Qualcomm Incorporated
QUALCOMM Incorporated - Definitive Proxy Statement

Definitive Proxy Statement


Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

(AMENDMENT NO.      )

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[X]  Definitive Proxy Statement

[   ]  Definitive Additional Materials

[   ]  Soliciting Material Pursuant to Section 240.14a-12

QUALCOMM INCORPORATED

 

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Table of Contents

 

LOGO

QUALCOMM INCORPORATED

NOTICE 2014 ANNUAL MEETING STOCKHOLDERS

AND PROXY STATEMENT

 


Table of Contents

 

LOGO

LETTER TO STOCKHOLDERS

Dear Fellow Stockholder:

You are cordially invited to attend Qualcomm’s Annual Meeting of Stockholders (Annual Meeting) on Tuesday, March 4, 2014. The meeting will begin promptly at 9:30 a.m. Pacific Time at the Irwin M. Jacobs Qualcomm Hall, 5775 Morehouse Drive, San Diego, California 92121 . I invite you to arrive early at 8:30 a.m. to preview our product displays. We will begin the Annual Meeting with a discussion and vote on the matters set forth in the Notice of Annual Meeting of Stockholders, followed by presentations and a report on Qualcomm’s fiscal 2013 performance.

This year, we are again furnishing the proxy materials to stockholders primarily over the Internet. Therefore, most stockholders will not receive paper copies of our proxy materials. We will instead send these stockholders a notice with instructions for accessing the proxy materials and voting via the Internet. The notice also provides information on how stockholders may obtain paper copies of our proxy materials if they so choose. This method expedites the receipt of your proxy materials, lowers the costs of our Annual Meeting and helps to conserve natural resources.

Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. As an alternative to voting in person at the Annual Meeting, you may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card. Voting by any of these methods will ensure your representation at the Annual Meeting.

Your vote is very important to us. I urge you to vote as we recommend.

I look forward to seeing you in San Diego at the Irwin M. Jacobs Qualcomm Hall on March 4, 2014.

Sincerely,

 

LOGO

Paul E. Jacobs

Chairman and Chief Executive Officer


Table of Contents

 

LOGO

5775 Morehouse Drive

San Diego, California 92121-1714

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On March 4, 2014

To the Stockholders of QUALCOMM Incorporated:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (Annual Meeting) of QUALCOMM Incorporated (the Company), a Delaware corporation, will be held at the Irwin M. Jacobs Qualcomm Hall, 5775 Morehouse Drive, San Diego, California 92121 , on Tuesday, March 4, 2014 at 9:30 a.m. Pacific Time for the following purposes:

 

  1. To elect 14 directors to hold office until the next annual stockholders’ meeting and until their respective successors have been elected and qualified.

 

  2. To ratify the selection of PricewaterhouseCoopers LLP as our independent public accountants for our fiscal year ending September 28, 2014.

 

  3. To hold an advisory vote to approve our executive compensation.

 

  4. To hold an advisory vote on the frequency of future advisory votes on executive compensation.

 

  5. To transact such other business as may properly come before stockholders at the Annual Meeting or any adjournment or postponement thereof.

The Board of Directors has fixed the close of business on January 6, 2014 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof.

By Order of the Board of Directors,

 

LOGO

Donald J. Rosenberg

Executive Vice President,

General Counsel and Corporate Secretary

San Diego, California

January 16, 2014


Table of Contents

PROXY STATEMENT

TABLE OF CONTENTS

 

Letter to Stockholders

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

PROXY STATEMENT TABLE OF CONTENTS

    i   

PROXY SUMMARY

    1   

2014 Annual Meeting of Stockholders

    1   

Voting Matters and Board Recommendations

    1   

Director Nominees

    2   

Executive Compensation Highlights

    3   

PROXY STATEMENT

    7   

Meeting Information

    7   

Voting Rights and Outstanding Shares

    7   

Notice of Internet Availability of Proxy materials

    7   

Voting Methods

    8   

How Your Shares Will Be Voted

    8   

Broker Non-Votes

    8   

Revocability of Proxies

    9   

Proxy Solicitation

    9   

Stockholder Proposals

    9   

Householding

    9   

Financial Information

    10   

Corporate Directory

    10   

CORPORATE GOVERNANCE

    11   

Code of Ethics and Corporate Governance Principles and Practices

    11   

Board Leadership Structure

    11   

Board Meetings, Committees and Attendance

    12   

Board’s Role in Risk Oversight

    14   

Director Nominations

    15   

Majority Voting

    16   

Stock Ownership Guidelines

    16   

Communications with Directors

    17   

Annual Meeting Attendance

    17   

Director Independence

    17   

PROPOSAL 1: ELECTION OF DIRECTORS

    18   

Election of Directors

    18   

Nominees for Election

    18   

Required Vote and Board Recommendation

    25   

PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTING FIRM

    26   

Fees for Professional Services

    26   

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Public Accountants

    27   

Representation from PricewaterhouseCoopers at the Annual Meeting

    27   

Required Vote and Board Recommendation

    27   

PROPOSAL 3: ADVISORY VOTE FOR APPROVAL OF OUR EXECUTIVE COMPENSATION

    28   

Pay and Performance Alignment

    28   

 

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Compensation Program Best Practices

    28   

Modifications to our Compensation Programs

    29   

Effect of this Resolution

    29   

Board Recommendation

    29   

PROPOSAL 4: ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION

    30   

Reason for the Proposal at this time

    30   

Effect of this Resolution

    30   

Board Recommendation

    30   

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    31   

Section 16(a) Beneficial Ownership Reporting Compliance

    33   

Compensation Committee Interlocks and Insider Participation in Compensation Decisions

