor Corporation 2021 Proxy Statement     1


Proxy Statement

 

                                             
 

 

LOGO

 

Vote by internet.

 

The website address for internet voting is on your proxy card and in the Internet Notice. Internet voting is available 24 hours a day.

     

 

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Vote by telephone.

 

The toll-free number for telephone voting is on your proxy card and in the Internet Notice. Telephone voting is available 24 hours a day.

     

 

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Vote by mail.

 

Mark, date, sign and promptly mail the proxy card. If you are receiving our proxy materials and proxy card by mail, you will also receive a postage-paid envelope for mailing in the United States.

     

 

LOGO

 

Vote in person.

 

You may vote in person if you or your validly designated proxy attends the Annual Meeting.

 
                                             

If the shares you own are held in “street name” by a Broker, then your Broker, as the record owner, will vote your shares according to your instructions. You will need to follow the directions your Broker provides you. Each share held by you is entitled to one vote.

Proof of Ownership Required for Attending Meeting in Person

You are entitled to attend the Annual Meeting only if you were a stockholder as of the close of business on the Record Date or hold a valid proxy for the Annual Meeting. In order to be admitted to the Annual Meeting, we may, in our sole discretion, require you to present any one or more of the following documents as proof of ownership of ON Semiconductor stock on the Record Date and authority to vote the shares:

 

   

a brokerage statement or letter from a Broker indicating ownership on the Record Date;

   

the Internet Notice;

   

a printout of the proxy distribution email (if you received your materials electronically);

   

a proxy card;

   

a legal proxy provided by your Broker or nominee; and/or

   

a form of photo identification, such as a driver’s license.

We reserve the right not to admit anyone who refuses to provide the applicable documents set forth above.

Proposals and Board Recommendations

All shares represented by valid proxies will be voted as specified. If no specification is made, the proxies will be voted according to the Board’s recommendations below:

 

   Proposal Board  
Recommendation  
  1.   

Electionof ten directors of the Company, each for a one-year term expiring at the annual meeting of the Company’s stockholders to be held in 2022 and until their successors are duly elected and qualified

FOR
  2.   

Advisory(non-binding) resolution to approve the compensation of our named executive officers

FOR
  3.   

Ratificationof the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2021

FOR
  4.   

Approvalof an amendment to the ON Semiconductor Corporation 2000 Employee Stock Purchase Plan

FOR
  5.   

Approvalof amendments to the ON Semiconductor Corporation Amended and Restated Stock Incentive Plan

FOR

We are not aware of any other matters that will be brought before the stockholders for a vote at the Annual Meeting. If other matters properly come before the Annual Meeting, all shares validly represented by proxies will be voted in accordance with the discretion of the appointed proxies.

 

2     ON Semiconductor Corporation 2021 Proxy Statement


Proxy Statement

 

Record Date and Quorum

The Board has fixed the close of business on the Record Date for determination of stockholders entitled to notice of and to vote at the Annual Meeting. As of the Record Date, there were 418,076,949 shares of our common stock outstanding and entitled to vote at the Annual Meeting. The presence, in person or by proxy, of holders of a majority of the shares entitled to vote at the Annual Meeting will constitute a quorum. Abstentions, withheld votes and Broker non-votes are included in determining whether a quorum has been met for the Annual Meeting. Abstentions include shares present in person but not voting and shares represented by proxy but with respect to which the holder has abstained.

Required Vote

With respect to Proposal No. 1 (Election of Directors), each of the members of the Board (collectively, the “Directors,” and individually, a “Director”) standing for election at the Annual Meeting must be elected by a majority of the votes cast with respect to such Director’s election, meaning that the number of votes cast “FOR” such Director must exceed the number of votes cast “AGAINST” that Director.

With respect to Proposal No. 2 (Advisory (Non-Binding) Resolution to Approve Named Executive Officer Compensation), Proposal No. 3 (Ratification of Selection of Independent Registered Public Accounting Firm), Proposal No. 4 (Approval of an Amendment to the ON Semiconductor Corporation 2000 Employee Stock Purchase Plan) and Proposal No. 5 (Approval of Amendments to the ON Semiconductor Corporation Amended and Restated Stock Incentive Plan), in order for each proposal to be approved, it must receive a “FOR” vote from a majority of the shares present in person or by proxy at the Annual Meeting and entitled to vote on the proposal.

Abstentions and Broker non-votes, as applicable, are not treated as votes cast and, therefore, will have no effect on the outcomes of any of the proposals. Broker non-votes occur when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power on that item and has not received instructions from the beneficial owner. Although Brokers have discretionary power to vote your shares with respect to “routine” matters, they do not have discretionary power to vote your shares on “non-routine” matters.

Notably, your Broker is NOT able to vote on your behalf in any Director election or with respect to Proposal Nos. 2, 4 or 5 without specific voting instructions from you. Accordingly, if your shares are held in “street name” and you cannot attend the Annual Meeting in person, we encourage you to vote your shares on all proposals by promptly instructing your Broker as to how to vote on these matters so that your shares will be voted at the Annual Meeting.

Revocation of Proxies

You may revoke your proxy at any time before it is voted by attending the Annual Meeting and voting in person or by submitting a written notice of revocation or a properly executed proxy bearing a later date to our Secretary at our principal executive office, located at 5005 East McDowell Road, Phoenix, Arizona 85008.

MANAGEMENT PROPOSALS

Proposal No. 1: Election of Directors

The Board routinely assesses its size and composition and the skillsets of each Director to ensure an appropriate complement of perspectives and skills in light of the Company’s current and future business objectives and the evolving nature of the Company’s product offerings and technology in the highly competitive semiconductor industry. Each Director stands for election annually. Once elected, Directors hold office until their terms expire at the next annual meeting of stockholders and until their successors are duly elected and qualified, or until the earlier of their death, resignation or removal. Each nominee for Director will be nominated at the Annual Meeting to serve for a term expiring at the 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”), and each of the nominees has agreed to serve as a Director if elected by the stockholders.

 

ON Semiconductor Corporation 2021 Proxy Statement     3


Management Proposals

 

Director Nominees

The following is a summary of information about each nominee for Director and certain aggregated characteristics of our Board:

 

Qualifications    Semiconductor   

 

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   Public Company Management   

 

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   International   

 

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   Manufacturing   

 

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   Finance   

 

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   Compliance   

 

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   Marketing   

 

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   Mergers and Acquisitions   

 

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   Government Relations   

 

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Name

  Age    

Director

Since

    Independent      Committees   Qualifications

Atsushi Abe

    67       2011       X      Audit, Science and Technology  

 

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Alan Campbell

    63       2015       X      Audit, Corporate Governance and Nominating, Executive (Chair)  

 

LOGO   LOGO

Susan K. Carter

    62       2020       X      Audit (Chair), Corporate Governance and Nominating  

 

LOGO

Thomas L. Deitrich

    54       2020       X      Science and Technology  

 

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Gilles Delfassy

    65       2015       X     

Compensation,

Science and Technology (Chair)

 

 

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Hassane S. El-Khoury

    41       2020    

 

 

 

   Executive  

 

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Bruce E. Kiddoo

    60       2020       X      Audit  

 

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Paul A. Mascarenas

    59       2014       X      Compensation, Corporate Governance and Nominating (Chair), Executive  

 

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Gregory L. Waters

    60       2020       X      Executive, Science and Technology  

 

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Christine Y. Yan

    55       2018       X      Compensation (Chair), Science and Technology  

 

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Age Distribution

 

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The Board is committed to

balancing the age and experience

of its members. All Directors are

below the mandatory retirement

age of 75.

     

 

Gender

 

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        There are eight men and

        two women on the Board.

     

 

Tenure Years

 

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      The tenure of the Board

      demonstrates the Board’s

      commitment to balancing

      experience and refreshment.

     

 

Geography/International

 

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    All nominees for Director have

    international experience, and

    two are based outside of the

    United States.

 
                                             

 

4     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

Set forth below is additional information concerning the nominees for Director. In addition to the specific qualifications described below, we believe that each Director has the business acumen and sound judgment required for the proper functioning of our Board and the integrity, honesty and adherence to high ethical standards necessary to set the “tone at the top” for our Company. Most of our Directors also have significant experience on other public company boards of directors that broadens their knowledge of board processes, issues and solutions.

 

ON Semiconductor Corporation 2021 Proxy Statement     5


Management Proposals

 

ATSUSHI ABE  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2011

 

 

Age: 67

 

 

Committees:

 

Audit

Science and Technology

 

 

  Extensive experience in the investment banking and private equity industry, particularly in the area of technology

 

  Experience in mergers and acquisitions as well as in capital markets transactions, financial transactions and negotiations

 

  Familiarity with technology companies and businesses throughout Asia, including Japan

 

 

 

CAREER HIGHLIGHTS

 

  Sangyo Sosei Advisory Inc. (a technology, media and telecommunication industry-focused mergers and acquisitions advisory firm), 2009 – Present

 

— Senior Advisor

— Managing Partner

 

  Unitas Capital, 2004 – 2009

 

— Partner

 

  Deutsche Bank Group, 1998 – 2004

 

— Managing Director

— Head of Global Corporate Finance in Japan

— Head of Global Semiconductor Investment Banking

— Head of TMT Investment Banking in Asia

 

  Alex Brown & Sons, Inc., 1992 – 1998

 

— Managing Director

 

  Mitsui & Co., Ltd., 1978 – 1992

 

—  Various management positions in the Industrial Electronics Division and Principal Investment Unit

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  Fujitsu Ltd. (an information technology company listed on the Tokyo Stock Exchange), board of directors, 2015 – Present

 

— Chair of the board, 2019 – Present

 

  Binfinity AG (a start-up company offering a regulatory compliant, institutional-grade cryptocurrency exchange platform), board of directors, 2018 – Present

 

  Edwards Group Limited, board of directors, 2007 – 2009

 

6     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

ALAN CAMPBELL  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2015

Chair of the Board since 2017

 

 

Age: 63

 

 

Committees:

 

Audit

Corporate Governance and Nominating

Executive (Chair)

 

 

  Extensive experience in the semiconductor industry

 

  Experience as chief financial officer of a publicly-held semiconductor company

 

  Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance

 

  Significant mergers and acquisitions and global experience

 

 

 

CAREER HIGHLIGHTS

 

  Freescale Semiconductor, Inc. (acquired by NXP Semiconductors N.V.), 2004 – 2014

 

— Chief Financial Officer

 

  Motorola, Inc. – Semiconductor Product Sector, 2000 – 2004

 

— Senior Vice President

— Director of Finance

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  Dialog Semiconductor Plc (a U.K.-based semiconductor company), board of directors, 2015 – Present

 

— Audit committee (chair), 2015 – Present

 
 
 

 

ON Semiconductor Corporation 2021 Proxy Statement     7


Management Proposals

 

SUSAN K. CARTER  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2020

 

 

Age: 62

 

 

Committees:

 

Audit (Chair)*

Corporate Governance and Nominating

 

 

*Effective as of April 3, 2021

 

  Experience as chief financial officer of a publicly-held industrial company

 

  Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance

 

  Extensive experience in manufacturing, automotive, aerospace, defense and engineering and construction industries

 

  Extensive experience in accounting and financial reporting, international business, mergers and acquisitions, investor relations, information technology, finance and capital management, government relations and environmental, social and governance (“ESG”) matters

 

 

CAREER HIGHLIGHTS

 

  Ingersoll Rand plc (now known as Trane Technologies plc) (an industrial manufacturing company domiciled in Ireland), 2013 – 2020

 

— Senior Vice President and Chief Financial Officer

 

  KBR, Inc., 2009 – 2013

 

— Executive Vice President and Chief Financial Officer

 

  Lennox International, Inc., 2004 – 2009

 

— Executive Vice President and Chief Financial Officer

 

  Cummins, Inc., 2002 – 2004

 

— Vice President and Chief Accounting Officer

— Vice President and Corporate Controller

 

  Honeywell International, Inc., 1996 – 2002

 

— Vice President, Finance and Chief Financial Officer, Transportation and Power Systems

— Director of Finance, Engine Systems and Accessories

— Director of Finance, Defense and Space Systems

 

  Crane Co., 1989 – 1996

 

— Various roles, including Division Controller, Crane Valve Group

 

  DeKalb Corporation, 1981 – 1989

 

— Controller, DeKalb Financial Services

— Corporate Audit – Staff, Senior

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  Amcor plc (a packaging manufacturing company), board of directors, 2021 – Present

 

— Audit committee, 2021 – Present

 

  Air Products and Chemicals, Inc. (an industrial gases company), board of directors, 2011 – Present

 

— Management development and compensation committee, 2016 – Present

— Audit and finance committee, 2011 – Present

 

  Lyondell Chemical, board of directors, 2007

 
 

 

8     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

THOMAS L. DEITRICH  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2020

 

 

Age: 54

 

 

Committees:

 

Science and Technology

 

 

 

  Experience as chief executive officer of a publicly-held technology company

 

  Extensive experience in product management, research and development, supply chain management, business development and sales

 

  Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance

 

  Significant mergers and acquisitions and global experience

 

 

CAREER HIGHLIGHTS

 

  Itron, Inc. (an energy and water resource management technology company), 2015 – Present

 

— President, Chief Executive Officer and Director, 2019 – Present

— Chief Operating Officer, 2015 – 2019

 

  Freescale Semiconductor, Inc. (acquired by NXP Semiconductors N.V.), 2006 – 2015

 

— Senior Vice President and General Manager

 

  Flex Ltd. (formerly known as Flextronics International Ltd.), 2003 – 2006

 

— Senior Vice President, Mobile Communications Segment

 

  Sony Ericsson Mobile Communications AB (acquired by Sony Mobile), 2001 – 2003

 

— Senior Corporate Vice President

— Corporate Vice President

 

  Ericsson, Inc., 1994 – 2001

 

— Vice President

— Director of Product Development

 

  General Electric Company, 1988 – 1994

 

— Various roles, including Chief Development Engineer

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  Ferric, Inc. (a semiconductor manufacturer), board of directors, 2016 – 2020

 
 

 

ON Semiconductor Corporation 2021 Proxy Statement     9


Management Proposals

 

GILLES DELFASSY  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2015

 

 

Age: 65

 

 

Committees:

 

Compensation

Science and Technology (Chair)

 

 

 

  Extensive experience in the semiconductor industry, with particular experience in the wireless industry, automotive and microcontrollers

 

  Management experience in a publicly-held semiconductor company

 

  Strategic insight and knowledge of the practical application of semiconductors

 

  Expertise with new business development, manufacturing and marketing

 

 

CAREER HIGHLIGHTS

 

  Texas Instruments Incorporated, 1978 – 2007

 

— Senior Vice President and Executive Officer, General Manager, 2000 – 2007

— Founder, Wireless Terminals Business

— Department Manager and various other capacities

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  Kalray S.A. (a French fabless semiconductor and software company), board of directors, 2014 – Present

 

— Supervisory board (chair)

 

  eLichens SAS (a research and development company that provides services and sensing solutions for hyper-local air quality), board of directors, 2017 – Present

 

  FOREIS (an endowment fund with the objective of promoting the development of early-stage microelectronics companies in France), board of directors, 2019 – Present

 

  Cavendish Kinetics, Inc. (a provider of RF MEMS components for smartphones, wearables and ultra-portable devices acquired by Qorvo, Inc. in 2019), board of directors, 2014 – 2019

 

  decaWave Ltd. (a semiconductor company focused on micro-location services headquartered in Ireland), board of directors, 2012 – 2017

 

  Imagination Technologies Group plc (a U.K.-based semiconductor and other technology company), board of directors, 2012 – 2017

 

  Movea SA (a French privately-held provider of software for ultra-low power location, activity tracking and context sensing), chair of the board, 2012 – 2015

 

  Anadigics, Inc. (acquired by II-VI Inc.), chair of the board of directors and interim chief executive officer, 2008 – 2009

 

  Stanford University, University of Chicago, National Association of Corporate Directors

 

 

10     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

HASSANE S. EL-KHOURY  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2020

 

 

Age: 41

 

 

Committees:

 

Executive

 

 

 

  Experience as chief executive officer of a publicly-held semiconductor company

 

  Extensive experience in the semiconductor and automotive industries

 

  Significant management and product development experience

 

  Significant mergers and acquisitions and global experience

 

 

CAREER HIGHLIGHTS

 

  ON Semiconductor Corporation, 2020 – Present

 

— President, Chief Executive Officer and Director

 

  Cypress Semiconductor Corporation (acquired by Infineon Technologies AG) (a semiconductor design and manufacturing company), 2007 – 2020

 

— President, Chief Executive Officer and Director, 2016 – 2020

— Executive Vice President, Programmable Systems Division, 2012 – 2016

— Senior Director of Automotive Business Unit, 2010 – 2012

— Senior Business Development Manager, 2008 – 2010

— Staff Application Engineer, 2007 – 2008

 

  Continental Automotive Systems, 1999 – 2007

 

— Senior Design Engineer

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  KeraCel Inc. (a private 3D printing company), board of directors, 2020 – Present

 

  Semiconductor Industry Association, board of directors, 2017 – Present

 

 

ON Semiconductor Corporation 2021 Proxy Statement     11


Management Proposals

 

BRUCE E. KIDDOO  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2020

 

 

Age: 60

 

 

Committees:

 

Audit

 

 

 

  Extensive experience in the semiconductor industry

 

  Experience as chief financial officer of a publicly-held semiconductor company

 

  Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance

 

  Significant mergers and acquisitions experience

 

 

CAREER HIGHLIGHTS

 

  Maxim Integrated Products, Inc. (a semiconductor design and manufacturing company), 2007 – 2019

 

— Chief Financial Offficer

 

  Broadcom Corporation, 1999 – 2007

 

— Vice President and Acting Chief Financial Officer, 2006 – 2007

— Vice President, Finance and Corporate Controller

— Controller, Broadband Communications

 

  LSI Logic Corporation, 1994 – 1999

 

— Director, Products Group Finance

 

— Director, Worldwide Manufacturing Finance

 

— Director, Asia Sales & Marketing Controller

 

— Manager, Financial Planning and Analysis

 

  International Business Machines, 1991 – 1994

 

— Senior Financial Analyst

— Advisory Financial Analyst

— Staff Financial Analyst

— Financial Analyst

 

  United States Navy, Division of Naval Reactors, 1985 – 1991

 

— Financial Representative

— Contract Administrator

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  San Onofre Parks Foundation, Director, 2020 – Present

 

12     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

PAUL A. MASCARENAS  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2014

 

 

Age: 59

 

 

Committees:

 

Compensation

Corporate Governance
and Nominating (Chair)

Executive

 

 

 

  Extensive experience in technical strategy, planning and research and development

 

  Leadership and strategic planning expertise in automotive industry

 

 

CAREER HIGHLIGHTS

 

  Ford Motor Company, 1982 – 2014

 

—  Vice President of Research & Advanced Engineering and Chief Technical Officer, 2011 – 2014

—  Vice President of Engineering, 2007 – 2011

—  Vice President, North American Vehicle Programs, 2005 – 2007

—  Various positions in product development, program management and business leadership, 1982 – 2005

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  The Shyft Group (formerly Spartan Motors, Inc.) (an automobile and auto parts designer, engineer and manufacturer), board of directors, 2018 – Present

 

— Corporate governance and nominating committee, 2018 – Present

— Human resources and compensation committee, 2018 – Present

 

  BorgWarner Inc. (a supplier of propulsion system technologies for the automotive industry), board of directors, 2018 – Present

 

— Corporate governance committee, 2020 – Present

— Audit committee, 2018 – Present

 

  United States Steel Corporation (a steel manufacturing company), board of directors, 2016 – Present

 

— Corporate governance and sustainability committee, 2017 – 2018, 2020 – Present

— Audit committee, 2016 – Present

 

  Mentor Graphics (a company engaged in electronic design automation), board of directors, 2015 – 2017

 

  Fontinalis Partners (a venture capital firm), venture partner, 2015 – Present

 

  Stanford Directors College, 2017

 

  Society of Automotive Engineers International (a non-profit serving the aerospace, commercial and automotive sectors), 2018 – January 2021

 

— Immediate past president, January 2020 – January 2021

— President, 2019 – January 2020

 

  The International Federation of Automotive Engineering Societies, board of directors, 2012 – Present

 

— Executive board (president and chair), 2014 – 2016

 

  British-American Business Council of Michigan, board of directors, 2015 – Present

 

  Appointed Officer of the Order of the British Empire by Her Majesty Queen Elizabeth II for his services in the automotive industry, 2015

 

  United States Council for Automotive Research LLC, council member, 2011 – 2014

 

  Honorary doctorate degree, Chongqing University, China, 2013

 

ON Semiconductor Corporation 2021 Proxy Statement     13


Management Proposals

 

GREGORY L. WATERS  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2020

 

 

Age: 60

 

 

Committees:

 

Executive

Science and Technology

 

 

 

  Extensive experience with device technology companies

 

  Experience as chief executive officer of a publicly-held technology company

 

  Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance

 

 

CAREER HIGHLIGHTS

 

  Integrated Device Technology, Inc. (a semiconductor design and manufacturing company acquired by Renesas Electronics Corporation), 2014 – 2019

 

— President, Chief Executive Officer and Director

 

  Skyworks Solutions, Inc., 2003 – 2012

 

— Executive Vice President

 

  Agere Systems, Inc., 1998 – 2003

 

— Senior Vice President

 

  Texas Instruments Incorporated, 1983 – 1998

 

— Various roles in technical sales, marketing and product line management

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  Sierra Wireless, Inc. (a wireless communications equipment designer and manufacturer), board of directors, March 2020 – Present

 

— Human Resource chair

 

  Mythic Inc. (an artificial intelligence company), board of directors, June 2020 – Present

 

  Starboard Value Acquisition Corp., advisor, 2020 – Present

 

  MatrixSpace, Inc. (an artificial intelligence software company), founder, 2019 – Present

 

  Mellanox Technologies Ltd. (supplier of ethernet and InfiniBand intelligent interconnect solutions and services acquired by NVIDIA Corporation), board of directors, 2018 – 2020

 

  Sand 9 Inc. (acquired by Analog Devices Inc.), board of directors, 2011 – 2014

 

 

 

14     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

CHRISTINE Y. YAN  

RELEVANT SKILLS AND QUALIFICATIONS

LOGO

 

Director since 2018

 

 

Age: 55

 

 

Committees:

 

Compensation (Chair)

Science and Technology

 

 

 

  Extensive global general management experience in the automotive, industrial and consumer markets

 

  Deep emerging market experience

 

  Significant mergers and acquisitions experience

 

  Extensive, commercial, technology and operations management experience, including as member of senior management team of a public company

 

  Corporate governance experience

 

 

CAREER HIGHLIGHTS

 

  Stanley Black & Decker, Inc. (an industrial and household hardware manufacturing company and security products provider), 1989 – November 2018

 

—  Vice President, Integration, January 2018 – November 2018

—  President, Asia, 2014 – January 2018

—  President, Stanley Storage and Workspace Systems, 2013 – 2014

—  President, Americas, Stanley Engineered Fastening, 2008 – 2013

—  President, Global Automotive, Stanley Engineered Fastening, 2006 – 2008

—  Various roles in sales and marketing, engineering and research and development, 1989 – 2006

 

ADDITIONAL EXPERIENCE AND SERVICE

 

  Ansell Limited (an Australian protective industrial and medical glove manufacturer), board of directors, 2019 – Present

 

— Governance committee, 2020 – Present

— Audit and compliance committee, 2019 – Present

— Human resources committee, 2019 – Present

 

  Cabot Corporation (a specialty chemicals and performance materials company), board of directors, 2019 – Present

 

— Safety, health, environment and sustainability committee, 2019 – Present

 

  Modine Manufacturing Company (a thermal management company), board of directors, 2014 – Present

 

— Audit committee, 2014 – Present

— Technology committee, 2014 – Present

— Corporate governance and nominating committee (chair), 2021 – Present

 

  Goldman Sachs Merchant Banking Division (a private equity company), 2018 – Present

 

— Advisor, China-U.S. Industrial Cooperation Fund

 

  Harvard Business School Compensation Committee Program, 2019

 

ON Semiconductor Corporation 2021 Proxy Statement     15


Management Proposals

 

Required Vote

Upon recommendation of the Corporate Governance and Nominating Committee of the Board (the “Corporate Governance and Nominating Committee”), the Board has concluded that re-nominating each Director described above would strike the appropriate balance of perspectives and qualifications on the Board and align with the Company’s current and future business objectives.

To be elected, each of the nominees for Director must receive the affirmative vote of the majority of votes cast, meaning that the number of votes cast “FOR” a nominee must exceed the number of votes cast “AGAINST” that nominee. Unless you withhold your vote or indicate otherwise on your proxy card, and except in a case of a Broker non-vote, proxies will be voted “FOR” the election of the nominees for Director. The Board has no reason to believe that any of the nominees for Director will be unable to serve. If, however, any one of them should become unavailable, the Board may reduce the size of the Board or designate a substitute nominee. If the Board designates a substitute nominee, shares represented by proxies will be voted for the substitute nominee.

The Board of Directors recommends a vote “FOR” the election of each of the nominees for Director in Proposal No. 1.

 

16     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

Proposal No. 2: Advisory (Non-Binding) Resolution to Approve Named Executive Officer Compensation

As required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are asking for stockholder approval of the compensation of our named executive officers identified in the “Compensation Discussion and Analysis — Overview” section of this proxy statement (the “NEOs”). The Board of Directors recommends that our stockholders approve such compensation by approving the following advisory resolution:

RESOLVED, that the stockholders of ON Semiconductor Corporation approve, on an advisory basis, the compensation of the Company’s named executive officers identified in the Summary Compensation Table included in this proxy statement as such compensation is described pursuant to Item 402 of Regulation S-K in this proxy statement (which disclosure includes the Compensation Discussion and Analysis and the compensation tables and accompanying footnotes and narratives under the heading “Compensation of Executive Officers” in this proxy statement).

The principal objective of our compensation programs is to attract, retain and motivate highly talented individuals who will deliver competitive financial returns to our stockholders and accomplish our short-term and long-term plans and goals. The Company seeks to accomplish this objective by rewarding performance, both individual and corporate, in a way that is aligned with the short-term and long-term interests of the Company and its stockholders. Consistent with this philosophy, the majority of the total compensation opportunity for each of our NEOs is incentive-based, and a significant portion of such compensation is dependent upon the Company’s or the individual’s achievement of specified and predetermined financial and operational goals. The Company believes that its executive compensation program satisfies the Company’s compensation objectives. We describe our compensation policies and programs in more detail below in this proxy statement, including in the Compensation Discussion and Analysis section of this proxy statement (the “CD&A”).

