SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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INTUITIVE SURGICAL, INC.
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|NOTICE OF THE 2021 ANNUAL MEETING OF STOCKHOLDERS|
To the stockholders of Intuitive Surgical, Inc.:
We are pleased to provide notice of the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) of Intuitive Surgical, Inc. that will be held on Thursday, April 22, 2021, at 3:00 p.m. Pacific Daylight Time. The Annual Meeting will be held entirely online due to the COVID-19 pandemic, in order to support the health and well-being of our partners, employees, and stockholders. You will be able to attend and participate in the Annual Meeting online by visiting www.virtualshareholdermeeting.com/ISRG2021, where you will be able to listen to the meeting live, submit questions, and vote.
Items of Business:
1.To elect eleven members to the Board of Directors of the Company to serve until the 2022 Annual Meeting of Stockholders (Proposal No. 1).
2.To consider and approve, on an advisory basis, the compensation of the Company’s Named Executive Officers (“NEOs”) as disclosed in the Proxy Statement (Proposal No. 2).
3.To ratify the appointment of PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021 (Proposal No. 3).
4.To approve the amendment and restatement of the Amended and Restated 2010 Incentive Award Plan (Proposal No. 4).
5.To transact any other business that is properly brought before the Annual Meeting or adjournments or postponements thereof.
Only stockholders of record at the close of business on March 5, 2021, are entitled to notice of, and to vote at, the Annual Meeting or any adjournments or postponements thereof.
We are pleased to continue to provide access to our proxy materials over the Internet instead of mailing printed documents. We believe that this process allows us to provide information regarding the Annual Meeting in a more timely manner, while reducing the environmental impact and the cost of our Annual Meeting. The Notice will be mailed to stockholders starting on or about March 12, 2021, and contains instructions on how to access our proxy materials over the Internet. The Notice also contains instructions on how to request a copy of our proxy materials, including the attached Proxy Statement, our 2020 Annual Report, and a form of proxy card or voting instruction card.
Your vote is important. Whether or not you are able to attend the Annual Meeting online, it is important that your shares be represented. Please vote as soon as possible.
On behalf of our Board of Directors, thank you for your participation in this important annual process.
|By order of the Board of Directors|
|/s/ Gary S. Guthart, Ph.D.|
|Gary S. Guthart, Ph.D.|
|President and Chief Executive Officer|
March 10, 2021
Please note that attendance at the online Annual Meeting will be limited to stockholders as of the record date, or their authorized representatives, and guests of Intuitive.
TABLE OF CONTENTS
Why am I receiving these materials?
Our Board of Directors (the “Board”) has made these materials available to you on the Internet or has delivered printed versions of these materials to you by mail in connection with the solicitation of proxies to be voted at our Annual Meeting of Stockholders to be held on April 22, 2021, at 3:00 p.m., Pacific Daylight Time, online for the purposes as set forth in the “Notice of Annual Meeting of Stockholders.” Our stockholders are invited to attend the Annual Meeting online and are requested to vote on the proposals described in this Proxy Statement. The approximate date on which this Proxy Statement and form of proxy will be first made available to stockholders is March 10, 2021.
What is included in these materials?
These materials include:
•This Proxy Statement for the Annual Meeting; and
•Our 2020 Annual Report to Stockholders, which includes our audited consolidated financial statements.
If you received printed versions of these materials by mail, these materials also include the proxy card or voting instruction form for the Annual Meeting.
What items will be voted on at the Annual Meeting?
You will be voting on the following proposals:
1.The election of eleven members to the Board to serve until the 2022 Annual Meeting of Stockholders (Proposal No. 1);
2.The advisory approval of the compensation of the Company’s NEOs (Proposal No. 2);
3.The ratification of the appointment of PwC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021 (Proposal No. 3); and
4.The approval of the amendment and restatement of the Amended and Restated 2010 Incentive Award Plan (Proposal No. 4).
What are the Board’s voting recommendations?
The Board recommends that you vote your shares:
•“FOR” the election of each of the nominees to the Board (Proposal No. 1);
•“FOR” the approval, on an advisory basis, of the compensation of the Company’s NEOs (Proposal No. 2);
•“FOR” the ratification of the appointment of PwC as the Company’s independent registered accounting firm for the fiscal year ending December 31, 2021 (Proposal No. 3); and
•“FOR” the approval of the amendment and restatement of the Amended and Restated 2010 Incentive Award Plan (Proposal No. 4).
Where are Intuitive’s principal executive offices located, and what is Intuitive’s main telephone number?
Our principal executive offices are located at 1020 Kifer Road, Sunnyvale, California 94086, and our main telephone number is (408) 523-2100.
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
We are pleased to continue to take advantage of the SEC rules that allow us to furnish our proxy materials to our stockholders by providing access to such documents on the Internet instead of mailing printed copies. Accordingly, most of our stockholders of record and beneficial owners have received a Notice of Internet Availability of Proxy Materials (“Notice”) and will not receive a full set of proxy materials in the mail unless requested. Instructions on how to access the proxy materials on the Internet may be found on the website referred to in the Notice. If you would like to receive our proxy materials electronically by email, you should follow the instructions for requesting such materials provided in the Notice. Your election to receive proxy materials electronically by email will
remain in effect until you terminate such election. Choosing to receive future proxy materials electronically by email will reduce the environmental impact and the costs incurred by us in printing and mailing the proxy materials.
How can I get electronic access to the proxy materials?
Registered and Beneficial Stockholders
You can view the proxy materials for the Annual Meeting on the Internet at www.proxyvote.com.
Who may vote at the Annual Meeting?
The Board set March 5, 2021, as the record date for the Annual Meeting. All stockholders of record who owned Intuitive common stock at the close of business on March 5, 2021, are entitled to receive notice of, to attend, and to vote at the Annual Meeting. Each share of Intuitive common stock has one vote on each matter, and there is no cumulative voting, nor does Intuitive have non-voting preference shares, non-voting shares without preference, multiple voting rights shares, priority shares, golden shares, voting rights ceilings, or other similar voting right restrictions. At the close of business on the record date, there were 118,378,130 shares of common stock outstanding.
What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent, Computershare Investor Services, LLC (“Computershare”), you are considered the stockholder of record with respect to those shares, and the Notice was sent directly to you by the Company. If you request printed copies of the proxy materials, you will receive a proxy card by mail. As a stockholder of record, you may vote at the Annual Meeting by attending the Annual Meeting online and following the instructions posted at www.virtualshareholdermeeting.com/ISRG2021, or you may vote by proxy. Whether or not you plan to attend the Annual Meeting online, we encourage you to fill out and return the proxy card or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted.
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, you are the beneficial owner of shares held in “street name,” and the Notice is forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. If you request printed copies of the proxy materials, you will receive a voting instruction form by mail. You are also invited to attend the Annual Meeting online at www.virtualshareholdermeeting.com/ISRG2021. However, since you are not the stockholder of record, you may not vote your shares at the Annual Meeting by attending the Annual Meeting online unless you request and obtain a valid proxy card from your broker or other agent.
How can I vote my shares?
By Attending the Annual Meeting Online — If you are a stockholder of record, you may vote online at the Annual Meeting by attending the Annual Meeting online and following the instructions posted at www.virtualshareholdermeeting.com/ISRG2021. If your shares are held in a brokerage account or by another nominee or trustee, you are considered the beneficial owner of shares held in street name. If you are a beneficial owner, you are also invited to attend the Annual Meeting online. Since a beneficial owner is not the stockholder of record, you may not vote these shares online at the Annual Meeting unless you obtain a “legal proxy” from the organization that holds your shares, giving you the right to vote the shares at the Annual Meeting.
Via the Internet — You may vote by proxy via the Internet by visiting www.proxyvote.com.
By Telephone — If you requested printed copies of the proxy materials by mail, you may vote by proxy by calling the toll-free number found on the voting instruction form.
By Mail — If you requested printed copies of the proxy materials by mail and if you are a stockholder of record, you may also vote by proxy by filling out the proxy card and sending it back in the envelope provided. If you requested printed copies of the proxy materials by mail and you are a beneficial owner, you may vote by proxy by filling out the voting instruction form and sending it back in the envelope provided.
What is the quorum requirement for the Annual Meeting?
The holders of a majority of the shares entitled to vote at the Annual Meeting must be present at the Annual Meeting for the transaction of business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against, or abstained, if you:
•are present in attendance and vote online at the Annual Meeting; or
•have voted on the Internet, by telephone, or by properly submitting a proxy card or voting instruction form by mail.
Broker non-votes will also be counted as present and entitled to vote for purposes of determining if there is a quorum. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.
At the close of business on the record date, there were 118,378,130 shares of common stock outstanding and entitled to vote. Accordingly, 59,189,066 shares must be represented by stockholders present at the Annual Meeting online or by proxy to have a quorum.
How are proxies voted?
All shares represented by valid proxies received prior to the Annual Meeting will be voted and, where a stockholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the stockholder’s instructions.
What happens if I do not give specific voting instructions?
Stockholders of Record. If you are a stockholder of record and you:
•indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or
•sign and return a proxy card without giving specific voting instructions,
then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.
Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.”
Which ballot measures are considered “routine” or “non-routine”?
The ratification of the appointment of PwC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021 (Proposal No. 3) is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters and, therefore, no broker non-votes are expected to exist in connection with Proposal No. 3.
The election of directors (Proposal No. 1), the advisory approval of the compensation of our NEOs (Proposal No. 2), and the approval of the amendment and restatement of the Amended and Restated 2010 Incentive Award Plan (Proposal No. 4) are considered non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters and, therefore, there may be broker non-votes on these three proposals.
What is the voting requirement to approve each of the proposals?
For Proposal No. 1, each director must be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares present in attendance online or represented by proxy at the Annual Meeting and entitled to vote on the proposal. This means that the number of votes cast “FOR” a director must exceed the number of votes cast “AGAINST” that director, with abstentions and broker non-votes not counted as votes cast as either “FOR” or “AGAINST” such director’s election.
Approval of Proposal Nos. 2, 3, and 4 requires the affirmative vote of a majority of the shares present in attendance online or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” Proposal Nos. 2, 3, and 4. Broker non-votes will have no effect on the vote for Proposal Nos. 2 and 4, and broker non-votes are generally not expected for Proposal No. 3.
How are abstentions and broker non-votes treated?
Shares represented by proxies that reflect abstentions or broker non-votes will be counted as shares that are present in attendance and entitled to vote for purposes of determining the presence of a quorum. Shares voted “ABSTAIN” on proposals other than Proposal No. 1 will have the same effect as voting against the matter. Brokers, banks, and other nominees have the power to vote without receiving voting instructions from beneficial owners on Proposal No. 3, so the Company expects no broker non-votes on this proposal. For Proposal Nos. 1, 2, and 4, broker non-votes are not deemed to be entitled to vote for purposes of determining whether stockholder approval of a matter has been obtained. As a result, broker non-votes are not included in the tabulation of voting results for these proposals for purposes of determining whether proposals have been approved. In order to minimize the number of broker non-votes, the Company encourages you to provide voting instructions to the organization that holds your shares by carefully following instructions provided on the Notice.
Can I change my vote?
You may revoke your proxy at any time before it is actually voted at the Annual Meeting by any of the following:
•Delivering written notice of revocation to our Corporate Secretary at 1020 Kifer Road, Sunnyvale, California 94086;
•Submitting a later dated proxy; or
•Attending the Annual Meeting online and voting by following the instructions at www.virtualshareholdermeeting.com/ISRG2021.
Your attendance at the Annual Meeting online will not, by itself, constitute revocation of your proxy. You may also be represented by another person present in attendance online at the Annual Meeting by executing a form of proxy designating that person to act on your behalf. Shares may only be voted by or on behalf of the record holder of shares as indicated in our stock transfer records. If you are a beneficial stockholder but your shares are held of record by another person, such as a stock brokerage firm or bank, that person must vote the shares as the record holder in accordance with the beneficial holder’s instructions.
Who bears the cost of proxy solicitation and who is soliciting proxies on our behalf?
We will bear the expense of soliciting proxies, including the expense of preparing, printing, and mailing this proxy statement and the proxies we solicit. Proxies will be solicited by mail, telephone, personal contact, and electronic means. We have retained Alliance Advisors, LLC to solicit proxies for a fee of approximately $8,500 plus a reasonable amount to cover out-of-pocket expenses for proxy solicitation services. Proxies may also be solicited by our directors, officers, and employees in person, by the Internet, by telephone, or by fax without additional remuneration. Copies of proxy materials and our 2020 Annual Report will be supplied to brokers and other nominees for the purpose of soliciting proxies from beneficial owners, and we will reimburse such brokers or other nominees for their reasonable expenses.
Who will serve as the inspector of election?
A representative from Veaco Group will serve as the inspector of election to determine whether or not a quorum is present and to tabulate votes cast by proxy or online at the Annual Meeting.
Where can I find the voting results of the Annual Meeting?
The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of election and published in our current report on Form 8-K within four business days after the Annual Meeting.
How do I attend the Virtual Annual Meeting?
This year’s Annual Meeting will be held entirely online due to the continuing public health impact of the COVID-19 pandemic, in order to support the health and well-being of our partners, employees, and stockholders. Stockholders of record as of March 5, 2021, will be able to attend and participate in the Annual Meeting online by accessing www.virtualshareholdermeeting.com/ISRG2021. To join the Annual Meeting, you will need to have your 16-digit control number, which is included on your Notice and your proxy card.
Even if you plan to attend the Annual Meeting online, we recommend that you also vote by proxy as described herein so that your vote will be counted if you decide not to attend the Annual Meeting.
Access to the Audio Webcast of the Annual Meeting. The live audio webcast of the Annual Meeting will begin promptly at 3:00 p.m., Pacific Daylight Time. Online access to the audio webcast will open approximately thirty minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. We encourage our stockholders to access the meeting prior to the start time.
Log in Instructions. To attend the online Annual Meeting, log in at www.virtualshareholdermeeting.com/ISRG2021. Stockholders will need their unique 16-digit control number, which appears on the Notice and the instructions that accompanied the proxy materials. In the event that you do not have a control number, please contact your broker, bank, or other nominee as soon as possible and no later than April 20, 2021, so that you can be provided with a control number and gain access to the meeting.
Submitting Questions at the virtual Annual Meeting. As part of the Annual Meeting, we will hold a live question and answer session, during which we intend to answer questions submitted during the meeting in accordance with the Annual Meeting’s Rules of Conduct that are pertinent to the Company and the meeting matters, as time permits. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once.
The Annual Meeting’s Rules of Conduct will be posted on https://isrg.gcs-web.com approximately 2 weeks prior to the date of the Annual Meeting.
Technical Assistance. Beginning 30 minutes prior to the start of and during the virtual Annual Meeting, we will have support team ready to assist stockholders with any technical difficulties they may have accessing or hearing the virtual meeting.
If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log-in page.
Availability of live webcast to team members and other constituents. The live audio webcast will be available to not only our stockholders but also our team members and other constituents.
Deadline for receipt of stockholder proposals for the 2022 Annual Meeting of Stockholders.
Any stockholder who meets the requirements of the proxy rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), may submit to the Board proposals to be considered for submission to the stockholders at the 2022 Annual Meeting of Stockholders. In order to be considered for inclusion in the proxy material to be disseminated by the Board, your proposal must comply with the requirements of Rule 14a-8 under the Exchange Act and be submitted in writing by notice delivered or mailed by first-class United States mail, postage prepaid, to our Corporate Secretary at:
Intuitive Surgical, Inc.
Attn: Corporate Secretary
1020 Kifer Road
Sunnyvale, CA 94086-5301
and must be received no later than November 12, 2021. Your notice must include the following:
•Your name and address and the text of the proposal to be introduced.
•The number of shares of stock you hold of record, beneficially own, and represent by proxy as of the date of your notice.
•A representation that you intend to appear in person or by proxy at the 2022 Annual Meeting of Stockholders to introduce the proposal specified in your notice.
The chair of the meeting may refuse to acknowledge the introduction of your proposal if it is not made in compliance with the foregoing procedures or the applicable provisions of our Amended and Restated Bylaws (“Bylaws”). Our Bylaws also provide for separate notice procedures to recommend a person for nomination as a director or to propose business to be considered by stockholders at a meeting outside the processes of Rule 14a-8. To be considered timely under these provisions, the stockholder’s notice must be received by our Corporate Secretary at our principal executive offices at the address set forth above no earlier than December 23, 2021, and no later than January 22, 2022. If the date of our 2022 Annual Meeting of Stockholders is more than 30 days before or more than 60 days after April 21, 2022, the stockholder’s notice must be received not later than the 90th day prior to such annual meeting or, if later, the 10th day following the day on which public announcement of the date of such annual meeting was first made. A stockholder providing such notice must also further update and supplement such notice so that the information provided or required to be provided is true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement must be received by our Corporate Secretary at our principal executive offices not later than 5 business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date) and not later than 8 business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof). Our Bylaws also specify requirements as to the form and content of a stockholder’s notice. We recommend that any stockholder wishing to make a nomination for director or to bring any other item before an annual meeting, other than proposals intended to be included in the proxy materials pursuant to Rule 14a-8, review a copy of our Bylaws, as amended and restated to date, which can be found at www.intuitive.com or obtained, without charge, from our Corporate Secretary at the address above.
In addition, our Bylaws permit certain of our stockholders who have beneficially owned 3% or more of our outstanding common stock continuously for at least three years to submit nominations to be included in our proxy materials for up to 25% of the total number of directors then serving. Notice of proxy access director nominations for the 2022 Annual Meeting of Stockholders must be delivered to our Corporate Secretary at our principal executive offices at the address noted above no earlier than December 23, 2021, and no later than the close of business on January 22, 2022. The notice must set forth the information required by our Bylaws with respect to each proxy access director nomination that an eligible stockholder or stockholders intend to present at the 2022 Annual Meeting of Stockholders and must otherwise be in compliance with our Bylaws.
DIRECTORS AND CORPORATE GOVERNANCE
The Board is composed of a group of leaders with broad and diverse experience in many fields, including management of large global enterprises, technology and innovation leadership, and healthcare. In these positions, they have also gained industry knowledge and significant and diverse management experience, including strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. Many of the directors also have experience serving as executive officers or on boards of directors and board committees of other public companies and have an understanding of corporate governance practices and trends. Other directors have significant academic and research experience and bring unique perspectives to the Board.
The Governance and Nominating Committee of the Board and the Board believe the skills, qualities, attributes, and experiences of its current directors provide the Company with business acumen and a diverse range of perspectives to engage each other and management to effectively address the evolving needs of the Company and represent the best interests of the Company’s stockholders.
The Governance and Nominating Committee evaluates candidates recommended by stockholders using the same criteria as used for other candidates recommended by its members, other members of the Board, or other persons. The criteria are described in detail in the Nomination Process section below. In addition, our Bylaws permit a stockholder, or group of up to 20 stockholders, owning 3% or more of the Company’s common stock continuously for at least three years to nominate and include in the Company’s proxy materials for an annual meeting of stockholders, director candidates constituting up to 25% of the Board, provided that the stockholder (or group) and each nominee satisfy the requirements specified in the Bylaws.
The Bylaws provide for a majority voting standard in uncontested elections of directors. As such, in an election where the number of nominees for director does not exceed the number of directors to be elected, a nominee for director will be elected to the Board if the number of shares voted for the nominee exceeds the number of shares voted against the nominee. However, the majority voting standard would not apply if the number of nominees for director exceeds the number of directors to be elected. In that case, the nominees receiving the highest number of affirmative votes of the shares entitled to vote at the meeting would be elected.
The majority voting standard will apply to the election taking place at the meeting. Consequently, in order to be elected, a nominee must receive more “for” votes than “against” votes. Proxies may not be voted for more than the eleven nominees, and stockholders may not cumulate votes in the election of directors. In the event any nominee is unable or declines to serve as a director at the time of the meeting, the proxies will be voted for such nominee, if any, as may be designated by the Board to fill the vacancy. As of the date of this Proxy Statement, the Board is not aware that any nominee is unable or will decline to serve as a director.
Nominees for Director
The names of the directors being nominated for election and their ages, as of February 13, 2021, are set forth below. The following biographies describe the principal occupations, positions, and directorships for at least the past five years of the nominees for director, as well as certain information regarding their individual experiences, qualifications, attributes, and skills that led the Board to conclude that they should serve on the Board. There are no family relationships among any of our director nominees or executive officers. Among our eleven nominees for election to the Board, four nominees self-identify as women, and two nominees self-identify as individuals from underrepresented communities (defined as an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender).
Craig H. Barratt, Ph.D.
Chairman of the Board, Intuitive Surgical, Inc.
Director since 2011
Joseph C. Beery
Former Senior Vice President and Chief Information Officer, Thermo Fisher Scientific Inc.