    33   

Equity Compensation Plan Information

    33   

CERTAIN RELATIONSHIPS AND RELATED-PERSON TRANSACTIONS

    35   

COMPENSATION COMMITTEE REPORT

    37   

EXECUTIVE COMPENSATION AND RELATED INFORMATION

    38   

COMPENSATION DISCUSSION AND ANALYSIS

    38   

Executive Summary

    39   

Discussion and Analysis

    45   

Compensation Program Best Practices

    67   

COMPENSATION RISK MANAGEMENT

    75   

COMPENSATION TABLES AND NARRATIVE DISCLOSURES

    76   

Summary Compensation Table

    77   

All Other Compensation

    78   

Grants of Plan-Based Awards

    79   

Outstanding Equity Awards at Fiscal Year End

    82   

Option Exercises and Stock Awards Vested During Fiscal 2013

    86   

Nonqualified Deferred Compensation

    86   

Potential Post-Employment Payments

    87   

DIRECTOR COMPENSATION

    93   

All Other Compensation

    95   

AUDIT COMMITTEE REPORT

    97   

OTHER MATTERS

    99   

APPENDIX 1:  Financial Information

    A-1   

APPENDIX 2:  Corporate Directory

    B-1   

APPENDIX 3:  Reconciliation of Adjusted Non-GAAP Results to GAAP Results

    C-1   

 

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PROXY SUMMARY

This summary highlights information contained elsewhere in our proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

2014 ANNUAL MEETING OF STOCKHOLDERS (ANNUAL MEETING )

 

 

 

•   Date and Time:

  

March 4, 2014

9:30 a.m. Pacific Time

•   Location:

  

Irwin M. Jacobs Qualcomm Hall

5775 Morehouse Drive, San Diego, California 92121

•   Record Date:

   January 6, 2014

•   Voting:

   Stockholders of record as of the record date may vote by the Internet at www.proxyvote.com ; by telephone at 1-800-690-6903; by completing and returning their proxy card; or in person at the Annual Meeting.

•   Date of First Distribution
of Proxy Materials

   January 16, 2014

VOTING MATTERS AND BOARD RECOMMENDATIONS

 

 

 

  Proposal           Board Recommendation    Page Reference

  PROPOSAL 1

   Election of Directors    FOR each Nominee    18

  PROPOSAL 2

   Ratification of the selection of PricewaterhouseCoopers LLP as our independent public accountants for our fiscal year ending September 28, 2014    FOR    26

  PROPOSAL 3

   Advisory vote to approve our executive compensation    FOR    28

  PROPOSAL 4

   Advisory vote on the frequency of future advisory votes on executive compensation    Annual    30

 

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DIRECTOR NOMINEES (SEE PAGE 18)

 

 

 

                                     Committee
Memberships
 
Name   Age    

Director

Since

    Occupation   Independent       AC      CC      GC      FC  
   

Barbara T. Alexander

    65        2006      Independent Consultant     X         X         X           
   

Donald G. Cruickshank

    71        2005      Chairman, Audioboo Ltd.     X         X               X   
   

Raymond V. Dittamore

    70        2002      Retired Audit Partner, Ernst &Young LLP     X         C              
   

Susan Hockfield

    62        2012      President Emerita and Professor of Neuroscience, Massachusetts Institute of Technology     X            X           
   

Thomas W. Horton

    52        2008      Chairman, American Airlines Group Inc.     X                  X   
   

Paul E. Jacobs

    51        2005      Chairman of the Board and Chief Executive Officer, QUALCOMM Incorporated                
   

Sherry Lansing*

    69        2006      Founder and Chair, The Sherry Lansing Foundation     X               C        
   

Steven M. Mollenkopf

    44        2013      Chief Executive Officer-elect and President, QUALCOMM Incorporated                
   

Duane A. Nelles

    70        1988      Self-Employed, Personal Investment Business     X                  C   
   

Clark T. Randt, Jr.

    68        2013      President, Randt &Co. LLC     X                 
   

Francisco Ros

    63        2010      Founder and President, First International Partners, S.L.     X               X        
   

Jonathan J. Rubinstein

    57        2013      Former Chairman and CEO, Palm, Inc.     X                 
   

Brent Scowcroft

    88        1994      President, The Scowcroft Group, Inc.     X               X        
   

Marc I. Stern

    69        1994      Chairman, The TCW Group, Inc.     X                  C                     

 

AC Audit Committee

 

CC Compensation Committee

 

GC Governance Committee

 

FC Finance Committee

 

C Committee Chair

 

* Presiding Director

 

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EXECUTIVE COMPENSATION HIGHLIGHTS (SEE PAGE 38)

 

 

Key Changes to our Compensation Programs and Practices in Fiscal 2013

 

    Added revenues as a secondary quantitative criterion for selecting peer companies.

 

    Reduced the maximum Annual Cash Incentive Plan (ACIP) amount from 2.5 times to 2.0 times the target amount.

 

    Reduced the rate of increase in the ACIP funding formula for financial performance that exceeds financial objectives.

 

    Changed the timing of equity awards to better align the disclosure of the awards with the fiscal year financial performance for which they were earned.

 

    Prohibited pledging of our common stock.

Pay for Performance

The majority of compensation provided to our chief executive officer (CEO) and our other NEOs is variable and in the form of annual cash and long-term equity incentives. For the past three years, we have set robust financial goals, and we have exceeded those goals. Our growth in revenues and operating income is in the top quartile among our peer companies. The following series of charts present an overview of our operating performance.