As an advisory vote, this proposal is not binding upon the Company. However, the Compensation Committee of the Board (the “Compensation Committee”), which is responsible for designing and administering the Company’s executive compensation programs, values the opinions expressed by stockholders. If there are a significant number of negative votes, the Compensation Committee will seek to understand the concerns that influenced the voting and will consider whether any actions are necessary to address those concerns.

The Board has previously adopted a policy providing for an annual advisory vote to approve the compensation of our NEOs. Unless the Board modifies its current policy, the next advisory vote will be at the 2022 Annual Meeting.

Required Vote

The affirmative vote of a majority of the votes duly cast on this item is required to approve this Proposal No. 2. Abstentions and Broker non-votes are not treated as votes cast and, therefore, will have no effect on the outcome of this Proposal No. 2.

The Board of Directors recommends a vote “FOR” the advisory (non-binding) resolution to approve the compensation of our NEOs in Proposal No. 2.

 

ON Semiconductor Corporation 2021 Proxy Statement     17


Management Proposals

 

Proposal No. 3: Ratification of Selection of Independent Registered Public Accounting Firm

The Audit Committee of the Board (the “Audit Committee”): (i) has selected PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”) as the independent registered public accounting firm to (1) audit our consolidated financial statements for the year ending December 31, 2021, and (2) render other services as required of them, including to report on the effectiveness of our internal control over financial reporting as of December 31, 2021; and (ii) is seeking ratification of this selection from the stockholders of the Company. PricewaterhouseCoopers has served as the Company’s independent auditor since 1999.

In determining whether to retain PricewaterhouseCoopers as our 2021 independent auditor, the Audit Committee considered, among other things:

 

   

the historical and recent performance of PricewaterhouseCoopers on our audits;

   

the breadth of knowledge of PricewaterhouseCoopers with respect to our industry and business, our accounting policies and practices and our internal control over financial reporting;

   

the capability and expertise of PricewaterhouseCoopers in handling the breadth and complexity of our worldwide operations;

   

external data on audit quality and performance, including recent Public Company Accounting Oversight Board (“PCAOB”) reports on PricewaterhouseCoopers and its peer firms;

   

the appropriateness of PricewaterhouseCoopers’ fees for audit and non-audit services; and

   

PricewaterhouseCoopers’ independence and tenure as our independent auditor.

Based on this evaluation, the Audit Committee believes that the retention of PricewaterhouseCoopers as our independent auditor for the year ending December 31, 2021 is in the best interest of the Company and our stockholders.

A representative of PricewaterhouseCoopers is expected to be present at the Annual Meeting. If present, the representative will have an opportunity to make a statement, if such representative desires to do so, and will be available to respond to appropriate questions by stockholders.

Stockholder ratification of the selection of PricewaterhouseCoopers as our independent registered public accounting firm is not required by the bylaws of the Company (the “Bylaws”) or otherwise. Nonetheless, the Audit Committee is submitting the selection of PricewaterhouseCoopers to the stockholders for ratification as a matter of good corporate practice and because the Audit Committee values stockholders’ views on our independent auditor.

If the stockholders fail to ratify the selection, the Audit Committee may reconsider the selection of PricewaterhouseCoopers. Even if the selection is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time during the year if it determines that such a selection would be in our best interest and the best interest of our stockholders.

Audit and Related Fees

The Audit Committee reviews and approves audit and permissible non-audit services performed by PricewaterhouseCoopers, as well as the fees charged by PricewaterhouseCoopers for such services. In its review of non-audit services and fees and its selection of PricewaterhouseCoopers as our independent registered public accounting firm, the Audit Committee considered whether the provision of such services is compatible with maintaining PricewaterhouseCoopers’ independence. The table below sets forth the aggregate fees for audit and other services provided by PricewaterhouseCoopers for each of the past two fiscal years.

 

18     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

Fee Type

   2020
($ in millions)
    

2019  

($ in millions)  

Audit Fees (1)

       6.7              7.7    

Audit-Related Fees (2)

       0.0              0.0    

Tax Fees (3)

       1.3              1.4    

All Other Fees

       0.0              0.0    
    

 

 

        

 

 

 

Total Fees

           8.0                  9.1    
(1)

Includes fees billed or expected to be billed for each of 2020 and 2019 for professional services rendered in connection with the audit of our consolidated financial statements, limited reviews of our interim consolidated financial information, audits of the financial statements of certain of our subsidiaries and joint ventures, review of purchase accounting and acquisition matters and assistance with securities offerings, including the review of related documents, preparation of comfort letters and issuance of consents.

 

(2)

Includes fees for professional services rendered in connection with the annual audit of the ESPP (as defined below).

 

(3)

Includes fees billed or expected to be billed for each of 2020 and 2019 for professional services rendered in connection with tax consulting, tax compliance, tax audit assistance and transfer pricing.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services

Under the Audit Committee’s charter, the Audit Committee must pre-approve all audit and permitted non-audit services (including the fees and terms thereof) to be performed by our independent registered public accounting firm, except for any de minimis non-audit services that are approved by the Audit Committee prior to the completion of the audit and that qualify for the de minimis exception under federal securities laws and regulations. The Audit Committee may delegate to one or more members of the Audit Committee the authority to grant pre-approvals of audit and permitted non-audit services, provided that such decisions shall be presented to the full Audit Committee at its next scheduled meeting.

The Audit Committee’s pre-approval policy (the “Pre-Approval Policy”) requires the Audit Committee to pre-approve certain audit, audit-related, tax and other services to be performed by our independent registered public accounting firm. With certain exceptions, the term of pre-approval is 12 months from the date of pre-approval. The Audit Committee periodically revises the list of pre-approved services. The Audit Committee may delegate pre-approval authority to one or more of its members, who must report any pre-approval decisions to the full Audit Committee, but may not delegate such decisions to management. In granting any such pre-approvals, the Audit Committee considers the extent to which approved services could impair the independence of our independent registered public accounting firm. With respect to each proposed pre-approved service, the auditor must provide the Audit Committee, upon request, with detailed back-up documentation regarding the specific services to be performed. During 2020 and 2019, all audit and permissible non-audit services were pre-approved by the Audit Committee pursuant to the Pre-Approval Policy and its charter.

The Audit Committee has determined that the provision of services described above is compatible with maintaining PricewaterhouseCoopers’ independence.

Required Vote

The affirmative vote of a majority of the votes duly cast on this item is required to approve this Proposal No. 3. Abstentions are not treated as votes cast and, therefore, will have no effect on this Proposal No. 3.

The Audit Committee and the Board of Directors recommend a vote “FOR” the approval of Proposal No. 3.

 

ON Semiconductor Corporation 2021 Proxy Statement     19


Management Proposals

 

Proposal No. 4: Approval of an Amendment to the ON Semiconductor Corporation 2000 Employee Stock Purchase Plan

The Company’s stockholders are being asked to approve an amendment to increase the cumulative total number of shares of common stock issuable under the ON Semiconductor Corporation 2000 Employee Stock Purchase Plan, as most recently amended as of May 17, 2017 (the “ESPP”), by 6,000,000 shares from 28,500,000 shares to 34,500,000 shares. The ESPP provides eligible employees of the Company and its participating subsidiaries with the opportunity to purchase shares of our common stock through convenient payroll deductions, except where prohibited by law. The Company utilizes proceeds from the sale of ESPP shares for general corporate purposes.

On March 17, 2021 (the “Proposal No. 4 Effective Date”), the Board approved the adoption of an amendment to the ESPP, subject to stockholder approval under this Proposal No. 4. If approved by our stockholders, this Proposal No. 4 will become effective as of the Proposal No. 4 Effective Date and will increase the number of shares of common stock authorized for issuance under the ESPP by 6,000,000 shares, for a cumulative total of 34,500,000 shares (which includes all shares previously issued under the ESPP). If not approved by our stockholders, the amendment described in this Proposal No. 4 will not become effective and our ability to continue using the ESPP will be limited to the remaining share reserve. As of the Proposal No. 4 Effective Date, the total number of shares remaining available for issuance under the ESPP was 2,950,704, and the total number of shares of our common stock outstanding was 416,428,407, resulting in a dilution percentage of 0.71%.

Since January 1, 2018, the percentage of the Company’s employees in the U.S. and Malaysia who participate in the ESPP has increased from 28% to 33%, which accelerated the usage of available shares under the ESPP. In addition, during 2020, our stock price fluctuated between $8.17 and $32.93, and such volatility makes it difficult to predict our future share usage. Consequently, the Board believes it to be in the Company’s best interest to seek to obtain stockholder approval of an increase in the ESPP share reserve at the Annual Meeting. Assuming the approval of this Proposal No. 4 by our stockholders, we expect that the requested increase of 6,000,000 shares, or 1.4% of our total common stock outstanding as of the Proposal No. 4 Effective Date, would allow for at least five additional years of ESPP purchases and will give us the ability to continue to attract and retain the talented employees necessary for our continued growth and success.

Set forth below is a summary of the principal provisions of the ESPP, as amended by the amendment set forth in this Proposal No. 4. The summary is not exhaustive and is qualified by reference to the full text of the ESPP, as amended by the amendment set forth in this Proposal No. 4, which is attached to this proxy statement as Appendix A.

Summary of Material Terms of the ESPP

Purpose. The Board believes that the ESPP encourages ownership of common stock of the Company by all eligible employees and provides incentives for them to exert maximum efforts for the success of the Company and its affiliates. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”).

Administration. The ESPP is administered by the Compensation Committee. In the discussion that follows with respect to this Proposal No. 4, all references to the “Committee” will mean the Compensation Committee. Subject to the terms of the ESPP, the Committee has the authority to adopt, amend, suspend, waive and rescind rules and regulations as it deems necessary or advisable to administer the ESPP, to correct any defect, supply any omission or reconcile any inconsistency in the ESPP and to construe and interpret the ESPP and the rules and regulations thereunder. The Committee may also make any other decision and determination under the ESPP, including determinations relating to eligibility.

Stock Subject to the ESPP. The total number of shares of common stock authorized for issuance pursuant to the ESPP is 28,500,000. If the ESPP Amendment is adopted, the total number of shares authorized for issuance will be increased to 34,500,000. Shares sold under the ESPP may consist of newly issued shares, treasury stock or stock purchased on the open market. The amount of stock reserved for issuance pursuant to the ESPP is subject to adjustment in the event of certain changes in capital structure as described below under “Adjustment Provisions.”

Eligibility. The Committee has the authority to designate the subsidiaries of the Company whose employees may participate in the ESPP. The Committee has delegated to the Chief Executive Officer (the “CEO”) and/or to the President of the Company

 

20     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

the authority to designate new United States and Malaysian subsidiaries of the Company that are eligible to be participating employers in the ESPP, subject to certain restrictions. All employees of the Company or any Company subsidiary designated by the CEO are eligible to participate in the ESPP, so long as such employees are employed by the Company or a subsidiary authorized to participate in the ESPP on the first day of the offering period. An employee is not eligible, however, if he or she owns or has the right to acquire 5% or more of the voting stock of the Company or of any subsidiary of the Company. Also, an employee is not eligible if he or she is normally scheduled to work less than or equal to 20 hours per week or five months per calendar year or if the employee has been employed by the Company for less than 90 days. An employee who is a citizen or resident of a foreign jurisdiction will be ineligible to participate in the ESPP if the offering is prohibited under the laws of such foreign jurisdiction or if compliance with the laws of such foreign jurisdiction would cause the offering to violate Section 423 of the Code. The ESPP is intended to be a broad-based compensation plan and currently the only subsidiaries of the Company whose employees are eligible to participate in the ESPP are certain of the Company’s United States and Malaysian subsidiaries. As of December 31, 2020, there were approximately 9,500 employees eligible to participate in the ESPP, subject to limitations of local law and tax policy.

Enrollment and Contributions. Eligible employees voluntarily elect whether to enroll in the ESPP. Currently, employees may join for a period of three months, which is the maximum offering period provided for in the ESPP. Employees who have joined the ESPP are automatically re-enrolled for additional rolling three-month periods so long as the employee remains eligible under the rules of the ESPP. However, an employee may cancel his or her enrollment at any time, subject to certain provisions of the ESPP. Employees may contribute to the ESPP through payroll deductions. Participating employees generally may contribute up to 10% of their eligible compensation through after-tax payroll deductions. From time to time, the Committee may establish a lower or higher maximum permitted contribution percentage. An employee may change the payroll contribution amount for a future offering period by filing a new enrollment form at least two weeks prior to the beginning of the offering period. An employee may discontinue payroll contributions during an offering period by filing a new enrollment form, and the change will be effective for the next payroll after the enrollment form is received.

Purchase of Shares. At the end of each offering period, each participating employee’s payroll deductions are used to purchase shares of common stock for the employee. The price of the shares purchased will be 85% of the lower of: (i) the stock’s fair market value on the first day of the three-month offering period; or (ii) the stock’s fair market value on the last day of the offering period. Currently, during any single offering period, no employee may purchase more than the lesser of: (i) 500 shares of common stock; or (ii) the number of shares derived by dividing $6,250 by 100% of the fair market value of one share of common stock on the first day of the offering period. In the event that an employee’s payroll contribution is greater than the amount the employee is able to purchase, the excess amount will be returned to the employee as soon as practicable after the end of the offering period.

Termination of Participation. Participation in the ESPP terminates when a participating employee’s employment with the Company and its subsidiaries ceases for any reason, the employee withdraws from the ESPP, the employee becomes ineligible to participate under the rules of the ESPP, whether by amendment of the ESPP or otherwise, or the ESPP is terminated.

Adjustment Provisions. In the event of any extraordinary dividend or other distribution, recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange or other similar corporate transaction or event affecting the stock, the number and kind of shares subject to the ESPP will be proportionally adjusted by the Committee.

Amendment, Modification and Termination of the ESPP. The Board may amend or terminate the ESPP at any time for any reason unless stockholder approval is required by federal or state law or regulation or the rules of the automated quotation system or stock exchange on which the Company’s common stock is quoted or listed, or is necessary in order for the ESPP to continue to meet the requirements of Section 423 of the Code. If stockholder approval is required, such approval must be obtained within one year of Board action. No amendment or termination of the ESPP may materially and adversely affect the rights of a participant without such participant’s consent.

Federal Income Tax Information. The following is a brief summary of certain of the federal income tax consequences of the purchase of shares of stock under the ESPP. This summary is not intended to be exhaustive and does not describe state, local or foreign income tax consequences that may also be applicable. Participants in the ESPP should consult their own professional tax advisors concerning tax aspects of rights under the ESPP. Nothing in this proxy statement is written or intended to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. The discussion below concerning tax deductions that may become available to the Company under U.S. federal tax law is not intended to imply that the

 

ON Semiconductor Corporation 2021 Proxy Statement     21


Management Proposals

 

Company will necessarily obtain a tax benefit or asset from those deductions. Taxation of equity-based payments in other countries is complex, does not generally correspond to U.S. federal tax laws and is not covered by the summary below. Under a plan which qualifies as an employee stock purchase plan under Section 423 of the Code, as a general rule, an employee does not recognize taxable income when shares of stock are purchased through the ESPP. An employee will, however, generally recognize taxable income upon the sale or disposition of stock purchased through the ESPP. For shares that are disposed of more than 24 months after the first day of the offering period under which shares were purchased and more than one year after the actual purchase date of those shares (a “qualifying disposition”), the participant will recognize ordinary income in the year of such sale or disposition equal to the lesser of: (i) the amount by which the fair market value of the shares on the sale or disposition date exceeds the purchase price paid for those shares; or (ii) the excess of the fair market value of the shares on the start date of the offering period over the purchase price (however, if the purchase price is based on the lower of the value of the stock on the first day of the offering period or the purchase date, the purchase price discount is computed as of the first day of the offering period for this purpose). Any additional gain above that amount is taxed at the long-term capital gains rates. If the employee sells the stock for less than the purchase price, there will be no ordinary income. Instead, the employee will have a long-term capital loss for the difference between the sale price and the purchase price. If a participant disposes of shares during the 24-month period after the first day of the offering period in which shares were purchased or within one year after the actual purchase date of the shares (a “disqualifying disposition”), the employee will recognize ordinary income in the year of such sale or disposition on the difference between the purchase price and the fair market value of the stock on the actual purchase date, regardless of whether there is any gain upon such disposition. Any additional gain (or loss) is taxed to the stockholder as long-term or short-term capital gain (or loss). The purchase date starts the holding period for determining whether the gain (or loss) is short-term or long-term.

Tax Consequences to the Company or Its Affiliates. If an employee makes a disqualifying disposition, the Company or an affiliate of the Company generally will receive a deduction equal to the amount of ordinary income an employee must recognize for the year of the disqualifying disposition. Neither the Company nor any affiliate of the Company will receive a deduction for qualifying dispositions.

New Plan Benefits. Benefits under the ESPP will depend on the number of employees who elect to participate in the ESPP and the fair market value of the Company’s stock at various future dates. Consequently, it is not possible to determine the future benefits that will be received by participants in the ESPP.

Prior Purchases under the ESPP. The following table sets forth the purchases made in the 2020 fiscal year under the ESPP by each of the NEOs, the Company’s current executive officers as a group, current non-employee Directors (“Outside Directors”) as a group, each of the nominees for Director, all other current employees, including current officers who are not executive officers, as a group, each associate of any Directors, executive officers or nominees for Director and each other person who received, or is to receive, 5% of such options, warrants or rights.

 

22     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

Plan Benefits Table

 

Name

   Number of Shares Purchased  

NEOs

    

Hassane S. El-Khoury,

President and Chief Executive Officer

      

Keith D. Jackson,

Former President and Chief Executive Officer

      

Bernard Gutmann,

Former Executive Vice President, Chief Financial Officer and Treasurer

      

William A. Schromm,

Former Executive Vice President and Chief Operating Officer

      

Vincent C. Hopkin,

Executive Vice President and General Manager, Advanced Solutions Group

    

 

 

 

1,261

 

Simon Keeton,

Executive Vice President and General Manager, Power Solutions Group

    

 

 

 

1,357

 

 

All current executive officers, as a group

    

 

 

 

6,438

 

Atsushi Abe

      

Alan Campbell

      

Susan K. Carter

      

Thomas L. Deitrich

      

Gilles Delfassy

      

Bruce E. Kiddoo

      

Paul A. Mascarenas

      

Gregory L. Waters

      

Christine Y. Yan

      

All current Outside Directors, as a group (1)

      

 

All current employees (including officers who are not current executive officers), as a group

    

 

 

 

1,831,818

 

Each associate of any of such Directors, executive officers or nominees (2)

      

Each other person who received or is to receive 5% of such options, warrants or rights (3)

      
(1)

Outside Directors are not eligible to participate in the ESPP.

 

(2)

No such associates are eligible to participate in the ESPP.

 

(3)

No such person is eligible to receive 5% of purchase rights under the ESPP.

Required Vote

The affirmative vote of a majority of the votes duly cast on this item is required to approve this Proposal No. 4. Abstentions and Broker non-votes are not treated as votes cast and, therefore, will have no effect on the approval of this Proposal No. 4.

The Board of Directors recommends a vote “FOR” the approval of an amendment to the 2000 Employee Stock Purchase Plan as described in this Proposal No. 4.

 

ON Semiconductor Corporation 2021 Proxy Statement     23


Management Proposals

 

Proposal No. 5: Approval of Amendments to the ON Semiconductor Corporation Amended and Restated Stock Incentive Plan

The Company’s stockholders are being asked to approve certain amendments to the ON Semiconductor Corporation Amended and Restated Stock Incentive Plan, as most recently amended as of May 17, 2017 (the “2010 SIP”).

General Information

Under its current terms, the 2010 SIP will expire on the date of the 2022 Annual Meeting and provides for the grant of incentive stock options, non-qualified stock options, time-based restricted stock units (“RSUs”), restricted stock, performance shares, performance share units, performance cash awards, stock appreciation rights (“SARs”) and stock grant awards. For the reasons set forth in this Proposal No. 5, the Company believes that it is prudent to seek stockholder approval at the Annual Meeting to approve certain amendments to the 2010 SIP as described in this Proposal No. 5.

Among other amendments described below, Proposal No. 5 proposes to increase the number of authorized shares under the 2010 SIP from 87,000,000 shares to 109,500,000 shares. Based on estimated share usage as of March 17, 2021 (the “Proposal No. 5 Effective Date”), we do not expect that the 2010 SIP’s share reserve will be depleted before the 2022 Annual Meeting. However, given the Company’s belief that there is a need to increase the share reserve for the ESPP at this time (as described in Proposal No. 4), and because the Company believes that we will need to extend the term of the 2010 SIP or adopt a new stock incentive plan prior to the 2010 SIP’s current expiration date at the 2022 Annual Meeting, the Company has determined that seeking stockholder approval of this Proposal No. 5 is a prudent and administratively efficient course of action. The Board believes that the proposed 22,500,000 share increase to the 2010 Plan’s share reserve described below in this Proposal No. 5 will provide us with sufficient shares for our equity compensation program for at least five years. If this Proposal No. 5 is approved by our stockholders, it will become effective as of the Proposal No. 5 Effective Date. If this Proposal No. 5 is not approved by our stockholders, awards will continue to be made under the 2010 SIP as currently in effect, to the extent shares are available, until the 2010 SIP expires on the date of the 2022 Annual Meeting.

As shown in the following table, based on the burn rate methodology used by the Company, the Company’s three-year average annual burn rate as of December 31, 2020 is 1.23%. If adjusted to utilize the same burn rate methodology as Institutional Shareholder Services Inc. (“ISS”), the Company’s three-year average annual burn rate as of December 31, 2020 is 1.85%, which is well below the adjusted “burn rate benchmark” of 6.23% for the Company’s industry as calculated using ISS’s burn rate methodology. If adjusted to reflect forfeitures due to employee terminations, then the Unadjusted Burn Rate (as calculated below) would be 1.08% and the Adjusted Burn Rate (as calculated below) would be 1.61%.

 

Year

  Unadjusted Total (1)
(a)
  Adjusted Total (2)
(b)
  Weighted Average Number of
Common Shares Outstanding (3)
(c)
 

Unadjusted Burn Rate
(%) (2)

(d)

 

Adjusted  

Burn Rate (%) (2)  

(e)

2020

      6.55       9.825       410.7       1.60       2.39

2019

      5.45       8.175       410.9       1.33       1.99

2018

      3.27       4.905       423.8       0.77       1.16
                  3-year average:       1.23       1.85

Shares are stated in millions, rounded to conform to the Company’s annual report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on February 16, 2021 (the “Form 10-K”), where applicable.

 

(1)

The disclosed amount reflects the number of performance-based restricted stock units (“PBRSUs”) that were granted during the applicable year. Performance metrics for PBRSUs are further described in this proxy statement under the heading “Compensation of Executive Officers — 2020, 2019 and 2018 Awards of Equity.”

 

(2)

Adjusted Total includes column (e) as adjusted to reflect that ISS considers full value awards to be more valuable than stock options. The adjustment is made based on the Company’s annual stock price volatility, such that one full value award will count as 1.5 option shares. “Unadjusted Burn Rate” is computed by dividing the amount in column (a) by the amount in column (c). “Adjusted Burn Rate” is computed by dividing the amount in column (b) by the amount in column (c).

 

(3)

Rounded to the nearest $0.1 million as disclosed in the Form 10-K and the Company’s annual reports on Form 10-K for the years ended December 31, 2019 and 2018.

Summary of Proposed Amendments to, and Other Material Terms of, the 2010 SIP

On the Proposal No. 5 Effective Date, the Board approved, subject to stockholder approval, the amendments to the 2010 SIP that we are now asking stockholders to approve in this Proposal No. 5. The proposed amendments to the 2010 SIP that have been approved by the Board are:

 

24     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

   

Extended Term. The extension of the term under the 2010 SIP from the date of the 2022 Annual Meeting through March 17, 2031 (the “Expiration Date”).

 

   

Share Reserve Increase. The increase of the share reserve in the 2010 SIP (which is the specified number of shares that, over the life of the 2010 SIP since its original inception in 2010, may be made subject to awards) by 22,500,000 shares to a cumulative total of 109,500,000 shares (which would include all shares previously issued under the 2010 SIP and the ON Semiconductor Corporation 2000 Stock Incentive Plan (the “2000 SIP”)).

 

   

Elimination of Code Section 162(m) Provisions. The removal of references in the 2010 SIP to the “performance-based compensation” exception to the $1,000,000 limitation on the deduction of compensation and related provisions under Section 162(m) of the Code (“Section 162(m)”) given that such provisions were repealed by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) and are now obsolete for tax purposes.

Set forth below is a summary of the material terms of the 2010 SIP, as amended by the amendments contained in this Proposal No. 5. The summary is not exhaustive and is qualified by reference to the full text of the 2010 SIP, as amended by the amendments set forth in this Proposal No. 5, which is attached to this proxy statement as Appendix B. Capitalized terms used but not defined herein have the meanings given to such terms in the 2010 SIP.

Term, Amendment, Modification and Termination. Subject to the Board’s right to amend or terminate the 2010 SIP at any time, unless our stockholders approve the amendments described under this Proposal No. 5, the 2010 SIP will expire on, and no award may be granted under the 2010 SIP following, the date of the 2022 Annual Meeting. Any awards outstanding on the date of the 2022 Annual Meeting will remain in effect according to the terms of the applicable Award Agreement and the 2010 SIP.

Purpose. The Board believes that the 2010 SIP promotes the success and enhances the long-term growth of the Company. The 2010 SIP was designed to provide participants with an incentive for outstanding performance in order to generate superior returns for the Company’s stockholders. The Board believes that this alignment between participant incentives and stockholder value is in the best interest of the Company and its stockholders. The Board also believes that the 2010 SIP allows the Company to attract, retain and motivate individuals upon whose judgment, interest and effort the successful conduct of the Company’s operations is largely dependent.