Director since 2020
Craig H. Barratt, Ph.D., 58, has been a member of our Board since April 2011 and has served as Chairman of our Board of Directors since April 2020. Dr. Barratt served as the independent lead director (“Lead Director”) from April 2018 to April 2020. Dr. Barratt has previously served as the Senior Vice President and General Manager of the Connectivity Group of Intel Corporation, a semiconductor company, since its acquisition of Barefoot Networks, Inc., a computer networking company, from July 2019 until May 2020, where he previously served as President and Chief Executive Officer from April 2017. He held several different roles at Google, Inc., an Internet company, from June 2013 to January 2017, including Senior Vice President, Access and Energy, and Advisor. He previously served as President of Qualcomm Atheros, the networking and connectivity subsidiary of Qualcomm Inc. (“Qualcomm”), a mobile technology company, from May 2011 to February 2013. He served as President, Chief Executive Officer and a director of Atheros Communications, Inc., a fabless semiconductor company, from 2003 until its 2011 acquisition by Qualcomm. Dr. Barratt holds Ph.D. and Master of Science degrees from Stanford University, as well as a Bachelor of Engineering degree in electrical engineering and a Bachelor of Science degree in pure mathematics and physics from the University of Sydney in Australia. Dr. Barratt is a co-inventor of a number of U.S. patents in fields including wireless communications and medical imaging and has co-authored a book on linear controller design and open-source software.
Dr. Barratt’s qualifications to serve on our Board and in the Chairman position include his leadership roles at various high growth technology companies.
Joseph C. Beery, 58, has been a member of our Board since April 2020. Mr. Beery is an experienced leader of corporate information technology (“IT”) systems with a long history in managing IT and eCommerce services for global companies. Mr. Beery joined Thermo Fisher Scientific Inc., a life sciences company, in January 2014, through its acquisition of Life Technologies Corporation, a biotechnology company, and last held the role of Senior Vice President and Chief Information Officer until September 2019. Mr. Beery previously was the Senior Vice President and Chief Information Officer at Life Technologies Corporation from 2008 to 2014 and U.S. Airways and America West Airlines from 2000 to 2008. Mr. Beery has served as a member of the Board of Directors of several other companies and not-for-profit organizations. Mr. Beery received his B.S. in Business Administration and Business Computer Systems from the University of New Mexico. Mr. Beery self-identifies as Hispanic.
Mr. Beery’s qualifications to serve on our Board include his broad experience within global organizations leading IT and digital strategy.
Gary S. Guthart, Ph.D.
President and Chief Executive Officer, Intuitive Surgical, Inc.
Director since 2009
Amal M. Johnson
Former Executive Chairman of the Board, Author-IT, Inc.
Director since 2010
Gary S. Guthart, Ph.D., 55, joined Intuitive in April 1996. In July 2007, Dr. Guthart was promoted to President and, in January 2010, he was appointed as Chief Executive Officer. Prior to that, in February 2006, Dr. Guthart assumed the role of Chief Operating Officer. Prior to joining Intuitive, Dr. Guthart was part of the core team developing foundation technology for computer enhanced-surgery at SRI International (formerly Stanford Research Institute). Dr. Guthart has served on the Board of Directors of Illumina, Inc., a sequencing- and array-based solutions company, since December 2017 and previously served on the Board of Directors of Affymetrix, Inc., a life sciences company, from May 2009 until its acquisition by Thermo Fisher Scientific Inc. in March 2016. He received a B.S. in Engineering from the University of California, Berkeley and an M.S. and a Ph.D. in Engineering Science from the California Institute of Technology.
Dr. Guthart brings to the Board business, operating, financial, and scientific experience. His service as the Chief Executive Officer of Intuitive enables the Board to perform its oversight function with the benefits of management’s perspectives on the business.
Amal M. Johnson, 68, has been a member of our Board since April 2010. Ms. Johnson has served on the Board of Directors of CalAmp since Dec 2013 and as chairman since July 2020. She also served on the board of Essex Property Trust, Inc. since February 2018 and, from March 2012 to December 2017, Ms. Johnson was a member of the Board of Directors of Author-IT, Inc. (“Author-IT”), a Software as a Service (“SaaS”) private company that provides a platform for creating, maintaining, and distributing single-sourced technical content, and Executive Chairman from March 2012 to October 2016. Prior to joining Author-IT, Ms. Johnson led MarketTools, Inc., a SaaS company as Chief Executive Officer from 2005 to 2008, and then as Chairman of the Board until the company was acquired in January 2012. Ms. Johnson holds a Bachelor of Arts in Mathematics from Montclair State University and studied Computer Science at Stevens Institute of Technology Graduate School of Engineering. Ms. Johnson self-identifies as Middle Eastern.
Ms. Johnson brings to our Board her leadership and operational experience, including from her service as the Chairman of the Board of Directors and Chief Executive Officer of a technology company.
Don R. Kania, Ph.D.
Former President and Chief Executive Officer of FEI Company
Director since 2018
Amy L. Ladd, M.D.
Orthopaedic Surgeon, Stanford University Medical Center
Director since 2019
Don R. Kania, Ph.D., 66, has been a member of our Board since July 2018. Dr. Kania has more than 25 years of experience that includes scientific research and development, global operations, and manufacturing. From August 2006 to September 2016, Dr. Kania served as Chief Executive Officer and President of FEI Company, a high-performance electron microscopy company, until its acquisition by Thermo Fisher Scientific Inc. Dr. Kania has served as a member on the Board of Directors and Audit Committee of NanoString Technologies, Inc., a life sciences company, since October 2019. He has previously served as a member of the Board of Directors of several other companies. He also serves as an advisor to several privately held life sciences companies. Dr. Kania received his Ph.D. in Engineering and Bachelor and Master’s degrees in physics from the University of Michigan.
Dr. Kania’s qualifications to serve on our Board include his deep scientific and leadership expertise.
Amy L. Ladd, M.D., 63, has been a member of our Board since August 2019. Dr. Ladd has spent nearly three decades practicing orthopaedic surgery at Stanford University. Dr. Ladd has served as the Elsbach-Richards Professor of Surgery since December 2017 and as Professor of Orthopaedic Surgery as well as Professor of Medicine (Immunology & Rheumatology), by courtesy, at the Stanford Universal Medical Center since 2003. Dr. Ladd has served on the Board of the Perry Initiative since September 2013. Dr. Ladd also served as the chair of the American Academy of Orthopaedic Surgeons (AAOS) Board of Specialties Society from March 2018 to March 2019 and previously served as a member of the Board of the AAOS from March 2016 to March 2019. Dr. Ladd received her M.D. from SUNY Upstate Medical University, completed her Orthopaedic Residency at the University of Rochester, and completed the Harvard Combined Hand Surgery Fellowship. Dr. Ladd was a fellow at L’Institut de la Main in Paris, France prior to joining the Stanford University faculty in 1990. She earned her A.B. in History from Dartmouth College.
Dr. Ladd’s qualifications to serve on our Board include her deep surgical and medical expertise.
Keith R. Leonard, Jr.
Chairman of the Board, Unity Biotechnology, Inc.
Director since 2016
Alan J. Levy, Ph.D.
Former Chief Executive Officer of Chrono Therapeutics Inc.
Director since 2000
Keith R. Leonard, Jr., 59, has been a member of our Board since January 2016. Mr. Leonard has more than 20 years of experience in the pharmaceutical industry and has served as the Chairman of the Board of Unity Biotechnology, Inc., a biotechnology company, since October 2016 and was CEO from January 2016 to March 2020. Previously, Mr. Leonard was President, Chief Executive Officer, and a member of the Board of Directors of Kythera Biopharmaceuticals, Inc., a biopharmaceutical company that he co-founded, which focused on discovering, developing, and commercializing drugs for the aesthetic medicine market, from 2005 until its acquisition by Allergan plc in October 2015. Mr. Leonard worked across numerous areas at Amgen Inc. from 1991 to 2004, leading various functions including engineering, IT, and ultimately as General Manager of Amgen Europe. Mr. Leonard received a B.S. in Engineering from the University of California, Los Angeles, a B.A. in History from the University of Maryland, an M.S. in Engineering from the University of California, Berkeley, and an M.B.A. from the Anderson School of Management at the University of California, Los Angeles. Mr. Leonard has served on the Boards of Directors of Anacor Pharmaceuticals, Inc. from June 2014 to June 2016 and Sienna Biopharmaceuticals, Inc. from February 2016 to December 2019. Mr. Leonard also serves on the Board of Directors of several private companies.
Mr. Leonard’s qualifications to serve on our Board include his operational and leadership experience with public companies in the pharmaceutical industry.
Alan J. Levy, Ph.D., 83, has been a member of our Board since February 2000 and served as the Lead Director from April 2013 to April 2018. Dr. Levy was the Founder, Chairman, and Chief Executive Officer of Chrono Therapeutics, a privately-held digital medicine company, from February 2014 to February 2018. From 2012 to 2017, he was a Senior Advisor at Frazier Healthcare Ventures and also a Venture Partner from 2007 to 2012. Dr. Levy previously was the Chief Executive Officer at Incline Therapeutics, Inc., Northstar Neuroscience, and Heartstream, Inc. Dr. Levy holds a B.S. in Chemistry from City University of New York and a Ph.D. in Organic Chemistry from Purdue University. Dr. Levy currently serves as a director of several private companies and not-for-profit organizations.
Dr. Levy’s qualifications to serve on our Board include his executive leadership experience with several companies and an understanding of physicians and other health care providers who are central to the use and development of our products.
Jami Dover Nachtsheim
Former Corporate Vice President of the Sales and Market Group and Director of Worldwide Marketing, Intel Corporation
Director since 2017
Monica P. Reed, M.D.
Former Chief Learning Officer and Chief Medical Officer of AdventHealth
Jami Dover Nachtsheim, 62, has been a member of our Board since April 2017. Ms. Nachtsheim served in a variety of positions with Intel Corporation, a semiconductor company, from 1980 until her retirement in 2000, most recently as the Corporate Vice President of the Sales and Marketing Group and Director of Worldwide Marketing. Ms. Nachtsheim served on the Board of Directors of FEI Company, a high-performance electron microscopy company, from March 2010 until its acquisition by Thermo Fisher Scientific Inc. in September 2016. Ms. Nachtsheim also served on the Board of Directors of Affymetrix, Inc., a life sciences company, from May 2009, and as Chairman starting January 2015, until its acquisition by Thermo Fisher Scientific Inc. in March 2016. Ms. Nachtsheim holds a B.S. in Business Management from Arizona State University. Ms. Nachtsheim has served as a member of the Board of Directors of several other public and private companies.
Ms. Nachtsheim’s qualifications to serve on our Board include her extensive experience in bringing high technology products to market and her long service as a board member of several public and private organizations. Her international experience provides useful insight to the Board’s deliberations on a wide range of global business matters.
Monica P. Reed, M.D., 58, is an experienced leader of large regional health systems and community hospitals promoting the delivery of top-quality healthcare services. Dr. Reed served AdventHealth, a non-profit health care system, as the Chief Medical Officer from 2001 to 2006. From 2006 to 2016, Dr. Reed was the CEO of AdventHealth Celebration and then served as SVP for the Care Continuum and Chief Learning Officer for the Central Florida region of the corporation until March 2018. Dr. Reed founded the Reed Consulting Group in May 2018, where she currently consults with companies to address evolving clinical and healthcare needs. Dr. Reed received her M.D. from Loma Linda University, School of Medicine, and completed her Obstetrics and Gynecology Residency at the White Memorial Medical Center. She earned her M.S. in Consulting and Coaching for Change from Saïd Business School at the University of Oxford. Monica self-identifies as African American.
Dr. Reed’s qualifications to serve on our Board include her deep medical and leadership expertise as well as her extensive experience working in and with healthcare systems and community hospitals.
Mark J. Rubash
Former Chief Financial Officer Emeritus - Strategic Advisor, Eventbrite, Inc.
Director since 2007
Mark J. Rubash, 63, has been a member of our Board since October 2007. Most recently, Mr. Rubash served as a Strategic Advisor from December 2016 to September 2018 at Eventbrite, Inc. (“Eventbrite”), an e-commerce company, where he previously was the Chief Financial Officer from June 2013 to November 2016. Prior to Eventbrite, he was the Chief Financial Officer at Heartflow, Inc., Shutterfly, Inc., and Deem, Inc. (formerly, Rearden Commerce), and held finance executive positions at Yahoo! Inc. and eBay Inc. Prior to that, Mr. Rubash was also an audit partner at PwC, where he was most recently the Global Leader for their Internet Industry Practice and Practice Leader for their Silicon Valley Software Industry Practice. Mr. Rubash received his B.S. in Accounting from California State University Sacramento. Mr. Rubash has served as a member of the Boards of Directors and Chairman of the Audit Committees of Line 6 Corporation from April 2007 to January 2014, IronPlanet, Inc. from March 2010 to May 2017, and iRhythm Technologies, Inc. since March 2016.
Mr. Rubash’s qualifications to serve on our Board include his experience with public company financial accounting matters and risk management.
The number of authorized directors constituting the full Board is set at eleven effective on the date of our 2021 Annual Meeting of Stockholders. The Board evaluates the appropriateness of the size of the Board from time to time. In evaluating the size of the Board, the Board and the Governance and Nominating Committee consider a number of factors, including (i) resignations and retirements from the current Board; (ii) the availability of appropriate and qualified candidates; (iii) balancing the desire of having a small enough Board to facilitate deliberations with, at the same time, having a large enough Board to have the diversity of knowledge, experience, skills, expertise, gender, and backgrounds to ensure that the Board and its committees can effectively perform their responsibilities in overseeing the Company’s business; and (iv) the goal of having an appropriate mix of inside and independent directors.
The Governance and Nominating Committee identifies director nominees by reviewing the desired experience, mix of skills, and other qualities to assure appropriate Board composition, taking into consideration the current Board members and the specific needs of the Company and the Board.
The Governance and Nominating Committee will consider nominees recommended by stockholders, and any such recommendations should be sent to the Corporate Secretary in writing at the executive offices as identified in this Proxy Statement. Such recommendations should comply with the notice and other requirements set forth in the Bylaws, including, but not limited to, stating the following information:
•The name and address of such nominating stockholder and the class or series and number of shares of securities of the Company that are, directly or indirectly, owned of record or beneficially owned by such stockholder.
•Whether the nominating stockholder intends to deliver a proxy statement and form of proxy to elect such nominee.
•Interests of the nominating stockholder required to be disclosed under the Bylaws.
•All information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required in a contested election (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected).
•A description of all direct and indirect compensation and other material monetary agreements, arrangements, and understandings during the past three years, and any other material relationships, between or among any nominating stockholder, on the one hand, and each proposed nominee, his or her respective affiliates and associates, on the other hand.
•A completed and signed questionnaire, representation, and agreement as provided in the Bylaws.
The Company will also request such other information as may reasonably be required to determine the eligibility of such proposed nominee to serve as an independent director or that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such proposed nominee. Any recommendations received from stockholders will be evaluated in the same manner as potential nominees suggested by Board members, management, or other parties.
In addition, the Bylaws permit certain of the Company’s stockholders who have beneficially owned 3% or more of the outstanding common stock continuously for at least three years to submit nominations to be included in proxy materials for up to 25% of the total number of directors then serving. Notice of proxy access director nominations for the 2022 Annual Meeting of Stockholders must be delivered to the Corporate Secretary at the principal executive offices no earlier than December 23, 2021 and no later than January 22, 2022. The notice must set forth the information required by the Bylaws with respect to each proxy access director nomination that an eligible stockholder or stockholders intend to present at the 2022 Annual Meeting of Stockholders and must otherwise be in compliance with the Bylaws.
The Governance and Nominating Committee evaluates director candidates based upon a number of criteria, including:
•The desired experience, mix of skills, and other qualities to assure appropriate Board composition, taking into account the current Board members and the specific needs of the Company and the Board.
•The experience, knowledge, skills, and expertise of candidates, which may include experience in management, finance, marketing, and accounting, across a broad range of industries with particular emphasis on healthcare and medical device industries, along with experience operating at a policy-
making level in an appropriate business, financial, governmental, educational, non-profit, technological, or global field.
•Diversity of backgrounds and perspectives, including those backgrounds and perspectives with respect to business experience, professional expertise, age, gender, and ethnic background.
•Personal and professional integrity, character, and business judgment of candidates.
•Whether candidates are independent, including as determined by the independence requirements of the SEC and the Nasdaq Stock Market.
The Governance and Nominating Committee assesses the effectiveness of its approach to consideration of Board candidates as part of its evaluation of the Board’s composition to ensure that the Board reflects the knowledge, experience, skills, expertise, and diversity required for the Board to fulfill its duties.
Board Responsibilities and Corporate Governance Guidelines
The Board’s primary responsibility is to exercise their business judgment in the best interests of the Company and its stockholders. The Board selects the Chief Executive Officer of the Company, monitors management’s and the Company’s performance, and provides advice and counsel to management. Among other things, the Board at least annually reviews the Company’s long-term strategy, long-term business plan, and annual budget for the Company. The Board also reviews and approves transactions in accordance with guidelines that the Board may adopt from time to time. In fulfilling the Board’s responsibilities, directors have full access to the Company’s management, external auditors, and outside advisors. With respect to the Board’s role in risk oversight of the Company, the Board discusses the Company’s risk exposures and risk management of various parts of the business, including appropriate guidelines and policies to minimize business risks and major financial risks and the steps management has undertaken to control them. As a result of the COVID-19 pandemic, in 2020, the Board worked closely with management to ensure that appropriate guidelines and policies were in place to manage the risks to various parts of the business.
The Board has also adopted Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities and to serve the interests of the Company and its stockholders. These guidelines serve as a framework for, among other things, the composition and selection of members of the Board, director orientation and continuing education, responsibilities of directors, conduct of Board meetings, structure and conduct of Board committees, succession planning, and oversight of risk management. The Company’s Corporate Governance Guidelines are available on its website at www.intuitive.com.
The Company is focused on its corporate governance practices and values independent board oversight as an essential component of strong corporate performance to enhance stockholder value. Its commitment to independent oversight is demonstrated by the fact that all of its directors, except the President and Chief Executive Officer, are independent under the listing standards of the Nasdaq Stock Market. In addition, all of the members of the Board’s committees are independent under such standards. The Board acts independently of management and regularly holds independent director sessions of the Board without members of management present.
Lonnie M. Smith served as the Chairman of the Board until his retirement from the Board of Directors at the Company’s annual meeting of stockholders in April 2020. Dr. Barratt is the Chairman of the Board, and Dr. Guthart is the President and Chief Executive Officer as well as a member of the Board. The Board has determined that the separation of the roles of Chairman of the Board and Chief Executive Officer is appropriate, as it allows the Chief Executive Officer to focus primarily on management responsibilities and corporate strategy, while allowing the Chairman to focus on leadership of the Board, providing feedback and advice to the Chief Executive Officer, and providing a channel of communication between the Board members and the Chief Executive Officer. The Chairman of the Board presides over all Board meetings and works with the Chief Executive Officer to develop agendas for Board meetings. The Chairman advises the Chief Executive Officer and other members of senior management on business strategy and leadership development. He also works with the Board to drive decisions about particular strategies and policies and, in concert with the independent Board committees, facilitates a performance evaluation process of the Board.
The Board has established an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. The Board and its committees set schedules to meet throughout the year and also can hold special meetings and act by written consent from time to time, as appropriate. The Board has delegated various responsibilities and authority to the Audit Committee, Compensation Committee, and Governance and Nominating Committee as described below. These committees regularly report on their activities and actions to the full Board. Each of these committees of the Board has a written charter approved by the Board, which is available on our website at www.intuitive.com. The Board from time to time establishes additional committees to address specific needs.
During 2020, the Board held five meetings. Each incumbent director attended at least 75% of the aggregate of the total number of meetings of the Board held during the period for which he or she has been a director and the total number of meetings held by all committees of the Board on which he or she served during the periods that he or she served.
The following table reflects the current membership of each Board committee:
| || ||Committee Membership|
| ||Governance and|
|Craig H. Barratt, Ph.D. || ||ü|| |
Joseph C. Beery (1)
|Amal M. Johnson|| || ||Chair|
|Don R. Kania, Ph.D. ||ü|
|Amy L. Ladd, M.D. ||ü|
|Keith R. Leonard, Jr.||ü|
|Alan J. Levy, Ph.D.||Chair|
|Jami Dover Nachtsheim|| ||ü|| ||ü|
|Mark J. Rubash||Chair|
(1)In April 2020, Joseph C. Beery was appointed to the Board and as a member of the Compensation Committee.
The Audit Committee assists the full Board in its general oversight of our financial reporting, internal controls, and audit functions, and is directly responsible for the appointment, compensation, and oversight of the work of the Company’s independent registered public accounting firm. The Audit Committee reviews and discusses with management and the independent registered public accounting firm the annual audited and quarterly financial statements (including the related disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K and the quarterly reports on Form 10-Q), reviews the integrity of the financial reporting processes, both internal and external, reviews the qualifications, performance, and independence of the registered public accounting firm, and prepares the Audit Committee Report included in the Proxy Statement in accordance with rules and regulations of the SEC. In addition, the Audit Committee discusses policies with respect to financial and cybersecurity risk assessment and risk management, including appropriate guidelines and policies to govern the processes, as well as the Company’s major financial and cybersecurity risk exposures and the steps management has undertaken to address them. The responsibilities and activities of the Audit Committee are described in further detail in the “Audit Committee Report” in this proxy statement and the Audit Committee’s charter, a copy of which can be found on the Company’s website at www.intuitive.com.