Figure 1 summarizes the extent to which our financial objectives exceeded our prior year financial performance, the extent to which we exceeded our financial objectives for the fiscal year and the year-over-year growth in our financial performance for fiscal 2011, 2012 and 2013. Our fiscal 2013 Non-GAAP revenues and Non-GAAP operating income goals were 23% and 18% higher than our fiscal 2012 performance, respectively, and we exceeded both of the goals by recording 30% year-over-year Non-GAAP revenues growth and 22% Non-GAAP operating income growth. The most directly comparable GAAP financial measures and information reconciling these Non-GAAP financial measures to our financial results prepared in accordance with GAAP are included in Appendix 3.

Figure 1: Robust Objectives, Strong Performance and Double-Digit Growth (1)

 

    Fiscal 2011       Fiscal 2012       Fiscal 2013
   

  Non-GAAP  

Revenues

     

  Non-GAAP  

Operating

Income

     

Non-GAAP  

Revenues

     

  Non-GAAP  

Operating

Income

     

  Non-GAAP  

Revenues

     

  Non-GAAP  

Operating

Income

Robust Objectives : Extent to which objective exceeded prior year performance.   + 14%     + 11%     + 30%     + 20%     + 23%     + 18%
             
Strong Performance : Extent to which performance exceeded objective for the year.   + 14%     + 22%     + 3%     + 2%     + 5%     + 3%

Double-Digit Growth : Extent to which

performance exceeded prior year performance

  + 30%       + 35%     + 34%       + 22%     + 30%       + 22%

 

  (1) Fiscal 2011 Non-GAAP revenues and Non-GAAP operating income were adjusted to exclude certain items for calculating financial performance.

 

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Figures 2 and 3 depict our financial growth exceeding the 90 th percentile rankings among our peer companies for both 1- and 3-year periods. On page 47 in the Compensation Discussion & Analysis (CD&A) section, we discuss the peer companies that the Compensation Committee selected and used as a reference for comparing our financial performance and compensation practices. The 19 peer companies include businesses in technology, telecommunications and media with comparable market capitalization and revenues (using a guideline of one-quarter to four times our revenues).

 

Figure 2: Qualcomm’s and Peer Companies’ Relative Percentile Rankings for 1-Year Revenue and Operating Income Growth

  

Figure 3: Qualcomm’s and Peer Companies’ Relative Percentile Rankings for 3-Year Revenue and Operating Income Growth

LOGO    LOGO

 

    Our CEO’s direct compensation (salary, ACIP earnings and equity awards) for fiscal 2013 increased less than 1% from fiscal 2012, while our 1-year total stockholder return (TSR) was up 10% and Non-GAAP revenues and Non-GAAP operating income grew 30% and 22%, respectively. His fiscal 2013 total compensation disclosed in the Fiscal 2013 Summary Compensation Table is approximately the same as his fiscal 2012 total compensation.

Figures 4 and 5 show the percentile ranking of our CEO’s total compensation, as disclosed in the Fiscal 2013 Summary Compensation Table, relative to our peer companies’ 1-year percentile ranking for revenues and operating income growth, respectively. Our financial growth was in the top (fourth) quartile, yet our CEO’s total compensation was in the third quartile (i.e., between the median and the 75 th percentile). The same relationships were found for 3-year average total compensation and 3-year revenues and operating income growth (which are not displayed here).

 

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Figure 4: Qualcomm’s and Peer Company CEOs’ 1-Year Total Compensation Percentile Ranking Relative to
1-Year Revenue Growth

   Figure 5: Qualcomm’s and Peer Company CEOs’
1-Year Total Compensation Percentile Ranking Relative to 1-Year Operating Income Growth
LOGO    LOGO

Executive Compensation Summary (See page 46)

The table below summarizes the key components of our NEOs’ compensation for fiscal 2013. See the narrative and footnotes accompanying the Fiscal 2013 Summary Compensation Table on page 76 for more information.

 

Name and Principal Position   Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
    All Other
Compensation
($)
    Total
($)
 
             

Paul E. Jacobs,

Chairman and Chief Executive Officer (1)

    1,200,014        8,325        15,000,069        3,480,000        760,532        20,448,940   
             

George S. Davis,

Executive Vice President and Chief Financial

Officer (2)

    363,463        1,000,000        11,500,110        590,000        192,023        13,645,596   
             

William E. Keitel,

Executive Vice President and Senior Advisor

(Former Chief Financial Officer) (3)

    600,971        -        -        775,000        345,956        1,721,927   
             

Derek K. Aberle,

Executive Vice President and Group President

    728,321        -        8,000,053        1,045,000        284,061        10,057,435   
             

Steven M. Mollenkopf,

President and Chief Operating Officer (4)

    815,006        1,500        12,000,079        1,325,000        166,481        14,308,066   
             

Donald J. Rosenberg,

Executive Vice President

General Counsel and Corporate Secretary

    675,002        -        4,500,078        860,000        256,411        6,291,491   

 

  (1) Dr. Jacobs will step down as our Chief Executive Officer following the Annual Meeting. Dr. Jacobs will remain an employee of the Company, and will continue to serve as the Company’s Chairman of the Board of Directors, as Executive Chairman.

 

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  (2) Mr. Davis joined the Company as Executive Vice President and Chief Financial Officer (CFO) in March 2013.

 

  (3) Mr. Keitel stepped down from his role as CFO in March 2013 and remained with the Company as Executive Vice President and Senior Advisor through November 2013.

 

  (4) Throughout fiscal 2013, Mr. Mollenkopf served as our President and Chief Operating Officer. On December 12, 2013, the Company’s Board of Directors appointed Mr. Mollenkopf to the position of Chief Executive Officer-elect. Mr. Mollenkopf continues to serve as our President, and will commence his service as our Chief Executive Officer following the Annual Meeting.

 

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PROXY STATEMENT

In this document, the words “Qualcomm,” “the Company,” “we,” “our,” “ours” and “us” refer only to QUALCOMM Incorporated and its consolidated subsidiaries and not any other person or entity.

