ANALOG DEVICES INC
For the period ended Jan 19, 2024. Filed Jan 19, 2024.
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Jan 19, 2024 · Filed Jan 19, 2024
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 |
| ☐ | Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☑ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material under §240.14a-12 |
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Mission
The most exciting development in technology today is the dawning of the Intelligent Edge era. Pervasive sensing and AI-driven edge computing is bringing computation and data storage closer to data sources in real time, providing intelligent insights faster, and saving bandwidth. This ubiquitous connectivity is coming in smart, connected systems that enable new capabilities, applications, and markets. ADI is at the center of this new era, supplying the intelligent sensing and connectivity on which it depends. Leveraging our strong position at theboundary between the physical and digital worlds, innovation capabilities, and domain expertise, ADI isworking closely with customers to bring intelligence to the edge.
| Transforming digital healthcare for better access and outcomes | Combating climate change through electrification, energy management, and industrial automation |
| Unlocking human potential by safely automating factories and transportation | Connecting humanity to foster knowledge, understanding, and community |
Letter from our CEO and Chair
Dear Fellow Shareholders,
The strength of a company’s business model, strategy, and culture is proven not by its performance in bullish times, but by the resilience of its performance in the face of adverse conditions. I am proud to share that ADI shined against the challenging macroeconomic backdrop of 2023 and once again delivered a year of record revenue and profits. The secret to our long track record of success remains the same – alignment of our cutting-edge innovation engine and domain expertise to the macrotrends underpinning the greatest growth opportunities at the Intelligent Edge; deep partnerships with our customers to cooperatively tackle their biggest challenges; and operational excellence with a continuous-improvement mindset. As we move through the prevailing business cycle downturn, we believe that the optionality and resilience of our diversified business model, numerous concurrent secular tailwinds, balance sheet strength, and focused execution will enable us to deliver strong financial returns over the long term.
Fiscal 2023 Results and Strategic Progress
The combination of our business model diversity and enterprise-wide focus on our customers’ success generated record revenue of $12.3 billion in fiscal 2023. We delivered net cash from operating activities and free cash flow of $4.8 billion and $3.6 billion, respectively, or 39% and 29% of our revenue, respectively, even after investing at record levels in research and development (R&D), our go-to-market (GTM) capabilities, and capital expenditures (CapEx) to ensure supply chain resiliency. Once again, we exceeded our target of returning 100% of our free cash flow to shareholders over the long term, returning a record $4.6 billion through share repurchases and dividends.
Though the macroeconomic environment softened in fiscal 2023, our customers deepened their partnerships with us; a reflection of the tremendous value we bring to their businesses. We continued, and continue, to invest heavily in R&D, GTM, and CapEx to strengthen our cutting-edge franchise and position ourselves for even greater success when the market recovers. As we further integrated Maxim this past year, we accelerated our efforts to capitalize on revenue synergy opportunities, and we made stellar progress toward a singular, “best of all” culture across our enterprise.
It is our strong belief that the current business cycle and geopolitical challenges are transitory concerns when viewed against the great wave of opportunity for ADI at the dawn of the Intelligent Edge era.
Leading the Intelligent Edge
Semiconductors have long been the bedrock of the Information Age and will surge in importance as the global economy continues to digitalize. The Intelligent Edge represents the latest era of digitalization as greater levels of sensing, artificial intelligence (AI)-driven computing, security, and connectivity are pushed to the far edges of traditional networks and diffused across innumerable market applications. ADI is well positioned to capitalize on this phenomenal growth opportunity as a technology and industry leader at the intersection of the physical and digital domains, aligned to the macrotrends shaping our future – from automation, to electrification of the transportation system, to immersive consumer experiences, to the digitalization of chemistry and biology. ADI is where the world’s most important data is born, and our customers rely on our extensive domain expertise and capabilities to sense, measure, interpret, and securely deliver the essential data and information fueling their products and solutions.
Intelligent Edge applications require ever higher levels of performance-driven analog technologies, supplemented by digital and software capabilities, delivered in smaller, securely connected, power-efficient solutions. We are partnering closely, and earlier, with our customers’ product development teams to co-create solutions of compounding sophistication. Increasingly, we are leveraging AI in and around our own products and across our operations to maximize the potential of our solutions’ and business’ performance.