During 2020, the Audit Committee consisted of Don R. Kania, Ph.D., Keith R. Leonard, Jr., and Mark J. Rubash. The Board has determined that all of the Audit Committee members meet the independence and experience requirements of the Nasdaq Stock Market and the SEC and that Mr. Rubash is an “audit committee financial expert” as defined under applicable rules of the SEC. In 2020, the Audit Committee met ten times.
Governance and Nominating Committee
The Governance and Nominating Committee is responsible for matters relating to the corporate governance of the Company and the nomination of members of the Board, the Lead Director (if any), and committees thereof. The Board has determined that all of the Governance and Nominating Committee members meet the independence requirements of the Nasdaq Stock Market. The responsibilities and activities of the Governance and Nominating Committee are described in further detail in the Governance and Nominating Committee’s charter, a copy of which can be found on the Company’s website at www.intuitive.com.
During 2020, the Governance and Nominating Committee consisted of Craig H. Barratt, Ph.D., Alan J. Levy, Ph.D., and Jami Dover Nachtsheim. In 2020, the Governance and Nominating Committee met seven times.
The Compensation Committee reviews and approves all compensation programs applicable to executive officers of the Company, including salaries, bonuses, and equity compensation. The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer, evaluates the performance of the Chief Executive Officer in light of those goals and objectives, and sets the Chief Executive Officer’s compensation level based on this evaluation. The Compensation Committee approves any new compensation plan or any material change to an existing compensation plan whether or not subject to stockholder approval and makes recommendations to the Board with respect to the Company’s incentive compensation plans and equity-based plans subject to stockholder approval. The Compensation Committee reviews and discusses with management the disclosures regarding executive compensation and inclusion of the Compensation Discussion and Analysis (“CD&A”) included in the annual proxy statements. The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee. The responsibilities and activities of the Compensation Committee are described in further detail in the Compensation Committee’s charter, a copy of which can be found on the Company’s website at www.intuitive.com.
Through July 2020, the Compensation Committee directly engaged an independent compensation consultant, Compensia, Inc. (“Compensia”), to provide analysis, advice, and guidance on compensation matters. Commencing August 2020, the Compensation Committee has engaged Aon plc. (“Aon”) as its independent compensation consultant.
The Board has determined that all of the Compensation Committee members meet the independence requirements of the Nasdaq Stock Market and the SEC. In 2020, the Compensation Committee met five times.
Compensation Committee Interlocks and Insider Participation
During 2020, the Compensation Committee consisted of Joseph C. Beery (upon his appointment to the Board in April 2020), Amal M. Johnson, Amy L. Ladd, M.D., Alan J. Levy, Ph.D. (until April 2020), and Jami Dover Nachtsheim, none of whom is a present or former officer or employee of the Company. In addition, during 2020, none of the Company’s officers had an “interlock” relationship, as that term is defined by the SEC.
Attendance at the Annual Meeting
The Company encourages, but does not require, its Board members to attend each annual meeting of stockholders. All members of the Board attended the 2020 Annual Meeting of Stockholders.
Derivatives Trading, Hedging, and Pledging Policies
Our Insider Trading Policy provides that no employee, officer, or director may acquire, sell, or trade in any interest or position relating to the future price of Company securities, such as a put option, a call option, or a short sale (including a short sale “against the box”), or engage in hedging transactions (including “cashless collars”). In addition, our Insider Trading Policy provides that no employee, officer, or director may pledge Company securities as collateral to secure loans. This prohibition means, among other things, that these individuals may not hold Company securities in a “margin” account, which would allow the individual to borrow against their holdings to buy securities. Also, our Insider Trading Policy provides that all executive officers and directors shall only execute trades in Company securities pursuant to a trading plan that complies with Rule 10b5-1.
At Intuitive, corporate sustainability is our commitment to creating sustainable value for patients, physicians, hospitals, payers, employees, and stockholders. During 2020, our value framework oriented around responding to the COVID-19 pandemic and meeting the needs of our core constituencies.
Focus on Customers and Their Patients
In 2020, we extended our founding principle of “patients first” and focused our sustainability efforts to provide meaningful support to patients, customers, and communities dealing with the COVID-19 pandemic.
Customer Financial-Relief Program: We introduced a financial relief program for our customers that included service credits, warranty credits and extensions, and more flexible lease payment and purchasing terms for new systems. This global initiative supported customers with more than $80 million in service credits in 2020.
Procedure Back-Log Support: As COVID-19 safety and treatment protocols stabilized, customers considered ways to reduce the mounting backlog of diagnostic and surgical procedures. We worked with hospitals to create protocols and methods that addressed COVID-19 risks and develop a multifaceted plan to help customers resume robotic-assisted surgeries using the da Vinci surgical system.
Extended Use Program: Introduced in 2020, our Extended Use Program aims to help customers reduce expenses and redeploy cost savings. The initiative achieved our goal of extending the use limits for 13 of our core Intuitive da Vinci X and Xi instruments from two to eight additional uses with the same performance, quality, safety, and reliability. In keeping with our goal of reducing care costs, we simultaneously reduced pricing for select Intuitive da Vinci X and Xi instruments that remained at the 10-use standard.
Commitment to Training: During the pandemic, our team transformed Intuitive's customer education by opening regional training centers to reduce our customers' travel as well as accelerating our virtual training program development, giving our customers the flexibility to train at their convenience.
•Intuitive Learning: Intuitive Learning is our cloud-enabled learning platform that guides surgeons and care teams through personalized learning plans, providing all the steps of our technology training pathway in a single, guided experience.
◦In 2020, we expanded the capabilities of our online learning platform allowing customers easy access to our ever-growing library of skills simulation exercises, virtual-reality scenarios, and learning plans translated into over 15 available languages.
◦We also expanded Intuitive Learning centers around the world to move training closer to our customers, bringing training within driving distance for many surgeons and care teams.
◦We also developed the hospital learning management (HLM) feature in Intuitive Learning, empowering hospital learning coordinators (HLCs) to manage and track practitioner training. The HLM feature was offered as a pilot program in 2020 to 31 hospitals and more than 4,000 users. The HLM feature will be available globally in 2021.
•Telepresence: Our telepresence program, which allows physicians to consult with experienced surgeon mentors through two-way audio and video communication, can now be planned in the learning platform.
•Surgeon Training: The following updates were made to our surgical skills training programs in 2020:
◦We updated our programs, including additions to our virtual didactic courses, to help surgeons and care teams maintain proficiency and confidence when they had been out of the operating room (OR) due to surgery delays or cancellations.
◦When the pandemic closed our traditional training centers, we quickly moved to create virtual offerings. Taught by surgeons experienced in a procedure or related group of procedures and featuring ongoing peer support, our advanced courses made it possible for surgeons to continue refining their skills despite the pandemic.
•Care Team Training: We expanded our training continuum for OR care teams by creating programs that paired Intuitive trainers with experienced robotic coordinators to help enable a smooth restart once surgeries resumed. We also shared best practices for staffing, scheduling, inventory management, lean process optimization methodologies, and cost-containment strategies.
Genesis Program: Genesis is our best-practice initiative that helps hospitals grow efficiently by offering pragmatic, real-world support. Our Genesis teams provide consulting and training services on topics that include resource scheduling, process improvements, and cost savings. Over 550 hospitals were engaged with our Genesis services as of December 31, 2020.
Talent and Workplace Experience
COVID-19 Pandemic: With employees around the globe, our response to the pandemic included the following policies and initiatives:
•All employees who could do so began working from home when shelter-in-place orders were issued for global locations.
•A number of employees critical to maintaining our essential manufacturing, repair, and logistics functions continued to work from Intuitive locations globally. To protect and support our essential team members, we implemented health and safety measures that included maximizing personal workspaces, changing shift schedules, providing PPE, and instituting mandatory screening before accessing buildings.
•Compensation program modifications resulted in a payout of a portion of 2020 bonuses in the first half of the year to help staff cover unforeseen pandemic-related expenses. We also offered premium pay and a subsidized lunch program.
Inclusion and Diversity (I&D): We strive to foster a culture where mutual respect, inclusive behavior, and dignity are core to our individual expectations.
•Board Composition: We have three women on our Board of Directors, one director who self-identifies as Hispanic, and one director who self-identifies as Middle Eastern. Dr. Monica Reed, who is a nominee for election to the Board of Directors at our 2021 Annual Stockholders’ Meeting, self-identifies as African American.
•Inclusion & Diversity Council: We have an I&D Council that works with our businesses across regions to develop our inclusion and diversity strategy, promote recruitment of diverse talent, and manage our diversity sponsorships and alliances. Our 2020 Sustainability Report discloses our employee population metrics associated with our global gender representation, people of color representation within the U.S., and three-year trends associated with both.
•Employee Resource Groups: In 2020, our employee resource groups (ERGs) grew from 3 to 10 companywide. These employee-volunteer-led groups focus on four key areas: recruitment, employee development, community building, and business development. ERGs also provided ideas and insight to important aspects of our business, such as talent acquisition and retention, accessibility accommodations, and operational challenge solutions.
•I&D Training: In the days following the global recognition of lives lost to racial injustice, we provided guidance tools to our employees for listening and engaging in these sensitive conversations with our Black teammates, asking that we support each other and the diverse communities that we serve with compassion and solidarity against racism and discrimination. We believe that inclusion is the result of ongoing education and practice that requires commitment and intention. Therefore, Intuitive I&D training has been designed as a learning continuum to bring employees along in our journey to promote inclusion. All global employees are required to participate in I&D training as a module within our annual business code of conduct and ethics training requirement. I&D training includes interactive learning content on topics such as bias, micro messages, psychological safety, confident conversations, belonging, and inclusive leadership.
•Diversity Recruitment: We have a multifaceted diversity recruitment and outreach program that includes direct sourcing from organizations supporting veterans, women, and minority talent. We participate in special recruiting events organized to promote hiring of diverse talent and work with external search firms specifically targeting diverse candidates. Our staff sourcing team is trained on recruiting talent, using best practices to secure diverse candidates for consideration for our open positions. Our ERGs help drive our diversity recruiting efforts by providing perspective on attracting, retaining, and developing diverse candidates.
•Inclusive Design: We assemble teams of diverse talent, with different backgrounds, experiences, and perspectives to participate in our research, design, and development activities. This broad-based collaboration helps to ensure that the systems and technology we design and deliver will work for the wide range of characteristics in human beings from patient, physician, and care team perspectives.
Talent Development: At Intuitive, we value our employees and the passion, commitment, and professional depth they provide. To enhance employee retention and job satisfaction, we offer ongoing learning and leadership training opportunities that support growth.
•Leadership Training: We increased our leadership development efforts in 2020 by reinforcing development around our People Leadership Success Model, which focuses on people-leadership effectiveness, cultural continuity, and organizational effectiveness, so that leaders at all levels have the capabilities and knowledge that they and their teams need to succeed.
•Employee Support Surveys: In 2020, we developed, fielded, and assessed the results from a series of employee-support surveys. The surveys allowed us to capture the pulse of employees and informed our COVID-19 response by developing new resources and programs and adjusting and adapting existing policies and processes to help employees during the pandemic.
•Annual Performance Reviews: We have robust annual global performance review processes for reviewing all employees’ performance and pay. To support our managers, we train them on conducting effective performance reviews and making compensation recommendations, which take into consideration market
pay data and performance, as well as experience in an employee’s respective role. Our highly engaged employees completed over 98% of their self-evaluations during our annual performance review process in the spring of 2020.
•Commitment to Pay Equity: At Intuitive, assuring fair and equitable pay is integral to our commitment to our employees. To support pay equity, we conduct annual pay-equity reviews, utilize a robust inspection process with an independent consulting firm to determine whether any statistically significant pay differences exist between women and men, and between minorities and non-minorities, and, if pay disparities are identified, we conduct further evaluation to determine whether remedial adjustments are appropriate, and we address them by making any such adjustments.
Our cybersecurity systems and processes adhere to global industry standards based on the National Institute of Science and Technology guidelines and the International Standards Organization framework. Our cybersecurity and data privacy program includes:
•Executive and Board Oversight: Our executives, including our Chief Executive Officer, Chief Financial Officer, General Counsel, and others, meet regularly to review our data and cybersecurity program and performance metrics. We report to the Audit Committee of the Board of Directors at least annually on these matters.
•Multi-prong approach to cybersecurity: All employees receive training on security awareness and data-loss prevention annually. We conduct a review of risk notifications provided by global threat intelligence resources followed by required actions. We implement remote access protection to control access to our network, applications, and data. We deploy advanced technology tools for cyber threat management. We implement privacy and data protection measures for online meetings and activities.
•Third-Party Cybersecurity Ratings: We work with a cybersecurity ratings company, BitSight, to detect security issues. In 2020, we achieved a BitSight score of 790.
•Cybersecurity Insurance: We procure cybersecurity liability coverage that is renewable annually.
Supply Chain Sustainability
We value and maintain a strong supply chain composed of carefully selected suppliers who share our commitment to quality. This year, we emphasized working with our suppliers, helping them to stay safe during the pandemic while minimizing product-continuity risk. Our supply chain sustainability initiatives included: (i) supplier development programs that are designed to help ensure that our suppliers are actively engaged in building a healthy, transparent relationship; (ii) supplier training initiatives to help suppliers move forward on the path of continuous improvement on metrics that make up our supplier scorecard ratings; (iii) supplier ratings and engagement to monitor and conduct complete assessments of our suppliers that incorporate internal supply reviewers as well as third-party services that monitor various specific aspects of our supply chain; (iv) certification programs to ensure that our suppliers comply with all applicable laws and regulations and to pursue and maintain ISO 13485 certifications for quality management systems specific to the medical device industry and ISO 9001 certifications for quality management systems; and (v) a supplier symposium to enable suppliers to better understand our mission as well as our plans.
Our commitment to the environment drives our approach to global sustainability. We comply with environmental regulations in each of our locations as we continue to progress toward global certification to ISO 14001, which is the international standard of requirements for effective environmental management systems (EMS). In 2020, we completed ISO 14001 recertification for our Sunnyvale campus facilities. Although COVID-19 delayed efforts to reach that certification elsewhere, we moved forward with new building designs and pursued other initiatives to better manage greenhouse gas and carbon emissions.
•Sustainability in building design and renewable energy: We pursue U.S. Green Building Council Leadership in Energy and Environmental Design (LEED) standards as well as Swiss Minergie building standards in constructing facilities around the world. In the fall of 2020, we opened the newest LEED Gold standard verified building on our Sunnyvale, California, headquarters campus. With water-efficient landscaping, low-flow plumbing, efficient building automation features, and photovoltaic (PV) solar panels that are expected to offset 13% of energy use, the building reflects our vision of low-environmental impact teamed with high function for our employees.
•Sustainable product design: Our recently announced Extended Use Instrument Program helps to reduce the company’s environmental impact by requiring less materials and packaging, while also generating less medical waste and helping reduce greenhouse gases through fewer shipments.
•Proprietary recycling: When materials reach their end of life, our proprietary recycling program puts them to future use when possible. In 2020, our program collected and recycled more than 829,000 pounds of waste. That equates to more than 131,000 gallons of water saved, more than 1.1 million pounds of greenhouse gases reduced, and more than 23,000 pounds of toxic materials diverted from landfills.
•Repair, reuse, and recycle: When we receive returned parts, our first choice is to use them as future service components, reducing our generated waste and extending our product life cycle. Our da Vinci X surgical systems use recycled components from our da Vinci Si returned systems with 95% of the surgeon console and 55% of the patient side cart being recycled.
•Service depot expansion: In March 2020, we opened a service depot in Osaka, Japan, to support business growth in the region. This new facility provides greater flexibility in servicing our distribution channel and reduce the number of repair parts shipments over long distances.
•Ocean freight program: Our logistics team has been working to reduce our logistics carbon emissions by implementing ocean freight options over the next two years. Starting with our large volume, weekly, and semimonthly replenishment shipments to locations outside of the U.S., we target to have 50% of these shipments moving as ocean freight by the end of 2021.
The Governance and Nominating Committee of the Board reviews and assesses our performance on environmental and sustainability matters. Management reports annually to the Governance and Nominating Committee on sustainability priorities.
The Sustainability Steering Committee, which reports into our Governance and Nominating Committee, implements the Company’s sustainability strategy and targets. Led by our General Counsel and Chief Medical Officer, the Committee includes members from different functional groups across the organization, including medical and legal affairs, human resources, and our business units. The Committee sets our sustainability priorities and communicates those priorities to stakeholders to help ensure that we continually integrate sustainability principles into our business model.
Other Sustainability Initiatives
For more information on our sustainability initiatives, including our outreach to communities and quality management system initiatives, please visit our 2020 Sustainability Report located on the “About Us - Investors” section of our website. The information from our 2020 Sustainability Report is not incorporated by reference into this Proxy Statement.
COMPENSATION FOR DIRECTORS
We compensate our non-employee directors for their service on our Board with a combination of cash and equity awards. The compensation provided is commensurate with their role and involvement and consistent with competitive market practices. We provide a majority of the compensation in the form of equity to align the interests of our non-employee directors with the interests of our stockholders. We do not compensate our Chief Executive Officer for serving on our Board in addition to his regular employee compensation.
The Compensation Committee, consisting solely of independent directors, has the primary responsibility for reviewing and considering any changes to our director compensation program. Our Board determines the form and amount of director compensation after reviewing the committee’s recommendation.
The Compensation Committee reviews total compensation of our non-employee directors every other year and evaluates the appropriate level and form of their compensation. In making its recommendations, the committee considers the amount of time our non-employee directors expend, as well as the skill level required of members of our Board in fulfilling their duties. It also considers the Company’s financial performance, general market conditions, and advice from its independent compensation consultant, including the independent analysis of our director compensation program that is updated on a biennial basis. As part of this analysis, the compensation consultant reviews and analyzes competitive market practices in director compensation as represented by the companies in our compensation peer group. The analysis also examines how director compensation levels, practices, and design features compare to the constituent members of the compensation peer group, which is the same peer group used as a reference when setting executive compensation. The committee also considers the extent to which our Board’s compensation practices align with the interests of our stockholders.
Our Board reviews the Compensation Committee’s recommendations and then determines the form and amount of compensation for our non-employee directors. Our Board sets cash compensation levels with reference to the median of the competitive market and equity compensation levels to approximate the 75th percentile of the competitive market.
Following a review with its compensation consultant in January 2019, the Compensation Committee determined that the compensation of our non-employee directors was generally consistent with the compensation for non-employee directors at the companies in the compensation peer group and recommended that no changes be made to the cash fees and target equity award amounts paid to our non-employee directors for 2019, which recommendation was approved by the Board. As the review is performed every other year, there was no such review performed in 2020, and the compensation of our non-employee directors in 2020 remained consistent with 2019.
During 2020, our director compensation program consisted of cash and equity compensation elements, as further described below.
Annual Cash Compensation
We provide cash compensation through retainers for Board and committee service, as well as separate retainers to the chairs and members of our Board committees. Compensation in this manner simplifies the administration of our program and creates greater equality in rewarding service on committees of our Board. The committee and committee chair retainers compensate directors for the additional responsibilities and time commitments involved with those positions.
During 2020, the non-employee directors received the following cash compensation:
|Board or Committee Position||Cash Retainer ($)|
|General Annual Board Retainer||60,000 |
|Additional Annual Retainer - Audit Committee Chair||23,000 |
|Additional Annual Retainer - Compensation Committee Chair||20,000 |
|Additional Annual Retainer - Governance and Nominating Committee Chair||13,000 |
|Additional Annual Retainer - Audit Committee Member||10,000 |
|Additional Annual Retainer - Compensation Committee Member||6,000 |
|Additional Annual Retainer - Governance and Nominating Committee Member||4,000 |
Cash compensation is pro-rated for the time served by a director on the Board and any Board committees.
Non-employee directors receive grants of stock options and restricted stock unit awards, which vest 100% on the earlier of (i) the first anniversary of the grant date or (ii) the next annual meeting of stockholders following the grant date, subject to continued service through such vesting date.
During 2020, the non-employee directors received equity compensation granted at the 2020 Annual Meeting of Stockholders with the following target values:
Value ($) (1)
Value ($) (2)
|Chairman of the Board||190,000 ||190,000 |
|Members of the Board||140,000 ||140,000 |
(1)The number of RSUs granted is determined by taking the RSU Value and dividing by the 60 trading-day average closing price of the Company’s common stock reported by Nasdaq through the last trading day of the month prior to the date of grant.
(2)The number of shares underlying the stock options granted is determined by taking the Stock Option Value and dividing by one-third of the 60 trading-day average closing price of the Company’s common stock reported by Nasdaq through the last trading day of the month prior to the effective grant date.
New non-employee directors receive a pro-rated equity grant based on the number of months remaining between appointment date and the expected date of the next annual grant.
The equity compensation program for our non-employee directors for 2021 is similar to the program described above for 2020.