MEETING INFORMATION

 

 

The Board of Directors (Board) of QUALCOMM Incorporated, a Delaware corporation, is soliciting your proxy for use at the Annual Meeting of Stockholders (Annual Meeting) to be held on Tuesday, March  4, 2014, at 9:30 a.m. Pacific Time, and at any adjournment or postponement thereof.

VOTING RIGHTS AND OUTSTANDING SHARES

 

 

Only holders of record of common stock at the close of business on January 6, 2014 (Record Date) will be entitled to notice of and to vote at the Annual Meeting. At the close of business on the Record Date, we had 1,687,803,144 shares of common stock outstanding and entitled to vote. Each holder of record of common stock on the Record Date will be entitled to one vote for each share held on all matters to be voted upon. If no choice is indicated on the proxy, the shares will be voted as described in “How Your Shares Will Be Voted.” All votes will be counted by an independent inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

 

 

We are furnishing proxy materials to our stockholders primarily via the Internet under rules adopted by the U.S. Securities and Exchange Commission (SEC), instead of mailing printed copies of those materials to each stockholder. On January 16, 2014, we commenced mailing to our stockholders (other than those who previously requested electronic delivery or a full set of printed proxy materials) a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including this proxy statement. The Notice of Internet Availability of Proxy Materials also provides instructions on how to access your proxy card to vote via the Internet.

This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. If you received the Notice of Internet Availability and would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

This proxy statement and our Annual Report on Form 10-K for fiscal 2013 are available at

http:// www.qualcomm.com .                         

 

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VOTING METHODS

 

 

If you are a stockholder with shares registered in your name, you may vote by one of the following three options depending on which method of delivery you received the proxy material:

 

    Vote via the Internet . Go to the web address http://www.proxyvote.com and follow the instructions for Internet voting shown on the proxy card or the Notice of Internet Availability of Proxy Materials mailed to you or the instructions that you received by e-mail.

 

    Vote by Telephone. Dial 1-800-690-6903 and follow the instructions for telephone voting shown on the proxy card you received by mail.

 

    Vote by Proxy Card. Complete, sign, date and mail the proxy card in the envelope provided. If you vote via the Internet or by telephone, please do not mail your proxy card.

If your shares are held by a broker, bank or other stockholder of record, in nominee name or otherwise, exercising fiduciary powers (typically referred to as being held in “street name”), please follow the instructions you receive from them, or you may need to contact your broker, bank or other stockholder of record to determine whether you will be able to vote electronically via the Internet or by telephone.

 

PLEASE NOTE THAT IF YOUR SHARES ARE HELD BY A BROKER, BANK OR OTHER STOCKHOLDER OF RECORD AND YOU WISH TO VOTE AT THE ANNUAL MEETING, YOU MUST FIRST OBTAIN A LEGAL PROXY ISSUED IN YOUR NAME FROM THE RECORD HOLDER. OTHERWISE, YOU WILL NOT BE PERMITTED TO VOTE IN PERSON AT THE MEETING.

HOW YOUR SHARES WILL BE VOTED

 

 

Your shares will be voted in accordance with your instructions. If you do not specify voting instructions on your proxy, the shares will be voted:

 

Proposal 1:   FOR    all director nominees (see page 18);
Proposal 2    FOR    ratification of the selection of PricewaterhouseCoopers LLP as our independent public accountants for our fiscal year ending September 28, 2014 (see page 26);
Proposal 3    FOR    the stockholder advisory proposal to approve our executive compensation (see page 28); and
Proposal 4    ANNUAL    frequency of future advisory votes on executive compensation (see page 30).

In the absence of instructions to the contrary, proxies will be voted in accordance with the judgment of the person exercising the proxy on any other matter properly presented at the Annual Meeting.

BROKER NON -VOTES

 

 

A broker non-vote occurs when a broker, bank or other stockholder of record, in nominee name or otherwise, exercising fiduciary powers (typically referred to as being held in “street name”) submits a proxy for the Annual Meeting, but does not vote on a particular proposal because that holder does not have discretionary voting power with respect to that proposal and has not received voting instructions from the beneficial owner.

 

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Abstentions and broker non-votes have no effect on the determination of whether a nominee or the proposal has received the vote of a majority of the shares of common stock present or represented by proxy and voting at the Annual Meeting. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote those shares on routine matters, but not on non-routine matters. Routine matters include ratification of the selection of independent public accountants. Non-routine matters include the election of directors, the advisory vote on executive compensation and the advisory vote on the frequency of future advisory votes on executive compensation.

REVOCABILITY OF PROXIES

 

 

Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. A proxy may be revoked by filing a written notice of revocation or a duly executed proxy bearing a later date with our Corporate Secretary at our principal executive offices, 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714, or it may be revoked by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.

PROXY SOLICITATION

 

 

We will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of the Notice of Internet Availability of Proxy Materials, this proxy statement, the proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials to such beneficial owners. In addition, we have retained Morrow & Company to act as a proxy solicitor in conjunction with the Annual Meeting. We have agreed to pay that firm $7,500, plus reasonable out-of-pocket expenses, for proxy solicitation services. Solicitation of proxies by mail may be supplemented by telephone or personal solicitation by our directors, officers or other employees. No additional compensation will be paid to directors, officers or other employees for such services.

STOCKHOLDER PROPOSALS

 

 

The deadline for submitting a stockholder proposal for inclusion in our proxy materials for our 2015 Annual Meeting of Stockholders is September 18, 2014. Stockholder nominations for director and other proposals that are not to be included in such materials must be received no earlier than November 4, 2014 and no later than the close of business on December 4, 2014. Any such stockholder proposals or nominations for director must be submitted to our Corporate Secretary in writing at 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714. Stockholders are also advised to review our Amended and Restated Bylaws, which contain additional requirements for submitting stockholder proposals and director nominations. See page  15 for further information.