These initiatives further our mission of accelerating the breakthroughs that enrich lives and the world around us at quantum and cosmic scales. ADI’s products are increasingly allowing customers to deliver market-shaping impact and address critical environmental and social issues, making safety, sustainability, and energy efficiency a strategic advantage for their businesses. That future focus extends to our own manufacturing and operations as we pursue continuous improvements in key areas such as energy efficiency, safety, water usage, and chemical management.
In closing, I fervently believe that ADI’s best days are still ahead. Though we have much to be pleased about, we are restless in our quest to find ever more creative ways to improve the health and welfare of people and our planet. Our strength and momentum reflect the tremendous passion, talent, creativity, and disciplined execution of our amazing employees, as well as the robust and long-standing support of our partners, customers, and investors. As we continue this journey together, we are grateful for your faith in ADI and are committed to increasing shareholder value into the opportunity-rich future.
VINCENT ROCHEChief Executive Officer and Chair of the Board of Directors
Letter from our Lead Independent Director
Dear Fellow Shareholders,
On behalf of the Board of Directors, I am pleased to present our annual Proxy Statement and provide an update on key activities and focus areas of the Board as ADI executes on our strategy to unlock long-term shareholder value.
In 2023, ADI accelerated its pursuit of the tremendous opportunities at the Intelligent Edge, negotiating macroeconomic and geopolitical challenges, and further sharpening its execution to enable both near- and long-term success. As the Board supported and oversaw management in driving this strategy, we also continued our work to further extend the independence, diversity, and capabilities of the Board to ensure the high standards of governance and results that you, our shareholders, expect and deserve.
Although the pandemic and supply issues the company experienced in recent years have normalized and receded in impact, geopolitical and macroeconomic challenges continued to reverberate across our industry and markets. ADI’s hybrid manufacturing strategy has been a key element of the company’s successful management of both areas, adding diversity and resilience to our supply chain and giving ADI the ability to more effectively and rapidly respond to fluctuations in demand.
However, supply issues extend beyond mere availability. Ensuring compliance with regulatory demands globally and in the regions where ADI operates has always been, and will continue to be, a critical area of focus. Additionally, our industry is facing a significant challenge in the unauthorized resale, diversion, and unintended misuse of semiconductor products and technologies. This challenge is one that ADI’s management and Board take seriously. Beginning in 2022, the Board enhanced its oversight of company programs designed to proactively identify and counter these activities. We are pleased with the progress made to date and with management’s commitment to taking appropriate actions to mitigate the misuse and diversion of our products.
Sustainability topics also remain key focus areas for ADI and our stakeholders and is a key oversight area for the Board. Accordingly, we engage regularly with management on these topics as they drive bold sustainability initiatives to reduce our overall emissions as we work toward carbon neutrality by 2030 and net zero by 2050. Management further demonstrated ADI’s commitment to sustainability by setting a new target in 2023 to reduce overall water withdrawn for our operations by 50% normalized to production output by 2027.
ADI creates, interprets, and acts upon data that is increasingly critical and valuable to customers. As such, the Board views the evolution and improvement of programs that protect privacy and security of our data as a top priority. We are strongly focused on minimizing the risk of a cybersecurity incident and actively govern cybersecurity as a Board. ADI’s management, including its Chief Information Security Officer, regularly provide the Audit Committee and full Board with updates on the performance of, and enhancements to, our cyber and information security programs.
To ensure the overall effectiveness and continuous improvement of our Board, we engaged a third-party facilitator for our Board evaluation process in fiscal 2023 to measure the impact of our strategy and actions against globally recognized governance best practices.
We have maintained an active engagement program with our shareholders and the Board directly receives and reviews shareholder feedback to inform decision making. Additionally, members of the Board take part in select meetings with our largest investors to hear what they are focused on and to ensure transparency, alignment, and accountability.
As our business evolves, so does our Board. We continued to expand the capabilities of our Board of Directors during 2023. I was pleased to join the Board in June 2023 to contribute my experience and expertise in corporate governance and strategy as a former Strategy Principal at Deloitte, LLP. Further, Dr. Peter B. Henry joined our Board in December 2023. His renowned academic career includes foreign affairs, global economics, and international finance experience; areas of growing importance to ADI’s global operations.
The Board’s Compensation and Talent Committee and the full Board continued to evaluate our compensation, succession, and leadership development programs to ensure alignment with our corporate strategy. Notably for fiscal 2023, we increased the percentile achievement required for target performance of our Relative TSR PRSUs to the 55th percentile, up from the 50th percentile. We also increased the weighting of our CEO and Chair’s annual long-term incentive compensation that is tied to challenging long-term performance goals to 75%, up from 65% in fiscal year 2022 to enhance the difficulty of achieving our performance goals.