Our stock ownership policy requires non-employee directors to own shares of our common stock having a total value equal to five times their annual cash retainer for serving as a member of our Board, not including any meeting fees, incentive awards, or committee, chair, or other similar retainers. These mandatory ownership guidelines are intended to create a clear standard that encourages our directors to remain invested in the performance of the Company and the Company’s common stock. Each non-employee director has five years from the date that he or she is appointed to come into compliance with the guidelines. All of our non-employee directors met the guidelines or were on track to comply with the guidelines in the relevant time frame as of the date of this proxy statement. For the purposes of determining stock ownership levels, the following forms of equity interests in the Company are included: shares owned outright by, or held in trust for the benefit of, the director or his or her spouse or children sharing the same household; shares held through a fund or other entity as to which the director has control; shares of the Company’s common stock, stock units, or other stock equivalents obtained through the exercise of stock options or vesting of Company equity awards; shares of common stock underlying vested stock options, net of shares that would need to be withheld for the exercise price; and other stock or stock equivalent awards determined by the Compensation Committee.
The aggregate grant date fair value of total equity compensation (consisting of stock options, restricted stock unit awards, and any other equity compensation) to any non-employee director in any calendar year in respect of such director’s service as a member of our Board or any Board committee during such year shall not exceed $750,000. Our Board has determined that imposing such a limit is in the best interests of the Company and its stockholders.
We reimburse non-employee directors for reasonable out-of-pocket expenses incurred in the performance of their duties as directors of the Company.
Director Compensation Table
The following Director Compensation Table sets forth summary information concerning the compensation paid to the Company's non-employee directors for the year ended December 31, 2020, for services to the Company.
|Name ||Fees earned or|
paid in cash ($)
Awards ($) (1)
Awards ($) (1)
|Craig H. Barratt, Ph.D.||64,000 ||177,574 ||160,434 ||402,008 |
Joseph C. Beery (2)
|43,000 ||130,871 ||118,166 ||292,037 |
|Amal M. Johnson||80,000 ||130,871 ||118,166 ||329,037 |
|Don R. Kania, Ph.D. ||70,000 ||130,871 ||118,166 ||319,037 |
|Amy L. Ladd, M.D. ||66,000 ||130,871 ||118,166 ||315,037 |
|Keith R. Leonard, Jr.||70,000 ||130,871 ||118,166 ||319,037 |
|Alan J. Levy, Ph.D.||76,000 ||130,871 ||118,166 ||325,037 |
|Jami Dover Nachtsheim||70,000 ||130,871 ||118,166 ||319,037 |
|Mark J. Rubash||83,000 ||130,871 ||118,166 ||332,037 |
Lonnie M. Smith (3)
|20,000 ||— ||— ||20,000 |
(1)While the target equity compensation values are based on 60-day trading-day average closing prices, as noted above, the amounts in these columns represent the grant date fair value of stock options and restricted stock units (“RSUs”) granted to non-employee directors in 2020, determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”) and, accordingly, will not equal the target equity compensation values. Each non-employee director received one grant of stock options and one grant of RSUs in 2020, and the aggregate grant date fair value of each award is reflected in the table above. See Note 10 of the Notes to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K filed on February 10, 2021, for a discussion of all assumptions made by the Company in the valuation of the equity awards.
(2)Joseph C. Beery was elected to our Board at the 2020 Annual Meeting of Stockholders.
(3)Lonnie M. Smith did not stand for re-election at the 2020 Annual Meeting of Stockholders.
The table below sets forth the aggregate number of shares of the Company’s common stock subject to options outstanding as well as the number of outstanding RSUs held by non-employee directors as of December 31, 2020.
|Name||Number of Shares of Common Stock|
|Number of Shares of Common Stock|
|Number of Shares of Common Stock Subject to Outstanding RSUs|
|Craig H. Barratt, Ph.D.||17,462 ||16,422 ||346 |
|Joseph C. Beery||766 ||— ||255 |
|Amal M. Johnson||24,370 ||23,604 ||255 |
|Don R. Kania, Ph.D.||2,199 ||1,433 ||255 |
|Amy L. Ladd, M.D. ||1,316 ||550 ||255 |
|Keith R. Leonard, Jr. ||2,548 ||1,782 ||255 |
|Alan J. Levy, Ph.D.||14,524 ||13,758 ||255 |
|Jami Dover Nachtsheim||4,093 ||3,327 ||255 |
|Mark J. Rubash||5,870 ||5,104 ||255 |
EXECUTIVE OFFICERS OF THE COMPANY
The Company’s executive officers and their ages as of February 13, 2021, are as follows:
|Gary S. Guthart, Ph.D.||55||President and Chief Executive Officer|
|Myriam J. Curet, M.D.||64||Executive Vice President and Chief Medical Officer|
|Marshall L. Mohr||65||Executive Vice President and Chief Financial Officer|
|David J. Rosa||53||Executive Vice President and Chief Business Officer|
|Bob DeSantis||55||Executive Vice President and Chief Product Officer|
The principal occupations and positions for at least the past five years of the executive officers named above, other than Dr. Guthart, are as follows:
Myriam J. Curet, M.D. joined Intuitive in December 2005 as Chief Medical Advisor. In February 2014, Dr. Curet was promoted to the position of Senior Vice President and Chief Medical Officer. In November 2017, Dr. Curet was promoted to the position of Executive Vice President and Chief Medical Officer. Dr. Curet also held a faculty position as Professor of Surgery at Stanford University. Since October 2010, she has served as a Consulting Professor of Surgery at Stanford University with a part time clinical appointment at the Palo Alto Veteran’s Administration Medical Center. Dr. Curet also currently serves on the Board of Directors of Nektar Therapeutics. Dr. Curet received her M.D. from Harvard Medical School and completed her general surgery residency program at the University of Chicago. She then worked for the Indian Health Service for four years before finishing her Surgical Endoscopy fellowship at the University of New Mexico. She was on the faculty at the University of New Mexico for six years prior to joining the Stanford Department of Surgery in 2000.
Marshall L. Mohr joined Intuitive in March 2006 as Senior Vice President and Chief Financial Officer and was promoted to Executive Vice President and Chief Financial Officer in July 2018. Prior to that Mr. Mohr was Vice President and Chief Financial Officer of Adaptec, Inc. (“Adaptec”). Prior to joining Adaptec in July 2003, Mr. Mohr was an Audit Partner with PwC where he was most recently the Managing Partner of the firm’s west region technology group and led its Silicon Valley accounting and audit advisory practice. Mr. Mohr also currently serves on the Boards of Directors of Plantronics, Inc. and Pacific Biosciences of California, Inc. Mr. Mohr received his B.B.A. in Accounting and Finance from Western Michigan University.
David J. Rosa joined Intuitive in March 1996 and has held leadership positions in engineering, clinical development, marketing, and product development. In April 2011, Mr. Rosa was promoted to the position of Senior Vice President, Emerging Procedures & Technology, and transitioned to the position of Senior Vice President, Scientific Affairs. In August 2014, Mr. Rosa was promoted to the position of Executive Vice President and Chief Scientific Officer. In June 2015, Mr. Rosa was appointed as Executive Vice President and Chief Commercial Officer. In January 2019, Mr. Rosa took on additional responsibility as Executive Vice President and Chief Business Officer. Mr. Rosa also currently serves on the Boards of Directors of Kardium Inc. and Arterys Inc. Mr. Rosa graduated magna cum laude with a B.S. in Mechanical Engineering from California Polytechnic University at San Luis Obispo. He also holds a Master of Science in Mechanical Engineering from Stanford University.
Bob DeSantis joined Intuitive in January 2013 as Vice President, Instruments & Accessories, New Product Introduction, and was promoted to Executive Vice President, Instruments, Accessories, and Endoscopes, in April 2020. In January 2021, Mr. DeSantis was promoted to the position of Executive Vice President and Chief Product Officer. Prior to joining Intuitive, Mr. DeSantis was Vice President, R&D for Surgical Devices, of Covidien, a medical devices and supplies company, from May 2008 to January 2012, where he led the mechanical and energy devices organizations. He also led the group that developed and first commercialized single incision laparoscopic surgery (SILS). Mr. DeSantis earned his B.S. and M.S. in Mechanical Engineering from the State University of New York, Buffalo. He also holds a Certificate in Innovation Management from the Massachusetts Institute of Technology.
This Proxy Statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements relate to expectations concerning matters that are not historical facts. Words such as “projects,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “may,” “will,” “could,” “should,” “would,” and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements related to risks associated with our compensation programs. Readers are cautioned that these forward-looking statements are based on current expectations and are subject to risks, uncertainties, and assumptions that are difficult to predict. We undertake no obligation to revise or update any forward-looking statements for any reason.
Compensation Committee Report
The following report of the Compensation Committee shall not be deemed to be “soliciting material” or to otherwise be considered “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the Company specifically incorporates it by reference into such filing.
The Compensation Committee has reviewed and discussed with management the disclosures contained in the section entitled “Compensation Discussion and Analysis” of this Proxy Statement. Based upon this review and discussion, the Compensation Committee recommended to the Board that the section entitled “Compensation Discussion and Analysis” be included in this Proxy Statement for the 2021 Annual Meeting of Stockholders and incorporated by reference into the Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Members of the Compensation Committee
|Amal M. Johnson (Chair)||Joseph C. Beery|| ||Amy L. Ladd, M.D.|| ||Jami Dover Nachtsheim|
Compensation Discussion and Analysis
This Compensation Discussion and Analysis explains our executive compensation program, including the philosophy, objectives, and the policies and practices that contributed to our executive compensation actions and decisions for our 2020 named executive officers (our “NEOs”), who are listed below.
|Gary S. Guthart, Ph.D.||President and Chief Executive Officer|
|Myriam J. Curet, M.D.||Executive Vice President and Chief Medical Officer|
|Marshall L. Mohr||Executive Vice President and Chief Financial Officer|
|David J. Rosa||Executive Vice President and Chief Business Officer|
|Bob DeSantis||Executive Vice President and Chief Product Officer|
In response to the COVID-19 pandemic, we implemented significant changes to our operations that we determined were in the best interest of our employees, our core constituencies, and the communities that we serve. We focused our investments in our employees, customers, and communities. We implemented a work-from-home policy for the majority of our employees globally and an expanded paid and sick leave program to support employees who were unable to work due to family care responsibilities, underlying health issues, or other unique circumstances. We also implemented additional safety measures for employees continuing critical on-site work. Employees critical to maintaining our essential engineering, manufacturing, repair, and logistics functions have continued to work from Intuitive locations globally. To protect and support our essential team members, we have implemented health and safety measures that included maximizing personal workspaces, changing shift schedules, providing personal protective equipment (PPE), and instituting mandatory screening before accessing buildings. We created subteam groups, keeping the same manufacturing teams working together to facilitate contact tracing and minimize potential staffing risk.
We also paid a portion of our 2020 annual performance-based cash bonuses in the first half of the year to help employees cover unforeseen pandemic-related expenses and provided premium pay for essential team members who continued to supply customers with our products needed to care for patients.
For our customers, we implemented a customer-relief program, which included a series of measures to ease financial burdens – from service credits for our surgical systems to warranty extensions and other flexible payment terms. For our communities, we converted some of our manufacturing lines to produce personal protective equipment, donating more than a million face shields globally through the Intuitive Foundation. Our engineers helped design and implement updates to ventilators that made them easier to produce. Some of our medically trained employees volunteered as healthcare workers on the front lines. Our company, the Intuitive Foundation, and many of our employees contributed financially to support COVID-19 relief.
For 2020, our executive compensation program continued to reflect pay for performance. Due to our below threshold performance on adjusted operating income under our Corporate Incentive Program, none of our NEOs received a cash bonus for 2020, other than Bob DeSantis, who received a prorated bonus in accordance with the bonus program that applied to him prior to his promotion to Executive Vice President on April 1, 2020. In addition, we made only limited base salary increases for our NEOs and continued to provide a significant portion of target direct compensation to our NEOs in equity, the value of which is directly tied to our performance and which aligns our NEOs’ interests with those of our stockholders.
2020 Financial Highlights
During 2020, da Vinci procedure volumes and system placements were significantly impacted by the COVID-19 pandemic, as healthcare systems around the world diverted resources to respond to COVID-19. The impact of the COVID-19 pandemic on the Company's business has, and continues to, differ by geography and region.
|Measure (Amounts in millions of USD, except procedures and system placements)||Fiscal 2020||Fiscal 2019||Percentage|
|Revenue||$||4,358.4 ||$||4,478.5 ||(3)||%|
|Worldwide da Vinci procedures||1,243,000 ||1,229,000 ||1 ||%|
|Da Vinci Surgical System placements||936 ||1,119 ||(16)||%|
|Ion System placements||26 ||10 ||160 ||%|
|Income from operations||$||1,049.8 ||$||1,374.5 ||(24)||%|
|Non-GAAP income from operations (*)||$||1,514.6 ||$||1,784.7 ||(15)||%|
|Net income attributable to Intuitive Surgical, Inc.||$||1,060.6 ||$||1,379.3 ||(23)||%|
|Non-GAAP net income attributable to Intuitive Surgical, Inc. (*)||$||1,222.7 ||$||1,525.3 ||(20)||%|
|Cash, cash equivalents, and investments||$||6,869.1 ||$||5,845.2 ||18 ||%|
|Repurchases and retirement of common stock ||$||134.3 ||$||269.5 ||(50)||%|
(*)Non-GAAP Financial Measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, financial results prepared in accordance with U.S. GAAP. See the section “Non-GAAP Financial Measures” in this proxy statement for more information about these non-GAAP financial measures and for a reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures.
Recent Operational Highlights
•Instruments and accessories revenue increased by 2% to $2.46 billion for the year ended December 31, 2020, compared to $2.41 billion for the year ended December 31, 2019. Systems revenue decreased by 12% to $1.18 billion for the year ended December 31, 2020, compared to $1.35 billion for the year ended December 31, 2019. Service revenue of $0.72 billion was consistent year over year.
•U.S. da Vinci procedures declined approximately 1% for the year ended December 31, 2020, as compared to the prior year. The 2020 U.S. procedure decline was largely attributable to a decline in gynecology procedures, most notably benign dVH procedures, and urology procedures, most notably dVP procedures. Offsetting these declines was continued growth in general surgery procedures, most notably cholecystectomy and bariatric procedures.
•Outside of U.S. (“OUS”) da Vinci procedures grew approximately 6% for the year ended December 31, 2020, as compared to the prior year. 2020 OUS procedure growth was driven by continued growth in urologic procedures, including nephrectomies and prostatectomies, and earlier stage growth in general surgery (particularly colorectal), thoracic, and gynecology procedures.
•Procedure volumes in 2020 around the world were significantly impacted by the COVID-19 pandemic with a strong inverse correlation between infection rates and da Vinci procedures. Beginning in the first quarter of 2020, we saw a substantial reduction in da Vinci procedures in China as infection rates increased and a similar pattern in Western Europe and the U.S. as the pandemic spread. Procedure rates began to recover by the end of the first quarter in China and at the beginning of May in the U.S as cases declined and elective procedures were permitted. Resurgences of COVID-19 throughout the U.S and outside of the U.S during the remainder of 2020 and into early 2021 once again resulted in declines in da Vinci procedures followed by recoveries in procedures as infection rates decreased.
•As of December 31, 2020, we had a da Vinci Surgical System installed base of approximately 5,989 systems, an increase of 7% compared to the installed base of approximately 5,582 systems as of December 31, 2019.
•In 2020, we launched Intuitive Ventures, an inaugural $100 million fund focused on investment opportunities in companies that share Intuitive’s commitment to advancing positive outcomes in healthcare.
The charts below show our total revenue and the number of da Vinci procedures, system placements, and installed base in 2018, 2019, and 2020.
*Recurring revenue consists of instruments and accessories, services, and operating lease revenue.
2020 Executive Compensation Highlights
The Compensation Committee took the following actions with respect to the 2020 compensation of our NEOs:
•Annual Performance-Based Cash Bonuses. The 2020 Corporate Incentive Program (the “CIP”), our annual performance-based cash incentive program, is funded based on our actual level of achievement as measured against a pre-established adjusted operating income goal and pre-established strategic Company performance goals. In 2020, no bonus payouts were awarded to any of our NEOs, with the exception of Bob DeSantis, who received a prorated bonus in accordance with the bonus program that applied to him prior to his promotion to Executive Vice President on April 1, 2020. See the section entitled “Annual Performance Based Cash Bonuses” below for a detailed discussion of the CIP.
•Base Salary. Base salaries were increased in the range of 3% to 4% for our NEOs, with the exception of Bob DeSantis, whose base salary was increased 9% in connection with his promotion to Executive Vice President. These base salary increases took into consideration the changes in responsibilities for each NEO, the competitive market for executive talent, Company performance, and the other factors described in the section entitled “Executive Compensation Elements” below.
•Equity Awards. The Compensation Committee granted equity awards in the form of stock options and RSUs. The amount of each award was based on several factors, including managing the Company’s burn rate, reducing our equity overhang in the long run, maintaining our ability to compete for outstanding talent, maintaining our corporate compensation philosophies, and the NEO’s experience and performance.
Pay for Performance
We believe our executive compensation program is closely aligned with stockholders’ interests. While base salary and an annual performance-based cash bonus opportunity incentivize the achievement of short-term goals, our equity awards in the form of stock options, which are typically subject to either a 4-year or 3.5-year vesting requirement and a 10-year term, and RSUs, which are typically subject to a 4-year vesting requirement, represent a long-term compensation structure that promotes retention and continuous commitment to the excellent operating results of the Company. We further believe this compensation mix rewards each executive officer for their individual contributions to the success of the Company, both present and future. At this phase in our growth cycle, a majority of the annual total direct compensation of our executive officers is directly tied, through the use of stock options and RSUs, to the growth in the value of our common stock. To illustrate this point, the following chart displays the historical relationship between the annual total direct compensation of our Chief Executive Officer and the changes in stockholder value as reflected by the percentage change in value of the market price of our common stock.
For illustration purposes, our Chief Executive Officer’s annual total direct compensation consists of base salary paid, annual performance-based cash bonus earned, and the grant date fair value of his equity awards (including both stock options and RSUs) granted in the following year. As described below under “Equity Award Grant Policies,” we grant stock options bi-annually in February and August. For purposes of the chart, the value of the stock options to be granted on August 26, 2021, is estimated using the Black-Scholes fair value as of February 26, 2021. Our stock return is calculated based on the closing market price of our common stock on the date of the fiscal year end. The stock return is indexed to 2016, such that it represents the stock price percentage change over the 2016 year-end price of $211.39 per share, and our Chief Executive Officer’s annual total direct compensation is similarly indexed to his 2016 annual total direct compensation.
Results of Stockholder Advisory Vote on Named Executive Officer Compensation
At our 2020 Annual Meeting of Stockholders, we conducted a stockholder advisory vote on the 2019 compensation of our then NEOs (commonly known as a “Say-on-Pay” vote). Our stockholders approved the 2019 compensation of our then NEOs, with approximately 94% of the votes cast in favor of the proposal. Based on the results of this Say-on-Pay vote, the Compensation Committee determined not to make significant changes to our compensation program following the 2020 Annual Meeting of Stockholders.
We believe that the outcome of the Say-on-Pay vote reflects our stockholders’ support of our compensation philosophy, specifically our efforts to attract, retain, and motivate our executive officers, including our NEOs.
We value the opinions of our stockholders and will continue to consider the outcome of future Say-on-Pay votes, as well as feedback received throughout the year, when making compensation decisions for our executive officers, including our NEOs. Our policy is to hold Say-on-Pay votes on the compensation of our NEOs on an annual basis.