HOUSEHOLDING

 

 

The SEC allows companies and intermediaries (such as brokers) to implement a delivery procedure called “householding.” Under this procedure, multiple stockholders who reside at the same address may receive a single copy of our proxy materials, including the Notice of Internet Availability of Proxy Materials, unless the affected stockholder has notified us that they want to continue receiving multiple copies. This practice is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources.

 

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Householding for bank and brokerage accounts is limited to accounts within the same bank or brokerage firm. For example, if you and your spouse share the same last name and mailing address, and you and your spouse each have two accounts containing Qualcomm stock at two different brokerage firms, your household will receive two copies of the Qualcomm proxy materials, one from each brokerage firm. To reduce the number of duplicate sets of proxy materials your household receives, you may wish to enroll some or all of your accounts in our electronic delivery program at http://enroll.icsdelivery.com/qcom .

If you received a householded mailing this year and you would like to have separate copies of our Notice of Internet Availability of Proxy Materials and proxy materials mailed to you, please submit your request to Broadridge ICS, either by calling toll-free (800) 542-1061, or by writing to Broadridge ICS, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. They will promptly send additional copies of our Notice of Internet Availability of Proxy Materials and proxy materials upon receipt of such request. Once you have received notice from your bank or broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. Stockholders may revoke their consent at any time by contacting Broadridge ICS. Please note, however, that if you want to receive a paper proxy or voting instruction form or other proxy materials for purposes of this year’s Annual Meeting, you should follow the instructions included in the Notice of Internet Availability that was sent to you. If you received multiple copies of the proxy materials and would prefer to receive a single copy in the future or if you would like to opt out of householding for future mailings, you may contact Broadridge ICS.

FINANCIAL INFORMATION

 

 

Attached as Appendix 1 is certain financial information from our Annual Report on Form 10-K for fiscal 2013 that we filed with the SEC on November 6, 2013. We have not undertaken any updates or revisions to such information since the date it was filed with the SEC. Accordingly, we encourage you to review Appendix 1 together with any subsequent information we have filed with the SEC and other publicly available information.

CORPORATE DIRECTORY

 

 

Attached as Appendix 2 is a listing of our executive officers and members of our Board.

 

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CORPORATE GOVERNANCE

CODE OF ETHICS AND CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES

 

 

The Board has adopted a Code of Ethics applicable to all of our employees, including employees of our subsidiaries, and members of our Board. Any amendments to, or waivers under, the Code of Ethics that are required to be disclosed by SEC rules will be disclosed on our website at www.qualcomm.com under the “Corporate Governance” section of our “Investor Relations” page. To date, there have not been any waivers by us under the Code of Ethics.

The Board has also adopted Corporate Governance Principles and Practices, which include information regarding the Board’s policies that guide its governance practices, including the roles, responsibilities and composition of the Board, director qualifications, committee matters and stock ownership guidelines, among others.

The Code of Ethics and the Corporate Governance Principles and Practices are available on our website at www.qualcomm.com under the “Corporate Governance” section of our “Investor Relations” page.

BOARD LEADERSHIP STRUCTURE

 

 

Chairman and CEO Roles

The Board believes that it should maintain flexibility in its ability to establish and revise Qualcomm’s Board leadership structure from time to time. Our charter documents and policies do not prevent our Chief Executive Officer from also serving as our Chairman of the Board. Our Board evaluates its leadership structure and elects the Chairman and the Chief Executive Officer based on the criteria it deems to be appropriate and in the best interests of the Company and its stockholders, given the circumstances at the time of such election. While we have in the past had different persons serving as Chairman of the Board and Chief Executive Officer, the Board believes that it is currently in the best interests of the Company and its stockholders for Dr. Paul Jacobs to serve in both roles. In light of Dr. Jacobs’s knowledge of the Company and its industry, having him serve as Chairman and Chief Executive Officer provides strong unified leadership for the Company, enhances communication between management and the Board, helps the Board focus on matters that management believes are most important and allows him to lead more effectively in executing the Company’s business plan and strategic initiatives. Notwithstanding the above, on December 12, 2013, the Board appointed Mr. Steven M. Mollenkopf, then our President and Chief Operating Officer, to the position of Chief Executive Officer-elect. Mr. Mollenkopf continues to serve as our President, and will commence his service as our Chief Executive Officer following the Annual Meeting. Dr. Jacobs will step down as our Chief Executive Officer at that time. Dr. Jacobs will remain an employee of the Company, and will continue to serve as the Company’s Chairman of the Board of Directors, as Executive Chairman.

Lead Director Role

Our Board believes that the role of Presiding Director, which pursuant to our Corporate Governance Principles and Practices must be an independent director, provides an appropriate balance in Qualcomm’s leadership. The Presiding Director helps ensure a strong, independent and active Board. Under our Corporate Governance Principles and Practices, the Presiding Director is chosen by rotation among the Chairs of the Audit, Compensation and Governance committees. An individual serves as the Presiding Director for a two-year period. Mr. Stephen Bennett served as the Board’s Presiding Director during fiscal 2013 until he concluded his board service in March 2013. Ms. Sherry Lansing, the Chair of the Governance Committee, began her service as Presiding Director in March 2013. The Presiding Director has the following roles and responsibilities:

 

    Presiding at all Board meetings at which the Chairman is not present, including executive sessions of the independent directors;

 

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    Collaborating with the Chairman and Chief Executive Officer in developing agendas for Board meetings;

 

    Acting as the principal liaison between the independent directors and the Chairman and Chief Executive Officer;

 

    Communicating with independent directors to ensure that matters of interest are included on agendas for Board meetings;

 

    Communicating with independent directors and management to affirm that appropriate briefing materials are being provided to directors sufficiently in advance of Board meetings to allow for proper preparation and participation in meetings; and

 

    Calling special meetings of the Board, with the concurrence of at least one additional director, as appropriate.