Administration. The 2010 SIP provides that it will be administered by the Compensation Committee or another committee (referred to as a subcommittee) of the Board. In the discussion that follows with respect to this Proposal No. 5, references to the “Committee” will mean the committee (or subcommittee) of the Board appointed to administer the 2010 SIP. Each Committee member (or member of any applicable subcommittee of the Committee) must be a “non-employee director” as defined in Rule 16b-3 of the Exchange Act if required to meet the conditions of exemption for awards from Section 16(b) of the Exchange Act. Due to the repeal of the performance-based exception under Section 162(m), this Proposal No. 5 contemplates the removal of a provision in the 2010 SIP that, for specified grants, required Committee members to meet the committee independence requirements in Section 162(m). The Committee, by majority action, is authorized to interpret the 2010 SIP, to prescribe, amend and rescind rules and regulations relating to the 2010 SIP, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company and to make all other determinations necessary for the administration of the 2010 SIP to the extent they are not contrary to express provisions of the 2010 SIP.

The Committee has the authority, without limitation, to determine: (i) the participants who are entitled to receive awards under the 2010 SIP; (ii) the types of awards; (iii) the times when awards shall be granted; (iv) the number of awards; (v) the purchase price or exercise price of awards, if any; (vi) the period(s) during which such awards shall be exercisable (whether in whole or in part); (vii) the restrictions applicable to awards; (viii) the form of each Award Agreement; (ix) the other terms and provisions of any award; and (x) the schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an award and accelerations or waivers thereof, based in each case on such considerations as the Committee, in its sole discretion, determines. The Committee also has the authority to modify existing awards to the extent permitted under the 2010 SIP.

Pursuant to the Amended and Restated Guidelines on the Delegation of Authority to the Chief Executive Officer to Make Certain Awards or other specific written delegation promulgated from time to time by the Committee in accordance with applicable law and subject to certain restrictions and limitations (the “Delegated Authority Guidelines”), the CEO has the authority to grant awards to individuals to expedite the hiring process and retain talented employees. However, the CEO does not have the authority to grant awards to any Director or “Senior Officer” (as such term is defined in the Delegated Authority Guidelines) or to grant awards above certain dollar thresholds.

 

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Management Proposals

 

Stock Subject to the 2010 SIP. Subject to adjustment in the event of certain changes in capital structure as described below under “Adjustment Provisions,” as of February 25, 2021, 16,908,154 shares of stock were reserved and available for awards granted under the 2010 SIP. If this Proposal No. 5 is approved by our stockholders, the number of shares available for grant would be increased by 22,500,000 shares to 39,408,154 shares. The 2010 SIP contains what is commonly referred to as a “fungible” share counting mechanism under which full value awards (that is, awards other than options and SARs) deplete the share reserve by 1.58 shares for each share underlying the award, and options and SARs deplete the share reserve by one share for each share underlying the option or SAR award. Under the 2010 SIP, if an award terminates, expires, lapses or is settled in cash rather than shares, the number of shares that was debited from the share reserve upon granting the award is added back – 1.58 shares for full value awards and one share for options and SARs. The maximum number of shares of stock that may be issued as incentive stock options under the 2010 SIP is 6,000,000. Shares delivered pursuant to the 2010 SIP may consist of authorized but unissued stock, treasury stock or stock purchased on the open market.

The exercise of a stock-settled SAR or Broker-assisted “cashless” exercise of an option (or a portion thereof) will reduce the 2010 SIP’s share reserve by the entire number of shares of stock subject to that SAR or option (or applicable portion thereof), even though a smaller number of shares of stock will be issued upon such an exercise. Also, shares of stock tendered to pay the exercise price of an option or tendered or withheld to satisfy a tax withholding obligation arising in connection with an award will not become available for grant or sale under the 2010 SIP.

Eligibility. All employees (including officers), Outside Directors and consultants of the Company and its affiliates are eligible to be selected to receive awards under the 2010 SIP, subject to Committee discretion as described below. On the Proposal No. 5 Effective Date, there were approximately 14,357 employees, 10 Outside Directors and 5,543 consultants eligible to participate in the 2010 SIP, subject to limitations of local law and tax policy. Subject to certain conditions, prospective employees, Outside Directors and consultants may also be granted awards. Any such awards to prospective employees, Outside Directors or consultants may not vest, become exercisable, be issued or become effective before the individual begins providing services.

The Committee may establish additional terms, conditions, rules or procedures to accommodate the rules or laws of non-U.S. jurisdictions, to allow for tax-favored treatment of awards granted to participants who reside outside of the United States or to otherwise provide for participation by participants who reside outside of the United States. The Committee may also approve any sub-plans, supplements to or amendments, restatements or alternate versions of the 2010 SIP as the Committee deems necessary to accomplish these purposes without affecting the terms of the 2010 SIP as in effect for any other purpose, provided that these documents do not increase the share limitations set forth in the 2010 SIP.

Types of Awards. The following types of awards may be granted pursuant to the 2010 SIP:

 

   

Stock Options. A stock option entitles the participant to purchase shares of stock in the future at a specified price. Both incentive stock options and non-qualified stock options may be granted under the 2010 SIP. Incentive stock options will be granted only to participants who are employees. The exercise price of all options granted under the 2010 SIP will be at least 100% of the fair market value of the common stock on the Grant Date. Stock options may be exercised as determined by the Committee, but no option may be exercised more than seven years from the Grant Date. The Committee will determine the methods by which the exercise price of an option may be paid and the form of payment. Special rules will apply to incentive stock options as provided in the 2010 SIP. Unless otherwise provided in the applicable Award Agreement, and subject to other conditions applicable to incentive stock options, an option will lapse immediately if a participant’s employment or services are terminated for Cause. A participant will have no rights as a stockholder with respect to options until the shares of stock are actually issued in connection with the award.

 

   

RSUs. An RSU award gives the participant the right to receive common stock or a cash payment equal to the fair market value of the common stock (determined as of a specified date) in the future, subject to certain restrictions and the risk of forfeiture. Participants holding RSUs have no voting rights with respect to the shares of stock subject to their RSU awards prior to the issuance of such shares. If the Committee grants a dividend equivalent with respect to an RSU award that vests based on the achievement of performance goals, the 2010 SIP provides that in no event will such dividend equivalent be paid unless and until such RSU award vests or is earned by satisfaction of the applicable performance goals.

 

26     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

   

Restricted Stock. A restricted stock award is a grant of a specified number of shares of common stock that are subject to restrictions that limit the participant’s ability to transfer the stock and subject the stock to a substantial risk of forfeiture until specific conditions or goals are met. The restrictions will lapse in accordance with a schedule or other conditions as determined by the Committee. Unless otherwise specified in the Award Agreement, if the participant terminates employment during the restriction period, the unvested restricted stock is forfeited. An award of restricted stock may include the right to vote the stock during the restriction period.

 

   

Performance Shares. A performance share award gives the participant the right to receive common stock, contingent on achievement of certain performance goals specified by the Committee during a performance period specified by the Committee. If the Committee grants a dividend equivalent with respect to a performance share award, the 2010 SIP provides that in no event will such dividend equivalent be paid unless and until such performance share award vests or is earned by satisfaction of the applicable performance goals.

 

   

Performance Share Units. A performance share unit award gives the participant the right to receive common stock, a cash payment or a combination of stock and cash, contingent on achievement of certain performance goals specified by the Committee during a performance period specified by the Committee. If the Committee grants a dividend equivalent with respect to a performance share unit award, the 2010 SIP provides that in no event will such dividend equivalent be paid unless and until such performance share unit award vests or is earned by satisfaction of the applicable performance goals.

 

   

Performance Cash Awards. A performance cash award gives the participant the right to receive a cash payment, contingent on achievement of certain performance goals specified by the Committee during a performance period specified by the Committee.

 

   

SARs. A SAR gives the participant the right to share in the appreciation in value of one share of common stock. Appreciation is calculated as the excess, if any, of the fair market value of a share of common stock on the date of exercise over the price fixed by the Committee on the Grant Date, which may not be less than the fair market value of a share of common stock on the Grant Date. Payment for SARs shall be made in stock. SARs are exercisable at such times and subject to such restrictions and conditions as the Committee approves, provided that no SAR may be exercised more than seven years following the Grant Date.

 

   

Stock Grant Awards. A stock grant award gives the participant the right to receive, or the right to purchase at a predetermined price, shares of common stock free from vesting restrictions. A stock grant award may be granted or sold as consideration for past services, other consideration or in lieu of cash compensation due to any participant.

Section 162(m)-Specific Provisions. The 2010 SIP contains provisions relating to certain awards that were intended to comply with the performance-based compensation exception under Section 162(m) and places certain limits on the size of awards that could be granted to certain employees if the awards were intended to qualify for the performance-based compensation exception under Section 162(m). The Tax Act eliminated the performance-based compensation exception under Section 162(m), except with respect to certain grandfathered awards. As a result of this change in tax laws, we are no longer able to grant awards that qualify for the performance-based compensation exception and, consequently, the provisions in the 2010 SIP that apply only to such awards are no longer of any effect. For this reason, if approved by stockholders, the amendments described in this Proposal No. 5 would remove these Section 162(m)-specific provisions, including the individual award limits referenced above. Nevertheless, the 2010 SIP retains provisions relating to awards that were not intended to qualify for this exception and the Company may continue to grant awards under the 2010 SIP that contain vesting or other terms that relate to performance-based conditions.

The Committee has the discretion to select the length of the performance period (which may be one or more periods of time of varying and overlapping durations, over which the attainment of one or more performance goals will be measured), the type of performance compensation award to be issued, the kind and/or level of performance goal or goals and whether the performance goal or goals apply to the Company, an affiliate or any division or business unit of any of them, or to the individual participant or any group of participants. The Committee also has the discretion to evaluate the achievement of the performance goals in a manner that includes or excludes certain events that may occur during the performance period.

Minimum Vesting Periods. Full value awards, such as restricted stock, RSUs, performance shares and performance share units, are subject to minimum vesting periods under the 2010 SIP. Full value awards that are exclusively subject to time-based vesting must have a vesting period of at least three years, while stock options, SARs and awards that are subject to performance-based vesting must have a vesting period of at least one year. These awards may vest in increments during the

 

ON Semiconductor Corporation 2021 Proxy Statement     27


Management Proposals

 

applicable vesting period. The Committee, in its discretion, may provide in the applicable Award Agreement for any full value award that the award vests, in whole or in part, on the participant’s termination of employment. The Committee may grant full value awards that are not subject to the minimum vesting requirements, provided that the sum of the number of shares of common stock subject to these awards plus the number of shares of stock subject to stock grant awards does not exceed 5% of the shares of stock available for the grant of awards pursuant to the 2010 SIP.

Outside Director Award Limit. Subject to adjustment upon the occurrence of any of the events indicated in Section 5.3 of the 2010 SIP, the maximum number of shares of stock that may be granted to any participant who is an Outside Director during any calendar year is 40,000 shares of stock.

Restrictions. The Committee may impose such restrictions on any awards under the 2010 SIP as it may deem advisable, including restrictions under applicable federal securities law, under the requirements of any stock exchange upon which the common stock is then listed and under any blue sky or state securities law applicable to the awards.

Change in Control. Under the 2010 SIP, upon a Change in Control, the Board has the discretion to provide that all or part of any outstanding options, SARs and other awards shall become fully exercisable and all or part of the restrictions on outstanding awards shall lapse. Upon, or in anticipation of, such an event, the Committee may cause every award outstanding under the 2010 SIP to terminate at a specific time in the future and shall give each participant the right to exercise awards during a period of time as the Committee, in its sole and absolute discretion, shall determine.

Non-transferability. The Committee may, in its sole discretion, determine the right of a participant to transfer any award granted under the 2010 SIP. Unless otherwise determined by the Committee, no award granted under the 2010 SIP may be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or pursuant to a domestic relations order in favor of a spouse (that would otherwise qualify as a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, but for the fact that the order pertains to an award), or, if applicable, until the termination of any restricted or performance period as determined by the Committee. A participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the participant and to receive any distribution with respect to any award upon the participant’s death.

Adjustment Provisions. If there is a change in the outstanding shares of common stock because of a stock dividend or split, recapitalization, merger, consolidation, combination, exchange of shares or other similar corporate change, the aggregate number of shares of stock available under the 2010 SIP and subject to each outstanding award, and its stated exercise price or the basis upon which the award is measured, will be adjusted appropriately by the Committee. Moreover, in the event of such transaction or event, the Committee, in its discretion, may provide in substitution for any or all outstanding awards under the 2010 SIP such alternative consideration (including cash) as it, in good faith, may determine to be equitable under the circumstances and may require in connection therewith the surrender of all awards so replaced. Any adjustment to an incentive stock option shall be made consistent with the requirements of Section 424 of the Code. Further, with respect to any option or SAR that otherwise satisfies the requirements of the stock rights exception to Section 409A of the Code (“Section 409A”), any adjustment shall be made consistent with the requirements of the final regulations promulgated pursuant to Section 409A.

Amendment, Modification and Termination of the 2010 SIP. The Board has discretion to terminate, amend or modify the 2010 SIP at any time. Any such action of the Board is subject to the approval of the stockholders to the extent required by law, regulation or the rules of any exchange on which the common stock is listed, quoted or traded. To the extent permitted by law, the Board may delegate to the Committee or the CEO the authority to approve non-substantive amendments to the 2010 SIP. Except as otherwise provided in the 2010 SIP, the Board, the CEO and the Committee may not do any of the following without stockholder approval: (i) reduce the purchase price or exercise price of any outstanding award, including any option or SAR; (ii) increase the number of shares available under the 2010 SIP (except in connection with any adjustment described in the “Adjustment Provisions” section above); (iii) grant options with an exercise price that is below fair market value of a share of common stock on the Grant Date; (iv) reprice previously granted options or SARs; (v) cancel any option or SAR in exchange for cash or any other award or in exchange for any option or SAR with an exercise price that is less than the exercise price for the original option or SAR; or (vi) expand the: (1) class of participants eligible to receive an award under the 2010 SIP, or (2) types of awards available for grant under the 2010 SIP. The 2010 SIP or any Award Agreement may also be amended to comply with Section 409A or to exclude or exempt the 2010 SIP or any Award Agreement from the requirements of Section 409A.

Tax Withholding. The Company may withhold, or require a participant to remit to the Company, up to the maximum amount necessary to satisfy federal, state and local withholding tax requirements on any award under the 2010 SIP. To the extent permissible under applicable tax, securities and other laws, the Company may, in its sole discretion, allow a participant to

 

28     ON Semiconductor Corporation 2021 Proxy Statement


Management Proposals

 

satisfy a tax withholding requirement by, among other means, directing the Company to apply shares of the Company’s common stock to which the participant is entitled pursuant to the award to satisfy the withholding amount.

Federal Income Tax Information. The following is a brief summary of certain of the federal income tax consequences of certain transactions under the 2010 SIP based on current federal income tax laws, which are subject to change. This summary is not intended to be exhaustive and does not describe state, local or foreign income tax consequences that may be applicable. Participants in the 2010 SIP should consult their own professional tax advisors concerning tax aspects of rights under the 2010 SIP. Nothing in this proxy statement is written or intended to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Generally, with the exception of a stock grant award (which is vested at the time of grant) or a restricted stock award with respect to which a participant has timely filed an election under Section 83(b) of the Code, a participant will not recognize taxable income with respect to any award at the time of grant. A participant will recognize income on a stock grant award at the time of grant. If a participant who receives a restricted stock grant makes an election under Section 83(b) of the Code, the participant will recognize income on the award at the time of grant. Any gain or loss on the participant’s subsequent disposition of the shares will receive long-term or short-term capital gain or loss treatment, depending on whether the shares are held for more than one year following exercise. The Company does not receive a tax deduction for any such gain.

Upon exercise of a non-qualified stock option, the lapse of restrictions on restricted stock (with respect to which a Section 83(b) election was not filed), the issuance of shares or payment of cash upon exercise or disposition of SARs or the issuance, as applicable, of shares or cash upon settlement of RSUs, performance shares, performance share units or performance cash awards, the participant will recognize ordinary taxable income in an amount equal to the difference between the amount paid for the award or the shares issued, if any (or, in the case of an option, the exercise price) and the fair market value of the stock or amount received on the date of exercise, lapse of restriction or payment. Subject to potential deduction limitations under Section 162(m) and Section 280G of the Code, the Company will generally be entitled to a concurrent income tax deduction equal to the ordinary income recognized by the participant. Any gain or loss on the participant’s subsequent disposition of the shares of the Company’s common stock will receive long-term or short-term capital gain or loss treatment, depending on whether the shares are held for more than one year following exercise. The Company does not receive a tax deduction for any such gain.

A participant who is granted an incentive stock option generally will not recognize taxable income at the time of exercise. However, the excess of the stock’s fair market value over the option price could be subject to the alternative minimum tax in the year of exercise (assuming the stock received is not subject to a substantial risk of forfeiture or is transferable). If a participant sells or disposes of the stock acquired upon the exercise of an incentive stock option after the later of two years from the Grant Date or one year from the date of exercise, the gain or loss (in an amount equal to the difference between the sales price and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and the Company will not be entitled to any income tax deduction. If the holding period requirements are not met, resulting in a disqualifying disposition, the incentive stock option will not meet the requirements for this tax-favored treatment. Instead, the participant would recognize ordinary income in the year of the disposition. The amount of such ordinary income generally is the lesser of: (i) the difference between the amount realized on the disposition and the exercise price; or (ii) the difference between the fair market value of the stock on the exercise date and the exercise price. Any gain in excess of the amount taxed as ordinary income would be treated as a long-term or short-term capital gain, depending on whether the stock was held for more than one year, and the Company would not receive a tax deduction for such gain. The Company, in the year of the disqualifying disposition, is generally entitled to a deduction equal to the amount of ordinary income recognized by the participant, subject to possible limitations imposed by Section 162(m) or Section 280G of the Code and so long as the Company appropriately reports such income, if required.

Recipients of stock-based awards that earn dividends (other than restricted stock awards with respect to which a Section 83(b) election has been made) or dividend equivalents will recognize taxable ordinary income on any dividend and dividend equivalent payments received with respect to such awards, which income is subject to withholding for U.S. federal income and employment tax purposes if the recipient of the award is an employee. The Company is generally entitled to an income tax deduction in the amount of the income recognized by a participant, subject to possible limitations imposed by Section 162(m) or Section 280G of the Code. Under Section 409A, the definition of deferred compensation arrangements potentially includes, among other forms of compensation, below-market option and SAR grants, as well as RSUs, performance shares, performance share units and performance cash awards. If awards that are subject to Section 409A fail to comply with Section 409A, a participant must include in ordinary income all deferred compensation, if any, conferred by the award, pay an additional 20% excise tax and, potentially, an additional interest penalty tax. The Company intends (but cannot and does not guarantee) that awards granted under the 2010 SIP will comply with the requirements of Section 409A or an exception thereto and intends to administer and interpret the 2010 SIP in such a manner. Under the net investment income

 

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Management Proposals

 

tax introduced under the Patient Protection and Affordable Care Act, dividends paid to and capital gains recognized by individuals with incomes over certain threshold amounts may be subject to an additional 3.8% tax on investment income.

Tax Consequences to the Company or Its Affiliates. To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the affiliate for which the participant performs services will generally be entitled to a corresponding deduction, subject to potential deduction limitations under Section 162(m) and Section 280G of the Code.

Grants under the 2010 SIP. Grants under the 2010 SIP are made in the discretion of the Committee (or the CEO, to the extent of any delegation as described above). Consequently, it is not possible to predict the future grants that will be made and benefits that will be received by participants pursuant to the 2010 SIP. The below table represents all equity awards granted under the 2010 SIP from adoption through the Proposal No. 5 Effective Date to the NEOs, current executive officers as a group, current Outside Directors as a group, all other current employees, including current officers who are not executive officers, as a group, each associate of any of such Directors, executive officers or nominees for Director and each other person who received or is to receive 5% of such options, warrants or rights. The below amounts do not include adjustments for full value awards as described under “Stock Subject to the 2010 SIP” above or canceled awards or forfeited shares due to performance awards not being earned. As of the Proposal No. 5 Effective Date, the closing price of the Company’s common stock on The Nasdaq Global Select Market LLC (“Nasdaq”) was $41.83.

 

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Name

   Shares Underlying
Options (#) (1)
   Shares Underlying
Performance-Based
Awards (#) (2)
  

Shares Underlying  

Stock and Time-Based  
Awards (#)

NEOs

              

Hassane S. El-Khoury,

President and Chief Executive Officer

       0        490,639        175,659

Keith D. Jackson,

Former President and Chief Executive Officer

       476,191        3,473,159        1,670,857

Bernard Gutmann,

Former Executive Vice President, Chief Financial Officer and Treasurer

       173,933        812,951        499,854

William A. Schromm,

Former Executive Vice President and Chief Operating Officer

       54,366        975,420        508,814

Vincent C. Hopkin,

Executive Vice President and General Manager, Advanced Solutions Group

       25,000        340,759        192,104

Simon Keeton,

Executive Vice President and General Manager, Power Solutions Group

       12,800        332,980        206,130

All current executive officers, as a group

       210,045        2,915,607        1,498,790

Atsushi Abe

       20,000               167,491

Alan Campbell

                     80,376

Susan K. Carter

                     3,968

Thomas L. Deitrich

                     4,390

Gilles Delfassy

                     79,925

Bruce E. Kiddoo

                     2,854

Paul A. Mascarenas

                     89,635

Gregory L. Waters

                     2,854

Christine Y. Yan

                     30,609

All current Outside Directors, as a group

       20,000               462,102

All current employees (including officers who are not current executive officers), as a group

       2,873,792        12,959,023        26,214,084

Each associate of any of such Directors, executive officers or nominees

       0        0        0

Each other person who received or is to receive 5% of such options, warrants or rights

       0        0        0
(1)

For a further description of options granted to our NEOs, see the “Outstanding Equity Awards at Fiscal Year-End 2020” table below in this proxy statement, and for a further description of options granted to our Outside Directors, see the “2020 Compensation of Directors” table below in this proxy statement.

 

(2)

Amounts shown in this column represent the number of PBRSUs granted under the 2010 SIP assuming that the target levels of performance goals are achieved.

Required Vote

The affirmative vote of a majority of the votes duly cast is required to approve this Proposal No. 5. Abstentions and Broker non-votes are not treated as votes cast and therefore will have no effect on the outcome of this Proposal No. 5.

The Board of Directors recommends a vote “FOR” the approval of amendments to the ON Semiconductor Corporation Amended and Restated Stock Incentive Plan, as described in this Proposal No. 5.

 

ON Semiconductor Corporation 2021 Proxy Statement     31


 

THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

The Board met 11 times in 2020, and the committees, including any special committees, of the Board held a total of 30 meetings. Each incumbent Director serving during 2020 attended all Board and applicable committee meetings held during his or her period of service in 2020. We do not currently have a policy with regard to Directors’ attendance at annual meetings of stockholders. Due to public health concerns related to the novel coronavirus 2019 (“COVID-19”) pandemic, only two of our Directors serving during 2020 attended the annual meeting of stockholders held on May 20, 2020 (the “2020 Annual Meeting”).

Board Refreshment and Diversity

Director Refreshment Initiative

During the Board’s 2020 self-evaluation process, the Board determined that a refreshment initiative was necessary in order to restore the appropriate balance between the knowledge and understanding of our business that comes from longer-term service on the Board and the fresh ideas and perspective that can come from adding new members. During this process, the Board also considered the need for various forms of diversity, including age, professional background, gender, racial and ethnic diversity, and the tenure of certain Directors serving on our Board at that time. In connection with that initiative, four Outside Directors were appointed by the Board. As a result of these recent additions to the Board, and as further evidence of the Board’s commitment to director refreshment, the average board tenure for our Outside Directors was reduced by more than two years. Our Outside Directors who have been nominated for re-election to the Board have a balance of tenure (average tenure of 4 years), age (average age of 61 years) and racial, ethnic and gender diversity (33.3% of the Outside Directors) that provides our Board with an effective mix of experience and fresh perspective.

Diversity

We endeavor to have a board representing diverse experiences in areas that are relevant to the Company’s global activities. When the Corporate Governance and Nominating Committee considers diversity, as it did in connection with the Board’s 2020 refreshment initiative, it may consider diversity of experience, skills and viewpoints, as well as traditional diversity concepts, such as race, ethnicity or gender, as it deems appropriate. In particular, we value international business experience and, as such, our directorship mix reflects that emphasis. With respect to traditional diversity concepts, two of our Board members self-identify as Asian. The Board will continue to evaluate from time to time the addition to the Board of any Director candidate that may complement the knowledge, skills and experience possessed by the nominees for Director to ensure that the composition of the Board appropriately reflects changes in the Company’s evolving business.

Considerations for Independence Determinations

Independence Determination

The Board has determined that the following Directors serving on the Board during 2020 are independent according to the applicable rules of the SEC and the listing standards of Nasdaq: Atsushi Abe, Alan Campbell, Susan K. Carter, Curtis J. Crawford, Ph.D., Thomas L. Deitrich, Gilles Delfassy, Emmanuel T. Hernandez, Bruce E. Kiddoo, Paul A. Mascarenas, Daryl A. Ostrander, Ph.D., Teresa M. Ressel, Gregory L. Waters and Christine Y. Yan.

Transactions and Relationships Considered in Independence Determinations

Consistent with Nasdaq listing standards, in making its independence determinations, the Board considered transactions occurring since the beginning of 2018 between the Company and the Directors, members of their immediate families and entities associated with the Directors or members of their immediate families. The Board determined that no “categorical” bars to independence under Nasdaq listing standards applied to any of the Outside Directors. In making its determination that no relationships exist that, in the opinion of the Board, would impair the independence of any of the Outside Directors, the Board considered the associations certain of our Outside Directors have with other companies, including other companies in the semiconductor industry, as disclosed in their biographies and discussed further below. In each applicable instance, the amounts paid to and/or received from each organization (and ON Semiconductor) were below the 5% of consolidated revenue of the recipient entity threshold set forth in Nasdaq listing standards. The following table contains the transactions occurring since January 1, 2018 that the Board considered in determining the independence of the current Outside Directors, each of whom is a nominee for Director:

 

32     ON Semiconductor Corporation 2021 Proxy Statement


The Board of Directors and Corporate Governance

 

    Director        
Outside Affiliation
   Consideration  

 

 

 

  Atsushi Abe

   Fujitsu Ltd.
(board of directors)
  

 

•  Sales of component semiconductor devices and non-recurring engineering (“NRE”) charges

 

•  Purchases of professional and manufacturing support services, spares, foundry services, manufacturing equipment, industrial supplies, hardware, software, assembly and test services and other products and services

 

•  The Company’s acquisition of ON Semiconductor Aizu Co., Ltd., which is a consolidated subsidiary of the Company and former subsidiary of Fujitsu Ltd.