Executive Compensation Policies and Practices
The Compensation Committee has adopted and is committed to maintaining a comprehensive governance framework for executive compensation which aligns with long-term stockholder interests. This framework includes the following:
|Independence||The Compensation Committee is comprised solely of independent directors.|
|Independent Adviser||The Compensation Committee engages an independent compensation consultant, Aon, to provide analysis, advice, and guidance on compensation matters.|
|Biennial Executive Compensation Review||The Compensation Committee reviews a biennial compensation analysis prepared by Aon, which includes approval of our executive compensation strategy and philosophy and our compensation peer group.|
|Succession Planning||We review the risks associated with key executive officer positions and endeavor to ensure adequate succession plans are in place.|
|Stock Ownership Guidelines||We maintain stock ownership guidelines for our executive officers and the non-employee members of our Board.|
|Compensation Recovery Policy||We have a Compensation Recovery Policy that provides that the Company may recover cash incentive or performance-vesting equity compensation of our current and former executive officers in the event that they engage in fraudulent or willful misconduct that results in the Company being required to prepare an accounting restatement.|
|Compensation At-Risk||Our executive compensation program is designed such that a significant portion of compensation is “at risk” based on corporate performance, including equity-based compensation, to align the interests of our executive officers and stockholders.|
|No Employment Agreements||We do not have employment agreements with any of our executive officers. All executive officers are employed “at will.”|
|No Executive Retirement Plans||We do not provide pensions or other supplemental executive retirement health or insurance benefits.|
|No Executive Perquisites||We do not provide any perquisites or other personal benefits to our executive officers that are not otherwise available on the same basis to our other full-time employees.|
|No Special Health or Welfare Benefits||Our executive officers participate in broad-based, company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees.|
|No Tax Reimbursements||We do not provide any tax reimbursement payments (including “gross-ups”) on any element of executive compensation.|
|“Double-Trigger” Change-in-Control Arrangements||All change-in-control payments and benefits pursuant to the Company-wide change in control plan are based on a “double-trigger” arrangement (i.e., they require both a change in control of the Company plus a qualifying termination of employment before payments and benefits are paid).|
|No Repricing||All of the Company’s equity plans expressly prohibit stock option repricing without stockholder approval.|
|No Buyout of Underwater Options||All of the Company’s active equity plans expressly prohibit the Company from buying out stock options whose exercise price exceeds the fair market value of our common stock, often referred to as underwater options, for cash.|
|No Liberal Recycling of Shares||All of the Company’s active equity plans prohibit the liberal recycling of shares or underlying awards granted under these plans.|
|No Automatic “Single Trigger” Vesting of Equity Awards||None of the Company’s active equity plans provide for automatic acceleration of vesting of equity awards upon a change in control of the Company.|
Executive Compensation Philosophy
Goal of Executive Compensation Program
The primary objective of our executive compensation program is to attract and retain a passionate team of executives who will provide leadership to advance the quadruple aim: better outcomes, better patient experience, better care team experience, and lower total cost to treat. We seek to accomplish this goal in a way that is aligned with the long-term interests of our stockholders.
We employ a “team-based” approach to compensating our executive officers, which is predicated on two principles.
•Each executive officer must demonstrate exceptional performance to remain a part of our executive team. We believe that executive officers who underperform should be removed from our executive team and have their compensation adjusted accordingly or be dismissed from the Company.
•Each executive officer must contribute as a member of the team to our overall success rather than merely achieve specific objectives within his or her area of responsibility.
As a result of this team-based approach, the Compensation Committee carefully considers the relative compensation levels among all members of the executive team. Accordingly, our executive compensation program is designed to be internally consistent and equitable to further the Company’s success. As reflected in the discussion below, the differences in the amounts awarded to each of our executive officers, including our NEOs, relate primarily to the experience, responsibilities, and performance of each individual executive officer and differing market practices for compensation in each executive officer’s job function.
We are focused on a total compensation program that directly links to performance. We provide competitive cash compensation through base salary, which is fixed pay, cash performance incentives, and equity. Our equity program provides for awards in both stock options and RSUs. We rely on these long-term equity awards to attract, motivate, and retain an outstanding executive team and to ensure a strong connection between our executive compensation program and the long-term interests of our stockholders. We believe stock options and RSUs are effective compensation elements for attracting innovative and passionate executive officers that reward stockholder value creation and for providing critical retention value for our executive officers. By ensuring that our executive officers have a significant portion of their potential compensation tied to long-term stock price performance, we are able to closely align the interest of our executive officers with the interests of our stockholders.
In 2020, the majority of Dr. Guthart’s and our other NEOs’ total target direct compensation (base salary, target annual bonus, and the grant date fair value of equity awards) is long-term equity-based compensation. Linking most of our NEOs total compensation to long-term equity emphasizes variable pay, which is consistent with the Company’s pay-for-performance philosophy. In 2020, no bonus payouts were awarded to any of our NEOs, with the exception of Bob DeSantis. See the section entitled “2020 Bonus Decisions” below for a more detailed discussion. The charts below illustrate the mix of our NEOs’ total target direct compensation.
Executive Compensation-Setting Process
Role of Compensation Committee
The Compensation Committee oversees our executive compensation program (including our executive compensation policies and practices), approves the compensation of our executive officers including our NEOs (other than Dr. Guthart), and administers our various equity plans.
The Compensation Committee annually reviews the performance of Dr. Guthart to determine whether to make any changes to his compensation. Following its approval, the Compensation Committee presents such changes to the independent members of our Board for review and ratification.
Role of Executive Officers
Dr. Guthart makes recommendations to the Compensation Committee regarding the base salary, annual performance-based cash bonus award, and equity awards for our executive officers other than himself. At the Compensation Committee’s request, Dr. Guthart reviews with the Compensation Committee the individual performance of each of the other executive officers, including each of our other NEOs. The Compensation Committee gives considerable weight to Dr. Guthart’s evaluations and determines whether the recommended changes in each executive officer’s compensation, if any, are appropriate.
The Compensation Committee receives support from our Human Resources Department in designing our executive compensation program and analyzing competitive market practices. In addition, Dr. Guthart participates in Compensation Committee meetings, providing input from our executive team on organizational structure, executive development, and financial analysis.
Role of Compensation Consultant
In 2020, the Compensation Committee directly retained the services of Compensia (through July 31) and Aon (from August 1), independent national executive compensation consulting firms, to assist it in fulfilling its duties and responsibilities. Compensia and Aon do not provide services to the Company or its management outside of the services provided to the Compensation Committee unless directed by the Compensation Committee.
The Compensation Committee annually reviews the performance of Compensia and Aon. As part of this annual review, the Compensation Committee considers the independence of the consultant in accordance with SEC and Nasdaq rules and has concluded that the work that Compensia and Aon have performed for the Compensation Committee has not raised any conflict of interest.
While the Compensation Committee does not establish compensation levels based solely on a review of competitive market data, it believes that such data is a useful tool in its deliberations, as it recognizes that our compensation policies and practices must be competitive in the marketplace for us to be able to attract, motivate, and retain qualified executive officers. Generally, the Compensation Committee reviews our executive compensation relative to our established competitive market (based on an analysis of the compensation policies and practices of a select group of peer companies) every two years. The Compensation Committee uses the competitive market data when evaluating all aspects of executive compensation. As a reference point for our NEOs, the Compensation Committee uses the market median for cash and short-term incentive values, the 75th percentile for long-term incentive values, and the market median and 75th percentile for the total direct compensation values.
The Compensation Committee engaged Compensia to assist with updating our compensation peer group and assessing the competitiveness of our executive compensation program in 2020. In evaluating and making changes to the compensation peer group, the Compensation Committee considers the following selection criteria:
•Location of the Company (U.S.-based);
•Ownership structure of the company (publicly-traded);
•Company’s industry (medical device, medical supplies, life sciences tools, and services and technology);
•Revenues (approximately 1/3 to 3x the Company’s last four quarters’ revenue); and
•Market capitalization (approximately 1/3 to 3x the Company’s market capitalization).
After considering the analysis performed by Compensia, the Compensation Committee selected the following direct compensation peer group for use in 2020:
|Adobe Inc.||Edwards Lifesciences Corporation||Square, Inc.|
|Agilent Technologies, Inc.||IDEXX Laboratories, Inc.||Stryker Corporation|
|Align Technology, Inc.||Illumina, Inc.||VMWare, Inc.|
|Arista Networks Inc.||Intuit Inc.||Workday, Inc.|
|Becton, Dickinson and Company||Mettler-Toledo International Inc.||Zimmer Biomet Holdings, Inc.|
|Boston Scientific Corporation||ResMed Inc.|
|DexCom, Inc.||ServiceNow, Inc.|
As a result of the application of the selection criteria described above, DexCom, Inc. was added to our peer group, and Waters Corporation was removed from our prior peer group.
Executive Compensation Elements
The following table lists the elements of the 2020 target direct compensation for our executive compensation program. A mix of fixed and variable compensation elements is used to drive Company performance by applying specific measures that correlate to the creation of stockholder value and aligning our financial and strategic Company goals.
The Compensation Committee reviewed the base salaries of our executive officers, including our NEOs, for possible adjustments in 2020. After taking into consideration our “team-based” approach to compensation, as well as competitive market data provided by Compensia, the Compensation Committee set the base salaries of our NEOs as follows:
|Named Executive Officer||Base Salary |
April 1, 2020 ($)
|Base Salary |
August 1, 2019 ($)
Gary S. Guthart, Ph.D. (1)
|827,500 ||803,400 ||3.0 ||%|
|Myriam J. Curet, M.D. ||569,875 ||549,877 ||3.6 ||%|
|Marshall L. Mohr||571,250 ||551,250 ||3.6 ||%|
|David J. Rosa||594,468 ||576,468 ||3.1 ||%|
Bob DeSantis (2)
|500,000 ||459,821 ||8.7 ||%|
(1)Dr. Guthart’s base salary was subsequently ratified by the independent members of the Board.
(2)Mr. DeSantis was promoted to Executive Vice President on April 1, 2020.
The base salaries earned by our NEOs during 2020 are set forth in the “2020 Summary Compensation Table” below.
Annual Performance-Based Cash Bonuses
Under our Corporate Incentive Program (the “CIP”), we use annual performance-based cash bonuses to motivate and reward our executive officers, including our NEOs, to achieve or exceed our short-term financial and operational objectives while making progress towards our long-term growth and other goals. Consistent with our executive compensation philosophy, these annual performance-based cash bonuses constitute a smaller portion of the target total direct compensation opportunity of our executive officers than their long-term equity awards.
At the end of each year, the Compensation Committee determines the amount of the bonus award to be paid to each executive officer by comparing our actual results to the performance goals established for the year. The Compensation Committee may, in its discretion, reduce or increase the amount of any individual award based on an executive officer’s overall performance and his or her contribution to the achievement of our performance goals.
Target Annual Cash Bonus Opportunities
Given our emphasis on long-term stockholder value creation over annual operating results, the bonuses for which our executive officers are eligible under the CIP are relatively low compared to the competitive market, as reflected by their target annual cash bonus opportunities. For 2020, the target and maximum annual cash bonus opportunities (expressed as a percentage of base salary) under the CIP for our NEOs were as follows:
|Named Executive Officer||Target Annual Cash Bonus|
Opportunity (as a percentage
of base salary)
Maximum Annual Cash Bonus
Opportunity (as a percentage
of base salary) (1)
|Gary S. Guthart, Ph.D.||125%||156.25%|
|Myriam J. Curet, M.D.||80%||100%|
|Marshall L. Mohr||80%||100%|
|David J. Rosa||80%||100%|
Bob DeSantis (2)
(1)The maximum annual cash bonus opportunity (as a percentage of base salary) is calculated at 125% of the target annual cash bonus opportunity; however, the Compensation Committee may award higher amounts based on individual performance.
(2)Prior to Mr. DeSantis’ promotion to Executive Vice President on April 1, 2020, his target and maximum annual cash bonus opportunities (as a percentage of base salary) were 65% and 81.25%, respectively.
These target and maximum annual cash bonus opportunities (expressed as a percentage of base salary) under the CIP were increased from their levels in 2019 of 100% and 125%, respectively, for Dr. Guthart and from 70% and 87.5%, respectively, for the other NEOs other than Mr. DeSantis to better align with our compensation group. The target and maximum annual cash bonus opportunities (expressed as a percentage of base salary) under the CIP were increased from their prior levels of 50% and 62.5%, respectively, for Mr. DeSantis, who was promoted to Executive Vice President on April 1, 2020.
For 2021, the target and maximum annual cash bonus opportunities (expressed as a percentage of base salary) under the CIP were increased to 150% and 187.5%, respectively, for Gary S. Guthart, Ph.D., and to 100% and 125%, respectively, for the other continuing NEOs to better align with our compensation peer group.
Annual Cash Bonus Plan Formula and Funding
NEOs other than Mr. DeSantis
For 2020, the CIP for each NEO other than Mr. DeSantis was planned to be funded through an incentive pool based on our achievement of an adjusted operating income (“AOI”) goal, as set forth in our annual operating plan, and paid to our executive officers based on our actual level of achievement with respect to AOI and several pre-established strategic Company performance objectives (the “Company Performance Goals”). For purposes of the CIP, “AOI” is defined as operating income, excluding non-cash share-based compensation expense, non-cash amortization of intangible assets, and litigation charges.
For 2020, the CIP incentive pool was funded based on an AOI target set at the previous year’s AOI level plus a pre-established increase in AOI for the year and could be funded up to a maximum of 125% of target. For 2020, the threshold, target, and maximum AOI achievement levels were $1,787 million, $1,854 million, and $2,175 million, respectively, with achievement between any two levels determined by linear interpolation. Achievement at threshold, target, and maximum AOI levels corresponded to funding at 0%, 100%, and 125%.
The amount of the incentive pool that is paid out as annual cash bonuses for each executive officer, including each NEO, is determined by an equal weighting of achievement of the AOI goal and aggregate achievement of the Company Performance Goals. In the event that the AOI threshold was not achieved, the incentive pool would not be funded, and our NEOs would not be eligible to receive any bonus under the CIP. Typically, the overall CIP payout will not exceed the amount by which the incentive pool is funded.
The Company Performance Goals are established at the corporate level by the executive team and Dr. Guthart and then reviewed and approved by our Board annually at the beginning of the year. For 2020, the Company Performance Goals fell into six categories: Customer Acceptance; Learning, Clinical Science, and Economics; Customer Experience; Innovation; Quality; and Business at Scale. Given their relationship to our annual operating plan and business strategy and because the Company Performance Goals and their specific target levels are highly confidential, we do not publicly disclose them. We believe their disclosure would provide our competitors,
customers, and other third parties with significant insights regarding our confidential business strategies that could cause us substantial competitive harm.
The Company Performance Goals are designed to focus on the short-term objectives that we believe ultimately drive the long-term success of the Company. There is a risk that payments with respect to any specific goal will not be made at all or will be made at less than 100% of the target level. The achievement of the goals may be affected by several factors including, but not limited to, the impact of changes in healthcare legislation and policy, global and regional conditions, credit markets and the related impact on healthcare spending, timing and success of product development and market acceptance of developed products, changes in trade agreements and/or tariffs imposed on cross-border commerce, and regulatory approvals, clearances, and restrictions. Because several of these factors are not entirely within the control of our NEOs and given the “stretch” nature of the goal-setting process, we believe that it would be relatively difficult to fully achieve the Company Performance Goals in any year. The challenge of the goals and uncertainty in the environment ensures that any payments under the CIP are truly performance-based, which is consistent with the plan’s objectives.
Mr. DeSantis was eligible to participate in the CIP as a Senior Vice President prior to his promotion to Executive Vice President on April 1, 2020. The terms of Mr. DeSantis’ CIP as a Senior Vice President were substantially the same as the CIP for our executive officers, except that funding of the incentive pool was not contingent on achievement of the AOI threshold. The funding and payout of the incentive pool under Mr. DeSantis’ CIP as Senior Vice President was determined by an equal weighting of achievement of the AOI goal and aggregate achievement of the Company Performance Goals.
2020 Bonus Decisions
For 2020, the Company achieved an AOI of $1,552 million, which was below threshold performance. Therefore, the incentive pool under the CIP for our executive officers was not funded, and our NEOs, other than Mr. DeSantis did not receive any bonuses under the CIP. Mr. DeSantis was promoted to Executive Vice President on April 1, 2020, and, accordingly, was eligible to receive a pro-rated bonus payment for his achievements in Q1 2020 for his previous role as Senior Vice President in accordance with the terms of his CIP plan, based on actual achievement of AOI of 0%, weighted at 50%, and actual achievement of the Company Performance Goals of 100%, weighted at 50%. The CIP for Mr. DeSantis was funded at 55% of the target level in Q1 2020.
Based on our 2020 performance, including below threshold performance of AOI and in response to the COVID-19 pandemic, the annual cash bonus payment for Bob DeSantis and no payments for our other NEOs were approved by the Compensation Committee or, in the case of Dr. Guthart, ratified by the independent members of the Board.
The 2020 annual cash bonus payment amounts for our NEOs are set forth in the “2020 Summary Compensation Table” below.
Long-Term Incentive Compensation
Our long-term incentive compensation consists of equity awards in the form of stock options and RSUs. We grant these equity awards to ensure that our executive officers, including our NEOs, have a continuing stake in our long-term success. The Compensation Committee believes that these types of equity awards best meet our overall goals of alignment with long-term performance, stockholder value creation, and retention of our executive officers. The Compensation Committee also believes that the granting of equity awards with multi-year vesting requirements and, with respect to options, a 10-year term creates a substantial retention incentive and encourages our executive officers to focus on our long-term business objectives and long-term stock price performance.
Individual grant awards are determined by the Compensation Committee after considering various factors including a competitive market analysis prepared by its compensation consultant, the current value of our common stock, the overall available stock pool under our active equity plans, and the individual performance of each NEO. The Compensation Committee also considers Dr. Guthart’s recommendations for the other NEOs when approving equity awards. The Compensation Committee determines and presents its equity award recommendation for Dr. Guthart to the independent members of the Board for their ratification.
As in prior years, for 2021 and 2020, the Compensation Committee targeted the stock option-to-RSU grant ratio at approximately 3:1 and authorized the following equity awards for our NEOs:
|Shares of Company Common Stock Underlying RSUs Granted|| Shares of Company Common Stock Subject to Options Granted|
|Named Executive Officer|
|Gary S. Guthart, Ph.D.||4,040 ||5,154 ||5,000 ||12,122 ||15,463 ||15,000 |
|Myriam J. Curet, M.D.||2,281 ||3,007 ||2,333 ||6,842 ||9,020 ||7,000 |
|Marshall L. Mohr||2,281 ||3,007 ||2,333 ||6,842 ||9,020 ||7,000 |
|David J. Rosa||2,281 ||3,007 ||3,000 ||6,842 ||9,020 ||9,000 |
|Bob DeSantis||2,118 |
|2,833 ||6,354 |
(1) As described below under “Equity Award Grant Policies,” stock options are granted bi-annually in February and August. We have included both the February 2021 grant and the August 2021 grant in this table. The 2021 equity awards are granted based on 2020 performance, while the 2020 equity awards are granted based on 2019 performance. Please refer to the section “Equity Award Grant Policies” for more information on the vesting terms of these awards.
(2) Includes additional awards made to Mr. DeSantis in May 2020 in connection with his promotion to Executive Vice President. The option to purchase 1,448 shares granted to Mr. DeSantis in May 2020 vests as to 25% of the shares subject to the option on the first anniversary of the date of grant and as to 1/48th of the shares subject to the option on each monthly anniversary thereafter. The award of 483 restricted stock units granted to Mr. DeSantis in May 2020 vests as to 25% of the restricted stock units annually from the date of grant.
Equity is an important part of our compensation package to employees company-wide and allows us to attract and retain critical talent in a very competitive labor market. The total equity awards granted to our NEOs remains at a small percentage relative to the total equity awards granted to our employees company-wide for the last ten years. For 2011 through 2020, the percentage of NEO equity award grants relative to total equity award grants were as follows:
Equity Award Grant Policies
The Compensation Committee reviews and approves annual equity award grants to our executive officers, including our NEOs, and Dr. Guthart’s equity award is ratified by the independent members of the full Board. Beginning in 2020, we changed the timing of our annual equity award grants to accommodate the consolidation of our annual compensation programs into one cycle in the first quarter of the year. Stock options are granted to our executive officers bi-annually on the last business day of February and on the same date in August or, if that date is not a business day, the next business day. RSUs are granted on the last business day of February each year. The February stock option grants vest over a four-year period, while the August stock option grants vest over a 3.5-year period. The RSUs vest 25% annually over a four-year period.
We do not time the granting of stock options with any favorable or unfavorable news released by the Company. Beginning in January 2020, initial stock option and RSU grants are consistently granted on the tenth day of the month. If the tenth day of the month is not a business day, then the grant date will be the business day immediately following the tenth day of the month. Proximity of any awards to an earnings announcement or other market events is coincidental.
Welfare and Other Employee Benefits
We have established a tax-qualified Section 401(k) retirement plan for all employees, including our NEOs, who satisfy certain eligibility requirements, including requirements relating to age and length of service. We match 200% of employee contributions up to $1,500 per calendar year per participant, including our named executive officers. All matching employer contributions are fully vested when made.
In addition, we provide all of our employees who work 30 hours or more per week, including our NEOs, a variety of health and welfare benefits. These benefits include medical, dental, and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance coverage.
Our employee benefits programs are intended to be affordable and competitive in relation to the market. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
Perquisites and Other Personal Benefits
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide perquisites to our executive officers, including our NEOs, except in limited situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes.
In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual executive officer in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation, or retention purposes. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee.
In December 2008, our Board approved and adopted a change-in-control plan (the “Change-in-Control Plan”). Under the Change-in-Control Plan, all eligible employees of the Company who have been employed at least six months prior to the date of their separation from service, including our executive officers, are eligible to receive certain payments and benefits in the event of a termination of employment without cause or an involuntary separation from service within 12 months after a change in control of the Company.