BOARD MEETINGS , COMMITTEES AND ATTENDANCE

 

 

During fiscal 2013, the Board held eight meetings. Board agendas include regularly scheduled sessions for the independent directors to meet without management present, and the Board’s Presiding Director leads those sessions. The Board delegates various responsibilities and authority to different Board committees. We have four standing Board committees: the Audit, Compensation, Governance and Finance committees. Committees regularly report on their activities and actions to the full Board. Committee assignments are re-evaluated annually and approved by the Board at an annual meeting that follows the Annual Meeting of Stockholders, typically in March of each year. Each committee acts according to a written charter approved by the Board. Copies of each charter can be found on our website at www.qualcomm.com as follows:

 

Name of Committee

    

Website Link

Audit Committee      http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=463
Compensation Committee      http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=462
Governance Committee      http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=461
Finance Committee      http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=464

 

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The table below provides fiscal 2013 committee membership information for each of the Board committees.

 

 

     Committees  

Name

     Audit      Compensation (1)      Governance      Finance (2)  

Barbara T. Alexander

       X         X           

Donald G. Cruickshank

       X               X   

Raymond V. Dittamore

       C              

Susan Hockfield

          X           

Thomas W. Horton

                X   

Paul E. Jacobs

               

Sherry Lansing

             C        

Duane A. Nelles

                C   

Francisco Ros

             X        

Jonathan Rubinstein (3)

               

Brent Scowcroft

             X        

Marc I. Stern

                C                     

 

  (1) Mr. Stephen M. Bennett served as Presiding Director and as Chair of the Compensation Committee until he concluded his service as a director at our 2013 annual meeting of stockholders on March 5, 2013.

 

  (2) Dr. Robert E. Kahn served on the Finance Committee until he concluded his service as a director at our 2013 annual meeting of stockholders on March 5, 2013.

 

  (3) Mr. Jonathan Rubinstein was appointed to the Board on May 5, 2013.

 

  C Committee Chair

The Audit Committee. The Audit Committee meets at least quarterly with our management and independent public accountants to review the results of the annual integrated audit and quarterly reviews of our consolidated financial statements and to discuss our financial statements and earnings releases. The Audit Committee selects, engages, oversees and evaluates the qualifications, performance and independence of our independent public accountants, reviews the plans and results of internal audits and reviews evaluations by management and the independent public accountants of our internal control over financial reporting and the quality of our financial reporting, among other functions. The Audit Committee met 18 times during fiscal 2013. All of the members of the Audit Committee are audit committee financial experts as defined by the SEC and independent directors within the meaning of Rule 5605 of the NASDAQ Stock Market LLC (NASDAQ Rule 5605) and Rule 10A-3(b)(1)(ii) of the Securities Exchange Act of 1934, as amended.

The Compensation Committee. The Compensation Committee determines compensation levels for the Chief Executive Officer, the named executive officers (as listed in the Fiscal 2013 Summary Compensation Table), the other executive officers and Board members, administers and approves stock offerings under our employee stock purchase and long-term incentive plans and performs such other functions regarding compensation as the Board may delegate. The Compensation Committee met nine times during fiscal 2013. All of the members of the Compensation Committee are independent directors within the meaning of NASDAQ Rule 5605 and outside directors within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.

The Governance Committee. The Governance Committee reviews, approves and oversees various corporate governance related policies and procedures applicable to us, including emergency procedures (such as disaster recovery and security). The Committee also reviews and evaluates the effectiveness of our executive

 

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development and succession planning processes and provides active leadership and oversight with respect to these processes. In addition, the Governance Committee evaluates and recommends nominees for membership on the Board and its committees. The Governance Committee met six times during fiscal 2013. All of the members of the Governance Committee are independent directors within the meaning of NASDAQ Rule 5605.

The Finance Committee. The Finance Committee reviews our financial position, cash management, dividend and stock repurchase programs, securities issuances, acquisitions and other major strategic investment decisions and provides oversight of our budgeting process. The Finance Committee met seven times during fiscal 2013.

During fiscal 2013, each Board member attended at least 75% of the aggregate of the meetings of the Board and of the meetings of the committees on which he or she served and that were held during the period for which he or she was a Board or committee member, respectively.

BOARD S ROLE IN RISK OVERSIGHT

 

 

Qualcomm does not view risk in isolation, but considers risk as part of its regular evaluation of business strategy and business decisions. Assessing and managing risk is the responsibility of Qualcomm’s management, which establishes and maintains risk management processes, including action plans and controls, to balance risk mitigation and opportunities to create stockholder value. It is management’s responsibility to anticipate, identify and communicate risks to the Board and/or its committees. The Board oversees and reviews certain aspects of the Company’s risk management efforts, either directly or through its committees. Qualcomm approaches risk management by integrating its strategic planning, operational decision making and risk oversight and communicating risks and opportunities to the Board. The Board commits extensive time and effort every year to discussing and agreeing upon the Company’s strategic plan, and it reconsiders key elements of the strategic plan as significant events and opportunities arise during the year. As part of the review of the strategic plan, as well as in evaluating events and opportunities that occur during the year, the Board and management focus on the primary success factors and risks for the Company.