We expect that 2024 will be another challenging year for our industry and the end-markets we serve. However, the Board and ADI’s management remain confident in what the future holds, and believe that the optionality and resilience of our business model, balance sheet strength, and focused execution, all underpinned by our robust corporate governance practices, will drive further value creation for our shareholders in the long-term.
I am honored to have been appointed by the Board as Lead Independent Director this January. The entire Board would like to thank Jim Champy for his leadership and dedication serving in this role for the last 13 years. We continue to be committed to strong, independent leadership, and the Lead Independent Director role is a critical part of our effective governance practices.
We thank you for your investment in ADI and recognize that your ownership of ADI shares reflects your belief in both the value of our company today and its potential in the future.
STEPHEN M. JENNINGSLead Independent Director and Chair of the Nominating andCorporate Governance Committee
Notice of 2024 Annual Meeting of Shareholders
| Items of BusinessThe 2024 Annual Meeting of Shareholders (Annual Meeting) of Analog Devices, Inc. (ADI) will be held at our offices located at 125 Summer Street, Boston, Massachusetts 02110, on Wednesday, March 13, 2024 at 9:00 a.m. local time. At the Annual Meeting, shareholders will consider and vote on the following matters:1.To elect the 11 director nominees named in this Proxy Statement to our Board of Directors, each to serve for a term expiring at the next annual meeting of shareholders; 2.To approve, by a non-binding “say-on-pay” vote, the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables, and accompanying narrative disclosures in this Proxy Statement; 3.To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending November 2, 2024; and 4.To consider a shareholder proposal regarding simple majority vote, if properly presented at the Annual Meeting.The shareholders will also act on any other business that may properly come before the Annual Meeting.Our Board of Directors recommends that you vote FOR each director nominee included in Proposal 1, FOR each of Proposals 2 and 3, and AGAINST Proposal 4. The full text of these proposals is set forth in this Proxy Statement.Please note that we are furnishing proxy materials and access to our Proxy Statement to our shareholders via our website instead of mailing printed copies to each of our shareholders. By doing so, we save costs and reduce our impact on the environment.Beginning on January 19, 2024, we will mail to our shareholders a Notice of Internet Availability of Proxy Materials, or Notice, which contains instructions on how to access our proxy materials and vote online. The Notice also contains instructions on how each of our shareholders can receive a paper copy of our proxy materials, including this Proxy Statement, our 2023 Annual Report, and a form of proxy card or voting instruction form. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically.Shareholders of record at the close of business on the record date of January 9, 2024 are entitled to vote at the Annual Meeting.Your vote is important no matter how many shares you own, and we encourage you to vote promptly whether or not you plan to attend the Annual Meeting.By Order of the Board of Directors, | |
| DATE AND TIMEWednesday, March 13, 2024 9:00 a.m. local timePLACE125 Summer Street Boston, MA 02110RECORD DATETuesday, January 9, 2024 | |
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| How to vote: Your vote is importantVOTE BY PROXY:BY INTERNETGo to www.proxyvote.comYou will need the 16-digit control number that appears on your proxy card or the Notice.BY TELEPHONECall 1-800-690-6903 You will need the 16-digit control number that appears on your proxy card or the Notice.BY MAILMark, sign, date, and mail your proxy card or your voting instruction form. No postage is required if mailed in the United States.VOTE DURING THE ANNUAL MEETING:For details on voting your shares during the Annual Meeting, see Q&A About Annual Meeting and Voting on page 93. | |
| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on March 13, 2024: This Proxy Statement and the 2023 Annual Report are available for viewing, printing and downloading at https://investor.analog.com/financial-info/annual-reports. | |