 

 

  Susan K. Carter

  

 

Air Products and Chemicals, Inc. (board of directors)

  

 

•  Purchases of manufacturing equipment, gases, chemicals, manufacturing support and professional services, spares and facility leases

 

 

  Thomas L. Deitrich

   Itron, Inc. (president and chief executive officer and board of directors)   

 

•  Sales of standard products, directly and through distributors

 

•  The Board determined that the above transactions were made in the ordinary course of business at arm’s-length and that Mr. Deitrich did not have a material direct or indirect interest in any commercial transactions

 

 

  Gilles Delfassy

  

 

Cavendish Kinetics, Inc. (“Cavendish”)
(board of directors)

 

  

 

•  Sales of standard wafer products to Qorvo, Inc., which acquired Cavendish in 2019

 

  Paul A. Mascarenas

  

 

BorgWarner, Inc. (“BorgWarner”)
(board of directors)

 

Society of Automotive Engineers International (“SAE”) (board of directors and president)

 

  

 

•  Sales of standard products made by the Company to BorgWarner and affiliates and to Delphi Technologies PLC and its affiliates, which merged with BorgWarner in October 2020

 

•  Minor sponsorship of a design and technology challenge hosted by SAE

 

  Gregory L. Waters

  

 

Sierra Wireless, Inc.
(board of directors)

 

  

 

•  Sales of standard products and wireless hardware chips made by the Company

 

 

  Christine Y. Yan

  

 

Stanley Black & Decker, Inc.
(former president of Asia)

  

 

•  Sales and purchases of products during 2018

   

The following table contains the transactions occurring since January 1, 2018 that the Board considered in determining the independence of former Directors, each of whom served as a Director during a portion of the 2020 fiscal year:

 

   Former Director        
Outside Affiliation
   Consideration  

 

 

 

  Curtis J. Crawford, Ph.D.

  

 

Xylem, Inc.
(board of directors)

 

  

 

•  Purchases of manufacturing spares and facilities construction work

 

 

  Daryl A. Ostrander, Ph.D.

   RFMicron, Inc.
d/b/a Axzon (“Axzon”)
(board of directors)
  

 

•  Purchases of raw material components, prototype products, NRE charges, spares and manufacturing support services

 

•  Sales of standard products

 

•  The Company has the right to purchase wafers and the right of first refusal to purchase jointly developed chip reader technology under specific circumstances

 

 

  Teresa M. Ressel

   Invesco Ltd. mutual fund complex (trustee)   

 

•  Invesco Ltd. is the parent company of investment funds governed by the Company’s credit agreement, providing, in the aggregate, approximately 1.27% of the total loan amount

 

•  Certain investment companies in the Invesco mutual fund complex manage or are advised by certain investment funds that collectively owned approximately 0.49% of the Company’s outstanding common stock as of December 31, 2020

   

 

ON Semiconductor Corporation 2021 Proxy Statement     33


The Board of Directors and Corporate Governance

 

Committees of the Board

Our Board standing committees and membership, effective as of April 3, 2021, are as follows:

 

 

 

Corporate
Governance and
Nominating
Committee
Audit
Committee
Compensation
Committee
Executive
Committee
Science and
Technology
Committee

Atsushi Abe

 

 

 

Alan Campbell

 

Chair

 

Susan K. Carter

Chair*

 

 

 

Thomas L. Deitrich

 

 

 

 

Gilles Delfassy

 

 

 

Chair

Hassane S. El-Khoury

 

 

 

 

Bruce E. Kiddoo

 

 

 

 

Paul A. Mascarenas

Chair

 

 

Gregory L. Waters

 

 

 

Christine Y. Yan

 

 

Chair

 

*

Ms. Carter was appointed as Chair of the Audit Committee effective as of April 3, 2021. Prior to such time, Mr. Hernandez served as Chair of the Audit Committee.

Audit Committee

The Audit Committee, established pursuant to Section 3(a)(58)(A) of the Exchange Act, has a formal written charter, a copy of which is available on our website at www.onsemi.com. The adequacy of this charter is reviewed at least annually. Our Audit Committee has the specific purpose under its charter to:

 

   

monitor the integrity of the corporate accounting and financial reporting processes of the Company and the audits of the financial statements;

   

provide to the Board the results of its monitoring and recommendations derived therefrom;

   

outline to the Board changes made, or to be made, in internal accounting controls noted by the Audit Committee;

   

appoint, determine funding for and oversee our independent registered public accounting firm;

   

review the independence, qualifications and performance of our internal and independent auditors;

   

oversee that management has the processes in place to assure our compliance with applicable corporate policies and legal and regulatory requirements that may have a material impact on our financial statements; and

   

inform the Board and appropriately provide information and materials on significant matters that require the Board’s attention.

Among other things, the Audit Committee has the specific authority and responsibility under its charter to:

 

   

pursuant to SEC rules, establish procedures for: (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;

   

review and oversee related party transactions to the extent required under applicable federal securities laws and related rules and regulations or Nasdaq rules, unless such transactions are submitted to another comparable independent body of the Board;

   

discuss with management our major financial risk exposures and the steps we have taken to monitor and control such exposures, including related risk assessment and risk management policies as they relate to the Audit Committee’s responsibilities; and

   

review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in the management’s discussion and analysis section of our annual report, and recommend to the Board whether the audited financial statements should be included in the annual report.

 

34     ON Semiconductor Corporation 2021 Proxy Statement


The Board of Directors and Corporate Governance

 

The Audit Committee has other specific responsibilities under its charter, including with respect to the pre-approval of auditing services and permitted non-audit services (including the fees and terms thereof) of our independent registered public accounting firm. As provided in its charter, the Audit Committee also has authority over and responsibility for various other financial statement and disclosure matters, other items associated with the Company’s independent registered public accounting firm and additional events associated with the Company’s internal audit and compliance functions. In addition, the Audit Committee conducts an annual self-assessment. The Audit Committee regularly meets with the Company’s independent registered public accounting firm and, to the extent it deems necessary or appropriate, may retain independent legal, accounting or other advisors with appropriate funding related thereto to be provided by the Company. See also “Audit Committee Report” below for more information on the Audit Committee. The Audit Committee met 10 times in 2020.

The Board has determined that each member of the Audit Committee during 2020 and each current member of the Audit Committee is independent within the meaning of applicable SEC rules and Nasdaq listing standards and that each current member of the Audit Committee is financially competent under the current Nasdaq listing standards. The Board has also determined that Alan Campbell, Susan K. Carter and Bruce E. Kiddoo, all of whom are independent members of the Audit Committee, meet the qualifications of an “audit committee financial expert” in accordance with SEC rules and similar financial sophistication rules under Nasdaq listing standards.

Compensation Committee

The Compensation Committee has a formal written charter, a copy of which is available on our website at www.onsemi.com. The adequacy of this charter is reviewed at least annually. Among other things, our Compensation Committee has the specific purpose under its charter to:

 

   

discharge the Board’s responsibilities relating to the application of compensation policies and all elements of compensation of our Outside Directors and our CEO, other executive officers and any other employees whose total compensation is substantially similar to such other officers; and

   

administer the Company’s stock option and other equity-based plans, all other short-term and long-term incentive plans and any deferred compensation programs of the Company.

Among other things, our Compensation Committee has the specific authority and responsibility under its charter to:

 

   

annually review and approve corporate goals and objectives relevant to the compensation of our CEO and senior executives, evaluate the performance of our CEO and senior executives in light of those goals and objectives and establish the compensation level for our CEO and senior executives based on this evaluation, subject to the terms of any employment agreements that may be in effect (the CEO may not be present during deliberation or voting concerning the CEO’s compensation);

   

review and approve, or recommend to the Board for approval, any employment agreement with the CEO or any senior executive;

   

periodically review and establish compensation for Outside Directors for service on our Board and its committees;

   

review the competitive position of, and recommend changes to, the plans, systems and practices of the Company relating to compensation and benefits;

   

make recommendations to the Board with respect to equity-based plans and any equity compensation arrangements outside of such plans (pending stockholder approval where appropriate);

   

approve or review the designation of participants in the plans and the principles and procedures used in determining grants and awards under the plans;

   

retain or terminate any compensation consultants or other advisors, or obtain advice of such persons in accordance with applicable federal securities laws and related rules and regulations and Nasdaq rules (including after any necessary evaluation of the independence and potential conflicts of interests of such persons), to assist the Compensation Committee in evaluating any aspect of CEO, senior executive or Outside Director compensation or on any other subject relevant to its responsibilities, including its oversight of the work, and the authority to approve the fees and compensation, of such consultants and advisors. The Company is required to provide appropriate funding for the payment of such fees and other compensation;

   

review insurance coverage for Directors and officers and make recommendations to the Board with respect to such insurance;

   

obtain or conduct an annual evaluation of the Compensation Committee’s performance; and

   

consider and discuss with management whether compensation arrangements for Company employees incentivize unnecessary or excessive risk-taking.

 

ON Semiconductor Corporation 2021 Proxy Statement     35


The Board of Directors and Corporate Governance

 

Pursuant to its charter, the Compensation Committee also prepares a report required by SEC rules for inclusion in our proxy statement. This report is included in this proxy statement immediately following the CD&A.

The Compensation Committee generally may delegate authority to subcommittees and others, as appropriate, subject to any limitations set forth in its charter and other applicable governance documents. The 2010 SIP, together with the Delegated Authority Guidelines, contemplate that pursuant to a specific written delegation of authority by the Compensation Committee, the CEO may grant awards to certain employees of the Company (other than Directors and “Senior Officers” (as defined in the Delegated Authority Guidelines)) to expedite the hiring process and retain talented employees. We describe the role of executive officers in determining or recommending the amount or form of executive compensation in the CD&A under “Processes and Procedures for Considering and Determining Executive Compensation — Role of Senior Executives in Determining Executive Compensation.” The role that officers play in determining or recommending the amount or form of director compensation is generally consistent with that description.

The Compensation Committee has regularly and directly engaged a compensation consultant to assist in recommending the form and amount of executive and director compensation. In May 2012, the Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) as its primary compensation consultant. The Compensation Committee has reviewed the performance of Pearl Meyer annually since that date, and continues to engage Pearl Meyer as its primary compensation consultant. Among other things, with respect to our 2020 compensation programs, Pearl Meyer was requested to:

 

   

perform an executive compensation review, including a peer group review and competitive pay assessments;

   

perform a short-term incentive plan and equity grant review;

   

perform a non-employee director compensation review;

   

provide legislative and regulatory updates; and

   

provide additional assistance, as requested, in analyzing and determining senior executive compensation.

After considering the independence of Pearl Meyer in light of SEC rules and Nasdaq listing standards regarding compensation consultants, the Compensation Committee concluded that Pearl Meyer’s work for the Compensation Committee has not raised any conflict of interest.

The Board has determined that each member of the Compensation Committee during 2020 and each current member of the Compensation Committee is independent within the meaning of applicable SEC rules and Nasdaq listing standards. The Compensation Committee met eight times in 2020.

Corporate Governance and Nominating Committee

The Corporate Governance and Nominating Committee has a formal written charter, a copy of which is available on our website at www.onsemi.com. The adequacy of this charter is reviewed at least annually. Our Corporate Governance and Nominating Committee has the specific purpose under its charter to:

 

   

assist the Board in identifying qualified individuals to become Board members;

   

assist the Board in considering and making recommendations with respect to the composition of the Board and its committees;

   

assist the Board in monitoring the process to assess Board effectiveness;

   

assist the Board in developing and implementing the Company’s corporate governance principles;

   

assist the Board in providing guidance for the Company’s enterprise risk management (“ERM”) program (the “ERM Program”); and

   

review and make recommendations to the Board regarding other matters of corporate governance as requested by the Board or otherwise determined to be appropriate by the Corporate Governance and Nominating Committee.

Among other things, our Corporate Governance and Nominating Committee has the specific responsibility under its charter to:

 

   

oversee the evaluations of the Board and its committees;

   

develop and periodically review criteria for nominees for Director, which may include, without limitation, specific skills, experience, diversity and other qualifications, and develop a process for the recommendation of such nominees by the Corporate Governance and Nominating Committee;

 

36     ON Semiconductor Corporation 2021 Proxy Statement


The Board of Directors and Corporate Governance

 

   

identify and recommend to the Board slates of nominees for Director for election or re-election at each annual meeting of the stockholders, or for nomination for election to the Board when Board vacancies arise, consistent with the developed nomination criteria, including nominees’ qualifications, capability and availability to serve, conflicts of interest and other relevant factors;

   

make recommendations to the Board regarding Director retirement age and tenure;

   

make recommendations to the Board regarding the size and composition of the Board;

   

review and make recommendations to the Board regarding committee assignments;

   

retain and terminate any search firm to be used to identify Director candidates and approve fees and retention terms of any such search firm;

   

review activities of Directors with the Company or other entities, including potential conflicts of interest that may arise due to service on other boards of directors, that may diminish such Directors’ effectiveness or be inconsistent with the criteria established for Board membership;

   

subject to applicable law, consider stockholder nominations, if a stockholder complies with our Director nomination procedures described in the Bylaws;

   

oversee the Director orientation program and any other program designed to improve Directors’ understanding of the Company’s business;

   

encourage and facilitate Directors’ continuing education;

   

develop policies and procedures for recommendation to the Board related to the succession of the CEO and other key executives, including succession planning, and review such succession planning on at least an annual basis;

   

review and oversee matters related to environmental, health and safety, ethics and corporate social responsibility (“CSR”);

   

review and assess the adequacy of the charter annually, or more often as circumstances dictate, and recommend any changes to the Board;

   

obtain or perform an annual evaluation of the performance of the Corporate Governance and Nominating Committee;

   

develop and recommend to the Board a set of corporate governance principles applicable to the Company and continue to monitor, amend and update such principles, as appropriate; and

   

review the ERM Program and provide guidance to the Board regarding its risk oversight responsibilities.

The Corporate Governance and Nominating Committee is required to develop and periodically review criteria for nominees for Director, which may include specific skills, experience, diversity and other qualifications. Among other matters, the Corporate Governance and Nominating Committee may consider the following nomination criteria regarding Board membership:

 

   

the appropriate size of the Board;

   

a nominee’s knowledge, skills and experience, including, without limitation, experience in finance and accounting, general business management, the semiconductor industry and semiconductor technology, international business, sales and marketing, corporate governance and compliance and intellectual property;

   

the needs of the Company with respect to particular skills and experience;

   

a nominee’s experience leading and supporting ESG criteria and civic responsibility;

   

a nominee’s independence as defined in Nasdaq and SEC rules and regulations;

   

diversity, which fosters diversity of thinking;

   

a nominee’s age and tenure; and

   

the desire to balance the benefit of continuity with the periodic injection of the fresh perspectives provided by new Board members.

The Company’s goal is to assemble a Board that brings together a variety of perspectives and skills derived from high-quality business and professional experiences. Directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serve on the Board for an extended period of time. The Corporate Governance and Nominating Committee believes that it is appropriate for more than one member of the Board to meet the criteria for an “audit committee financial expert,” as defined by SEC rules, and for the CEO to participate as a member of the Board. Current members of the Board with skills and experience that are relevant to the Company’s business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service, if the Corporate Governance and Nominating Committee decides not to re-nominate a member for re-election or determines to replace that Director or if the Board considers increasing the size of the Board, the Board then identifies the desired skills and experience for a new nominee in light of the criteria above. Pursuant to its charter, if a stockholder complies with the Director nomination procedures described in the Bylaws, the Corporate Governance and Nominating Committee will consider that nomination. In such case, it will evaluate the stockholder nomination in the same manner as it evaluates other nominees.

 

ON Semiconductor Corporation 2021 Proxy Statement     37


The Board of Directors and Corporate Governance

 

The Corporate Governance and Nominating Committee may engage in research to identify qualified individuals, which may include engaging a professional search firm from time to time. In 2020, the Corporate Governance and Nominating Committee engaged in various search processes, resulting in the identification of Mr. Deitrich, Ms. Carter, Mr. Kiddoo and Mr. Waters. After careful consideration of their credentials and qualifications, the Board, upon recommendation from the Corporate Governance and Nominating Committee, elected each of Mr. Deitrich, Ms. Carter, Mr. Kiddoo and Mr. Waters to the Board on October 5, 2020, October 28, 2020, December 16, 2020 and December 16, 2020, respectively, to serve until the Annual Meeting and until their successors are duly elected and qualified.

On August 31, 2020, Keith D. Jackson, our former President, CEO and Director, informed the Board of his intention to retire from the Company and the Board. The Corporate Governance and Nominating Committee subsequently engaged a third party executive search firm to lead a search for a new CEO. Following a careful review of qualified candidates presented by the executive search firm, the Board, upon recommendation from the Corporate Governance and Nominating Committee, approved the appointment of Hassane S. El-Khoury as President and CEO of the Company, and as a member of the Board and the Executive Committee of the Board (the “Executive Committee”), in each case, effective December 7, 2020. Mr. Jackson stepped down as President, CEO and Director effective as of December 7, 2020, and will continue to serve as an advisor to the Company until his retirement on May 31, 2021.

The Board has determined that each member of the Corporate Governance and Nominating Committee during 2020 and each current member is independent within the meaning of applicable SEC rules and Nasdaq listing standards. The Corporate Governance and Nominating Committee met seven times in 2020.

Executive Committee

The Executive Committee has a formal written charter, a copy of which is available on our website at www.onsemi.com. The Executive Committee has the specific purpose under its charter to exercise between meetings of the Board all the delegable powers and authority of the Board regarding the management of the business and affairs of the Company to the extent not expressly prohibited and not separately delegated to other committees of the Board, and subject to applicable restrictions and limitations.

As set forth in its charter, the Executive Committee does not have the power, among other things, to:

 

   

amend or repeal any resolution of the Board which, by its express terms, is not so amendable or repealable;

   

appoint other committees of the Board or the members of such committees or amend or revise their duties and responsibilities or their charters (the Executive Committee may, however, appoint and delegate to subcommittees as permitted under applicable law);

   

appoint or remove the Chair of the Board, the President or the CEO;

   

authorize any single purchase or related series of purchases of assets, or an acquisition of a business or businesses, with an aggregate purchase price in excess of $50 million;

   

authorize any single sale or related series of sales of assets, or a disposition of a business or businesses, with an aggregate sales price in excess of $50 million; or

   

authorize any single investment or series of related investments in other businesses or ventures with an aggregate dollar amount of such investment in excess of $50 million.

The Executive Committee met one time in 2020.

Science and Technology Committee

The Science and Technology Committee of the Board (the “Science and Technology Committee”) has a formal written charter. The adequacy of this charter is reviewed at least annually. Our Science and Technology Committee has the specific purpose under its charter to advise the Board as to the scope, health, direction, quality, investment levels and execution of the Company’s technology and innovation strategies. Among other things, our Science and Technology Committee has the specific responsibility under its charter to:

 

   

review, evaluate and advise the Board regarding the Company’s technology, innovation strategies and initiatives, including to ensure that the strategies and initiatives are aligned with corporate objectives and mid-term to long-term technology and trends and to ensure that the strategies and initiatives are aligned with specific market growth segments and will contribute to our future competiveness;

 

38     ON Semiconductor Corporation 2021 Proxy Statement


The Board of Directors and Corporate Governance

 

   

review, evaluate and provide advice and guidance, as appropriate, to the Company on emerging technology and trends that are relevant to the Company’s future strategic directions;

   

review, evaluate and advise the Board on the Company’s intellectual property strategy;

   

review, evaluate and advise the Board on the scientific and technology aspects and intellectual property-related matters in respect of the Company’s major acquisitions and other business development transactions;

   

review succession planning for our Chief Technology Officer, Chief Information Officer (the “CIO”), Chief Intellectual Property Counsel and other key technical personnel on an annual basis;

   

review the progress on strengthening the Company’s technology ladder for technical employees on an annual basis;

   

assist the Board with its oversight responsibility for the Company’s ERM relating to the foregoing functions; and

   

perform such other functions and have such other powers as may be necessary in the discharge of the foregoing or as requested by the Board.

The Science and Technology Committee is required to convene at least two times each year, with additional meetings as deemed appropriate by the Science and Technology Committee or its Chair. It has the authority to retain such outside advisors, including legal counsel or other experts, as it deems appropriate and to approve the fees and expenses of such advisors. The Science and Technology Committee met four times in 2020.

Other Committees

The Board, from time to time, has deemed it desirable and in the best interest of the Company to form various special committees and other independent committees.

Annual Board and Committee Self-Evaluations

The Board believes that having good governance principles and practices improves the effectiveness of the Board and correlates to the creation of stockholder value. To measure its own operation against such principles and practices and to identify and act on areas for improvement, each of the Board and its committees performs an annual self-evaluation. The Corporate Governance and Nominating Committee is charged with overseeing the self-evaluations, and in 2020, the Corporate Governance and Nominating Committee used the following process to conduct the Board’s self-evaluation:

 

 

LOGO

In the Board self-evaluation process, topics and questions for 2020 were grouped into seven categories:

 

•  Strategy

  

•  ERM

•  Culture of Compliance and Ethics

  

•  Mergers and Acquisitions

•  Executive Evaluation and Succession Planning

  

•  Financial Reporting and Other Disclosure

•  Corporate Governance

The Corporate Governance and Nominating Committee and the Board reconsider the tools, processes, topics and questions for the self-evaluation as warranted, including consideration of whether to retain an independent third party to facilitate the Board’s self-evaluation. The Board and its committees may perform the annual self-evaluations using different tools and processes in future years. In 2020, the self-evaluation of the committees generally followed the process used by the Board, except that results were sent to committee chairs (as opposed to the Chair of the Corporate Governance and Nominating Committee), and committee chairs led the discussions for their respective committees with the Board in executive session.

 

ON Semiconductor Corporation 2021 Proxy Statement     39


The Board of Directors and Corporate Governance

 

Annual Director Peer Evaluations

We believe that each of our Directors can and do benefit from candid feedback received from other Board members about his or her individual performance. Accordingly, we conduct annual peer evaluations to obtain information about each Director’s performance, contributions and effectiveness. These Director peer evaluations are critical tools that promote more authentic board collaboration, improve the skills and perspectives of our Directors and allow them to receive guidance from esteemed colleagues.

2020 Compensation of Directors

 

Name (1)
(a)

   Fees
Earned
or Paid
in Cash
($) (2)
(b)
    

Stock
Awards
($) (3)

(c)

     Option
Awards
($)
(d)
  

Non-Equity
Incentive  Plan
Compensation
($)

(e)

   Change in
Pension  Value
and
Non-qualified
Deferred
Compensation
Earnings ($)
(f)
  

All Other
Compensation
($)

(g)

   Total ($)
(h)
 

Atsushi Abe

     89,875        205,001      0    0    0    0      294,876  

Alan Campbell

     189,875        205,001      0    0    0    0      394,876  

Susan K. Carter (4)

     15,014        121,322      0    0    0    0      136,336  

Curtis J. Crawford, Ph.D. (5)

     33,894        0      0    0    0    0      33,894  

Thomas L. Deitrich (6)

     17,615        134,224      0    0    0    0      151,839  

Gilles Delfassy

     93,337        205,001      0    0    0    0      298,338  

Hassane S. El-Khoury (7)

                                

Emmanuel T. Hernandez (5)

     99,106        205,001      0    0    0    0      304,107  

Keith D. Jackson (7)

                                

Bruce E. Kiddoo (8)

     3,465        0      0    0    0    0      3,465  

Paul A. Mascarenas

     92,375        205,001      0    0    0    0      297,376  

Daryl A. Ostrander, Ph.D. (5)

     38,736        0      0    0    0    0      38,736  

Teresa M. Ressel (5)

     41,641        0      0    0    0    0      41,641  

Gregory L. Waters (8)

     3,159        0      0    0    0    0      3,159  

Christine Y. Yan

     91,029        205,001      0    0    0    0      296,030  
(1)

This table includes compensation for services rendered in 2020 for all persons who served as Directors at any time during 2020.

 

(2)

This column includes annual retainer fees earned for 2020, regardless of when paid. Compensation for service on the Board and on committees is prorated for the number of days served on the Board and on committees in the applicable capacities.

 

(3)

This column includes the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codifications (“ASC”) Topic 718 with respect to awards of fully-vested stock made in 2020. The 2020 awards consisted of an annual grant for all Outside Directors in the table above except for Dr. Crawford, Ms. Ressel and Dr. Ostrander, whose terms expired on May 20, 2020, and Ms. Carter and Mr. Deitrich, who were elected to the Board effective October 28, 2020 and October 5, 2020, respectively. The grant date fair value for each grant is the closing price on the date of grant for stock grant awards to each Outside Director. Pursuant to the equity award grant date policy statement adopted by the Compensation Committee (the “Statement”), which was effective during 2020, the stock awards for Messrs. Kiddoo and Waters were not granted during 2020 and were therefore not reportable in the table above. With respect to Ms. Carter and Mr. Deitrich, the grant date fair value of the prorated awards made to each of them on December 7, 2020 was $30.58. All other Outside Directors were granted an annual stock award on June 1, 2020 with a grant date fair value of $16.78. As of December 31, 2020, none of the Outside Directors held any unvested stock.

 

(4)

Ms. Carter was elected to the Board effective October 28, 2020.

 

(5)

Dr. Crawford, Ms. Ressel and Dr. Ostrander served on the Board until May 20, 2020. On December 16, 2020, Mr. Hernandez informed the Board that he will resign from the Board effective as of the end of the first fiscal quarter of 2021.

 

(6)

Mr. Deitrich was elected to the Board effective October 5, 2020.

 

(7)

On December 7, 2020, Mr. Jackson retired from his position as a member of the Board and his positions as President and CEO of the Company, and Mr. El-Khoury was appointed President and CEO of the Company and a member of the Board. Neither Mr. El-Khoury nor Mr. Jackson received any compensation in connection with his service as a Director in 2020.

 

(8)

Messrs. Kiddoo and Waters were elected to the Board effective December 17, 2020. Cash retainers paid to each of Messrs. Kiddoo and Waters with respect to the fourth fiscal quarter were paid during 2020, and prorated from the date of election through December 31, 2020.