We believe the Change-in-Control Plan is beneficial to our stockholders because it minimizes the uncertainty presented to our valuable workforce in the case of a change in control of the Company. In addition, we provide the Change-in-Control Plan to encourage our employees to work at a dynamic and rapidly growing business where their long-term compensation largely depends on future stock price appreciation. In the case of our executive officers, the Change-in-Control Plan is intended to mitigate a potential disincentive for them when they are evaluating a potential acquisition of the Company, particularly when the services of the executive officers may not be required by the acquiring entity. In such a situation, we believe that these protections are necessary to encourage retention of the executive officers through the conclusion of the transaction and to ensure a smooth management transition. The payments and benefits provided under the Change-in-Control Plan have been designed to provide our eligible employees, including our executive officers, with consistent treatment that is competitive with current market practices.
A description of the terms and conditions of the Change-in-Control Plan, as well as information about the estimated payments and benefits that our NEOs would have been eligible to receive as of December 31, 2020, are set forth in “Potential Payments Upon Termination or Change in Control” below.
Other Compensation Policies
Stock Ownership Guidelines
We believe that stock ownership by our executive officers, including our NEOs, and the members of our Board is important to link the risks and rewards inherent in stock ownership of these individuals and our stockholders. Our executive officer stock ownership guidelines require (i) our Chief Executive Officer to maintain a minimum level of stock ownership equal to five times his annual base salary and (ii) each of our executive officers (other than our CEO) to maintain a minimum level of stock ownership equal to three times his or her annual base salary.
For purposes of determining stock ownership levels, the following forms of equity interests are included: shares owned outright by, or held in trust for the benefit of, the executive officer or his or her spouse or children sharing the same household; shares held through a fund or other entity as to which the executive officer has control; shares of our common stock, stock units, or other stock equivalents obtained through the exercise of stock options or vesting of equity awards; shares of common stock underlying vested stock options, net of shares that would need to be withheld for the exercise price; and other stock or stock equivalent awards determined by the Compensation Committee.
These stock ownership guidelines are intended to create a clear standard that encourages these executive officers to remain invested in the performance of our stock price. Each executive officer has five years from the date he or she becomes subject to the stock ownership guidelines to achieve compliance with the guidelines. Each of our current executive officers met the guidelines as of the date of this proxy statement.
Compensation Recovery Policy
Our Compensation Recovery Policy (the “Policy”) is intended to maintain a culture of focused, diligent, and responsible management that discourages conduct detrimental to the growth of the Company. Accordingly, as set forth in the Policy, the Company may recover cash incentive or performance-vesting equity compensation of its current and former executive officers in the event that they engage in fraudulent or willful misconduct that results in the Company being required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under United States securities laws.
Tax and Accounting Considerations
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code (the “Code”) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for “covered employees,” which generally consist of our Chief Executive Officer, Chief Financial Officer, and each of the next three highest compensated officers for the taxable year, without regard to whether such executive officers are serving at the end of the taxable year, and anyone who previously has been a covered employee for any taxable year beginning after December 31, 2016.
While the Compensation Committee considers the deductibility of compensation along with other factors when making compensation decisions, it believes it is important to maintain cash and equity incentive compensation at the requisite level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation.
Nonqualified Deferred Compensation
The Compensation Committee takes into account whether components of the compensation for our executive officers will be adversely impacted by the penalty tax imposed by Section 409A of the Code and aims to structure these components to be compliant with or exempt from Section 409A to avoid such potential adverse tax consequences.
“Golden Parachute” Payments
Sections 280G and 4999 of the Code provide that certain executive officers and other service providers who are highly compensated or hold significant equity interests may be subject to an excise tax if they receive payments or benefits in connection with a change in control of the company that exceeds certain prescribed limits and that we, or a successor, may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer, including any NEO, with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G or 4999 during 2020, and we have not agreed and are not
otherwise obligated to provide any executive officer, including any NEO, with such a “gross-up” or other reimbursement.
Accounting for Share-Based Compensation
We follow ASC 718 for our share-based compensation awards. ASC 718 requires companies to measure the compensation expense for all share-based compensation awards made to employees and directors, including stock options and RSUs, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their share-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.
COMPENSATION RISK CONSIDERATIONS
The Compensation Committee considers, in establishing and reviewing our employee compensation programs, whether each of these programs encourages unnecessary or excessive risk taking. The Company, after reviewing and discussing the compensation programs with the Compensation and Audit Committees of our Board, believes that the programs are balanced and do not motivate or encourage unnecessary or excessive risk taking because of, in part, the following:
•Base salaries are fixed in amount and, thus, do not encourage risk taking.
•While annual performance-based awards focus on achievement of short-term goals, and short-term goals may encourage the taking of short-term risks at the expense of long-term results, the Company’s performance-based award programs represent a reasonable portion of employees’ target total direct compensation opportunities. Performance-based awards are based on various departmental and Company-wide metrics; funding for the awards is capped at the Company level, and the distribution of the funds to executive officers and other employees is at the discretion of the Compensation Committee.
•Long-term equity awards are important to help further align employees’ interests with those of our stockholders. The ultimate value of the awards is tied to the Company’s stock price and, since awards are staggered and subject to long-term vesting schedules, they help ensure our executive officers have significant value tied to our long-term stock price performance. As described above in the Compensation Discussion and Analysis, we have established procedures related to the timing and approval of equity awards.
Because of the above, we believe that our employee compensation programs appropriately balance risk and the desire to focus employees on specific short-term goals important to the Company’s success.
COMPENSATION OF NAMED EXECUTIVE OFFICERS
2020 Summary Compensation Table
The following Summary Compensation Table sets forth summary information concerning the compensation provided to our NEOs in the years ended December 31, 2020, 2019, and 2018, for services to our Company in all capacities.
|Name and Principal Position||Year||Salary |
Gary S. Guthart, Ph.D.
President and Chief Executive Officer
|2020||821,475 ||2,752,030 ||2,468,357 ||— ||1,500 ||6,043,362 |
|2019||789,750 ||2,742,500 ||2,123,911 ||812,713 ||1,500 ||6,470,374 |
|2018||766,613 ||2,371,980 ||2,474,658 ||809,827 ||1,500 ||6,424,578 |
Myriam J. Curet, M.D.
Executive Vice President and Chief Medical Officer
|2020||564,875 ||1,605,618 ||1,439,878 ||— ||1,500 ||3,611,871 |
|2019||476,386 ||1,279,651 ||991,159 ||349,837 ||1,500 ||3,098,533 |
|2018||406,250 ||1,674,240 ||1,746,817 ||324,450 ||1,500 ||4,153,257 |
Marshall L. Mohr
Executive Vice President and Chief Financial Officer
|2020||566,250 ||1,605,618 ||1,439,878 ||— ||1,500 ||3,613,246 |
|2019||535,938 ||1,279,651 ||991,159 ||397,666 ||1,500 ||3,205,914 |
|2018||505,635 ||1,185,780 ||1,237,329 ||400,155 ||1,500 ||3,330,399 |
David J. Rosa
Executive Vice President and Chief Business Officer
|2020||589,968 ||1,605,618 ||1,439,878 ||— ||1,500 ||3,636,964 |
|2019||573,965 ||1,645,500 ||1,274,347 ||427,428 ||1,500 ||3,922,740 |
|2018||547,510 ||1,744,140 ||1,819,601 ||432,600 ||1,500 ||4,545,351 |
Executive Vice President and Chief Product Officer
|2020||489,955 ||1,808,335 ||705,369 ||41,097 ||1,500 ||3,046,256 |
(1)The amounts reported in these columns represent the grant date fair values of the stock options granted to the NEOs and the RSUs granted to the NEOs in the applicable fiscal year, determined in accordance with ASC 718. The grant date fair value for RSUs is measured based on the closing fair market value of the Company’s common stock on the date of grant. See Note 10 of the Notes to the Consolidated Financial Statements contained in our Annual Report on Form 10-K filed on February 10, 2021, for a discussion of all assumptions made by us in determining the grant date fair value of these equity awards.
(2)Represents the annual bonus earned in the designated fiscal year under the CIP paid in March of the following year. No bonus payouts were awarded to any of our NEOs with the exception of Bob DeSantis, who was promoted to Executive Vice President on April 1, 2020, and earned a pro-rated portion of the bonus to which he was entitled for his performance prior to such promotion. See the “Compensation Discussion and Analysis” section above for a more detailed discussion.
(3)Represents matching contributions paid by us pursuant to our 401(k) plan for all NEOs.
2020 Grants of Plan-Based Awards Table
The following table summarizes information about the non-equity incentive awards and equity-based awards granted to our NEOs in 2020:
Payouts Under Non-Equity
Incentive Plan Awards (1)
# of Shares
of Stock or Units (2)
# of Securities Underlying Options (2)
|Exercise or Base|
Options or Awards
Options and Awards ($) (3)
|Gary S. Guthart, Ph.D.||2/28/2020||5,154 ||2,752,030 |
|2/28/2020||7,732 ||533.96 ||1,011,745 |
|8/28/2020||7,731 ||727.01 ||1,456,612 |
|Cash Incentive||— ||821,508 ||1,026,885 |
|2/28/2020||3,007 ||1,605,618 |
|2/28/2020||4,510 ||533.96 ||590,141 |
|8/28/2020||4,510 ||727.01 ||849,738 |
|Cash Incentive||— ||564,902 ||706,128 |
|2/28/2020||3,007 ||1,605,618 |
|2/28/2020||4,510 ||533.96 ||590,141 |
|8/28/2020||4,510 ||727.01 ||849,738 |
|Cash Incentive||— ||566,277 ||707,846 |
|David J. Rosa||2/28/2020||3,007 ||1,605,618 |
|2/28/2020||4,510 ||533.96 ||590,141 |
|8/28/2020||4,510 ||727.01 ||849,738 |
|Cash Incentive||— ||589,993 ||737,491 |
|Bob DeSantis||2/28/2020||2,899 ||1,547,950 |
|2/28/2020||1,450 ||533.96 ||189,735 |
|539.10 ||242,625 |
|8/28/2020||1,449 ||727.01 ||273,009 |
|Cash Incentive||— ||490,010 ||612,513 |
(1)For 2020, Dr. Guthart had a bonus target of 125% of base salary, and Messrs. Mohr and Rosa and Dr. Curet had a bonus target of 80% of base salary. Mr. DeSantis had a bonus target of 80% of base salary upon his promotion to Executive Vice President on April 1, 2020, and a bonus target of 65% of base salary prior to such promotion under the terms of his CIP for his previous role as a Senior Vice President. Amounts shown in the table for Mr. DeSantis represent his target and maximum bonuses pro-rated based on the length of his service as Senior Vice President and Executive Vice President during 2020. At its discretion, the Compensation Committee has the authority to pay any NEO in excess of or below his or her targeted bonus amount. The goals for 2020 were approved by the Compensation Committee in January 2020. The payout amounts for each NEO were reviewed and approved by the Compensation Committee and the Board in January 2021 upon reviewing results for 2020. The maximum bonus or performance payout is calculated at 125% of the target. Please refer to the “Compensation Discussion and Analysis” section above for detailed discussion of the CIP.
(2)The options were granted under our Amended and Restated 2010 Incentive Award Plan. The February 28 option grants vest 6/48 at the end of six months and 1/48 per month thereafter through a four-year period, subject to continued employment through the applicable vesting date. The August 28 option grants vest 7/48 at the end of one month and 1/48 per month thereafter through a 3.5-year period, subject to continued employment through the applicable vesting date. The February 28 RSU grants vest in 1/4 increments annually over a four-year period, subject to continued employment through the applicable vesting date.
(3)The amounts shown represent the fair value per share as of the grant date of such award determined pursuant to ASC 718, multiplied by the number of shares. See Note 10 of the Notes to the Consolidated Financial Statements contained in our Annual Report on Form 10-K filed on February 10, 2021, for a discussion of all assumptions made by us in determining the value of the equity awards.
(4)The option vests as to 25% on the first anniversary of the grant date and as to 1/48 per month thereafter through a total four year-period, subject to continued employment through the applicable vesting date.
(5)The RSUs vest in 1/4 increments annually over a four-year period, subject to continued employment through the applicable vesting date.
Outstanding Equity Awards as of December 31, 2020
The following table summarizes the outstanding stock options and RSUs that were held by our NEOs as of December 31, 2020:
|Option Awards||Stock Awards|
|Name||Grant Date||# of Securities|
|# of Securities|
Shares or units of stock that have not vested (#) (1)
Market value of shares or units of stock that have not vested ($) (2)
|Gary S. Guthart, Ph.D.||2/15/2012||28,000 ||— ||168.41 ||2/15/2022|
|8/15/2012||42,000 ||— ||172.44 ||8/15/2022|
|2/15/2013||22,500 ||— ||189.74 ||2/15/2023|
|8/15/2013||22,500 ||— ||127.91 ||8/15/2023|
|2/18/2014||11,250 ||— ||148.03 ||2/18/2024|
|8/15/2014||11,250 ||— ||153.05 ||8/15/2024|
|2/17/2015||8,400 ||— ||171.33 ||2/17/2025|
|8/17/2015||8,400 ||— ||177.68 ||8/17/2025|
|2/16/2016||2,631 ||— ||178.39 ||2/16/2026|
|2/15/2017||11,500 ||500 ||238.91 ||2/15/2027|
|2/15/2017||2,000 ||1,636,200 |
|8/15/2017||11,500 ||500 ||328.46 ||8/15/2027|| || |
|2/15/2018||6,021 ||2,479 ||418.56 ||2/15/2028|
|2/15/2018||2,833 ||2,317,677 |
|8/15/2018||6,021 ||2,479 ||522.77 ||8/15/2028|| |
|2/15/2019||3,437 ||4,063 ||548.50 ||2/15/2029|
|2/15/2019||3,750 ||3,067,875 |
|8/15/2019||3,438 ||4,062 ||499.87 ||8/15/2029|| |
|2/28/2020||1,610 ||6,122 ||533.96 ||2/28/2030|
|2/28/2020||5,154 ||4,216,487 |
|8/28/2020||1,611 ||6,120 ||727.01 ||8/28/2030|
|Myriam J. Curet, M.D.||2/15/2017||1,875 ||250 ||238.91 ||2/15/2027|
|2/15/2017||999 ||817,282 |
|8/15/2017||5,750 ||250 ||328.46 ||8/15/2027|| |
|2/15/2018||4,250 ||1,750 ||418.56 ||2/15/2028|
|2/15/2018||2,000 ||1,636,200 |
|8/15/2018||4,250 ||1,750 ||522.77 ||8/15/2028|| |
|2/15/2019||1,604 ||1,896 ||548.50 ||2/15/2029|
|2/15/2019||1,749 ||1,430,857 |
|8/15/2019||1,605 ||1,895 ||499.87 ||8/15/2029|| |
|2/28/2020||939 ||3,571 ||533.96 ||2/28/2030|
|2/28/2020||3,007 ||2,460,027 |
|8/28/2020||940 ||3,570 ||727.01 ||8/28/2030|
|Marshall L. Mohr||2/15/2012||21,000 ||— ||168.41 ||2/15/2022|
|8/15/2012||21,000 ||— ||172.44 ||8/15/2022|
|2/15/2013||18,000 ||— ||189.74 ||2/15/2023|
|2/18/2014||9,375 ||— ||148.03 ||2/18/2024|
|8/15/2014||9,375 ||— ||153.05 ||8/15/2024|
|2/17/2015||6,825 ||— ||171.33 ||2/17/2025|
|8/17/2015||6,825 ||— ||177.68 ||8/17/2025|
|2/16/2016||3,750 ||— ||178.39 ||2/16/2026|
|8/15/2016||3,750 ||— ||231.00 ||8/15/2026|
|2/15/2017||7,187 ||313 ||238.91 ||2/15/2027|
|2/15/2017||1,250 ||1,022,625 |
|8/15/2017||7,188 ||312 ||328.46 ||8/15/2027|
|2/15/2018||3,010 ||1,240 ||418.56 ||2/15/2028|
|2/15/2018||1,416 ||1,158,430 |
|8/15/2018||3,010 ||1,240 ||522.77 ||8/15/2028|
|2/15/2019||1,604 ||1,896 ||548.50 ||2/15/2029|
|2/15/2019||1,749 ||1,430,857 |
|8/15/2019||1,605 ||1,895 ||499.87 ||8/15/2029|
|2/28/2020||939 ||3,571 ||533.96 ||2/28/2030|
|2/28/2020||3,007 ||2,460,027 |
|8/28/2020||940 ||3,570 ||727.01 ||8/28/2030|
|David J. Rosa||2/15/2012||21,000 ||— ||168.41 ||2/15/2022|
|8/15/2012||21,000 ||— ||172.44 ||8/15/2022|
|2/15/2013||18,000 ||— ||189.74 ||2/15/2023|
|8/15/2013||36,000 ||— ||127.91 ||8/15/2023|
|2/18/2014||9,375 ||— ||148.03 ||2/18/2024|
|8/7/2014||13,500 ||— ||147.27 ||8/7/2024|
|8/15/2014||9,375 ||— ||153.05 ||8/15/2024|
|2/17/2015||7,350 ||— ||171.33 ||2/17/2025|
|8/17/2015||7,350 ||— ||177.68 ||8/17/2025|
|2/16/2016||4,875 ||— ||178.39 ||2/16/2026|
|8/15/2016||4,875 ||— ||231.00 ||8/15/2026|
|2/15/2017||8,626 ||374 ||238.91 ||2/15/2027|
|2/15/2017||1,500 ||1,227,150 |
|8/15/2017||8,625 ||375 ||328.46 ||8/15/2027|| |
|2/15/2018||4,427 ||1,823 ||418.56 ||2/15/2028|
|2/15/2018||2,083 ||1,704,102 |
|8/15/2018||4,427 ||1,823 ||522.77 ||8/15/2028|| |
|2/15/2019||2,062 ||2,438 ||548.50 ||2/15/2029|
|2/15/2019||2,250 ||1,840,725 |
|8/15/2019||2,063 ||2,437 ||499.87 ||8/15/2029|
|2/28/2020||939 ||3,571 ||533.96 ||2/28/2030|
|2/28/2020||3,007 ||2,460,027 |
|8/28/2020||940 ||3,570 ||727.01 ||8/28/2030|
|Bob DeSantis||2/15/2017||1,500 ||1,227,150 |
|2/15/2018||1,916 ||1,567,480 |
|2/15/2019||2,124 ||1,737,644 |
|2/28/2020||302 ||1,148 ||533.96 ||2/28/2030|
|2/28/2020||2,899 ||2,371,672 |
|5/11/2020||— ||1,448 ||539.10 ||5/11/2030|
|5/11/2020||483 ||395,142 |
|8/28/2020||303 ||1,146 ||727.01 ||8/28/2030|
(*)All of the listed options, except the August 2015, 2016, 2017, 2018, 2019, 2020, August 15, 2014, and May 11, 2020 grants vest as to 6/48ths of the underlying option shares upon completion of six months of service following the date of grant and 1/48th per month thereafter, contingent upon continued employment. The August 2015, 2016, 2017, 2018, 2019, 2020, and August 15, 2014 options vest as to 7/48ths of the underlying option shares upon completion of one month of service following the date of the grant and 1/48th per month thereafter, contingent upon continued employment. The May 11, 2020 grant vests as to 25% of the underlying option shares on the completion of one year of service following the date of grant and 1/48 per month thereafter, contingent upon continued employment. All of these options have a ten-year term.
(1) All of the listed RSUs vest in 1/4 increments annually over a four-year period from the date of grant, subject to continued employment through the applicable vesting date.
(2) The dollar amounts shown are determined by multiplying the number of unvested units by $818.10 (the closing price of the Company’s common stock on December 31, 2020, the last trading day of the Company’s fiscal year).
Option Exercises and Stock Vested During Fiscal 2020
The following table summarizes the stock options exercised and vesting of RSUs during the year ended December 31, 2020, and the value realized upon exercise of stock options and vesting of stock awards by our NEOs:
|Option Awards||Stock Awards|
|Name||Number of Shares|
Exercise ($) (1)
|Number of Shares|
Acquired on Vesting (#)
Vesting ($) (2)
|Gary S. Guthart, Ph.D.||77,750 ||35,734,121 ||8,042 ||4,862,756 |
|Myriam J. Curet, M.D.||7,762 ||2,785,795 ||4,084 ||2,469,472 |
|Marshall L. Mohr||28,500 ||14,035,631 ||4,417 ||2,670,827 |
|David J. Rosa||48,000 ||24,563,916 ||5,729 ||3,464,154 |
|Bob DeSantis||765 ||352,597 ||4,479 ||2,708,317 |
(1)The value realized equals the excess of the fair market value of our common stock at exercise over the option exercise price, multiplied by the number of shares for which the option was exercised.
(2)The dollar amounts shown above for stock awards are determined by multiplying the number of shares that vested by the per-share closing price of the Company’s common stock on the vesting date.
Potential Payments Upon Termination or Change in Control
The following table shows potential payments to the NEOs upon a change in control of the Company and subsequent involuntary separation from service within 12 months after the change in control, in accordance with the Change-in-Control Plan. Under this plan, all eligible employees of the Company who have been employed at least six months prior to the separation from service date, including executive officers, are entitled to the following severance payments and benefits in the event of a termination of employment without cause or an involuntary separation from service within 12 months after a change in control of the Company:
•a lump-sum cash payment in the amount equal to the sum of six months of such eligible employee’s base compensation (defined in the Change-in-Control Plan as base salary and target bonus) plus an additional one month of base compensation for every year of such eligible employee’s service with the Company, such severance not to exceed 12 months;
•six months of COBRA premiums, provided that such eligible employee elects continued coverage under COBRA; and
•100% vesting of all outstanding unvested equity awards that the eligible employee then holds.