While the Board has primary responsibility for oversight of the Company’s risk management, the Board’s standing committees support the Board by regularly addressing various risks in their respective areas of oversight. Specifically, the Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with certain public reporting requirements. The Compensation Committee assists the Board in fulfilling its risk management oversight responsibilities with respect to risks arising from compensation policies and programs. The Governance Committee assists the Board in fulfilling its risk management oversight responsibilities with respect to risks related to corporate governance, succession planning and emergency procedures (including disaster recovery and security). The Finance Committee assists the Board in fulfilling its risk management oversight responsibilities with respect to risks related to major strategic investment decisions and other financial transactions, treasury functions and policies and budget processes. Each of the committee Chairs reports to the full Board at regular meetings concerning the activities of the committee, the significant issues it has discussed and the actions taken by the committee.

We believe that our leadership structure supports the risk oversight function of the Board. With our Chief Executive Officer serving as Chairman of the Board, he is able to promote open communication between management and directors relating to risk. Additionally, each Board committee is chaired by an independent director and all directors are actively involved in the risk oversight function.

 

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DIRECTOR NOMINATIONS

 

 

Our Amended and Restated Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the Board at our Annual Meeting of Stockholders. The Board has also adopted a formal policy concerning stockholder recommendations of Board candidates to the Governance Committee. This policy is set forth in our Corporate Governance Principles and Practices, which is available on our website at www.qualcomm.com under the “Corporate Governance” section of our “Investor Relations” page. Under this policy, the Governance Committee will review a reasonable number of candidates recommended by a single stockholder who has held over 1% of our common stock for over one year and who satisfies the notice, information and consent requirements set forth in our Amended and Restated Bylaws. To recommend a nominee for election to the Board, a stockholder must submit his or her recommendation to the Corporate Secretary at our corporate offices at 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714. A stockholder’s recommendation must be received by us within the time limits set forth above under “Stockholder Proposals.” A stockholder’s recommendation must be accompanied by the information with respect to the stockholder nominee as specified in the Amended and Restated Bylaws, including among other things, the name, age, address and occupation of the recommended person, the proposing stockholder’s name and address, the ownership interests of the proposing stockholder and any beneficial owner on whose behalf the nomination is being made (including the number of shares beneficially owned, any hedging, derivative, short or other economic interests and any rights to vote any shares), and any material monetary or other relationships between the recommended person and the proposing stockholder and/or the beneficial owners on whose behalf the nomination is being made. The proposing stockholder must also provide evidence of owning the requisite number of shares of our common stock for over one year. Candidates so recommended will be reviewed using the same process and standards for reviewing Governance Committee recommended candidates.

In evaluating director nominees, the Governance Committee considers the following factors:

 

    The appropriate size of the Board;

 

    Our needs with respect to the particular talents and experience of our directors;

 

    The knowledge, skills and experience of nominees, including experience in technology, business, finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;

 

    Familiarity with national and international business matters;

 

    Experience in political affairs;

 

    Experience with accounting rules and practices;

 

    Appreciation of the relationship of our business to the changing needs of society;

 

    The nominee’s other commitments, including the other boards on which the nominee serves; and

 

    The desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members.

The Governance Committee’s goal is to assemble a board of directors that brings to us a diversity of perspectives and skills derived from high quality business and professional experience. In doing so, the Governance Committee also considers candidates with appropriate non-business backgrounds.

 

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Other than the foregoing, there are no stated minimum criteria for director nominees, although the Governance Committee may also consider such other factors as it may deem are in the best interests of the Company and its stockholders. The Governance Committee does, however, believe it appropriate for at least one, and preferably several, members of the Board to meet the criteria for an “audit committee financial expert” as defined by the SEC, and for a majority of the members of the Board to meet the definition of “independent director” under NASDAQ Rule 5605. The Governance Committee also believes that it is in the best interests of stockholders that a key member of our current management participates as a member of the Board. The Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue their service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue their service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of the Board does not wish to continue to serve or if the Governance Committee or the Board decides not to re-nominate a member for re-election, the Governance Committee identifies the desired skills and experience of a new nominee based on the criteria above. Current members of the Governance Committee and Board are polled for suggestions as to individuals meeting the criteria of the Governance Committee. Research may also be performed to identify qualified individuals. We have, in the past, engaged third parties to assist in identifying and evaluating potential nominees.

MAJORITY VOTING

 

 

Under our Amended and Restated Bylaws, in an uncontested election, if any incumbent nominee for director receives a greater number of “withhold” votes (ignoring abstentions and broker non-votes) than votes cast “for” his or her election, the director shall promptly tender his or her resignation from the Board, subject to acceptance by the Board. In that event, the Governance Committee shall make a recommendation to the Board as to whether to accept or reject the tendered resignation or whether other actions should be taken. In making its recommendation, the Governance Committee will consider all factors it deems relevant, including, without limitation, the stated reasons why stockholders withheld votes from such director, the length of service and qualifications of such director, the director’s past contributions to us and the availability of other qualified candidates for director. The Governance Committee’s evaluation shall be forwarded to the Board to permit the Board to act on it no later than 90 days following the date of the stockholder meeting. In reviewing the Governance Committee’s recommendation, the Board shall consider the factors evaluated by the Governance Committee and such additional information and factors as the Board believes to be relevant. If the Board determines that the director’s resignation is in the best interests of the Company and its stockholders, the Board shall promptly accept the resignation. We will publicly disclose the Board’s decision within four business days in a Current Report on Form 8-K, providing an explanation of the process by which the decision was reached and, if applicable, the reasons for not accepting the director’s resignation. The director in question will not participate in the Governance Committee’s or the Board’s considerations of the appropriateness of his or her continued service, except to respond to requests for information.