 

40     ON Semiconductor Corporation 2021 Proxy Statement


The Board of Directors and Corporate Governance

 

Discussion of Director Compensation

The Compensation Committee regularly reviews the compensation payable to Outside Directors. In reviewing Board compensation practices, the Compensation Committee is advised by its outside consultants from time to time. In May 2020, Pearl Meyer provided the Compensation Committee with an analysis of Outside Director compensation, including a review of director compensation of the Company’s peer group (the “Pearl Meyer Director Compensation Report”). The peer group for this analysis consisted of the same comparator group that is used to evaluate executive compensation. Based on the Pearl Meyer Director Compensation Report and the recommendations therein, in May 2020, the Compensation Committee adopted the 2020 compensation program for our Outside Directors (the “Outside Director Compensation Program”). Under the Outside Director Compensation Program, which is described below, there were no year-over-year increases to Outside Director compensation, and temporary measures were taken to mitigate the impact of the COVID-19 pandemic on the Company’s 2020 financial performance.

Retainers and Temporary Fee Reduction — COVID-19

As part of the Company’s action plan in response to the COVID-19 pandemic, and similar to the approach taken with respect to 2020 compensation for the Company’s executive officers (including the NEOs), the Board reduced the cash retainer paid to Outside Directors for their service on the Board during the third quarter of 2020 from $17,500 to $14,875 (a reduction of 15%). Except as noted above, the annual cash retainers under the Outside Director Compensation Program remained consistent with the retainers paid during the previous year, and were as follows:

 

Position

   Cash Retainer Amount Per Year   

Outside Directors

     $ 70,000

Chair of the Board

     $ 100,000

Chair of the Audit Committee

     $ 30,000

Non-Chair members of the Audit Committee

     $ 15,000

Chair of the Compensation Committee

     $ 20,000

Non-Chair members of the Compensation Committee

     $ 10,000

Chair of the Corporate Governance and Nominating Committee

     $ 15,000

Non-Chair members of the Corporate Governance and Nominating Committee

     $ 7,500

Chair of the Science and Technology Committee

     $ 15,000

Non-Chair members of the Science and Technology Committee

     $ 7,500

Annual cash retainers are generally paid quarterly in arrears, except that the retainers for the fourth quarter are typically paid before the year-end.

Equity Compensation

Under the Outside Director Compensation Program, each Outside Director receives an annual award of fully-vested stock with a value equal to approximately $205,000, rounded up such that only whole shares are issued. The 2020 annual award for Outside Directors was granted on June 1, 2020, and the amount of such award was based on the closing price of our stock on the grant date ($16.78). Each Outside Director serving on the Board on the grant date therefore received an annual stock award of 12,217 shares. The 2020 grants were made under the 2010 SIP. Under the Outside Director Compensation Program, if an Outside Director is appointed after the date of the annual grant, the award amount is prorated based on the period of the year during which the Outside Director serves.

Other

We reimburse Outside Directors for reasonable expenses incurred to attend Board and committee meetings and to perform other relevant Board duties. Employee Directors do not receive any additional compensation for their services as members of the Board.

 

ON Semiconductor Corporation 2021 Proxy Statement     41


The Board of Directors and Corporate Governance

 

Majority Voting for Directors

Except as otherwise provided in the Bylaws, each Director is elected by a majority of the votes cast with respect to that Director’s election at any meeting for the election of Directors at which a quorum is present. A majority of votes cast means that the number of votes cast “FOR” a Director’s election exceeds the number of votes cast “AGAINST” that Director’s election (with abstentions and Broker non-votes not counted as votes cast either “FOR” or “AGAINST” that Director’s election). However, if, as of the tenth day preceding the date we first deliver the notice of such meeting to our stockholders, the number of nominees exceeds the number of Directors to be elected (a “Contested Election”), the Directors will be elected by the vote of a plurality of the votes cast. A plurality of votes cast means that the number of votes cast “FOR” a Director’s election, while less than a majority, nonetheless exceeds the number of votes cast “FOR” any other Director.

In the event an incumbent Director fails to receive a majority of the votes cast in an election that is not a Contested Election, the incumbent Director must promptly tender his or her resignation to the Board. The Corporate Governance and Nominating Committee, or such other committee designated by the Board for this purpose, will make a recommendation to the Board as to whether to accept or reject the resignation of such incumbent Director, or whether other action should be taken. The Board must act on the resignation, taking into account such committee’s recommendation, and publicly disclose (by a press release and filing an appropriate disclosure with the SEC) its decision regarding the resignation and, if such resignation is rejected, the rationale behind the decision, within 90 days following certification of the election results. The Corporate Governance and Nominating Committee in making its recommendation, and the Board in making its decision, each may consider any factors and other information that it considers appropriate.

If the Board accepts a Director’s resignation pursuant to these provisions, or if a nominee for Director is not elected and the nominee is not an incumbent Director, then the resulting vacancy may be filled by vote of a majority of the Directors then in office pursuant to Article NINTH, Section 2 of our Certificate of Incorporation.

Other Board Matters

Board Leadership Structure

We currently separate the roles of CEO and Chair of the Board to align the Chair role with our Outside Directors and to further enhance the independence of the Board from management. Our Chair works closely with our CEO and General Counsel to set the agendas for meetings, facilitate information flow between the Board and management and gain the benefit of the CEO’s Company-specific experience, knowledge and expertise.

The Board’s Role in Risk Oversight

While management is responsible for the day-to-day management of the Company’s risk, the Board plays an ongoing and active role in the oversight of such risk by regularly reviewing and discussing with management areas of material risk to the Company and mitigation measures being taken to address such risks. While the Board has primary responsibility for risk oversight, the Board’s committees support the Board by regularly addressing risks in their respective areas of oversight. Specifically, the Audit Committee’s charter requires the Audit Committee to discuss with management the Company’s major financial risk exposures. The Corporate Governance and Nominating Committee’s charter requires it to oversee the ERM Program and provide guidance to the Board regarding its risk oversight responsibilities. The Compensation Committee’s charter requires it to consider and discuss with management whether compensation arrangements for Company employees incentivize unnecessary and excessive risk-taking, and in designing our compensation programs and structuring awards, the Compensation Committee considers the likelihood of undue risk-taking and the impact that such compensation decisions may have on the Company’s risk profile. The charter for the Science and Technology Committee also requires it to review the Company’s risk exposure relating to its respective function. The chair of the relevant committee then reports on risk discussions to the full Board to the extent appropriate. This dual track of direct Board oversight and oversight through its committees is designed to foster a fulsome discussion of risks facing the Company. The Board’s role in risk oversight has not affected its leadership structure.

Periodic Risk Evaluations. As part of its review of the Company’s material areas of risk, the Board meets three times per year to discuss strategy and planning meetings at which business plans and proposals for the Company and various units or groups within the Company are presented and discussed. Business unit leaders and the heads of certain administrative function groups provide annual and mid-year status reports to the Board. These reports include risk evaluation and assessment as a matter of course. At least annually, the Board reviews how risk is being managed and reported to the Board and its committees, along with areas where the Board would like additional analysis or discussion. Comprehensive risk analysis is a significant part of such planning.

 

42     ON Semiconductor Corporation 2021 Proxy Statement


The Board of Directors and Corporate Governance

 

Information Security Risk Management. Management and the Board consider and evaluate from time to time the risk of cybersecurity breaches and vulnerabilities and how best to mitigate such risks. For example, under ON Semiconductor’s Insider Trading Policy (the “Insider Trading Policy”), the Company’s Securities Compliance Officer may impose a black-out on securities trading in the event of a cybersecurity breach or attack. Under such circumstances, as a further measure to promote compliance with the trading black-out, the Insider Trading Policy also imposes a duty upon the Securities Compliance Officer to notify the CEO and our Chief Financial Officer (the “CFO”) of the black-out at or before the time it is imposed. Additionally, the Audit Committee receives regular reports from our Corporate Internal Audit Department on internal audit matters and receives reports at least annually from our CIO and Chief Information Security Officer on information security and data privacy and protection. The Science and Technology Committee also receives reports from the CIO at least annually with respect to the Company’s information technology planning, penetration testing plans and cybersecurity. Other specific risks are also addressed appropriately as and when they are identified.

The Board’s Role in Diversity and Inclusion Oversight

The Company’s mission to be a leader in semiconductor-based solutions and empower customers to reduce global energy use is supported by a strong company culture focused on welcoming diversity of opinion and celebrating stakeholders from all walks of life. Pursuant to its charter, the Corporate Governance and Nominating Committee has the responsibility of reviewing and overseeing matters related to CSR, which include Company initiatives related to diversity and inclusion. Additionally, the Compensation Committee considers diversity and inclusion in its broader review of pay equity within the Company and, in 2020 and previous years, elected to use the achievement of a specified level of diversity within the Company’s workforce as a performance measure for the compensation of NEOs under the Company’s short-term incentive compensation program.

Stockholder Rights Plan

On June 7, 2020, in response to volatility in the marketplace as a result of the COVID-19 pandemic, the Board adopted a short-term stockholder rights plan (the “Rights Plan”) and declared a dividend of one preferred share purchase right for each share of common stock outstanding on June 18, 2020. The Rights Plan is designed to protect stockholder interests by reducing the likelihood that any person or group would gain control of the Company through the open-market accumulation of ON Semiconductor shares without appropriately compensating ON’s stockholders for such control. The Rights Plan is set to expire on June 7, 2021, but the Board may consider an earlier termination of the Rights Plan if market and other conditions warrant. The Board does not have an intention at the current time of renewing the Rights Plan. If the Board makes a determination to renew the Rights Plan at a later date, the Board would expect to, absent any material development or change in circumstances that would make the taking of prompt action by the Board to protect the Company and its stockholders necessary or advisable, submit such renewal (or any other stockholder rights plan to be adopted in the near term) to a stockholder vote.

Corporate Governance Principles

Our Corporate Governance Principles (the “Principles”) provide guidance for a variety of corporate governance matters and are available on our website at www.onsemi.com. The Corporate Governance and Nominating Committee reviews the Principles annually and recommends amendments to the Board, as appropriate. Below is a summary of certain of our corporate governance practices, many of which are addressed in the Principles and our Bylaws:

 

ON Semiconductor Corporation 2021 Proxy Statement     43


The Board of Directors and Corporate Governance

 

WHAT WE DO    WHAT WE DO NOT DO

 World-Class Culture for Ethics: In February 2021, the Company was recognized as a World’s Most Ethical Company® for the sixth consecutive year.

  

   No Classified Board: All of our Directors are elected by our stockholders on an annual basis using a majority voting standard for uncontested elections.

 Independent Board Chair: We separate the roles of CEO and Chair of the Board to ensure that the Board is independent from management.

  

   No Burdensome Director Removal Restrictions: Our stockholders have the authority to remove any Director from office without cause by a majority vote.

 Annual Committee, Board and Peer-to-Peer Director Evaluations: Each committee and the Board as a whole conducts an annual self-evaluation, and each Director’s individual performance is evaluated annually by other Directors.

  

   No Overboarding: We generally expect our Directors to limit the number of boards of public or private companies (other than non-profits) on which they serve (including our Board) to four for Outside Directors and two for our CEO.

 Stockholder Right to Call Special Meeting: We allow special meetings of our stockholders to be called upon the written request of stockholders who hold at least 25% of the outstanding voting stock.

  

   No Excise Tax Gross-ups: We do not provide excise tax gross-ups to our NEOs or Directors.

 Stock Ownership Guidelines: In order to align the interests and objectives of our Directors, executive officers and stockholders, we have established competitive guidelines for our stock ownership and retention.

  

   No “Single-Trigger” Change in Control Arrangements: None of our NEOs will receive payments solely on account of a change in control of the Company.

 Clawback Policy: We have a clawback policy (the “Clawback Policy”) that allows the Company to recoup compensation awards paid to NEOs who engage in certain acts detrimental to the Company’s interests or in the event that the Company is required to prepare a financial statement restatement.

  

   No Hedging or Pledging: Our NEOs and Directors are prohibited from engaging in hedging transactions with our stock and from pledging our stock as collateral for a loan. Other employees are also encouraged to adhere to these rules.

The Role of the Board and Management

Our business is conducted by our employees and officers, under the direction of the CEO and the oversight of the Board, to enhance the long-term value of the Company for its stockholders. Both our Board and management recognize that the long-term interests of stockholders are advanced by responsibly addressing the concerns of other stakeholders and interested parties, including employees, recruits, customers, suppliers, creditors, ON Semiconductor communities, government officials and the public at large.

Functions of the Board

The Board has at least four regularly scheduled meetings per year at which it reviews and discusses reports by management on our performance, plans and prospects and immediate issues facing the Company. The Board may choose to schedule additional meetings in accordance with our Bylaws. In addition to general oversight of management, the Board, acting directly or through its various committees, also performs specific functions, including, among other things: (i) selecting, evaluating and compensating the CEO and other senior executives and overseeing CEO succession planning; (ii) reviewing, monitoring and, where appropriate, approving fundamental financial and business strategies and major corporate actions; (iii) providing oversight for the ERM Program, including the establishment of corporate risk appetite parameters and management’s implementation of processes for assessing and managing risks affecting the Company; (iv) ensuring that processes are in place for maintaining the integrity of the Company, financial statements, compliance with law and ethics, relationships with customers and suppliers and relationships with other stakeholders; and (v) performing such other functions as are prescribed by law or our Bylaws.

 

44     ON Semiconductor Corporation 2021 Proxy Statement


The Board of Directors and Corporate Governance

 

Qualifications

Directors should possess the highest personal and professional ethics, integrity and values, and be committed to serving on the Board for an extended period of time. They must also have an inquisitive and objective perspective, practical wisdom and mature judgment. We endeavor to have a Board representing diverse experiences in areas that are relevant to the Company’s global activities and strategies in order to guide the Company in meeting its legal, financial and operational objectives.

Independence of Directors

We will have, at a minimum, a sufficient number of independent Directors to comply at all times with relevant and applicable SEC, Nasdaq and other rules and regulations.

Compensation of the Board

The Board has delegated responsibility for determining Outside Director compensation to the Compensation Committee, and such responsibility is codified in the Compensation Committee’s charter. In determining compensation and benefits for our Directors, the Compensation Committee is guided by three goals: (i) to fairly pay Outside Directors for work required in a public company of our size and scope; (ii) to align Outside Directors’ interests with the long-term interests of our stockholders; and (iii) to structure the compensation in a way that is simple, transparent and easy for our stockholders to understand. Generally, the Compensation Committee believes that these goals are served by compensating Outside Directors with a balance of cash and equity-based awards.

 

ON Semiconductor Corporation 2021 Proxy Statement     45


The Board of Directors and Corporate Governance

 

Directors’ and Officers’ Stock Ownership and Retention Guidelines

In order to align Directors’ and officers’ interests and objectives with those of our stockholders, and to further promote the Company’s longstanding commitment to sound corporate governance, the Company has established the following guidelines for Company stock ownership and retention:

 

 Guideline    Outside Directors    Officers    

 

Stock Ownership

  

 

•  At least five times base annual retainer fee as of January 1 (1)

 

•  Based on the average closing price of the Company’s common stock on Nasdaq for the prior calendar year

  

 

•  CEO: six times annual base salary

 

•  Executive Vice Presidents: three times annual base salary

 

•  Senior Vice Presidents: two times annual base salary

 

•  Vice Presidents: one time annual base salary

 

•  Based on the base salary of the employee as of January 1 and the average closing price of the Company’s common stock on Nasdaq for the prior calendar year (2)

 

 

Time Period to Meet Stock Ownership

  

 

•  Within 4 years of joining the Board

  

 

•  Within 5 years from the date on which the officer first became subject to the applicable guideline

 

Qualifying Shares

  

 

•  Shares purchased on the open market

 

•  Vested stock units from RSU awards or other equity-based awards granted by the Company

 

•  Shares owned jointly with, or separately by, a spouse and/or minor children

  

 

•  Shares purchased on the open market

 

•  Shares obtained through exercises of stock options granted by the Company

 

•  Vested stock units from RSU awards or other equity-based awards granted by the Company

 

•  Shares obtained through the ESPP

 

•  Shares owned jointly with, or separately by, a spouse and/or minor children

 

Remedy for Failure to Comply

  

 

•  Meeting with Chair of the Board to formulate an individualized and structured plan to ensure compliance (3)

 

•  Failure to comply with the plan will make an Outside Director ineligible for re-election at the next annual meeting of stockholders

 

•  Outside Directors are expected to retain all of the net shares of Company stock or equity-based awards received until the guideline is met

  

 

•  Meeting with Compensation Committee to formulate an individualized and structured plan to ensure compliance

 

•  At any time when the ownership guideline is not met, the officer is expected to retain all of the net shares of Company stock or equity-based awards received until such ownership guideline is met

   
  (1)

For Outside Directors appointed or elected after January 1, for the first year of service, the guideline is based on the retainer for such Director at the date of appointment or election.

 

  (2)

For officers hired after January 1, for the first year of employment, the guideline will be based on the base salary for such officer at the date of hire.

 

  (3)

If the Outside Director is the Chair of the Board, the Compensation Committee will meet with the Chair of the Board to formulate the individualized compliance plan.

If compliance would create a severe hardship or for other good reasons, these guidelines may be waived for: (i) Outside Directors other than the Chair of the Board, at the discretion of the Chair of the Board; and (ii) the Chair of the Board and officers, at the discretion of the Compensation Committee. It is expected that these instances will be rare.

Other Matters

The Principles include a discussion of Board size and selection, the determination of the Board agenda, the process available for reporting concerns to the Audit Committee relating to our accounting, internal accounting controls or auditing matters, access to senior management and independent advisors and other matters typical of boards of directors of other publicly-traded semiconductor or peer companies.

Ethics and Corporate Social Responsibility

We are committed to having and maintaining strong and effective global ethics and CSR programs. In 2021, for the sixth consecutive year, the Company was named a World’s Most Ethical Company® by the Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices. The designation recognizes organizations that align principle with action by working tirelessly to make integrity part of their corporate DNA. These efforts shape future industry

 

46     ON Semiconductor Corporation 2021 Proxy Statement


The Board of Directors and Corporate Governance

 

standards by introducing tomorrow’s best practices today. The Company was one of only three companies honored in the semiconductor industry in 2021, highlighting its leadership among global companies in ethical business standards and practices. The Corporate Governance and Nominating Committee has the responsibility under its charter to review and oversee matters related to ethics and CSR.

Ethics Program

We always strive to comply with the law, and have adopted policies and practices that go beyond what the law requires in order to foster an ethical culture. To that end, we have established an ethics program (the “Ethics Program”) designed to prevent, detect and respond to violations of the ON Semiconductor Corporation Code of Business Conduct (the “Code of Business Conduct”) and related policies and procedures, other standards of conduct and the law. A major goal of the Ethics Program is to promote an organizational culture that encourages ethical conduct and a commitment to compliance.

We have also established avenues for parties external to the Company to raise ethics and compliance concerns regarding our employees, Directors and third parties doing business with the Company directly to the Vice President, Ethics and Corporate Social Responsibility or our Chief Compliance Officer. Reports may be made anonymously where allowed by local law (or on a non-anonymous basis) by:

 

  (1)

calling the Ethics Helpline (subject to local legal requirements) at the following numbers (no access codes necessary): United States and Canada: 1-844-935-0213; Australia: 1-800-94-8150; Belgium: 0-800-748-19; China: 400-120-0176; Czech Republic: 800-142-490; Finland: 0800-41-3682; Germany: 0-800-0010086; Hong Kong: 800-964-146; India: 000-800-9191055; Ireland: 1-800-851-150; Israel: 1-809-477-265; Italy: 800-761697; Japan: 0-800-123-2333; Malaysia: 1-800-81-9976; Netherlands: 0800-0224703; Philippines (accessible via landline or via mobile with Smart and Digitel/Sun providers): 1800-1322-0333; Philippines (via mobile with Globe provider): 105-11 at the English prompt dial 844-935-0213; Romania: 0-800-890-295; Russia: 8-800-301-83-98; Singapore: 800-492-2389; Slovak Republic: 0800-002-591; Slovenia: 080-688802; South Korea: 00798-11-003-9294; Spain: 900-999-372; Sweden: 020-88-15-32; Switzerland: 0800-000-092; Taiwan: 00801-49-1584; Thailand: 18-0001-4543; Turkey: 0800-621-2119; United Kingdom 0800-098-8332; Vietnam (call from VNPT subscriber): 1-201-0288 at the English prompt dial 844-935-0213; and Vietnam (call from Viettel subscriber): 1-228-0288 at the English prompt dial 844-935-0213;

 

  (2)

visiting the Ethics Helpline website at helpline.onsemi.com;

 

  (3)

calling the Vice President, Ethics and Corporate Social Responsibility at (602) 244-6888 or our Chief Compliance Officer at (602) 244-5226;

 

  (4)

mailing the Vice President, Ethics and Corporate Social Responsibility or our Chief Compliance Officer at ON Semiconductor, 5005 East McDowell Road, Phoenix, Arizona 85008; or

 

  (5)

emailing the Vice President, Ethics and Corporate Social Responsibility at jean.chong@onsemi.com or our Chief Compliance Officer at sonny.cave@onsemi.com.

Corporate Social Responsibility

In addition to the information contained in this proxy statement, an annual report detailing our CSR initiatives, accomplishments and objectives is available on our website at www.onsemi.com. Below are a few of the highlights of our CSR practices and policies:

 

   

Responsible Business Alliance Member and RBA Code of Conduct. We are a full member of the Responsible Business Alliance (“RBA”), an international industry organization committed to supporting workers’ rights, and have adopted the RBA Code of Conduct covering labor, the environment, health and safety, ethics and management systems (the “RBA Code”).

 

   

Responsible Minerals Initiative — Full Member. As a full member of the Responsible Minerals Initiative, we are required to take heightened measures beyond the requirements under U.S. and European Union regulations to ensure responsible sourcing within our supply chains.

 

   

Human Rights Policy and UN Global Compact. Our Human Rights Policy, which applies to, among others, all of our employees and suppliers, codifies our commitment to social justice, environmental stewardship, anti-corruption, and the

 

ON Semiconductor Corporation 2021 Proxy Statement     47


The Board of Directors and Corporate Governance

 

 

prevention of human trafficking, child labor and related human rights violations. Additionally, we are a signatory to the United Nations Global Compact, which requires signatories to commit to 10 principles covering human rights, the environment, anti-corruption and related matters.

 

   

Social Impact through Giving and Volunteering Programs. We encourage social responsibility and charitable giving through our social impact initiatives, which include a paid employee volunteer program and the Company’s Global Giving Program, which gives employees the opportunity to support charitable organizations and educational institutions through grants, matched gifts, in-kind donations and sponsorships.

 

   

Global Recognition. Examples of our recent CSR accomplishments and recognition include:

 

   

The North America Dow Jones Sustainability Index (DJSI) (one of five semiconductor companies);

   

Barron’s 100 Most Sustainable Companies in the U.S. for the fourth year in a row (Top 10 in 2021);

   

EcoVadis “Outstanding” score for CSR management quality (Top 1% — electronics manufacturers);

   

ISS-Oekom “Prime” designation for ESG performance;

   

Corporate Knights Clean 200 for 2020 (ranking public companies by total clean energy revenues);

   

World Finance Magazine Most Sustainable Company in the Semiconductor Industry — 2020;

   

seven manufacturing facilities received “Gold,” “Silver” or “Platinum” recognition for RBA Code compliance; and

   

2020 Bloomberg Gender Equality Index: female leadership, gender pay equity, culture and “pro-women brand.”

 

   

Environmental Sustainability. In 2020, we implemented over 100 individual projects focused on energy conservation, waste reduction, chemical recycling, material optimization and water conservation, allowing the Company to save an estimated $10.8 million.

 

   

Supply Chain Responsibility. At least every three years, we complete supplier audits or assessments on our major corporate or manufacturing site suppliers using the RBA Code standard and require our major suppliers to sign a statement of commitment to the RBA Code and the Code of Business Conduct.

 

   

Diversity and Inclusion. Our 2020 compensation programs included organization-level and overall Company metrics to monitor for diverse directors and above, diverse new hires and diverse promotions. A detailed description of our other diversity and inclusion measures is available on our “Diversity & Inclusion” webpage at www.onsemi.com, and includes our Senior Leaders Diversity and Inclusion Council, which consists of seasoned employees from across the Company and employee leaders of our eight Affinity Network Groups, which provide leadership, direction and support for our programs.

Code of Business Conduct

We have adopted a Code of Business Conduct that is applicable to all of our Directors, officers and employees, and we believe the Code of Business Conduct satisfies the standards promulgated by the SEC and Nasdaq. The Code of Business Conduct is available free of charge on our website at www.onsemi.com, or a paper copy is available upon request by writing to our Investor Relations Department, ON Semiconductor Corporation, 5005 East McDowell Road, Phoenix, Arizona 85008, calling our Investor Relations Department at (602) 244-3437 or emailing your request to investor@onsemi.com.

Legal Compliance

Working closely with the Internal Audit Department and Ethics and CSR Department, the Law Department implements and manages legal compliance programs designed to prevent and detect violations of the Code of Business Conduct, related standards of conduct and the law by employees or third parties. Allegations of non-compliance with laws or regulations are thoroughly investigated and remediated, as appropriate.

Our Audit Committee has compliance oversight responsibility, including obtaining reports from the Internal Audit Department and the Law Department regarding any known material non-compliance with the law, advising the Board with respect to the Company’s legal compliance policies and procedures and discussing with the Law Department potentially material legal matters, including material inquiries received from regulators or government agencies. For more information on the Board’s oversight responsibilities, including its responsibility to oversee risk and our ERM Program, see the “The Board of Directors and Corporate Governance — Other Board Matters — The Board’s Role in Risk Oversight.”

 

48     ON Semiconductor Corporation 2021 Proxy Statement


 

COMPENSATION DISCUSSION AND ANALYSIS

Overview

This CD&A contains material information about our compensation objectives and policies and explains the material elements of the disclosures that are contained in this proxy statement with respect to the compensation of our NEOs. For 2020, our NEOs were:

 

Name

 

 

Position Held

 

Hassane S. El-Khoury (1)

 

 

President and Chief Executive Officer

 

Keith D. Jackson (1)

 

 

Former President and Chief Executive Officer

 

Bernard Gutmann (2)

 

 

Former Executive Vice President, Chief Financial Officer and Treasurer

 

Vincent C. Hopkin

 

 

Executive Vice President and General Manager, Advanced Solutions Group

 

Simon Keeton

 

 

Executive Vice President and General Manager, Power Solutions Group

 

William A. Schromm (3)

  Former Executive Vice President and Chief Operating Officer
(1)

Mr. El-Khoury was appointed as our President and Chief Executive Officer, and as a Director, effective December 7, 2020. In connection with the appointment of Mr. El-Khoury and effective as of the same date, Mr. Jackson retired from his positions as President and Chief Executive Officer and from the Board. Mr. Jackson will remain with the Company as an advisor until his retirement on May 31, 2021.