The amounts shown for all NEOs assume that a qualifying termination of employment was effective December 31, 2020, the last business day of the year, under the Change-in-Control Plan and are estimates of the amounts that would be paid to the NEOs upon such a termination of employment. The terms and conditions of the Change-in-Control Plan (including the definitions of the key plan terms) are set forth in the plan document.
and Target Bonus ($) (1)
|COBRA Premiums |
Total Value of Equity
Acceleration ($) (2)
|Gary S. Guthart, Ph.D.||2,443,711 ||13,303 ||17,662,778 ||20,119,792 |
|Myriam J. Curet, M.D.||1,025,775 ||13,303 ||10,281,658 ||11,320,736 |
|Marshall L. Mohr||1,028,250 ||9,738 ||9,721,694 ||10,759,682 |
|David J. Rosa||1,070,042 ||13,303 ||11,671,651 ||12,754,996 |
|Bob DeSantis||900,000 ||12,103 ||8,133,662 ||9,045,765 |
(1)Amounts shown are the maximum potential payment the executive officer would have received as of December 31, 2020. Amounts of the parachute payment cut-back, as described below, if any, would be calculated upon actual termination of employment.
(2)Amounts shown assume that all stock options would be exercised immediately upon termination of employment. Stock option values represent the excess of the market value of the option shares for which vesting is accelerated over the exercise price for those option shares, using $818.10 per share for the market value, which is the closing market price of a share of our common stock on December 31, 2020, the last trading day of our 2020 fiscal year. The dollar amounts of RSUs are determined by multiplying the number of shares subject to the RSUs for which vesting is accelerated by $818.10.
For purposes of the Change-in-Control Plan, an involuntary separation from service of a NEO generally means, (i) without the executive’s express written consent, the assignment to the executive of any duties or the significant reduction of the executive’s duties, authority, or responsibilities, which is inconsistent with the executive’s duties, authority, or responsibilities in effect immediately prior to such assignment, or the removal of the executive from such duties, authority, or responsibilities; (ii) a reduction by the Company in the base compensation of the executive as in effect immediately prior to such reduction; (iii) a material reduction by the Company in the kind or level of employee benefits to which the executive is entitled immediately prior to such reduction with the result that the executive’s overall benefits package is significantly reduced; (iv) the relocation of the executive to a facility or a location more than 25 miles from the executive’s then present location without the executive’s express written consent; (v) any purported termination of the executive by the Company, which is not effected for disability or for cause, or any purported termination for which the grounds relied upon are not valid; (vi) the failure of the Company to obtain the assumption of the agreement by any successors contemplated in the Change-in-Control Plan; or (vii) any act or set of facts or circumstances which would, under California case law or statute, constitute a constructive termination of the executive. In order for an executive to terminate employment in an involuntary separation from service, he or she must provide notice to the Company of the existence of a condition listed above, within 30 days of the initial existence of the condition, and the Company shall have 30 days following receipt of such notice to remedy such condition and not make any payments hereunder in connection with such termination of employment.
The payments and benefits pursuant to the Change-in-Control Plan are subject to a NEO’s timely execution and non-revocation of a release of claims. Further, the Change-in-Control Plan specifically includes a so-called parachute payment “best pay” provision, where payments and benefits will either be made to the executive in full or as to such lesser amount as which would result in no portion of the payments and benefits being subject to an excise tax under Section 280G of the Internal Revenue Code, whichever of the foregoing amounts is greater on an after-tax basis.
|Annual total compensation of the CEO for 2020||$||6,043,362 |
|Annual total compensation of the median employee for 2020||$||140,754 |
|Ratio of annual total compensation of the CEO to the annual total compensation of the median employee for 2020||43:1|
The Company identified the median employee using a consistently applied compensation measure that consists of annual base salary or wages, target annual performance-based cash bonuses, target commissions, and long-term equity awards based on their grant date fair values. Permanent employees who joined in 2020 and permanent employees who were on leave during 2020 were assumed to have worked for the entire year. All U.S. and non-U.S. employees employed as of December 31, 2020, were captured. No cost-of-living adjustments were made.
The annual total compensation of the CEO and the annual total compensation of the median employee were calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board has determined that the following current directors and director nominee are “independent” under current Nasdaq rules: Craig H. Barratt, Ph.D., Joseph C. Beery, Amal M. Johnson, Don R. Kania, Ph.D., Amy L. Ladd, M.D., Keith R. Leonard, Jr., Alan J. Levy, Ph.D., Jami Dover Nachtsheim, Monica P. Reed, M.D., and Mark J. Rubash. In addition, the Board determined that Lonnie M. Smith, who served on our board of directors until his retirement in April 2020, was “independent” under such rules.
The Company has adopted a written policy for approval of transactions between the Company and its related parties, such as directors, director nominees, executive officers, greater than five percent beneficial owners, and each of their respective immediate family members, as well as any firm, corporation, or other entity in which such persons are employed, serve as general partner, principal, or similar position or in which such persons own a five percent or greater beneficial ownership interest, where the amount involved in the transaction exceeds or is expected to exceed $120,000 in a single calendar year. The policy provides that the Audit Committee review transactions subject to the policy and determine whether or not to approve or ratify those transactions. In doing so, they take into account:
•Whether the terms of the transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related party.
•Whether there are business reasons for the Company to enter into the related party transaction.
•Whether the transaction would impair the independence of an outside director.
•Whether the transaction would present an improper conflict of interest for any director or executive officer of the Company.
•Any other factors deemed appropriate.
No member of the Audit Committee may participate in the approval of a related party transaction for which he or she is a related party.
In addition, each of the following types of related party transactions are deemed to be approved under the policy:
•Compensation to an executive officer or director of the Company required to be disclosed in the Proxy Statement pursuant to Item 402 of Regulation S-K; or compensation to an executive officer who is not an immediate family member of a related party, provided that such compensation would have been reported pursuant to Item 402 of Regulation S-K as compensation earned for services to the Company if the executive was a “named executive officer” and such compensation has been approved, or recommended to the Board for approval, by the Compensation Committee of the Board.
•The following transactions that are in the Company’s ordinary course of business and where the financial interest of the related party arises only in the following indirect manners:
a)from the related party’s position as a director of another corporation or organization that is a party to the transaction;
b)from the direct or indirect ownership by the related party (or parties, in the aggregate) of less than a 10% equity interest in another person (other than a partnership), which is a party to the transaction; or
c)from the related party’s position as a limited partner in a partnership in which the related party (or parties, in the aggregate) has or have an interest of less than 10%, and the related party is not a general partner of and does not have another position in the partnership.
•Transactions that are in the Company’s ordinary course of business and where the interest of the related party arises solely from the ownership of a class of equity securities in the Company and all holders of such class of equity securities of the Company will receive the same benefit on a pro rata basis.
A summary of all material related party transactions, if any, is provided to the Audit Committee for its review at each regularly scheduled Audit Committee meeting. If advance approval of a related party transaction is not feasible, then the transaction may be preliminarily entered into by management upon prior approval by the Chair of the Audit Committee and will be subject to ratification by the Audit Committee at the next regularly scheduled meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information in the following table sets forth the ownership of our common stock, as of December 31, 2020, by: (i) any person who is known by us to be the beneficial owner of more than five percent of our common stock; (ii) each of our NEOs named in the Compensation Discussion and Analysis section; (iii) each of our directors; and (iv) all executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has sole or shared voting power as well as any shares that the individual has the right to acquire within 60 days of December 31, 2020, through the exercise of any stock options, warrants, or other rights or upon vesting of RSUs. The percentage of shares beneficially owned is computed on the basis of 117,710,058 shares of our common stock outstanding as of December 31, 2020. Shares of our common stock that a person has the right to acquire within 60 days of December 31, 2020, are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. Unless otherwise noted below, the address for each beneficial owner listed is c/o Intuitive Surgical, Inc., 1020 Kifer Rd., Sunnyvale, California 94086.
The following table indicates those owners and their total number of beneficially owned shares, including shares subject to options exercisable or RSUs vesting within 60 days after December 31, 2020; however, unless otherwise indicated, these shares do not include any options or RSUs awarded after December 31, 2020:
|Beneficial Owner||Number of Shares||Percent of Total|
|T. Rowe Price Associates, Inc.||9,599,898 ||(1)||8.2 ||%|
|The Vanguard Group||9,127,891 ||(2)||7.8 ||%|
|BlackRock, Inc.||8,888,304 ||(3)||7.6 ||%|
|FMR LLC||5,190,152 ||(4)||4.4 ||%|
|Gary S. Guthart, Ph.D.||595,157 ||(5)||0.5 ||%|
|David J. Rosa||217,354 ||(6)||*|
|Marshall L. Mohr||143,596 ||(7)||*|
|Amal M. Johnson||27,072 ||(8)||*|
|Myriam J. Curet, M.D.||26,292 ||(9)||*|
|Craig H. Barratt, Ph.D.||24,057 ||(10)||*|
|Alan J. Levy, Ph.D.||21,597 ||(11)||*|
|Mark J. Rubash||9,664 ||(12)||*|
|Bob DeSantis||7,964 ||(13)||*|
|Jami Dover Nachtsheim||4,414 ||(14)||*|
|Keith R. Leonard Jr.||2,376 ||(15)||*|
|Don R. Kania, Ph.D.||1,922 ||(16)||*|
|Amy L. Ladd, M.D.||678 ||(17)||*|
|Joseph C. Beery||— ||*|
|All executive officers and directors as a group (16 persons)||1,102,451 ||(18)||0.9 ||%|
(*)Represents less than 0.5% of the issued and outstanding shares.
(1)Based on information provided by T. Rowe Price Associates, Inc. (“T. Rowe Price”), 100 East Pratt Street, Baltimore, MD 21202, in a Schedule 13G filed with the SEC on February 16, 2021, reporting beneficial ownership of Intuitive Surgical’s stock as of December 31, 2020. According to such Schedule 13G, T. Rowe Price has sole power to vote or direct the vote with respect to 3,736,230 shares and sole power to dispose or direct the disposition with respect to 9,599,898 shares.
(2)Based on information provided by The Vanguard Group (“Vanguard”), 100 Vanguard Blvd, Malvern, PA 19355, in a Schedule 13G filed with the SEC on February 10, 2021, reporting beneficial ownership of Intuitive Surgical’s stock as of December 31, 2020. According to such Schedule 13G, Vanguard has sole power to vote or direct the vote with respect to 0 shares, shared voting power for 202,968 shares, sole dispositive power for 8,605,362 shares, and shared dispositive power for 522,529 shares.
(3)Based on information provided by BlackRock, Inc. (“BlackRock”), 55 East 52nd Street, New York, NY 10055, in a Schedule 13G filed with the SEC on January 29, 2021, reporting beneficial ownership of Intuitive Surgical’s stock as of December 31, 2020. According to such Schedule 13G, BlackRock has sole power to vote or direct the vote with respect to 7,967,159 shares and sole power to dispose or direct the disposition with respect to 8,888,304 shares.
(4)Based on information provided by FMR LLC. (“FMR”), 245 Summer Street, Boston, MA 02210, in a Schedule 13G filed with the SEC on February 8, 2021, reporting beneficial ownership of Intuitive Surgical’s stock as of December 31, 2020. According to such Schedule 13G, FMR has sole power to vote or direct the vote with respect to 742,945 shares and sole power to dispose or direct the disposition with respect to 5,190,152 shares.
(5)Includes 252,197 shares directly owned, 108,757 shares held by G Guthart & D Guthart TTE Guthart Family Trust U/A DDTD 11-9-2000, 11,600 shares held by G Guthart & D Guthart TTEE Joseph Clay Guthart 2020 Irrev TR U/A DTD 10-30-20, 11,600 shares held by G Guthart & D Guthart TTEE Mia Hannah Guthart 2020 Irrev TR U/A DTD 10-30-20, 205,047 shares issuable pursuant to options exercisable within 60 days of December 31, 2020, and 5,956 RSU shares vesting within 60 days of December 31, 2020.
(6)Includes 26,480 shares directly owned, 186,830 shares issuable pursuant to options exercisable within 60 days of December 31, 2020, and 4,044 RSU shares vesting within 60 days of December 31, 2020.
(7)Includes 13,273 shares owned by the Mohr Trust Dated April 15, 2005, 127,030 shares issuable pursuant to options exercisable within 60 days of December 31, 2020, and 3,293 RSU shares vesting within 60 days of December 31, 2020.
(8)Includes 3,468 shares directly owned and 23,604 shares issuable pursuant to options exercisable within 60 days of December 31, 2020.
(9)Includes 48 shares directly owned, 30 shares owned by the McAdams Family Revocable Living Trust UAD 01/28/2009, 22,880 shares issuable pursuant to options exercisable within 60 days of December 31, 2020, and 3,334 RSU shares vesting within 60 days of December 31, 2020.
(10)Includes 7,635 shares held by the Barratt-Oakley Trust dated November 29, 2004, of which Dr. Barratt is a trustee and has voting and investment authority over the shares held by the trust, and 16,422 shares issuable pursuant to options exercisable within 60 days of December 31, 2020.
(11)Includes 7,839 shares directly owned and 13,758 shares issuable pursuant to options exercisable within 60 days of December 31, 2020.
(12)Includes 4,560 shares directly owned and 5,104 shares issuable pursuant to options exercisable within 60 days of December 31, 2020.
(13)Includes 3,348 shares directly owned, 725 shares issuable pursuant to options exercisable within 60 days of December 31, 2020, and 3,891 RSU shares vesting within 60 days of December 31, 2020.
(14)Includes 1,087 shares directly owned and 3,327 shares issuable pursuant to options exercisable within 60 days of December 31, 2020.
(15)Includes 594 shares directly owned and 1,782 shares issuable pursuant to options exercisable within 60 days of December 31, 2020.
(16)Includes 489 shares directly owned and 1,433 shares issuable pursuant to options exercisable within 60 days of December 31, 2020.
(17)Includes 128 shares directly owned and 550 shares issuable pursuant to options exercisable within 60 days of December 31, 2020.
(18)Includes 620,959 shares issuable pursuant to options exercisable within 60 days of December 31, 2020 and 24,084 RSU shares vesting within 60 days of December 31, 2020.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, file reports of ownership and changes in ownership (Forms 3, 4, and 5) with the SEC. Executive officers, directors, and greater-than-10% beneficial owners are required to furnish us with copies of all of these forms which they file.
Based solely on our review of these reports or written representations from certain reporting persons, we believe that, during 2020, all filing requirements applicable to our officers, directors, greater-than-10% beneficial owners, and other persons subject to Section 16(a) of the Exchange Act were met, except that, due to an administrative error on the part of the Company, a late Form 4 was filed on behalf of Dr. Curet on February 17, 2021, to report the sale of shares underlying restricted stock units on February 19, 2019, and to correct a gift of shares from September 13, 2018, reported in error on Form 5 on January 24, 2019.
Code of Business Conduct & Ethics
We have adopted a code of ethics that applies to all employees, including our executive officers. The full text of our code of ethics is posted on our website at www.intuitive.com. We intend to disclose future amendments to our code of business conduct and ethics, or certain waivers of such provisions, at the same location on our website identified above.
Equity Compensation Plan Information
The following table contains information as of December 31, 2020, for two categories of equity compensation plans:
Number of securities to be issued upon exercise of outstanding options, warrants, and rights (a) (1)
Weighted-average exercise price of outstanding options, warrants, and rights (2)
Number of securities
remaining available for future
issuance under equity
compensation plans (excluding
securities reflected in
column (a)) (4)
|Equity compensation plans approved by security holders||5,841,831 ||$||315.57 ||9,139,869 |
Equity compensation plans not approved by security holders (3)
|395,369 ||$||189.00 ||— |
|Total||6,237,200 ||$||305.07 ||9,139,869 |
(1)Amounts include 4,104,159 outstanding options and 1,737,672 outstanding RSUs under our Amended and Restated 2010 Incentive Award Plan and 371,711 outstanding options and 23,658 outstanding RSUs under our Amended and Restated 2009 Employment Commencement Incentive Plan.
(2)The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect shares that will be issued upon the vesting of outstanding RSUs, which have no price.
(3)Represents options and RSUs under the Amended and Restated 2009 Employment Commencement Incentive Plan, adopted by the Board in October 2009 and first used in 2010. Options are granted at an exercise price not less than the fair market value of the stock on the date of grant and have a term not to exceed ten years. This plan expired in October 2019 and, therefore, there are no shares reserved for future issuance.
(4)Includes 1,086,921 shares available for issuance under the 2000 Employee Stock Purchase Plan (of which 89,382 shares were issued with respect to the purchase period in effect as of December 31, 2020, which purchase period ended on January 31, 2021).
Material Features of the Amended and Restated 2009 Employment Commencement Incentive Plan
In October 2009, the Board adopted our Amended and Restated 2009 Employment Commencement Incentive Plan, or the 2009 Plan, pursuant to Rule 5653(c)(4) of the Nasdaq Global Market, which was subsequently amended by the Board in February 2011, July 2011, February 2012, July 2012, January 2013, May 2013, December 2013, and April 2015.
Awards granted under the 2009 Plan are intended to constitute “employment inducement awards” under Nasdaq Listing Rule 5635(c)(4) and, therefore, the 2009 Plan is intended to be exempt from the Nasdaq Listing Rules regarding stockholder approval of stock option and stock purchase plans. A total of 4,365,000 shares of our common stock are reserved for issuance under the 2009 Plan. The 2009 Plan provides for the grant of non-qualified stock options, restricted stock units, restricted stock awards, dividend equivalents, or stock appreciation rights. These awards may be granted to individuals who are then new employees, or are commencing employment with us or one of our subsidiaries following a bona fide period of non-employment with us, and for whom such awards are granted as a material inducement to commencing employment with us or one of our subsidiaries. This plan expired in October 2019 and, therefore, there are no shares reserved for future issuance. However, awards granted prior to the plan’s expiration continue to remain outstanding until their original expiration date.
The 2009 Plan is administered by the Compensation Committee or another committee of the Board. The plan administrator has broad discretion to take action under the 2009 Plan, as well as make adjustments to the terms and conditions of existing awards, in the event of certain transactions and events affecting our common stock, including a change in control, stock dividends, stock splits, mergers, acquisitions, consolidations, and other corporate transactions. In addition, in the event of certain non-reciprocal transactions with our stockholders, known as “equity restructurings,” the plan administrator will make equitable adjustments to the 2009 Plan and outstanding awards.
The Board may amend, suspend, or terminate the 2009 Plan at any time, provided that no such action may impair any rights under any outstanding awards without the consent of the participant.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee of the Board has appointed PwC, an independent registered public accounting firm, to audit the Company’s consolidated financial statements and the internal control over financial reporting for the year ending December 31, 2021. The Company is submitting its selection of PwC for ratification by the stockholders at the Annual Meeting. A representative of PwC is expected to be present at the Annual Meeting, will have the opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to appropriate questions.
The following table sets forth the fees for services rendered by our auditors, PwC, for the years ended December 31, 2020, and 2019, respectively. All of the services described in the following fee table were approved by the Audit Committee.
|Audit Fees||$||3,715,350 ||$||3,499,037 |
|Audit-Related Fees||— ||421,500 |
|Tax Fees||300,725 ||303,900 |
|All Other Fees||4,870 ||2,700 |
|Total||$||4,020,945 ||$||4,227,137 |
Audit Fees. This category includes the audit of our annual financial statements, the audit of our internal control over financial reporting, the review of our financial statements included in our Form 10-Q reports, and services that are normally provided by the independent registered public accounting firm in connection with statutory audit and regulatory filings for those fiscal years. This category also includes advice on accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees. This category consists principally of due diligence services.
Tax Fees. This category consists of services for tax compliance, tax advice, and tax planning.
All Other Fees. This category consists of all other services that are not reported above. The services for the fees disclosed include non-audit related services and annual subscription for accounting literature.
Pre-Approval Policies and Procedures
All audit services, audit-related services, tax services, and other services were pre-approved by our Audit Committee, which concluded that the provision of such services was compatible with the maintenance of PwC’s independence in the conduct of its auditing functions. The Audit Committee’s pre-approval policy provides for the pre-approval of audit, audit-related, tax, and other services specifically described by the committee on an annual basis and, unless a type of service is pre-approved under the policy, it will require separate pre-approval by the committee if it is to be provided by the independent registered public accounting firm. The policy authorizes the committee to delegate to one or more of its members pre-approval authority with respect to permitted services.
AUDIT COMMITTEE REPORT
The following audit committee report shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not otherwise be deemed filed under these acts, except to the extent we specifically incorporate by reference into such filings.
Our Audit Committee is composed of “independent” directors, as determined in accordance with the Nasdaq Stock Market’s Rules and Rule 10A-3 of the Exchange Act. The Audit Committee has certain duties and powers as described in its written charter adopted by the Board of Directors (the “Board”). A copy of the charter can be found on the Company’s website at www.intuitive.com.