| Web links throughout this document are provided for convenience only, and the content on the referenced websites does not constitute a part of this Proxy Statement.The sum and/or computation of individual numerical amounts or percentages disclosed in this Proxy Statement may not equal the total due to rounding. | Forward-Looking StatementsThis Proxy Statement contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “could” and “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance and our long-term financial model; our strategy; our anticipated growth and trends in our industry, markets, and businesses; new or improved innovative solutions, products, and technologies, including those related to artificial intelligence and the Intelligent Edge; future investments in research and development; the effects of business, economic, political, legal, and regulatory impacts or conflicts upon our global operations; recruiting or retaining our key personnel; changes to our compensation programs; our future liquidity, capital needs, and capital expenditures; our future market position, expected competitive changes in the marketplace, and changes in demand and supply for our products; the importance of our product offerings and technologies to our customers; our ability to pay dividends or repurchase stock; our ability to service our outstanding debt; our expected tax rate; our ability to successfully integrate acquired businesses and technologies, including Maxim Integrated Products, Inc. (Maxim); environment, social, and governance related goals, commitments, and progress towards such goals and commitments; and other characterizations of future events or circumstances are forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: the effects of business, economic, political, legal, and regulatory uncertainty or conflicts upon our global operations; changes in demand for semiconductors and the related changes in demand and supply for our products; products that may be diverted from our authorized distribution channels; manufacturing delays, product availability, and supply chain disruptions; our future liquidity, capital needs, and capital expenditures; our development of technologies and research and development investments; our ability to compete successfully in the markets in which we operate; changes in our estimates of our expected tax rates based on current tax law; adverse results in litigation matters; the risk that we will be unable to retain and hire key personnel; security breaches or other cyber incidents; unanticipated difficulties or expenditures relating to integrating Maxim; uncertainty as to the long-term value of our common stock; and the risk that expected benefits, synergies, and growth prospects of acquisitions, including those from our acquisition of Maxim, may not be fully achieved in a timely manner, or at all. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to our filings with the Securities and Exchange Commission (SEC), including the risk factors contained in our most recent Annual Report on Form 10-K. Forward-looking statements represent management’s current expectations and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances. |
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Table of Contents
| Highlights | 1 | |
|---|---|---|
| Proxy Summary | 6 | |
| Board of Directors | 14 | |
| Proposal 1 — Election of Directors | 14 | |
| Election Process | 14 | |
| Director Criteria, Qualifications, and Experience | 15 | |
| Director Biographies | 18 | |
| Determination of Independence | 24 | |
| Director Candidates | 25 | |
| Corporate Governance | 26 | |
| Board Policies and Practices | 26 | |
| Board and Committee Structure | 28 | |
| Oversight by Our Board | 34 | |
| Other Governance Matters | 40 | |
| Director Compensation | 42 | |
| Annual Director Compensation | 42 | |
| Fiscal Year 2023 Director Compensation | 43 | |
| Stock Ownership Guidelines for Non-Employee Directors | 44 | |
| Equity Award Grant Date Policy for Non-Employee Directors | 44 | |
| Leadership Team | 45 | |
| Leadership Team | 45 | |
| Executive Compensation | 47 | |
| Proposal 2 — Advisory Approval of the Compensation of ADI’s Named Executive Officers | 47 | |
| Compensation Discussion and Analysis | 48 | |
| Compensation and Talent Committee Report | 68 | |
| Compensation and Talent Committee Interlocks and Insider Participation | 69 | |
| Compensation Tables | 69 | |
| CEO Pay Ratio | 79 | |
| Pay Versus Performance | 80 |
| Audit Matters | 83 | |
|---|---|---|
| Proposal 3 — Ratification of the Selection of Ernst & Young LLP as Independent Registered Public Accounting Firm for the Company’s Fiscal Year Ending November 2, 2024 | 83 | |
| Overview | 83 | |
| Independent Registered Public Accounting Firm Fees | 84 | |
| Audit Committee’s Pre-Approval Policy and Procedures | 85 | |
| Audit Committee Report | 85 | |
| Beneficial Ownership of Common Stock | 86 | |
| Security Ownership of Certain Beneficial Owners | 86 | |
| Security Ownership of Directors and Executive Officers | 87 | |
| Delinquent Section 16(a) Reports | 88 | |
| No Hedging or Pledging Policy | 88 | |
| Equity Award Program Description | 88 | |
| Securities Authorized for Issuance under Equity Compensation Plans | 90 | |
| Shareholder Proposal | 91 | |
| Proposal 4 — Shareholder Proposal Regarding Simple Majority Vote | 91 | |
| Q&A About Annual Meeting and Voting | 93 | |
| Additional Information | 97 | |
| Other Matters | 97 | |
| Shareholder Proposals for Inclusion in Proxy Statement | 97 | |
| Shareholder Director Nominations for Inclusion in Proxy Statement | 97 | |
| Shareholder Proposals and Director Nominations Not Included in Proxy Statement | 97 | |
| Householding of Annual Meeting Materials | 98 | |
| Appendix A: Reconciliation of GAAP Measures to Non-GAAP Measures | 99 | |
| Helpful Resources | 101 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.