 

(2)

Mr. Gutmann retired from his positions as Executive Vice President, Chief Financial Officer and Treasurer of the Company as of February 16, 2021. In connection with Mr. Gutmann’s retirement and effective immediately following the filing of the Form 10-K, Thad Trent was appointed Executive Vice President, Chief Financial Officer and Treasurer of the Company. Mr. Gutmann will remain with the Company as an advisor until his retirement on April 23, 2021.

 

(3)

Mr. Schromm retired from his positions as Executive Vice President and Chief Operating Officer of the Company as of January 19, 2021. He will remain with the Company as an advisor until his retirement on April 11, 2021.

Unless the context otherwise requires, as used in this CD&A, the term “NEOs” is intended to exclude Mr. El-Khoury, who joined the Company on December 7, 2020 and whose compensation was therefore not contemplated in 2020 compensation decisions made by the Compensation Committee. For a discussion of Mr. El-Khoury’s compensation, please refer to the “Compensation of Executive Officers — Compensation for Our Chief Executive Officer” section of this proxy statement.

Response to COVID-19

Temporary Base Salary Reductions. The COVID-19 pandemic created significant social and economic disruption, both nationally and globally, that materially impacted our operations and financial performance. During 2020, we instituted certain reasonable temporary reductions in the compensation of the Company’s leadership, including the NEOs, as both a contribution towards the continued strength of the Company and a measure to promote fairness among non-leadership employees who were asked to make economic sacrifices as a result of the COVID-19 disruption. Compensation reductions affecting our NEOs are described below:

 

   

unpaid furloughs during the second and third fiscal quarters of 2020;

   

a 10% reduction in base salary, effective as of July 4, 2020; and

   

the temporary suspension of company match contributions under the ON Semiconductor 401(k) Plan (the “401(k) Plan”).

In light of the Company’s strong performance and improved market conditions, we rescinded the above base salary reductions and the suspension of the Company match contributions under the 401(k) Plan, effective as of October 1, 2020, and instituted 401(k) Plan match contributions that offset the contribution amounts forgone during the year. The 2020 merit increases, which were originally intended to be effective on July 16, 2020 and then were deferred until April 2021, were subsequently canceled.

No Bonuses Paid to Our NEOs. Despite adverse macroeconomic conditions during the early months of the COVID-19 pandemic, we upheld our commitment to our strategic financial objectives, our stockholders and our pay-for-performance philosophy by instituting temporary base salary reductions for our NEOs and electing not to reset, adjust or modify the original performance goals under our incentive compensation programs. In order to reinforce the strategic importance of our financial objectives, including gross margin expansion, despite achieving certain of the individual performance goals under the 2020 short-term incentive program, the Committee exercised negative discretion to not award a partial bonus payment to our NEOs under our short-term incentive compensation program because the Company did not achieve the required threshold level of non-GAAP operating income performance for the year.

 

ON Semiconductor Corporation 2021 Proxy Statement     49


Compensation Discussion and Analysis

 

Significant 2020 Compensation Changes and Highlights

We undertook the following actions in early 2020 to increase the pay-for-performance elements of our NEOs’ compensation and drive alignment with longer-term results:

 

   

To strengthen the link between executive pay and the Company’s strategic priority of gross margin expansion, we replaced the revenue performance measure in our upside PBRSUs (“Upside PBRSUs”) with a non-generally accepted accounting principles (“non-GAAP”) gross margin performance measure. We retained the relative total stockholder return (“Relative TSR”) performance measure for our Upside PBRSUs, as we believe this performance measure ensures alignment with stockholder interests.

   

To further incentivize and reward individual performance on the Company’s strategic objectives, we increased the weight on certain organizational performance metrics specific to each NEO under our short-term incentive program from 15% in 2019 to 20% in 2020.

The Compensation Committee believes that the features of our 2020 compensation program and our 2020 compensation actions advanced the Company’s 2020 strategic priorities, were consistent with market practices and were appropriate given the impact of COVID-19. Below are a few of the highlights of our compensation practices and policies for 2020 NEO compensation:

 

 WE DO:           WE DO NOT:

 

   

 

 

Incentivizeour employees to achieve or exceed financial goals established for the Company and to deliver superior returns to our stockholders.

     

 

 X 

 

 

Provideexcessive perquisites to our
executives.

      

 

Havestock ownership guidelines that are designed to align our executives’ interests with those of our stockholders.

     

 X   

 

Allowour NEOs and other insiders to pledge or margin our stock, hedge their exposure to ownership of our stock or engage in speculative transactions with respect to our stock.

      

 

Providelong-term equity incentives that vest over a period of two years to ensure that our executives maintain a long-term commitment to stockholder value.

     

 X   

 

Allowsingle triggers or excessive benefits in our change in control agreements or allow excise tax gross-up provisions in the employment agreements for our NEOs.

      

 

Benchmarkour industry to ensure that our compensation is appropriate for leadership retention, aligned with stockholder interests and not excessive for our industry.

     

 X   

 

Providetax gross-ups on any perquisites other than standard relocation benefits that are available to all employees and amounts paid for expatriate assignments.

      

 

Havea minimum 12-month vesting period for full-value awards (e.g., RSUs, restricted stock, performance shares and performance share units) to our NEOs pursuant to the 2010 SIP.

     

 X   

 

Designour compensation policies and practices in a way that poses a material risk to the Company or its stockholders.

      

 

Followa responsible approach to equity-based compensation.

   

 X   

 

Adopt“burn rates” that exceed the typical market practice for our peer group or applicable benchmark set by ISS.

CEO Realizable Pay-for-Performance Relative to Peer Group

In the course of reviewing our overall executive compensation program for 2020, Pearl Meyer reviewed the relationship between realizable total direct compensation (“TDC”) and our performance for the three fiscal years ended December 31, 2017, December 31, 2018 and December 31, 2019. This time period was selected because it was most closely aligned with the compensation information available for our peer group companies over the corresponding period. This review was conducted to understand the degree of alignment between realizable TDC delivered to the CEO during the period and our performance relative to our peer group. For purposes of this review, Company performance is defined as absolute total stockholder return (“TSR”). Except for the period beginning on December 7, 2020, the date of Mr. El-Khoury’s appointment as our President and CEO, through December 31, 2020, Mr. Jackson was our CEO during 2018, 2019 and 2020. Accordingly, the charts in this section are based on the compensation during the applicable periods for Mr. Jackson.

 

50     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

Realizable TDC is defined as the sum of:

 

   

actual base salaries paid over the three-year period;

   

actual short-term incentives (bonuses) earned over the three-year period;

   

“in-the-money” value as of December 31, 2019 of any stock options granted over the three-year period;

   

the value as of December 31, 2019 of any restricted shares or RSUs granted over the three-year period; and

   

payouts of cash-based long-term incentive plans and the value as of December 31, 2019 of any PBRSUs earned over the three-year period.

As the chart indicates, Mr. Jackson’s realizable TDC for the covered periods was within an “alignment corridor” representing a reasonable alignment in terms of TSR performance and magnitude of realizable pay.

 

LOGO

Compensation Philosophy and Guiding Principles

Our Compensation Committee is responsible for setting our compensation philosophy and guiding principles and for monitoring their effectiveness. Our compensation philosophy is focused on the following core principles:

 

   

Alignment with Stockholder Interests. Achieving corporate goals is a necessary condition for our executives to realize targeted levels of compensation, particularly with respect to variable pay and long-term incentives. In addition, the use of stock-based incentives, which link variable pay to stock price performance, and stock ownership guidelines further aligns executives’ interests with those of our stockholders.

 

   

Pay-for-Performance. A significant portion of compensation is variable and directly linked to Company and individual performance — both to incentivize goal-oriented performance and to reward individual contributions to our performance.

 

   

Market or Peer Company Comparison. As a general rule, we target the market median (50th percentile) for compensation, although we may deviate from the market median due to exceptional performance or other factors. The Company considers other semiconductor and high-technology companies as its market and generally utilizes survey or peer company data in these sectors to analyze the competitiveness of compensation design.

 

   

Attract, Motivate and Retain Talent. Our compensation program is designed to attract, motivate and retain highly talented individuals critical to our success by providing competitive total compensation with retentive features. Our employment agreements with our NEOs contain certain severance and double-trigger change in control arrangements, and our stock-based awards are designed to retain our officers and other employees, while also accomplishing our other compensation goals and objectives.

Purpose of Compensation

The goal of our compensation programs is to promote stockholder value by delivering a competitive rewards package consisting of base salary, short-term incentives and long-term incentives. Taking into account these three components, but excluding other benefits described in the Summary Compensation Table below, approximately 88.1% of Mr. Jackson’s target

 

ON Semiconductor Corporation 2021 Proxy Statement     51


Compensation Discussion and Analysis

 

TDC during 2020 was incentive-based compensation. The target TDC of our other NEOs as a group during 2020 was approximately 82.4% incentive-based compensation.

 

LOGO   LOGO

Short-term incentives in our compensation program are cash-based. Such incentives are intended to promote superior operational performance, disciplined cost management and increased productivity and efficiency that contribute significantly to positive results for our stockholders. Long-term incentives in our compensation program are stock-based. The aim of the long-term incentives is to motivate long-term performance while promoting employee retention. The long-term incentive grants also afford each NEO the opportunity to increase stock ownership, which aligns the NEO’s interest with those of our stockholders and assists the NEO in complying with our stock ownership guidelines. While our emphasis in determining the total reward package for each NEO is on performance incentives, we also provide elements that are not solely performance-based, including base salary, time-based equity awards and limited perquisites. We consider peer group and market practices in determining the appropriate level of performance-based and non-performance-based elements in our compensation programs.

Processes and Procedures for Considering and Determining Executive Compensation

Among other responsibilities, our Compensation Committee is primarily responsible for establishing the compensation programs for our NEOs and other senior executives, including the CEO, as well as monitoring, annually reviewing and approving the goals and objectives relevant to these programs.

Our Stockholder Engagement Program. We emphasize transparency in our approach to stockholder communications and seek out engagement and feedback from current and prospective stockholders on corporate strategy, executive compensation, corporate governance and other topics of importance. Through these engagements with our stockholders, we have received feedback in support of our existing executive compensation program and, in particular, the Compensation Committee’s decision to further drive accountability and reinforce our culture of compliance, diversity and inclusion, CSR and ethics. These discussions, our say-on-pay voting results, the alignment of the Company’s vision and strategic goals and other factors are key drivers in our ongoing assessment of our compensation programs and help shape future programs.

Stockholder Approval of our Compensation Decisions. At the 2020 Annual Meeting, the Company’s stockholders approved the advisory (non-binding) vote on executive compensation by 95.6% of the votes cast. The Compensation Committee considers this vote a validation of its approach to executive compensation and generally has continued its compensation processes and philosophy in making 2021 executive compensation decisions.

Role of Compensation Consultants. In determining compensation for our Outside Directors and executive officers, the Compensation Committee considers information and advice provided by its independent compensation consultant, Pearl Meyer. The Compensation Committee believes that Pearl Meyer has the requisite skills, knowledge, industry expertise and experience, as well as the necessary resources, to provide a comprehensive approach to executive and non-employee

 

52     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

director compensation planning, strategy and governance. In late 2019, Pearl Meyer conducted an executive compensation study and made recommendations regarding changes to compensation design for the 2020 program (the “Pearl Meyer Report”). At the Compensation Committee’s request, Pearl Meyer also participates in Compensation Committee meetings, reviews meeting minutes, makes proposals for compensation adjustments, advises and provides comparator group data on compensation decisions for existing and newly appointed officers, reviews the CD&A and provides other back-up information and analysis of compensation matters as requested. Pearl Meyer may also assist in preparing agendas for Compensation Committee meetings and provide input on management materials and recommendations in advance of Compensation Committee meetings. While the Compensation Committee considers the advice and recommendations of its independent consultant, ultimately, the Compensation Committee has the decision-making authority with respect to our compensation programs, including the specific amounts paid to our executive officers.

Role of Senior Executives in Determining Executive Compensation. The Compensation Committee made all compensation decisions related to our NEO compensation in 2020. However, our CEO and other senior executives regularly provide information and recommendations to the Compensation Committee on the compensation and performance of other officers. The senior executives also assist the Compensation Committee in determining the level of achievement of the performance targets underlying performance-based awards and incentives and provide other information specifically requested by the Compensation Committee from time to time. With respect to the compensation of the CEO, the independent consultant works directly with the Compensation Committee. The CEO does not make, and the Compensation Committee does not seek from him, recommendations on the level of his compensation, nor does any NEO or any other member of management.

Use of Market Data. The Compensation Committee considers competitive market data, among other things, in determining the individual elements of our compensation programs and in allocating between cash and non-cash compensation and between short-term and long-term incentive compensation. Although the peer company or other survey data is a starting point and a significant factor in the Compensation Committee’s compensation determinations, it is not the only factor. The Compensation Committee used data provided in the Pearl Meyer Report to assist in structuring the 2020 compensation packages for our NEOs. Based on a comparator group update prepared by Pearl Meyer in August 2019, the Compensation Committee considered changes to the peer group in light of consolidation within the semiconductor industry and changes to the revenue and market capitalization of our peer group companies. Criteria used to screen the peer group generally included:

 

   

revenue between $2.5 billion and $17.5 billion, which was approximately 0.4 to 3 times the Company’s revenue;

   

market capitalization between $2.5 billion and $40.6 billion, which was approximately 0.33 to 5 times the Company’s market capitalization; and

   

other semiconductor or semiconductor equipment companies, including selected companies that may fall outside of the revenue and market capitalization ranges shown above.

After considering these criteria, the Compensation Committee determined that the peer group identified in 2019 for 2020 compensation decisions (the “2020 Peer Group”) would consist of:

 

      

Advanced Micro Devices, Inc.

  

Marvell Technology Group Ltd.

Analog Devices, Inc.

  

Maxim Integrated Products, Inc.

Applied Materials, Inc.

  

Microchip Technology Incorporated

Cree, Inc.

  

Qorvo, Inc.

Cypress Semiconductor Corporation (1)

  

Skyworks Solutions, Inc.

First Solar, Inc.

  

Texas Instruments Incorporated

Lam Research Corporation

  

Xilinx, Inc.

(1)

Cypress Semiconductor Corporation was acquired by Infineon Technologies AG in April 2020.

 

ON Semiconductor Corporation 2021 Proxy Statement     53


Compensation Discussion and Analysis

 

Information provided by Pearl Meyer comparing certain Company information to the 25th percentile, 50th percentile, 75th percentile and average of the 2020 Peer Group follows:

 

                    Revenue
(1), (2)
Market
Capitalization (2)

Peer Group 25th Percentile

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  2,561   9,823

Peer Group 50th Percentile

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  3,388   19,553

Peer Group 75th Percentile

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  6,129   34,072

Peer Group Average

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  5,773   28,077

ON Semiconductor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  5,887   8,339

ON Semiconductor Percentile Rank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  64%     21%  

All amounts in the table above are U.S. dollars in millions except for percentages.

 

(1)

Reflects trailing 12 months as of July 19, 2019.

 

(2)

As of July 19, 2019.

In evaluating the competitiveness of compensation, the Pearl Meyer Report compared the compensation of senior executives to that of their functional matches (e.g., CFO compensation is compared to the compensation of comparator company CFOs). The report included information on each executive’s competitive position for base salary, total cash compensation at target (base salary and target bonus), actual total cash compensation, long-term incentives (based on grant date fair value) and TDC at target and actual (base salary, bonus and equity). In determining market data, Pearl Meyer utilized proxy statement data for the 2020 Peer Group, as well as data from three compensation surveys — the 2019 Radford Executive Survey, the 2019 Pearl Meyer Executive and Senior Management Survey and the 2019 Equilar Compensation Survey — that are primarily reflective of companies in the semiconductor industry, broader technology segments and general industry, and not prepared specifically for the ON Semiconductor compensation analysis.

Among other things, the Pearl Meyer Report summarized 2019 target and actual compensation for the NEOs, which analyzes how each NEO’s compensation varies from the competitive median. In the table below, negative amounts indicate that our compensation is below the competitive median and positive amounts indicate our compensation is above the competitive median.

 

NEO

   

 

   

 

   Salary   Total Target
Cash (1)
  Total Actual
Cash (2)
  2019 LTI Grant
Value (3)
  TDC at
Target (3)
  Total Actual Direct  
Compensation (4)  

Keith D. Jackson

   

 

 

 

   

 

 

 

       12 %       11 %       13 %       -6 %       -4 %       -3 %

Bernard Gutmann

   

 

 

 

   

 

 

 

       4 %       -2 %       -2 %       -6 %       -4 %       -4 %

Vincent C. Hopkin

   

 

 

 

   

 

 

 

       -14 %       -16 %       -20 %       -21 %       -20 %       -20 %

Simon Keeton

   

 

 

 

   

 

 

 

       -14 %       -15 %       -26 %       -21 %       -20 %       -22 %

William A. Schromm

     

 

 

 

 

 

     

 

 

 

 

 

       -5 %       -12 %       -9 %       7 %       -1 %       -1 %
(1)

Total target cash consists of 2019 base salary plus target annual incentive. Market annual incentive is based on target incentive opportunity for 2018. Data was aged 3% per year to January 1, 2020.

 

(2)

Total actual cash consists of 2019 base salary and actual annual incentive paid. Market annual incentive is based on actual incentive earned for 2018. Data was aged 3% per year to January 1, 2020.

 

(3)

Peer company long-term incentive awards reflect the three-year average grant value of awards. Market annual incentive is based on target incentive opportunity for 2018.

 

(4)

Total actual direct compensation consists of 2019 base salary, annual incentive and the grant date fair value of the 2019 long-term incentive awards. Market annual incentive is based on actual incentive earned for 2018.

Other Factors. In addition to the market data provided by Pearl Meyer, the Compensation Committee also assesses other factors when making compensation decisions, including, among others, the executive’s individual responsibilities, skills, expertise and value added through performance, as well as prior award accumulation. Our CEO presents the Compensation Committee with an individual performance overview for each executive officer, describing the officer’s accomplishments for the prior year, as well as his or her strengths, areas of improvement and development plans. The Compensation Committee separately reviews CEO performance based on, among other factors considered relevant, Company performance, including revenue growth, earnings growth, gross margin improvement, free cash flow and earnings per share, and further considers downturns or volatility in general economic conditions and other issues facing the Company.

 

54     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

Prior Compensation. In considering awards and other adjustments to the total compensation of each NEO, the Compensation Committee considers the value of previous compensation, including then-outstanding equity grants. On a quarterly basis, management also provides the Compensation Committee with information concerning expectations regarding the vesting of outstanding long-term incentive awards. The Compensation Committee uses this data to evaluate whether the NEO’s compensation and existing incentive opportunities from prior awards reflects Company operating performance and stockholder value, as well as the particular officer’s performance, the extent to which they continue to motivate the officer and whether adjustments are required to the program or an individual officer’s compensation.

Contractual Commitments. The Compensation Committee also considers contractual commitments in determining or recommending executive pay. The employment agreements for our NEOs generally provide for an initial level of annual salary, a target percentage of annual salary that can be earned pursuant to our short-term cash incentive plans and limited perquisites. In each case, the initial level of salary and target bonus percentage provided for in the employment agreements of the NEOs was less than or equal to the current salary and target bonus percentage of the NEOs. Therefore, contractual commitments did not play a significant role in compensation decisions for 2020.

Use and Availability of Equity. When considering equity awards to our officers, including the NEOs, the Compensation Committee considers our equity availability and usage, the potential voting power dilution to our stockholders and the projected impact on our earnings per share for the relevant years. The Company believes that its share usage and potential dilution have generally been conservative compared to peer group levels.

Internal Pay Equity. While the Compensation Committee considers internal pay equity in making compensation decisions, we do not have a policy requiring any set levels of internal pay differentiation. As previously discussed, we generally target the compensation levels among our executives to be competitive with market median. As compensation is competitively determined, the Compensation Committee believes that, during the time Mr. Jackson served as CEO during 2020, the differentiation between the pay of Mr. Jackson and the other NEOs was appropriate. The Compensation Committee reached the same conclusion in determining the compensation levels for Mr. El-Khoury in connection with his appointment as CEO in December 2020.

Risk Analysis. The Compensation Committee considers the potential for unacceptable risk-taking in its compensation design and performs periodic risk assessments with respect to its duties and actions. The Compensation Committee believes that the design of our executive compensation program does not unduly incentivize our executives to take actions that may conflict with our long-term best interests. Material risk in our compensation design is mitigated in several ways, including as follows:

 

   

Performance-based pay opportunities are designed with goals that are aggressive but attainable without the need to take inappropriate risks and with the goal of driving long-term value to the stockholders.

   

There is an appropriate mix of pay elements, with total compensation not overly weighted toward any one compensation component.

   

The base salaries of our NEOs, although comprising a relatively modest component of aggregate total compensation, nevertheless are adequate to discourage undue risk-taking.

   

Opportunities under our short-term and long-term incentive programs are capped so that the upside potential is not so large as to encourage excessive risk-taking.

   

Our stock-based incentives vest or are earned over a multi-year period, which provides long-term upside potential, but also requires the executive to bear the economic risk of the award over the vesting period.

   

We generally use different performance metrics in different programs and awards, which provides balance and lessens the opportunity to take undue risk in meeting a single goal.

   

The stock components inherent in our long-term incentive program, combined with our stock ownership guidelines, align the interests of our executives with a goal of long-term preservation and appreciation of stockholder value.

   

Incentive payments and awards are subject to clawback in the event of a material restatement of our financial results and in certain other cases.

   

The Compensation Committee considers information from comparator companies in compensation design, thereby avoiding unusually high pay opportunities relative to the Company’s peers.

   

To retain our executives, the Company maintains severance programs with reasonable terms and a double-trigger change in control provision.

 

ON Semiconductor Corporation 2021 Proxy Statement     55


Compensation Discussion and Analysis

 

Elements of Our Compensation Program

Our compensation program is designed to provide a competitive total compensation package consistent with our performance in the marketplace and our desire to retain talented management. The 2020 compensation program for each of our NEOs includes:

 

   

base salary;

   

short-term cash incentive awards;

   

long-term equity incentive awards;

   

post-termination compensation;

   

limited perquisites; and

   

other benefit plans and programs.

While executives have more of their total compensation at risk than other employees, we believe that corporate and individual performance drive incentive compensation and the principles that serve as the basis for executive compensation practices generally apply to the compensation plans for all employees.

Base Salary. At its February 2020 meeting, the Compensation Committee approved base salary increases between 0% and 6.09% for the NEOs. The 2020 merit increases, which were originally intended to be effective on July 16, 2020 and then were deferred until April 2021, were subsequently canceled. In making determinations regarding these salary increases, the Compensation Committee considered information from, and the analysis of, Pearl Meyer, where available. Differences in salary among officers are based on market median data and other factors as described in this CD&A. The primary objectives for the base salary component were to: (i) reward and retain our NEOs; and (ii) provide fixed compensation that was competitive in our market and commensurate with each NEO’s level of responsibility. The Compensation Committee also considered that following the adjustments, base salaries for the NEOs would vary from the market median in the following amounts: Mr. Jackson: +12%; Mr. Gutmann: +7%; Mr. Hopkin: -9%; Mr. Keeton: -8%; and Mr. Schromm: -1%.

Off-Cycle Base Salary Increases for Messrs. Hopkin and Keeton. The Compensation Committee generally targets executive pay, including long-term incentive compensation, at the median of benchmarked market data. During a review of executive pay conducted by the Compensation Committee in September 2020, it was determined that the base salary and long-term incentive compensation for Messrs. Hopkin and Keeton would be significantly and adversely impacted by economic conditions such that the resulting effect would be that these compensation components for Messrs. Hopkin and Keeton would be significantly below market levels. Given that the base salary for each of Messrs. Hopkin and Keeton was positioned between the 25th percentile and median of the market, the Compensation Committee approved certain awards designed to align the base salaries of Messrs. Hopkin and Keeton more closely with the median of the benchmarked data. These retention measures included an increase in the annual base salary for each of Messrs. Hopkin and Keeton to $450,000. The Company believes that the retention measures taken with respect to Messrs. Hopkin and Keeton, including the base salary increases described above, were reasonable in magnitude and represent an isolated practice.

Short-Term Cash Incentive Program. The primary objectives of the 2020 bonus program were to:

 

   

maximize return to stockholders;

   

reward and retain our top performers;

   

reward achievement of short-term financial performance goals;

   

use objective and verifiable metrics;

   

utilize a single program for all eligible employees; and

   

target bonus percentages based on benchmarked market data.

Summary of Features. The 2020 bonus program had the following features:

 

   

an annual plan providing for award opportunities based on full-year 2020 results;

   

performance goals were based on financial results, achievement of certain hiring and promotional goals designed to increase the racial and gender diversity of our employee population (“ODMs”) and organizational performance goals based on the performance of the organizational unit or department for which the award recipient had primary responsibility (or, in the case of the CEO and CFO, the average achievement with respect to all such performance goals) (“OPMs”);

   

payouts were to be determined on a linear basis from the 0% payout level to the 100% payout level and from the 100% payout level to the 200% payout level;

 

56     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

   

the Compensation Committee had the ability to exercise negative discretion and pay such lesser amounts as it determined to be appropriate; and

   

payouts were not allowed until threshold goals are exceeded, and payouts are capped at 200% attainment or 20% of the Company’s non-GAAP income.

 

PERFORMANCE GOALS AND WEIGHTING

Non-GAAP net income (60%)

   ODMs (5%)

Revenue (15%)

   OPMs (20%)

Thresholds for Payout of Awards under the 2020 Bonus Program. As structured, cash bonuses under the 2020 bonus program were to be paid for each component only if the threshold for that component was exceeded and were to be based on the level of achievement of the non-GAAP operating income, non-GAAP revenue, ODM and OPM components.