As described more fully in its charter, the purpose of the Audit Committee is to assist the Board with its oversight responsibilities regarding the integrity of our Company’s financial statements, our compliance with legal and regulatory requirements, the assessment of the independent registered public accounting firm’s qualifications and independence, and the performance of the persons performing the internal audit duties for our Company and the independent registered public accounting firm. The Company has a full-time Internal Audit department that reports to the Audit Committee. The Internal Audit department is responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of the Company’s internal controls related to, for example, the reliability and integrity of the Company’s financial reporting process and the safeguarding of the Company’s assets. Management is responsible for preparation, presentation, and integrity of our financial statements as well as our financial reporting process, accounting policies, internal audit function, internal accounting controls, and disclosure controls and procedures. PricewaterhouseCoopers LLP (“PwC”), the Company’s independent registered public accounting firm, is responsible for performing an independent integrated audit of our consolidated financial statements in accordance with generally accepted auditing standards and to issue a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes. The following is the Audit Committee’s report submitted to the Board for 2020.
The Audit Committee has:
•Reviewed and discussed our audited financial statements with management and PwC, the independent auditors.
•Discussed with PwC the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the Securities and Exchange Commission (“SEC“).
•Received from PwC the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditors’ communications with the Audit Committee concerning independence and discussed with the auditors their independence.
In addition, the Audit Committee has met separately with management and with PwC.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the SEC.
Members of the Audit Committee
|Mark J. Rubash (Chair)||Don R. Kania, Ph.D.||Keith R. Leonard, Jr.|
OVERVIEW OF PROPOSALS
This Proxy Statement contains FOUR proposals requiring stockholder action. Proposal No. 1 requests the election of eleven directors to the Board. Proposal No. 2 requests an advisory approval of the compensation of our NEOs. Proposal No. 3 requests the ratification of the appointment of the independent registered public accounting firm. Proposal No. 4 requests the approval of the amendment and restatement of the Amended and Restated 2010 Incentive Award Plan. Each of the proposals is discussed in more detail in the pages that follow.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors (the “Board”) has eleven authorized seats. Craig H. Barratt, Ph.D., Joseph C. Beery, Gary S. Guthart, Ph.D., Amal M. Johnson, Don R. Kania, Ph.D., Amy L. Ladd, M.D., Keith R. Leonard, Jr., Alan J. Levy, Ph.D., Jami Dover Nachtsheim, Monica P. Reed, M.D., and Mark J. Rubash have been nominated by the Board for election at the Annual Meeting to serve a one-year term expiring at the 2022 Annual Meeting of Stockholders or until a successor has been duly elected and qualified. Please refer to “Directors and Corporate Governance” section above for the nominees’ biographies.
The Company’s Bylaws provide for a majority voting standard in uncontested elections of directors. As such, in an election where the number of nominees for director does not exceed the number of directors to be elected, a nominee for director will be elected to the Board if the number of shares voted for the nominee exceeds the number of shares voted against the nominee. However, the majority voting standard would not apply if the number of nominees for director exceeds the number of directors to be elected. In that case, the nominees receiving the highest number of affirmative votes of the shares entitled to vote at the Annual Meeting would be elected.
The majority voting standard will apply to the election taking place at the Annual Meeting. Consequently, in order to be elected, a nominee must receive more “for” votes than “against” votes. Proxies may not be voted for more than the eleven nominees, and stockholders may not cumulate votes in the election of directors. In the event any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for the nominee, if any, who may be designated by the Board to fill the vacancy.
Shares represented by the accompanying proxy will be voted for the election of the nominees recommended by the Board unless the proxy is marked in such a manner so as to withhold authority to vote. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares will be voted for the election of such substitute nominee as management may propose. Each person nominated for election has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unable to serve.
A majority of the votes cast is required to elect each of the director nominees. This means that to be elected a nominee must receive more “for” votes than “against” votes.
Recommendation of the Board
The Board recommends that stockholders vote FOR the election of Craig H. Barratt, Ph.D., Joseph C. Beery, Gary S. Guthart, Ph.D., Amal M. Johnson, Don R. Kania, Ph.D., Amy L. Ladd, M.D., Keith R. Leonard, Jr., Alan J. Levy, Ph.D., Jami Dover Nachtsheim, Monica P. Reed, M.D., and Mark J. Rubash.
PROPOSAL NO. 2
ADVISORY APPROVAL OF THE COMPENSATION OF NAMED EXECUTIVE OFFICERS
The primary objective of our executive compensation program is to attract and retain a passionate team of executives who will provide leadership to make surgery more effective, less invasive, and easier on surgeons, patients, and their families. The Company accomplishes this goal in a manner consistent with its strategy, competitive practice, sound corporate governance principles, and stockholder interests and concerns. The Company believes the compensation program for the Named Executive Officers (“NEOs”) is strongly aligned with the long-term interests of its stockholders and was instrumental in helping the Company achieve its financial performance in 2020.
At the Company’s 2020 Annual Meeting of Stockholders, our stockholders approved the compensation of our NEOs, with over 94% of the votes cast voted in favor of the proposal. The Compensation Committee continues to apply the same principles and philosophy it has used in previous years in determining executive compensation. It will continue to consider stockholder concerns and feedback in the future. The Compensation Committee is continuously working to ensure that management’s interests are aligned with our stockholders’ interests to support long-term value creation and will continue to consider the outcome of the Company’s say-on-pay votes when making future compensation decisions for the NEOs. See the “Compensation Discussion and Analysis” (“CD&A”) section above for a more detailed discussion.
Stockholders are urged to read the Executive Compensation section of this Proxy Statement, including the CD&A section, which discusses the Company’s compensation policies and practices and the 2020 compensation for the Company’s NEOs. The Compensation Committee and the Board of Directors (the “Board”) believe that the Company’s compensation policies and practices are effective in achieving the Company’s goals and are consistent with stockholder interests.
The Company has determined to hold a separate stockholder vote on the compensation of our NEOs every year. Therefore, as a matter of good corporate governance and in accordance with Section 14A of the Exchange Act, we are including in this Proxy Statement a separate stockholder vote on the approval of the NEOs’ compensation, which vote is non-binding. Accordingly, we are asking you to approve, on an advisory basis, the compensation of the Company’s NEOs, as described in the Executive Compensation section of this Proxy Statement, including the CD&A section and the related compensation tables and other narrative executive compensation disclosure contained therein.
The following resolution will be submitted for a stockholder vote at the 2021 Annual Meeting of Stockholders:
“RESOLVED, that the stockholders of Intuitive approve, on an advisory basis, the compensation of Intuitive’s named executive officers, as disclosed in the Compensation Discussion and Analysis, compensation tables, and narrative discussion of this Proxy Statement.”
Although the advisory vote is non-binding, the Compensation Committee and the Board will review the results of the vote. The Compensation Committee will consider our stockholders’ concerns to the extent that there is any significant vote against the NEOs’ compensation as disclosed in this Proxy Statement and take them into account in future determinations concerning our executive compensation program. Unless the Compensation Committee or the Board modifies the Company’s determination in the frequency of future advisory stockholder votes on the compensation of the NEOs, the next advisory board vote will be held at the 2022 Annual Meeting of Stockholders.
The Board, therefore, recommends that you indicate your support for the Company’s compensation policies and practices as reflected in the compensation of the NEOs, as outlined above.
Recommendation of the Board
The Board recommends that stockholders vote, on an advisory basis, FOR the approval of the NEOs’ compensation described in the CD&A, the compensation tables, and the narrative discussion of this Proxy Statement.
PROPOSAL NO. 3
THE RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Company’s independent registered public accounting firm and its auditor for the year ended December 31, 2020, was PricewaterhouseCoopers LLP (“PwC”). At the 2021 Annual Meeting of Stockholders, the stockholders are being asked to ratify the appointment of PwC as the Company’s independent registered public accounting firm for the year ended December 31, 2021. In the event of a negative vote on such ratification, the Audit Committee will reconsider its selection. Even if this appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interest of the Company and its stockholders. Representatives of PwC are expected to be present online at the Annual Meeting and available to respond to appropriate questions.
Approval of Proposal No. 3 requires the affirmative vote of a majority of the shares present or represented by proxy and voting at the Annual Meeting and entitled to vote on the proposal.
Recommendation of the Board
The Board recommends a vote FOR the ratification of appointment of PwC as the Company’s independent registered public accounting firm.
PROPOSAL NO. 4
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED INTUITIVE SURGICAL, INC.
2010 INCENTIVE AWARD PLAN
We are asking you to approve the amendment and restatement of the Amended and Restated Intuitive Surgical, Inc. 2010 Incentive Award Plan (the “Amended 2010 Plan”), which (i) increases the shares of common stock reserved for issuance under the Amended 2010 Plan, as previously amended and restated effective February 28, 2020 (the “2010 Plan”), by 2,000,000 shares from 32,450,000 shares, thereby increasing the total number of shares reserved for issuance to 34,450,000, (ii) extends the term of the Amended 2010 Plan to 2031, (iii) provides that dividends and dividend equivalents may only be paid to the extent the underlying award vests, and (iv) includes certain changes to further reflect the elimination of the “qualified performance-based compensation” exemption from the tax deduction limits imposed by Section 162(m) of the Code.
The Board of Directors (the “Board”) has unanimously adopted, subject to stockholder approval, the Amended 2010 Plan for employees and other service providers of the Company and its subsidiaries. Per the requirements set forth in the 2010 Plan, the Amended 2010 Plan will become effective if approved by the affirmative vote of a majority of the shares present in person or represented by proxy at the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) and entitled to vote on the proposal. If the Amended 2010 Plan is not approved by our stockholders, it will not become effective, the 2010 Plan will continue in effect, and we may continue to grant awards under the 2010 Plan, subject to its terms, conditions, and limitations, using the shares available for issuance thereunder.
We designed the 2010 Plan with the intent to conform to best practices in equity compensation plans. The 2010 Plan was initially approved by stockholders on April 21, 2010, and replaced our previously expiring 2000 Equity Incentive Plan. The 2010 Plan adopted many features designed to address stockholders’ concerns related to equity incentive plans, such as prohibiting repricing, eliminating “evergreen” share replenishment features, granting only non-discounted options, and disallowing transfer of options to third parties. In the years following its adoption, the 2010 Plan has been amended and restated, most recently in 2020, among other things, to increase the number of shares of common stock reserved for issuance.
To continue to align the long-term interests of our employees with those of our stockholders and to attract and retain the highest quality of talent in a highly competitive labor market, we have determined to amend and restate the 2010 Plan to further increase the number of shares of common stock reserved for issuance by 2,000,000 shares. Our request is approximately 1.7% of the total shares of common stock outstanding as of the record date. The Compensation Committee and the Board have approved and are asking you to approve the Amended 2010 Plan. Non-approval of the Amended 2010 Plan may compel the Company to increase the cash component of employee compensation, because the Company would need to replace components of compensation previously delivered in equity awards.
The Company believes that long-term equity awards are an extremely important way to attract and retain a passionate team and align employees’ interests with the Company’s stockholders. Over the past several years, the Company’s investment in the expansion of robotic-assisted surgery, including the development of da Vinci Surgical Systems, the development of surgical instruments and accessories, regulatory approval and compliance, expanding surgical applications, training surgeons and surgical teams, and otherwise expanding the market for our products, has resulted in strong growth in the Company’s revenue and earnings. Over the period from 2010 through 2020, the Company’s annual revenue grew from $1.4 billion to $4.4 billion; net income grew from $382 million to $1.1 billion, while the Company’s cash and investments grew from $1.6 billion at December 31, 2010 to $6.9 billion at December 31, 2020. From January 1, 2011 through December 31, 2020, the Company has also repurchased 29.1 million shares of its outstanding common stock. The Company’s success has also resulted in a significant increase in stockholder value as the Company’s market capitalization grew from $10.0 billion at December 31, 2010 to $96.3 billion at December 31, 2020, an increase of approximately 863%.
The Board believes that the Company’s success is due to its highly talented employee base and that future success depends on the ability to attract and retain high-caliber employees. The total equity awards granted to our NEOs has remained at a small percentage relative to the total equity awards granted to our employees company-wide for the last ten years. In 2020, the total equity awards granted to our NEOs was approximately 3.8% of the total equity awards granted to our employees company-wide; see “Compensation Discussion and Analysis – Long-Term Incentive Compensation” for more information on the equity awards granted to our NEOs in 2020. The Company’s engineering operations are primarily located in Silicon Valley, where it must compete with many technology companies, including high profile start-ups, for a limited pool of talented people. We also compete with other large medical device companies for a limited pool of exceptional sales and service personnel globally. The ability to grant equity awards is a necessary and powerful recruiting and retention tool for the Company to obtain the high-quality employees it needs.
The 2009 Employment Commencement Incentive Plan (“New Hire Plan”) and the 2010 Plan are our only active employee equity plans (other than our 2000 Employee Stock Purchase Plan). The New Hire Plan expired in October 2019 and, therefore, while awards granted prior to the plan’s expiration continue to remain outstanding until their original expiration date, no additional awards may be granted under the New Hire Plan. As of March 1, 2021, the Compensation Committee anticipates that the 2,000,000 shares requested under the Amended 2010 Plan, plus 6,619,715 shares available for issuance under the 2010 Plan prior to the amendment and restatement, will enable the Company to fund its equity compensation program for employees through the date of our 2022 Annual Meeting of Stockholders, accommodating anticipated grants relating to the hiring, retention, and promotion of employees.
The Compensation Committee (which administers our equity plans) recognizes its responsibility to strike a balance between stockholder concerns regarding the potential dilutive effect of equity awards and the ability to attract, retain, and reward employees whose contributions are critical to the long-term success of the Company. The Company stresses a team approach and environment, believes that all employees should be driving a common set of goals, and believes that our employees’ interests should be aligned with the interests of our stockholders. Accordingly, all U.S. employees and nearly all non-U.S. employees are granted long-term equity awards.
In addition to the increase in the shares of common stock reserved for issuance, the Amended Plan also extends the term of the plan to 2031 and provides that dividends and dividend equivalents may only be paid to the extent the underlying award vests. The Amended 2010 Plan also includes further changes to reflect the elimination of the “qualified performance-based compensation” exemption from the tax deduction limits imposed by Section 162(m) of the Code due to changes in federal tax law.
Burn Rate and Overhang
In administering our equity program, we consider both our “burn rate” and our “overhang.” We define “burn rate” as the number of equity awards granted in the year, net of cancellations, divided by the sum of the undiluted weighted-average shares of our common stock outstanding during the year plus the number of options and RSUs that have been issued and are outstanding. The “burn rate” measures the potential dilutive effect of our annual equity grants. We granted 485,167 stock options and 707,687 RSUs in 2020 and 42,101 stock options and 95,389 RSUs were forfeited or canceled in 2020. As of December 31, 2020, the number of weighted-average shares outstanding was 117,023,416, and the total number of stock options and RSUs outstanding was 4,475,870 and 1,761,330, respectively. For 2020, our burn rate was 0.9%. Our three-year average burn rate from 2018 through 2020 was 0.9%.
We define “overhang” as the shares subject to equity awards outstanding but not exercised, plus shares available to be granted (the “available equity award shares”), divided by the total shares of common stock outstanding plus the available equity award shares. The overhang measures the potential dilutive effect of outstanding equity awards and available equity award shares.
The following table shows the details of shares available for grant as of March 1, 2021, and as of December 31, 2020, including overhang calculations, and assumes stockholders approve the Amended 2010 Plan:
|March 1, 2021||December 31, 2020|
|2010 Plan||6,619,715 ||8,052,948 |
|Proposed shares under the Amended 2010 Plan||2,000,000 ||— |
|2009 Employment Commencement Incentive Plan||— ||— |
|Total estimated shares available to grant||8,619,715 ||8,052,948 |
|Options and RSUs outstanding||6,165,237 ||6,237,200 |
|Total overhang||14,784,952 ||14,290,148 |
|Shares outstanding||118,279,355 ||117,710,058 |
|Total overhang percentage||11.1 ||%||10.8 ||%|
We believe that our burn rate and equity overhang are reasonable in relation to companies in our industry and reflect a judicious use of equity for compensation purposes. The following table summarizes significant ranges of outstanding and exercisable options as of March 1, 2021:
|Options Outstanding||Options Exercisable|
|Range of Exercise Prices||Number of Shares||Weighted |
|Weighted Average Exercise Price Per Share|
Aggregate Intrinsic Value (in millions)(1)
|Number of Shares||Weighted |
|Weighted Average Exercise Price Per Share|
Aggregate Intrinsic Value (in millions)(1)
|$89.74-$168.41||989,135 ||2.6 ||$||146.88 ||988,886 ||$||146.88 |
|$169.42-$189.74||1,126,646 ||3.1 ||$||178.33 ||1,126,334 ||$||178.33 |
|$190.11-$465.40||893,900 ||6.1 ||$||299.15 ||826,003 ||$||290.49 |
|$482.99-$548.50||975,023 ||8.2 ||$||523.33 ||438,920 ||$||522.57 |
|$548.71-$813.65||482,855 ||9.6 ||$||707.50 ||67,699 ||$||677.47 |
|Total||4,467,559 ||5.4 ||$||328.03 ||$||1,926.9 ||3,447,842 ||$||249.80 ||$||1,756.4 |
(1)The aggregate intrinsic value represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $759.21 as of March 1, 2021, which would have been received by the stock option holders had all stock option holders exercised their stock options as of that date.
A summary of the principal provisions of the Amended 2010 Plan is set forth below. The summary is qualified by reference to the full text of the Amended 2010 Plan, which is included as Exhibit A to this proxy statement.
•The Amended 2010 Plan has a ten-year term expiring 2031.
•The Amended 2010 Plan provides for the grant of stock options, both incentive stock options and nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards, restricted stock units, performance share awards, dividend equivalents, performance bonus awards, and other performance-based awards to eligible individuals.
•32,450,000 shares of common stock were previously authorized for issuance pursuant to awards under the 2010 Plan, and we are proposing to increase the number of shares under the Amended 2010 Plan by 2,000,000.
•The number of shares of common stock requested under the Amended 2010 Plan represents approximately 1.7% of the total outstanding shares of common stock as of December 31, 2020.
•On March 1, 2021, the closing price of our common stock on the Nasdaq Global Select Market was $759.21 per share.
The Amended 2010 Plan is administered by the Compensation Committee of the Board. The Compensation Committee may delegate to a committee of one or more members of the Board or one or more of our officers the authority to grant or amend awards to participants other than our senior executives who are subject to Section 16 of the Exchange Act, subject to certain other limitations. Unless otherwise determined by the Board, the Compensation Committee will consist solely of two or more members of the Board, each of whom is a “non-employee director” as defined by Rule 16b-3 of the Exchange Act and an “independent director” under the rules of the Nasdaq Stock Market (or other principal securities market on which shares of our common stock are traded).
The Compensation Committee has general authority to administer the Amended 2010 Plan, including the power to determine eligibility, the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction, as well as the authority to delegate such administrative responsibilities. However, the full Board will conduct the general administration of the Amended 2010 Plan with respect to any awards to non-employee members of the Board.
Persons eligible to participate in the Amended 2010 Plan include our nine non-employee members of the Board, approximately 8,081 employees of the Company and its subsidiaries and affiliates (including our executive officers), and consultants to the Company and its subsidiaries, as determined by the Compensation Committee.
Limitation on Awards and Shares Available
The aggregate number of shares of common stock that may be issued or transferred pursuant to the 2010 Plan is 32,450,000 shares of common stock. If the Amended 2010 Plan is approved by the stockholders, such aggregate number of shares will be 34,450,000. Any shares that are subject to awards of options or stock appreciation rights shall be counted against this limit as one (1) share for every one (1) share granted. Any shares that are subject to awards other than stock options or SARs that are settled in shares of common stock (“Full Value Awards”) shall be counted against this limit as 2.3 shares for everyone one (1) share granted. The shares of common stock covered by the Amended 2010 Plan may be treasury shares, authorized but unissued shares, or shares purchased in the open market.
To the extent that an award terminates, or expires for any reason, or an award is settled in cash without delivery of shares to the participant, then any shares subject to the award may be used again for new grants under the Amended 2010 Plan, provided that for each share subject to a Full Value Award that so terminated, expired, or settled in cash, 2.3 shares shall again become issuable under the Amended 2010 Plan. However, shares that are (i) tendered by the holder or withheld by us in satisfaction of an option exercise price or tax withholding obligations with respect to any award, (ii) subject to a stock appreciation right that are not issued in connection with a stock settlement of such right, or (iii) purchased on the open market with the cash proceeds from an option exercise will not be available for grant under the Amended 2010 Plan. Under the Amended 2010 Plan, any restricted stock repurchased by the Company at the same price paid by the participant so that such shares are returned to the Company will again be available for awards. Additionally, the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance. To the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us or any of our subsidiaries or affiliates will not be counted against shares available for issuance under the Amended 2010 Plan.