Opportunity for Payout under the Non-GAAP Operating Income Component. Payout of the non-GAAP operating income component had a primary gate and threshold of $749 million, a target of $916 million and a stretch goal of $1,120 million. The target goal represented a 17.6% increase relative to actual results achieved for the prior fiscal year of $779 million. For purposes of calculating non-GAAP operating income for the 2020 bonus program, GAAP operating income was adjusted for the following items: restructuring, asset impairments and other, net; goodwill and intangible asset impairment; acquisition- or divestiture-related costs; gains or losses (expenses or income) on business dispositions, including divestiture, licensing, or similar arrangements, to the extent recognized in GAAP operating income; expensing of inventory fair market value step up; amortization of acquisition-related intangible assets; and unusual/non-recurring material items. Unusual/non-recurring material items include items that are unusual in nature and/or occur infrequently, consistent with applicable accounting standards. Financial results of businesses acquired or divested during the performance period were included in all calculations. Generally, the above adjustments are not fixed and are intended to be conceptually consistent with the Company’s earnings release calculations for adjusted non-GAAP earnings per share.

The Compensation Committee believed that non-GAAP operating income should be used as a measure for the 2020 bonus program rather than GAAP operating income to prevent payments under the 2020 bonus program from being significantly impacted (positively or negatively) by extraordinary or unusual events or non-cash items. The Compensation Committee also considered adjustments eliminating the effect of certain non-cash items to be appropriate, believing that the adjusted numbers are a better indicator of current actual Company operating performance.

Opportunity for Payout under the Revenue Component. Payout of the revenue component had a primary gate and threshold of $5,630 million, a target of $6,150 million and a stretch goal of $6,635 million. The target goal represented an 11.5% increase relative to 2019 revenue. Revenue was as reported in the Company’s financial statements in the Form 10-K.

Opportunity for Payout under the ODM Component. The ODM component consisted of three separate metrics. The first metric was based on the percentage of directors and above who were “diversity employees” as of December 31, 2020 (“diversity directors”). The definition of “diversity” is based on the population of the Company’s employees who are either: (i) female; or (ii) (1) live and work in the United States, and (2) self-identify with one or more of the following races: American Indian, Alaskan Native, Asian, Black or African-American, Hispanic/Latino or Hawaiian/Pacific Islander. An employee who falls into any of the above categories is referred to as a “diversity employee.” The diversity directors component was weighted at 40%, with a threshold of 27.70%, a target of 29.10% and a stretch goal of 30.50%. The second metric relates to diversity new hires and was determined based on the percentage of employees hired in 2020 who are diversity employees (down to the level of associates and recent college graduates). The diversity new hires component was weighted at 30%, with a threshold of 34.73%, a target of 36.56% and a stretch goal of 38.38%. The third metric relates to diversity promotions and was determined by the percentage of employees promoted to an associate salary grade and above in 2020 who are diversity employees. The diversity promotion component was weighted at 30%, with a threshold of 33.19%, a target of 34.85% and a stretch goal of 36.51%. Threshold performance goals generally equated to actual 2019 attainment.

Opportunity for Payout under the OPM Component. The OPM component had individual threshold, target and stretch goals for the performance measurement period for each of the NEOs as follows:

 

NEO

   Metric (1)    Threshold    Target    Stretch

Keith D. Jackson

   Average of all organizational    Average    Average    Average

Bernard Gutmann

   Average of all organizational    Average    Average    Average

 

ON Semiconductor Corporation 2021 Proxy Statement     57


Compensation Discussion and Analysis

 

NEO

   Metric (1)    Threshold    Target    Stretch

Vincent C. Hopkin

  

Advanced Solutions Group (“ASG”)

 

Non-GAAP Operating Income (10%) (2)

   $243.9 million    $301.2 million    $373.4 million

 

   ASG Non-GAAP Gross Margin (10%) (3)    40.2%    41.5%    43.0%

Simon Keeton

  

Power Solutions Group (“PSG”)

 

Non-GAAP Operating Income (10%) (2)

   $546.8 million    $644.2 million    $756.4 million

 

   PSG Non-GAAP Gross Margin (10%) (3)    34.3%    35.8%    37.4%

William A. Schromm

   Non-GAAP Gross Margin (5%) (4)    35.8%    37.2%    38.8%

 

   PPB Improvement (5%) (5)    4.8%    11.7%    19.3%

 

   Delivery (5%) (6)    90.0%    91.25%    92.5%
 

 

   Product Quality Excursions (5%) (7)    20%    30%    50%
(1)

Organizational metrics exclude diversity.

 

(2)

ASG non-GAAP operating income and PSG non-GAAP operating income are the non-GAAP operating income, calculated as described under the heading “Opportunity for Payout under the Non-GAAP Operating Income Component” above, but solely for ASG and PSG, respectively.

 

(3)

ASG non-GAAP gross margin and PSG non-GAAP gross margin are the non-GAAP gross margin, calculated as described below in footnote (4) to this table, but solely for ASG and PSG, respectively.

 

(4)

For purposes of calculating non-GAAP gross margin, the Company’s non-GAAP gross profit is divided by the Company’s revenue. GAAP gross profit was adjusted for the following items: actuarial gains or losses on pension plans and other pension benefits; gains or losses (expenses or income) on divestitures to the extent recognized in GAAP gross margin; expensing of inventory fair market value step up; impact for the conversion of accounting from sell-through to sell-in, as measured in the quarter that the conversion occurs; and unusual/non-recurring material items. Unusual/non-recurring material items include items that are unusual in nature and/or occur infrequently, consistent with applicable accounting standards. Generally, the above adjustments are not fixed and are intended to be conceptually consistent with the Company’s earnings release calculations for adjusted non-GAAP earnings per share.

 

(5)

PPB Improvement is a quality metric calculated as follows: (total incidents divided by total number of units shipped) x 109. The performance goals set forth above present the threshold, target and stretch goals expressed as a relative percentage improvement in product quality for the performance measurement period as compared to the full year 2019.

 

(6)

Delivery is a customer service metric. For each quarter during 2020, the Company calculated a percentage based on the following formula: A plus B divided by C, where A = customer request date on time delivery (“OTD”) for original equipment manufacturers and electronic manufacturing sales industry customers divided by such customer total orders; B = commitment date OTD to distributors divided by distributor total orders; and C = total orders. The 2020 achievement for the delivery component reflected in the table above is the average of the four quarterly delivery results for 2020.

 

(7)

Product quality excursions include any of the following events: (i) any factory-caused problem resulting in three or more external failure analysis requests (“EFARs”) per month; (ii) any single back-end manufacturing EFAR due to test escape, probe escape, mislabeling, mixed device or mixed package; (iii) any single front-end manufacturing EFAR due to misprocess, wrong mask or rework; (iv) any EFAR on material that was reviewed and approved by the material review board; (v) any factory-caused problem resulting in a shutdown of an assembly line; or (vi) any incident or series of events resulting in a customer: (1) filing a credit claim of at least $25,000, (2) imposing a controlled shipping status, or (3) issuing an official red alert to their internal sites. The performance goals set forth above present the threshold, target and stretch goals expressed as a relative percentage improvement in the number of excursions for the performance measurement period as compared to the full year 2019.

Principles Underlying Metrics. In setting these payout metrics, the Compensation Committee considered its primary short-term compensation objectives, including maximizing total return to stockholders, the expectations of Company performance, projected market expectations and expectations regarding individual performance and organizational diversity. The diversity metric goals represent incremental improvement over baseline 2019 levels. Similarly, the OPM goals were set to reflect incremental improvement over past performance, considering corporate strategy and market conditions. With respect to the non-GAAP operating income and revenue goals, expectations at the date of approval regarding bonus attainment were projected to be 85% to 100% of target and the targets for these two goals were set such that budgeted performance was between threshold and target payout levels. As a general rule, amounts are set after considering the potential impact on TSR.

Target Award Opportunity. On February 16, 2020, the Compensation Committee considered the award opportunity for each of the NEOs and, in each case, retained the 2019 target as a percentage of base salary.

 

NEO

   2019 Target %
of Base Salary
 

2020 Target %  

of Base Salary  

Keith D. Jackson

   150%   150%

Bernard Gutmann

     85%     85%

Vincent C. Hopkin

     75%     75%

Simon Keeton

     75%     75%

William A. Schromm

     85%     85%
          

 

58     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

In making determinations regarding these bonus opportunity levels, the Compensation Committee considered, among other factors, information from Pearl Meyer and management.

Achievement Levels for 2020. For 2020, the Company achieved non-GAAP operating income of $536.55 million for an attainment percentage of 0%, non-GAAP revenue of $5,225 million for an attainment percentage of 0% and an ODM component achievement of 35% for diversity directors and above, 0% for diversity new hires and 0% for diversity promotions, for an aggregate ODM attainment percentage of 14%.

For the OPM component, achievement was as follows:

 

NEO

   Metric    Actual    Attainment (%)   

Keith D. Jackson

   Average of all organizational    Average    15.5

Bernard Gutmann

   Average of all organizational    Average    15.5

Vincent C. Hopkin

   ASG Non-GAAP Operating Income (10%)    $193.9 million    0.0

 

   ASG Non-GAAP Gross Margin (10%)    38.2%    0.0

Simon Keeton

   PSG Non-GAAP Operating Income (10%)    $444.6 million    0.0

 

   PSG Non-GAAP Gross Margin (10%)    31.1%    0.0

William A. Schromm

   Non-GAAP Gross Margin (5%)    32.7%    0.0

 

   PPB Improvement (5%)    12.4%    109.1

 

   Delivery (5%)    88.4%    0.0
 

 

   Product Quality Excursions (5%)    28    112.5

While certain ODM goals and OPM goals were achieved, the Compensation Committee, in its discretion, determined that no bonuses would be paid to our NEOs since the Company did not achieve the threshold level for either of the 2020 corporate financial performance goals.

2021 Bonus Program. In February 2021, the Compensation Committee approved a 2021 short-term incentive award program (the “2021 Bonus Program”) that directly aligns with the Company’s 2021 strategic objectives under the new CEO, encourages our executives to maximize profitability, growth and operational efficiency and utilizes the following metrics: revenue growth; gross margin; earnings before interest and taxes growth; and a binary metric based on the definition and deployment of management’s new corporate strategy and the planning and execution of certain transformation initiatives. In addition, attainment is subject to the satisfaction of “Corporate Multiplier %” goals based on revenue and EBIT metrics. As discussed below in the “2021 Long-Term Incentive Awards” section of this CD&A, the 2021 long-term incentive awards for the NEOs also utilize gross margin as a performance measure. The Compensation Committee made the determination to incorporate gross margin into the performance metrics for both the 2021 Bonus Program and the 2021 long-term incentive awards in light of the importance of gross margin performance to the Company’s 2021 strategy and the nature of gross margin as a key financial lever demonstrating value to the Company’s stakeholders. The Compensation Committee will reassess cash incentive metrics in 2022 and thereafter on an annual basis.

Under the 2021 Bonus Program, a NEO’s payout is determined according to the formula below:

 

 

LOGO

Long-Term Incentive Program. Long-term incentives for executives are entirely equity-based and are designed to reinforce the alignment of executive and stockholder interests. These rewards provide each individual with a significant incentive to manage from the perspective of an owner. In February 2020, the Compensation Committee made annual long-term incentive awards to each NEO (other than Mr. El-Khoury) consisting of 60% PBRSUs and 40% RSUs pursuant to the 2010 SIP. The Committee determined that such an allocation between PBRSUs and RSUs provided a reasonable balance between performance-based and retention incentives.

 

ON Semiconductor Corporation 2021 Proxy Statement     59


Compensation Discussion and Analysis

 

The principles of the 2020 equity grant program include that:

 

   

awards are aligned with stockholder interests;

   

the percentage of unvested value should align with executive retention strategies;

   

the majority of the stock pool is reserved for top performers;

   

equity grants are budgeted consistent with market practice based on median value and actual grants are based on performance and potential;

   

Company, department and individual performance drive above-market equity grants in the following annual cycle or additional grants throughout the year; and

   

awards are designed to support the Company’s business strategies.

Generally, RSUs are used for retention, base performance-based restricted stock units (“Base PBRSUs”) are used in support of business performance strategies and Upside PBRSUs are used for certain executives and global site leaders who are key individuals to further incentivize performance. The Compensation Committee also considered the advantages and disadvantages of using absolute versus relative performance measures and believes that the 2020 long-term incentive awards struck an appropriate balance between the two types of measures. Absolute measures, such as those utilized for the 2020 Base PBRSUs and the non-GAAP gross margin component of the Upside PBRSUs, are consistent with stockholder expectations, allow for greater sense of control and influence by the executive, encourage motivation and are consistent with the Company’s cash flow and ability to pay. Conversely, relative measures, such as the Relative TSR component of the Upside PBRSUs, reward executives for outperforming the Company’s peers in a highly competitive marketplace.

Description of RSUs. The 2020 RSUs are time-based and will vest annually in one-third increments on each anniversary of the grant date. For a discussion of the retirement provisions in the 2020 forms of RSU award agreement for the NEOs, please refer to the “Post-Termination Compensation” section in this CD&A.

Description of Base PBRSUs. The Base PBRSUs are performance-based and vest as follows:

 

   

The Base PBRSUs have a performance measurement period starting on January 1, 2020 and ending on December 31, 2021 (the “2020 PBRSU Performance Period”) and provide for payout between 0% and 100% of the target award level. Awards payable between threshold and target are based on adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) for the 2020 PBRSU Performance Period. The Adjusted EBITDA threshold is $2,500 million (required for vesting to begin) and target Adjusted EBITDA is $3,000 million (resulting in 100% vesting of the grant), with linear interpolation from threshold to target.

 

   

If the $2,500 million threshold amount is not exceeded, the entire award is canceled.

 

   

Adjusted EBITDA for the 2020 PBRSU Performance Period will not be determined until after the filing of the Company’s annual report on Form 10-K for the fiscal year ending December 31, 2021 (the “2021 Form 10-K”).

 

   

For grantees who receive Upside PBRSU awards, achievement of the Adjusted EBITDA target amount unlocks the Upside PBRSU “gate,” as further described in the “Elements of Our Compensation — Long-Term Incentive Awards — Description of Upside PBRSUs” section of this CD&A.

 

   

The Compensation Committee must approve the level of attainment of the performance goals and may exercise negative discretion with respect to the number of shares that will vest based on such goals.

 

   

Due to the two-year performance period for the Upside PBRSUs, achievement of non-GAAP gross margin and Relative TSR for the 2020 PBRSU Performance Period will not be determined until after the filing of the 2021 Form 10-K.

Calculation of Adjusted EBITDA. For purposes of calculating Adjusted EBITDA, GAAP net income will be adjusted for the following items: restructuring, asset impairments and other, net; goodwill and intangible asset impairment; interest expense and interest income; income tax provision; acquisition- and divestiture-related costs; gains or losses (expenses or income) on business dispositions, including divestiture, licensing or similar arrangements; net income attributable to non-controlling interests; depreciation and amortization; actuarial gains or losses on pension plans and other pension benefits; gain or loss on debt repurchase, debt exchange, early extinguishment of debt, etc.; expensing of inventory fair market value step up; and unusual or non-recurring material items. The unusual or non-recurring material items include items that are unusual in nature and/or occur infrequently, consistent with applicable accounting standards. Each such adjustment, if any, is to be made to provide a consistent basis from period to period for calculations of performance goals in order to prevent the dilution or enlargement of a grantee’s rights under the award. Financial results of businesses acquired or divested during the 2020 PBRSU Performance Period will be included in all calculations.

 

60     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

The Compensation Committee believes that Adjusted EBITDA drives stockholder value and is a particularly relevant financial performance measure in our industry and in the economic environment in which we operate. In addition, we consider Adjusted EBITDA to be an important tool in measuring our liquidity. The Compensation Committee believes that the adjustments to EBITDA are appropriate to avoid the impact (positive or negative) on achievement of the vesting parameters as a result of extraordinary or unusual items or non-cash items.

Description of the Upside PBRSUs. The Upside PBRSUs are intended to further align the interests of participants with stockholder interests by driving exceptional business performance and focusing participants on key business indicators. The Upside PBRSUs provide the opportunity for the applicable NEOs to earn additional shares up to 100% of their Base PBRSU equity awards. The performance period for the 2020 Upside PBRSUs is aligned, and runs concurrently with, the two-year 2020 PBRSU Performance Period applicable to the 2020 Base PBRSUs.

If the target performance goal for Adjusted EBITDA is achieved or exceeded for the Base PBRSUs, the “gate” to the Upside PBRSU opens and achievement of the goals for the Upside PBRSUs would determine the payout. The Upside PBRSUs provide for a payout depending on the achievement of two separate performance metrics — non-GAAP gross margin and Relative TSR — both of which are tied to the Company’s vision for growth and industry leadership.

Relative TSR is a relative performance measure benchmarked against an industry peer group consisting of a group of comparator companies in the semiconductor industry identified by the Compensation Committee (the “TSR Companies”), and non-GAAP gross margin is a financial performance measure. Financial results of businesses acquired or divested during the applicable performance period will be included in all calculations. If the threshold is not exceeded for either the non-GAAP gross margin or Relative TSR portion of the Upside PBRSUs, then the attainment for such portion of the Upside PBRSUs will be zero. All Upside PBRSUs will vest at the end of the 2020 PBRSU Performance Period based on the level of achievement of the above metrics.

The Compensation Committee must approve the level of attainment of the performance goals for the Upside PBRSUs and may exercise negative discretion with respect to the number of shares that will vest based on such goals. Due to the two-year performance period for the Upside PBRSUs, achievement of non-GAAP gross margin and Relative TSR for the 2020 PBRSU Performance Period will not be determined until after the filing of the 2021 Form 10-K.

In deciding on the metrics for the Upside PBRSUs, the Compensation Committee considered the importance of Relative TSR to our stockholders and that gross margin is correlated with increased profitability and operational efficiency. In light of such considerations, the Compensation Committee ultimately determined that these metrics are a good indicator of the Company’s long-term business performance.

 

 

 

   0% Payout
(Threshold)
   100% Payout
(Target)

Non-GAAP Gross Margin (weighted 60%)

   39.0%    40.0%

Relative TSR (weighted 40%)

   50th Percentile    75th Percentile

Non-GAAP Gross Margin Component. For purposes of the 2020 award of Upside PBRSUs, non-GAAP gross margin is based on the Company’s exit velocity for the last two fiscal quarters of the 2020 Performance Measurement Period and is calculated by dividing the Company’s non-GAAP gross profit by its non-GAAP revenue, in each case for the six fiscal months ending December 31, 2021, subject to adjustments for the categories of items taken into account in the Company’s calculation of adjusted non-GAAP gross margin (“Non-GAAP Gross Margin Adjustments”). The Non-GAAP Gross Margin Adjustments include gains or losses (expenses or income) on business divestitures to the extent recognized in GAAP gross profit; expensing of inventory fair market value step up; and unusual or non-recurring material items. The threshold (required for vesting to begin) target performance goals for the non-GAAP gross margin component of the Upside PBRSUs are 39.0% and 40.0%, respectively, with linear interpolation from threshold to target.

Relative TSR Component. To determine achievement of the Relative TSR metric, the average closing stock price for the Company’s fourth fiscal quarter of 2019 for each of the TSR Companies will be compared with the average closing stock price for the Company’s fourth fiscal quarter of 2021 for each such TSR Company. Dividends paid are added to the change in value of the stock. The companies are then ordered by percentage change.

 

 

ON Semiconductor Corporation 2021 Proxy Statement     61


Compensation Discussion and Analysis

 

The Relative TSR threshold is set at the 50th percentile (required for vesting to begin), and target Relative TSR is set at the 75th percentile of the TSR Companies, with linear interpolation from threshold to target. In other words, the ON Semiconductor stock needs to have performed better than 50% of the TSR Companies for threshold to be achieved and better than 75% of the TSR Companies to reach full target achievement.

 

 

 

  TSR COMPANIES    

 

Ambarella Inc.

 

Littelfuse, Inc.

  Power Integrations, Inc.

ams AG

 

Macom Technolgy Solutions Holdings, Inc.

  Qorvo, Inc.

Analog Devices, Inc.

 

Marvell Technology Group Ltd.

  Realtek Semiconductor Corp.

Broadcom Inc.

 

Maxim Integrated Products, Inc.

  Renesas Electronics Corporation

Cirrus Logic, Inc.

 

Maxlinear Inc.

  Rohm Co. Ltd.

Cree, Inc.

 

Melexis N.V.

  Semtech Corporation

Cypress Semiconductor Corporation (1)

 

Mellanox Technologies, Ltd. (3)

  Sensata Technologies Holdings PLC

Dialog Semiconductor PLC

 

Microchip Technology Incorporated

  Silicon Laboratories Inc.

Diodes Incorporated

 

MKS Instruments, Inc.

  Skyworks Solutions, Inc.

Infineon Technologies AG

 

Monolithic Power Systems, Inc.

  STMicroelectronics N.V.

Inphi Corporation

 

Murata Manufacturing Co., Ltd.

  Synaptics Incorporated

Integrated Device Technology, Inc. (2)

 

National Instruments Corporation

  Texas Instruments Incorporated

Knowles Corporation

 

NXP Semiconductors N.V.

  Vishay Intertechnology, Inc.

Lattice Semiconductor Corporation

 

Parade Technologies, Ltd.

  Xilinx, Inc.
(1)

Cypress Semiconductor Corporation was acquired by Infineon Technologies AG in April 2020.

 

(2)

Integrated Device Technology, Inc. was acquired by Renesas Electronics Corporation in March 2019.

 

(3)

Mellanox Technologies, Ltd. was acquired by NVIDIA Corporation in April 2020.

The TSR Companies listed above represent a mix of companies listed on the PHLX Semiconductor Index and other publicly-traded semiconductor companies whose product and service offerings, market capitalization, business model and other characteristics are similar to those of ON Semiconductor.

Consideration of Performance Period. The Compensation Committee selected a two-year performance period for the 2020 PBRSU awards. Although the Compensation Committee recognizes that a shorter performance period allows for changing perspectives within a long-term incentive award program in our highly cyclical industry, the Compensation Committee chose a longer performance period for PBRSUs in order to more closely align the grant with peer group practices and stockholder advisory firm preferences and to further drive long-term performance.

Target Equity Granted to each NEO. The following table sets out the 2020 target equity awards granted to each applicable NEO:

 

NEO

   Base PBRSU
Amount (1)
   RSU
Amount
   Upside PBRSU
Amount (1)
   LTI
Amount
   Base
PBRSUs (2)
(# of Units)
   RSUs
(# of Units)
  Upside  
PBRSUs  
(# of Units)  

Keith D. Jackson

     $ 3,462,497      $ 2,520,018        $0.0      $ 5,982,515        199,684        133,123       199,684  

Bernard Gutmann

     $ 1,099,209      $ 800,001        $0.0      $ 1,899,210        63,392        42,261       63,392  

Vincent C. Hopkin

     $ 824,408      $ 600,005        $0.0      $ 1,424,413        47,544        31,696  (3)       47,544  

Simon Keeton

     $ 824,408      $ 600,005        $0.0      $ 1,424,413        47,544        31,696  (3)       47,544  

William A. Schromm

     $ 1,346,528      $ 980,006        $0.0      $ 2,326,534        77,655        51,770       77,655  
(1)

The amounts disclosed in the above table reflect the grant date fair value for the Upside PBRSUs. These amounts represent the probable outcome of the performance conditions as of the date of grant, which: (i) for the Base PBRSUs, was based on a 92% attainment; and (ii) for the Upside PBRSUs, was based on a 0% attainment for each of the non-GAAP gross margin and Relative TSR components.

 

(2)

The actual value of each such award as of December 31, 2020 is disclosed in columns (h) and (j) of the Outstanding Equity Awards at Fiscal Year-End 2020 table below in this proxy statement and described in the footnotes to such table. The number of units granted was based on the closing stock price on the date of grant (March 2, 2020) of $18.93 per share.

 

(3)

Excludes off-cycle retention equity awards consisting of 8,640 RSUs awarded to each of Messrs. Hopkin and Keeton on October 5, 2020.

 

62     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

In making determinations regarding target equity award levels, the Compensation Committee considered the CEO’s recommendations (other than with respect to his own compensation) as well as market information, excluding the impact of the Upside PBRSUs, showing that:

 

   

The annual grant value of the 2020 equity awards would vary from the market median for each of the NEOs as follows: Mr. Jackson: -2%; Mr. Gutmann: -1%; Mr. Hopkin: -1%; Mr. Keeton: -1%; and Mr. Schromm: +7%.

   

Following the salary increases described above and taking into account the 2020 equity awards, target TDC variance from the market median for each of the NEOs would be as follows: Mr. Jackson: -1%; Mr. Gutmann: 0%; Mr. Hopkin: -6%; Mr. Keeton -6%; and Mr. Schromm: 0%.

Off-Cycle RSU Awards for Messrs. Hopkin and Keeton. For a discussion of the off-cycle RSUs awarded to Messrs. Hopkin and Keeton during 2020, please refer to the “Compensation of Executive Officers — 2020, 2019 and 2018 Awards of Equity” section of this proxy statement.

2021 Long-Term Incentive Awards. In February 2021, the Compensation Committee approved the Company’s long-term incentive program for 2021 (the “2021 LTI Program”) and related equity awards under such program to each of Messrs. El-Khoury, Hopkin and Keeton (the “Continuing NEOs”), among other executives. The 2021 LTI Program was designed to reward performance consistent the Company’s new long-term strategic objectives. Consistent with that approach, each of the Continuing NEOs received two awards — a PBRSU award (the “2021 PBRSUs”) and an RSU award (the “2021 RSUs”). The Compensation Committee weighted the 2021 PBRSUs approximately 60% and the 2021 RSUs approximately 40% in line with the Company’s pay-for-performance philosophy.

The 2021 RSUs will vest pro rata over three years from the date of grant, subject to continued employment or service to the Company through the vesting date.

The 2021 PBRSUs will vest, according to their terms, only if and to the extent that certain performance goals (the “2021 Performance Goals”) established by the Compensation Committee are achieved. The Compensation Committee established a payout scale to translate performance levels into vesting results. Exact achievement of the 2021 Performance Goals generally translates into earning 100% of the target number of shares, with lesser earnings provided for lesser performance and greater earnings provided for greater performance.

The 2021 Performance Goals selected by the Compensation Committee in February 2021 include three near-term financial performance goals — non-GAAP revenue (weighted 16.7%), non-GAAP gross margin (weighted 50%) and non-GAAP operating expense performance (weighted 33.3%) — during the fiscal year 2021 performance period. However, unlike in prior years, shares earned for 2021 performance would be divided into three portions that would be scheduled to vest over three years, in each of February 2022, February 2023 and February 2024, respectively, subject to the executive remaining continuously employed with the Company through the applicable vesting date.

The 2021 PBRSUs granted under the award are also eligible for longer-term upside opportunities up to 150% of target based on the achievement of certain Relative TSR metrics. Each of the three vesting tranches described above would be subject to:

 

   

an additional upside multiplier based on the Company’s Relative TSR over the prior one, two or three years, as applicable, such that the maximum possible vesting would be 225% of target (i.e., the 2021 earned percentage of up to 150% x a Relative TSR multiplier of up to 1.5x); and

 

   

a downside adjustment based on the Company’s Relative TSR over the prior one, two or three years, as applicable, such that the shares that would otherwise vest based on satisfaction of the 2021 Performance Goals would be reduced by 50% if the applicable Relative TSR for such performance period was less than the 25th percentile.

Based on its annual evaluation of the peer group at the August 2020 Compensation Committee meeting, which included a review and analysis of a report prepared by Pearl Meyer, the Compensation Committee determined to remove Cypress Semiconductor Corporation, which was acquired by Infineon Technologies AG in April 2020, but to otherwise keep the peer group used for purposes of 2021 NEO compensation decisions identical to the 2020 Peer Group used for purposes of 2020 NEO compensation decisions.

As described above, the new structure of the 2021 LTI Program features performance vesting opportunities each year for the next three years. This represents a change from the 2020 annual equity grant program that provided for a concentrated vesting opportunity at the end of year two. In the Compensation Committee’s view, the previously concentrated vesting

 

ON Semiconductor Corporation 2021 Proxy Statement     63


Compensation Discussion and Analysis

 

allocation, together with the currently anticipated lack of achievement of the performance metrics, did not provide sufficient retention benefits. In addition, in order to smooth the transition back to annual performance vesting over the extended three year period for each of the Continuing NEOs that had received grants in the 2020 annual equity grant program, each of Mr. Keeton’s and Mr. Hopkin’s February 2021 annual equity grant was increased by 25% compared to the levels that otherwise would have been approved.

Post-Termination Compensation

Severance and Change in Control Arrangements. Under the 2010 SIP, the Compensation Committee has discretion to accelerate equity-based vesting upon a Change in Control. In addition, we have entered into the following arrangements with our NEOs that provide for post-termination payment in the event of a Change in Control:

 

   

RSU Award Agreements. Certain of our 2019 and 2020 RSU agreements contain provisions causing the unvested portion of the awards to vest upon a termination of employment without “Cause,” or in the event that the NEO resigns for “Good Reason” (as such terms are defined in the applicable NEO’s employment agreement), within a two-year period after a Change in Control. Under the award agreements for the 2019 and 2020 RSUs awarded to our applicable NEOs, if a Change in Control occurs after a qualifying retirement, the unvested RSUs subject to those award agreements will also immediately vest.

 

   

PBRSU Award Agreements. Similarly, under the acceleration provisions of the 2019 and 2020 PBRSU award agreements for our applicable NEOs, if a Change in Control occurs prior to the end of the applicable performance period for the award, the units that could vest will be based on the Company’s progress toward attainment of the performance goals as of the closing of the transaction or event resulting in the Change in Control. If the Company thereafter terminates the NEO without Cause or the NEO resigns for Good Reason, a number of units will vest as of the employee’s termination of employment in an amount determined by a fraction, the numerator of which is the number of days the employee was employed during the performance period and the denominator of which is the total number of days in the performance period. If a Change in Control occurs after the end of the performance period, and thereafter the Company terminates the employee without Cause or the employee resigns for Good Reason, all units earned but not vested at that time will vest on the date of the employee’s termination of employment.

 

   

Employment Agreements. The employment agreements for our NEOs provide for certain post-termination compensation payments in the event of a Change in Control. For a description of the severance and change in control provisions of the employment agreements for our NEOs, see “Compensation of Executive Officers — Employment, Severance and Change in Control Arrangements” and “Compensation of Executive Officers — Potential Payments Upon Termination of Employment or Change in Control” below in this proxy statement.

Retirement Provisions — RSU Award Agreements. Under our 2019 and 2020 RSU award agreements to the NEOs, subject to certain advance notice requirements, any unvested RSUs awarded to a NEO who meets certain age and service requirements as of the grant date and retires after the six month anniversary of the grant date set forth in the award agreement will, upon such NEO’s retirement, continue to vest in accordance with the schedule set forth in the award agreement until such RSUs become fully vested. If a Change in Control (as defined in the 2010 SIP) (“Change in Control”) follows the date on which a grantee retires, any unvested RSUs will immediately vest as of the date of the Change in Control.

Market Alignment. The Compensation Committee believes that our post-termination compensation and related arrangements with our NEOs are aligned with existing market practices related to, and are consistent with, the principal objectives of our compensation programs. To the extent a NEO’s employment agreement contains severance benefits or a change in control provision, such benefits are predicated upon the NEO being terminated without Cause or resigning for Good Reason. In addition, our change in control provisions do not include excise tax gross-ups, and our severance benefits are subject to the NEO signing a general release and waiver and complying with certain restrictive covenants, including non-solicitation, confidentiality and non-disparagement agreements, as well as non-competition or non-interference agreements, all of which serve the best interests of the Company and its stockholders. The continued vesting benefit under the retirement provisions in the 2019 and 2020 RSU award agreements is similarly subject to restrictions that serve the best interest of the Company and its stockholders, as the benefit was subject to meeting certain age and service-based requirements as of the grant date of the applicable award.

Advantages of Our Post-Termination Compensation Arrangements. The Compensation Committee believes that our management has played a crucial role in making us a successful Company and it sends an important signal to the market and

 

64     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

potential employees that we are willing to protect our management with some guaranteed compensation in the event of a termination after a Change in Control. In addition, management may be less inclined to resist change in control transactions that are in the best interests of our stockholders if they have the added security that comes with such change in control arrangements. Similarly, the retirement benefits described in our 2019 and 2020 RSU award agreements are subject to reasonable restrictions and reward long-term service with the Company beyond the date that our NEOs might otherwise retire. The Compensation Committee also believes that the notice period required under the award agreements promotes a smooth and orderly transition of responsibilities to the NEO’s successor.

Limited Perquisites. Consistent with our pay-for-performance compensation philosophy, we generally do not provide our executive officers with significant perquisites other than the following, which are selected for competitive purposes:

 

   

an auto allowance of $1,200 per month;

   

enhanced coverage for life insurance (coverage of $1,000,000, which is $500,000 above the maximum allowed standard coverage of two times base salary that is afforded to all employees);

   

an executive physical examination; and

   

financial planning services.

Relocation payments are also available for certain of our employees, including the NEOs, and other amounts may also be available for expatriate assignments. The Compensation Committee believes these limited perquisites help to maintain the competitiveness of our compensation package vis-à-vis our peer companies and provide value at a reasonable cost to the Company. These include the executive physical examination at the Mayo Clinic and financial planning services of up to $10,000 per year. We describe the limited perquisites paid in 2020 to each of the NEOs in the Summary Compensation Table of this proxy statement.

Other Benefit Plans and Programs. We do not offer executive retirement plans, pension benefits or non-qualified deferred compensation plans. Instead, we provide our NEOs with opportunities to accumulate retirement income primarily through appreciation of their equity awards. Executives are eligible to participate in benefit programs available to all of the Company’s full-time employees. These generally available programs, which are designed to provide competitive capital accumulation and other benefits, include:

 

   

a tax-qualified employee stock purchase plan;

   

a 401(k) savings plan; and

   

medical, dental, disability and life insurance programs.

Individual Performance Considerations

Generally, award amounts for each individual officer, and compensation variance from the market median based on the applicable benchmarking data, were based on the comparative data and other factors and processes discussed above, as well as on the individual considerations described below. In setting the amount of equity awards and other compensation for 2020, the Compensation Committee also considered the following for each applicable NEO:

Keith D. Jackson. Mr. Jackson’s target TDC was positioned slightly below the market (50th percentile). In determining Mr. Jackson’s 2020 total pay package, the Compensation Committee considered Mr. Jackson’s overall leadership of the Company. The Company missed 2019 Board-approved business plan objectives, resulting in no increase to his short-term incentive pay and an incremental increase to his long-term incentive equity award. The Compensation Committee recognizes that Mr. Jackson used his deep understanding of the semiconductor industry to guide the Company successfully through mergers and acquisitions. We compensated Mr. Jackson to compete in a marketplace that is undergoing continued consolidation. We expected him to navigate difficult choices and paid him for accretive choices. The Company believes this compensation framework promoted sound decision-making and ensured that our primary selection criterion for our strategic acquisitions enhanced value for stockholders.

Bernard Gutmann. Mr. Gutmann’s target TDC was positioned at the market (50th percentile). Mr. Gutmann managed the Company’s finances in an ever-changing global market. He maintained cash flow generation, managed expenses and paid down the Company’s debt in a difficult market. Mr. Gutmann was tasked with closing the Company’s acquisition of Quantenna Communications, Inc. (“Quantenna”) during 2019 and the subsequent integration of financial systems and employees. Mr. Gutmann’s understanding of the semiconductor industry, financial leadership and strong analytical and accounting skills allowed him to positively impact the Company during an economic downturn.

 

ON Semiconductor Corporation 2021 Proxy Statement     65


Compensation Discussion and Analysis

 

Vincent C. Hopkin. Mr. Hopkin’s target TDC was positioned below the market (50th percentile). The compensation for Mr. Hopkin, while slightly below market, is consistent with his experience as General Manager of ASG. During 2019, Mr. Hopkin was tasked with closing the acquisition and integration of Quantenna. We expect Mr. Hopkin’s total compensation to align closer to market through future demonstrated ASG business and market strategy, leadership and performance.

Simon Keeton. Mr. Keeton’s target TDC was positioned below the market (50th percentile). Mr. Keeton’s compensation, while slightly below market, is consistent with his experience as General Manager of PSG. We expect Mr. Keeton’s total compensation to align closer to market through future demonstrated PSG business and market strategy, leadership and performance.

William A. Schromm. Mr. Schromm’s target TDC was positioned at the market (50th percentile). In setting Mr. Schromm’s compensation, the Compensation Committee considered his continued efforts on the integration of the Aizu, Japan and East Fishkill, New York factories. Mr. Schromm and his operations team launched several new IT platforms, improved factory performance, reduced manufacturing input costs and improved quality metrics. In determining Mr. Schromm’s compensation, the Compensation Committee recognized his deep understanding of semiconductor operations.

The Compensation Committee’s review of the individual performance of each NEO is not formulaic. The factors outlined above were considered in conjunction with many others, including, but not limited to, the then-current business environment and business challenges, the safety of our employees, the quality of our environmental efforts, the retentive value of the total compensation package and the cost of retention, all of which are taken into account in the course of making subjective judgments to determine final levels of executive compensation.

Impact of Taxation and Accounting Considerations on Executive Compensation

Section 409A imposes an additional 20% federal excise tax and penalties upon employees who receive “non-qualified deferred compensation” that does not comply with Section 409A. The Compensation Committee takes into account the impact of Section 409A in designing our executive plans and programs that provide for “non-qualified deferred compensation” and, as a general rule, these plans and programs are designed either to comply with the requirements of Section 409A or to qualify for an applicable exception to Section 409A so as to avoid possible adverse tax consequences that may result from failure to comply with Section 409A. While the Compensation Committee considers the tax deductibility of awards and the impact of Section 409A as factors in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not tax deductible or otherwise not optimal from a tax perspective. We cannot guarantee that the compensation awarded to our NEOs will comply with the requirements of Section 409A or an applicable exception thereto.

Accounting considerations also play a role in the design of our executive compensation program. Accounting rules require us to expense the grant date fair values of our equity awards (that is, the value of our equity awards based on U.S. GAAP), which reduces the amount of our reported profits under U.S. GAAP. Because of this stock-based expensing and the impact of dilution to our stockholders, we closely monitor the number, share amounts and the fair values of the equity awards that are granted each year. The Compensation Committee also takes into account other tax and accounting consequences of its total compensation program and weighs these factors when setting total compensation and determining the individual elements of an officer’s compensation package.

Other Matters Relating to Executive Compensation

Hedging / Pledging Transactions. We have a comprehensive Insider Trading Policy, which, among other things, prohibits our NEOs from engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company securities or that otherwise have economic consequences comparable to the same. Our NEOs are also prohibited from any pledging or margin transactions with respect to our stock, including, but not limited to, holding our securities in a margin account or otherwise pledging such securities as collateral for a loan. Our other employees are also encouraged to adhere to these rules.

Equity Award Practices. In 2006, in the interest of good governance and in response to concerns associated with certain technology companies backdating stock option awards to executives, the Compensation Committee adopted the Statement. Under the Statement, equity grants under our stock incentive plans generally became effective on the first Monday (or next following trading day if the first Monday is not a trading day) of the next month following the date of Board, Compensation

 

66     ON Semiconductor Corporation 2021 Proxy Statement


Compensation Discussion and Analysis

 

Committee or CEO approval. Options granted pursuant to the Statement were priced at the closing market value on the date of grant. The Statement afforded the Compensation Committee the right to approve, in its discretion, exceptions to the Statement from time to time and was in effect during the Company’s entire 2020 fiscal year. During its meeting on February 11, 2021 to consider the 2021 annual equity awards to our NEOs, the Compensation Committee determined to terminate the Statement and establish a new practice with respect to grant dates for equity awards (such practice, the “Equity Award Practice”). Under the Equity Award Practice, all equity awards will be: (1) granted on the date approved by the Compensation Committee or the CEO, as applicable; and (2) priced based on the closing price of our common stock on Nasdaq on such approval date. The Compensation Committee believes that the Equity Award Practice is more narrowly tailored to our current equity award practices, which no longer include awards of stock options.

Stock Ownership and Retention Guidelines for Officers. Under the Principles, an executive holding the title of Vice President or above is encouraged to hold our common stock in an amount equal to one to six times the officer’s base salary (based on position). As of March 1, 2021, all of our NEOs were either in compliance with, or within the grace period for compliance under, such guidelines.

Clawback Policy. In 2014, we adopted the Clawback Policy, which requires the Company to seek to recover any incentive-based compensation awards and payments made to any covered person in the event that: (i) the Company is required to prepare a financial restatement resulting from material noncompliance with any financial reporting requirements under the federal securities laws, which restatement would have resulted in payment of a lesser incentive as determined by the Board of Directors; (ii) there has occurred any intentional misconduct by the covered person that is materially injurious to the Company; or (iii) there has occurred any breach by the covered person of any material provision in his or her employment agreement with the Company or in any other agreement with the Company that contains non-solicitation, confidentiality, non-compete, non-disclosure or non-disparagement provisions applicable to the covered person. For purposes of the Clawback Policy, a “covered person” is any current or former Senior Vice President, Executive Vice President or CEO, or any other person as determined by the Board in its sole discretion. Each of our NEOs is a “covered person” under the Clawback Policy. The compensation to be recovered pursuant to the Clawback Policy applies to any award or payment made under any incentive-based compensation plan, including any corporate bonus plan and any RSUs, PBRSUs, stock options or other form of equity award made or paid by the Company during the applicable recovery period. The applicable recovery period for an accounting restatement is the three-year period preceding the date on which the Company is required to prepare an accounting restatement (determined in accordance with any applicable law, regulation or interpretation, or otherwise by the Board), which restatement would have resulted in payment of a lesser incentive as determined by the Board. The award agreements for our Base PBRSU and Upside PBRSU awards contain additional clawback provisions that subject the awards to Company compensation recovery policies in place from time to time and that allow the Company to require the grantee to forfeit all or a portion of any unvested PBRSUs and any shares of stock delivered pursuant to the grant agreement if: (i) the grantee’s employment is terminated for Cause (as defined in the grantee’s employment agreement or comparable agreement, or, if the grantee has no employment agreement or comparable agreement, in the 2010 SIP); or (ii) the Compensation Committee, in its sole and absolute discretion, determines that the grantee engaged in serious misconduct that results or might reasonably be expected to result in financial or reputational harm to the Company.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed with management the CD&A included in the proxy statement for the Annual Meeting. Based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the CD&A be included in the Form 10-K and this proxy statement. This report is submitted by the Compensation Committee.

Christine Y. Yan, Chair

Gilles Delfassy

Paul A. Mascarenas

COMPENSATION OF EXECUTIVE OFFICERS

The following tables set forth information concerning compensation earned by, or paid for services provided to us or our subsidiaries for the periods indicated to, our NEOs.

 

ON Semiconductor Corporation 2021 Proxy Statement     67


Compensation of Executive Officers

 

Summary Compensation Table

 

Name and Principal
Position
(a)

  Year
(b)
  Salary
($) (c)
  Bonus
($) (d)
 

Stock
Awards

($) (1) (e)

 

Option
Awards

($) (f)

  Non-Equity
Incentive Plan
Compensation
($) (2) (g)
  Change in
Pension Value
and Non-
qualified
Deferred
Compensation
Earnings
($) (3) (h)
  All Other
Compensation
($) (4) (i)
  Total
($) (j)

Hassane S. El-Khoury (5)

President and Chief
Executive Officer

   

 

2020

   

 

36,538

   

 

0

   

 

7,578,939

   

 

0

   

 

0

   

 

0

   

 

251,336

   

 

7,866,313

Keith D. Jackson (6)

Former President and
Chief Executive Officer

   

 

2020

   

 

1,021,018

   

 

0

   

 

5,982,515

   

 

0

   

 

0

   

 

0

   

 

53,209

   

 

7,056,742

   

 

2019

   

 

1,048,846

   

 

0

   

 

7,800,033

   

 

0

   

 

0

   

 

0

   

 

46,054

   

 

8,894,933

   

 

2018

   

 

1,016,154

   

 

0

   

 

9,000,057

   

 

0

   

 

1,841,576

   

 

0

   

 

35,614

   

 

11,893,401

Bernard Gutmann (7)

   

 

2020

   

 

528,337

   

 

0

   

 

1,899,210

   

 

0

   

 

0

   

 

0

   

 

35,988

   

 

2,463,535

Former Executive Vice
President, Chief Financial
Officer and Treasurer

   

 

2019
2018


   

 

548,846
530,769


   

 

0
0


   

 

2,470,027
2,850,006


   

 

0
0


   

 

0
545,084


   

 

0
0


   

 

35,766
32,992


   

 

3,054,639
3,958,851


Vincent C. Hopkin

Executive Vice President and General Manager, Advanced Solutions Group

   

 

2020

   

 

381,919

   

 

0

   

 

1,624,429

   

 

0

   

 

0

   

 

0

   

 

33,918

   

 

2,040,266

Simon Keeton

   

 

2020

   

 

389,782

   

 

0

   

 

1,624,429

   

 

0

   

 

0

   

 

0

   

 

32,828

   

 

2,047,039

Executive Vice President and General Manager, Power Solutions Group

   

 

2019

   

 

390,539

   

 

0

   

 

1,860,030

   

 

0

   

 

0

   

 

0

   

 

31,694

   

 

2,282,262

William A. Schromm (8)

Former Executive Vice
President and Chief
Operating Officer

 

   

 

2020

   

 

531,954

   

 

0

   

 

2,326,534

   

 

0

   

 

0

   

 

0

   

 

46,011

   

 

2,904,499

   

 

2019

   

 

556,154

   

 

0

   

 

3,185,048

   

 

0

   

 

0

   

 

0

   

 

45,783

   

 

3,786,985

   

 

2018

   

 

535,769

   

 

0

   

 

3,300,045

   

 

0

   

 

556,085

   

 

0

   

 

44,474

   

 

4,436,373

(1)

Amounts in this column represent the aggregate grant date fair value of awards of PBRSUs and RSUs computed in accordance with FASB ASC Topic 718, which is derived using the closing price of our common stock on the date of grant, except that the Relative TSR component of the Upside PBRSUs was based on a valuation as of the grant date performed by a third party valuation firm. For the 2020 PBRSUs, the valuation was based upon a 0% attainment for the Upside PBRSUs and a 92% attainment for the Base PBRSUs, which represent the probable outcomes of the performance conditions for those awards, consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. The value of the 2020 awards at the grant date for each of the NEOs, assuming that the highest level of the performance conditions will be achieved, is as follows: Mr. El-Khoury: $7,578,939; Mr. Jackson: $9,221,420; Mr. Gutmann: $2,927,445; Mr. Hopkin: $2,395,604; Mr. Keeton: $2,395,604; and Mr. Schromm: $3,586,108. The amounts in this column do not necessarily represent the fair value for expensing purposes or the fair value of awards that were expected to vest as of December 31, 2020. As of March 5, 2021, 100% of the PBRSUs awarded on March 5, 2018 were vested pursuant to the relevant award agreement, which amount takes into account shares earned under the “multiplier” feature of the 2018 PBRSU awards (the “Multiplier Shares”) in addition to the shares earned under the PBRSU base grant (“Base Grant Shares”). On January 29, 2021, the Compensation Committee determined that the attainment levels for all of the performance goals under the relevant award agreements for the Base PBRSUs and the Upside PBRSUs awarded on March 4, 2019 were below threshold and, accordingly, none of those awards were eligible to vest. As of February 11, 2021, 0% of the Base PBRSUs and 0% of the Upside PBRSUs awarded on March 2, 2020 were expected to vest by the final vesting date pursuant to the relevant award agreement, which amount takes into account the expected vesting of Upside PBRSUs in addition to the Base PBRSUs. The estimated number of units which are expected to vest is evaluated and adjusted each reporting period, as necessary, in connection with the Company’s quarterly and annual financial statements. We further discuss the assumptions we made in the valuation of stock awards in Note 11 of the Notes to Consolidated Financial Statements in the Form 10-K, which assumptions in Note 11 are incorporated herein by reference.

 

(2)

The amounts in this column consist of earnings made by the NEO in 2020, 2019 and 2018.

 

(3)

There are no defined benefit or actuarial pension plans with respect to our NEOs.

 

68     ON Semiconductor Corporation 2021 Proxy Statement


Compensation of Executive Officers

 

(4)

Amounts in this column for 2020 consist of the items in the following table:

 

Name   Company
Contributions
Under 401(k)
Plan ($) (a)
    Executive
Group Term
Life Insurance
Imputed
Income* ($) (b)
    Premiums Paid by
the Company for
Basic Life Insurance
and Accidental
Death and
Dismemberment
Insurance ($) (c)
    Car
Allowance*
($) (d)
   

Financial
Planning
Services*

($) (e)

   

Imputed Income for
Post-Tax Long-Term
Disability Insurance
Benefit Payments*

($) (f)

    Relocation
Payments
($) (g)
 

Hassane S. El-Khoury

    0       21       115       1,200       0       0       250,000  

Keith D. Jackson

    11,400       14,479       1,380       14,400       10,000       1,550       0  

Bernard Gutmann

    11,400       7,525       1,380       14,400       0       1,283       0  

Vincent C. Hopkin

    11,400       4,902       1,380       14,400       900       1,035       0  

Simon Keeton

    11,400       1,710       1,380       14,400       2,996       1,035       0  

William A. Schromm

    11,400       7,524       1,380       14,400       10,000       1,307       0  
*

The Company also pays Medicare tax at the rate of 1.45% on the amounts listed in columns (b), (d), (e) and (f).

 

(5)

Mr. El-Khoury was appointed President and CEO of the Company and a member of the Board, effective as of December 7, 2020. For more information concerning his 2020 compensation, please refer to the “Compensation of Executive Officers — Compensation for Our Chief Executive Officer” section of this proxy statement.

 

(6)

Mr. Jackson retired from his positions as President and Chief Executive Officer and from the Board, effective as of December 7, 2020. Mr. Jackson will remain with the Company as an advisor until his retirement on May 31, 2021.

 

(7)

Mr. Gutmann retired from his positions as Executive Vice President, Chief Financial Officer and Treasurer of the Company, effective as of February 16, 2021. Mr. Gutmann will remain with the Company as an advisor until his retirement on April 23, 2021.

 

(8)

Mr. Schromm retired from his positions as Executive Vice President and Chief Operating Officer of the Company, effective as of January 19, 2021. Mr. Schromm will remain with the Company as an advisor until his retirement on April 11, 2021.

 

ON Semiconductor Corporation 2021 Proxy Statement     69


Compensation of Executive Officers

 

Grants of Plan-Based Awards in 2020

 

 

 

   

 

   

 

 

Estimated Possible Payouts
Under Non-Equity  Incentive
Plan Awards (2)

 

Estimated Future

Payouts Under Equity

Incentive Plan

Awards (3)

 

All Other
Stock
Awards:
Number of

Shares
of Stock
or Units

(#) (4) (i)

 

All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#) (j)

 

Exercise
or Base
Price of
Option
Awards

($/Sh) (k)

 

Grant Date
Fair Value of
Stock and
Option

Awards

($) (5) (l)

Name (a)

 

Grant Date

(b)

  Approval
Date (1)
  Threshold
($) (c)
  Target
($) (d)
  Maximum
($) (e)
  Threshold
(#) (f)
  Target
(#) (g)
  Maximum
(#) (h)

Hassane S. El-Khoury

          12/03/2020           54,808       109,615       0                        
      12/07/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      98,120    

 

 

 

   

 

 

 

      3,000,019
      12/07/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      228,946       228,946    

 

 

 

   

 

 

 

   

 

 

 

      4,578,920

Keith D. Jackson

   

 

 

 

      02/16/2020    

 

 

 

      1,531,526       3,063,053       0    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      03/02/2020       02/13/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      133,123    

 

 

 

   

 

 

 

      2,520,018
      03/02/2020       02/13/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      339,368       339,368    

 

 

 

   

 

 

 

   

 

 

 

      3,462,497

Bernard Gutmann

          02/16/2020           449,087       898,174       0                        
      03/02/2020       02/13/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      42,261    

 

 

 

   

 

 

 

      800,001
      03/02/2020       02/13/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      126,784       126,784    

 

 

 

   

 

 

 

   

 

 

 

      1,099,209

Vincent C. Hopkin

   

 

 

 

      02/16/2020    

 

 

 

      286,439       572,879       0    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      03/02/2020       02/13/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      31,696    

 

 

 

   

 

 

 

      600,005
      03/02/2020       02/13/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      95,088       95,088    

 

 

 

   

 

 

 

   

 

 

 

      824,408
      10/05/2020       09/24/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      8,640    

 

 

 

   

 

 

 

      200,016

Simon Keeton

          02/16/2020           292,336       584,672       0                        
      03/02/2020       02/13/2020    

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

   

 

 

 

      31,696