STOCK OWNERSHIP GUIDELINES

 

 

We adopted stock ownership guidelines for our directors and executive officers to help ensure that they each maintain an equity stake in the Company and, by doing so, appropriately link their interests with those of other stockholders. The guideline for executive officers is based on a multiple of the executive’s base salary, ranging from two to six times, with the size of the multiple based on the individual’s position with the Company. Only shares actually owned (as shares or as vested deferred stock units) count toward the requirement. Executives are required to achieve these stock ownership levels within five years of becoming an executive officer. Non-employee directors are required to hold a number of shares of our common stock with a value equal to five times the annual retainer for Board service paid to U.S. residents. Non-employee directors are required to achieve this ownership level within five years of joining the Board, or (in the case of non-employee directors

 

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serving on the Board on September 18, 2009) by September 18, 2014. Non-employee directors who were serving on September 18, 2009 are required to hold a number of shares of the Company’s common stock with a value equal to three times the annual cash retainer for Board service paid to U.S. residents through September 18, 2014 when the new requirement becomes effective. In addition to the preceding ownership guidelines, all directors are expected to own shares of our common stock within one year of joining the Board. See the “Compensation Program Best Practices” section under “Compensation Discussion and Analysis” for additional information.

COMMUNICATIONS WITH DIRECTORS

 

 

We have adopted a formal process for stockholder communications with the Board. This process is also set forth in our Corporate Governance Principles and Practices. Stockholders who wish to communicate to the Board should do so in writing to the following address:

[Name of Director(s) or Board of Directors]

Qualcomm Incorporated

Attn: General Counsel

5775 Morehouse Drive, N-510F

San Diego, California 92121-1714

Our General Counsel logs all such communications (and the disposition of such communications as set forth below) and forwards those not deemed frivolous, threatening or otherwise inappropriate to the Chair of the Governance Committee for distribution to the appropriate members of the Board and/or management.

ANNUAL MEETING ATTENDANCE

 

 

Our Corporate Governance Principles and Practices set forth a policy on director attendance at annual meetings. Directors are encouraged to attend absent unavoidable conflicts. All directors then in office attended our last annual meeting, except Mr. Horton.

DIRECTOR INDEPENDENCE

 

 

The Board has determined that, except for Dr. Paul Jacobs and Mr. Steven Mollenkopf, all of the members of the Board are “independent directors” within the meaning of NASDAQ Rule 5605.

 

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PROPOSAL 1:  ELECTION OF DIRECTORS

ELECTION OF DIRECTORS

 

 

Our Restated Certificate of Incorporation and Amended and Restated Bylaws provide that directors are to be elected at the Annual Meeting of Stockholders to hold office until the next annual meeting and until their respective successors are elected and qualified. Vacancies on the Board resulting from death, resignation, disqualification, removal or other causes may be filled by either the affirmative vote of the holders of a majority of the then-outstanding shares of common stock or by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the Board is present. Newly created directorships resulting from any increase in the number of directors may, unless the Board determines otherwise, be filled only by the affirmative vote of the directors then in office, even if less than a quorum of the Board is present. Any director elected as a result of a vacancy shall hold office for a term expiring at the next annual meeting of stockholders and until such director’s successor has been elected and qualified.

Our Restated Certificate of Incorporation provides that the number of directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board. The Board has set the number of directors at 14. Therefore, 14 directors will stand for election at the Annual Meeting.

In an uncontested election, our Bylaws provide that a director nominee will be elected only if he or she receives a majority of the votes cast with respect to his or her election (that is, the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). Abstentions and broker non-votes have no effect on the vote. In an uncontested election, if any nominee for director who is currently serving on the Board receives a greater number of “withhold” votes than votes “for” his or her election, the director shall promptly tender his or her resignation from the Board, subject to acceptance by the Board. The process that will be followed by the Board in that event is described above under the heading “Majority Voting.”

The candidates receiving a majority of votes with respect to the election of directors will be elected directors of the Company. Shares of common stock represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the 14 nominees named below. 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.

NOMINEES FOR ELECTION

 

 

BARBARA T. ALEXANDER

 

 

 

LOGO

  

Age:  65

 

Director since:  2006

 

Ms. Alexander has been an independent consultant since February 2004. From October 1999 to January 2004, she was a senior advisor for UBS, and from January 1992 to September 1999, she was a managing director of Dillon Read & Co., Inc. (Dillon Read). Prior to joining Dillon Read, Ms. Alexander was a managing director in the corporate finance department of Salomon Brothers. Ms. Alexander is past Chairman of the Board of the Joint Center for Housing Studies at Harvard University and is currently a member of that board’s executive committee and an executive fellow of the Joint Center for Housing Studies at Harvard University. Ms. Alexander has been a director of Allied World Assurance Company Holdings, Ltd. since August 2009, KB Home since

 

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October 2010 and Choice Hotels since February 2012. Ms. Alexander previously served as a director of Centex Corporation from July 1999 to August 2009, Burlington Resources, Inc. from January 2004 to March 2006, Federal Home Loan Mortgage Corporation (Freddie Mac) from November 2004 to March 2010 and Harrah’s Entertainment, Inc. from February 2002 to April 2007. She holds B.S. and M.S. degrees in theoretical mathematics from the University of Arkansas, Fayetteville. We believe Ms. Alexander’s qualifications to serve on our Board include her significant financial and accounting experience. In addition, she has extensive experience serving on several other public company boards, including in most instances service as the Chair or a member of the audit committee of those other boards. Her experience at Freddie Mac has added to her knowledge regarding risk management issues. She has been designated as an audit committee financial expert.

DONALD G. CRUICKSHANK

 

 

 

LOGO

  

Age:  71

 

Director since:  2005

 

 

Sir Donald has been Chairman of Audioboo Ltd. since April 2010. He was Chairman of Clinovia Group Ltd. from January 2004 to February 2007 and Formscape Group Ltd. from April 2003 to December 2006 and was a member of the Financial Reporting Council, the body in the U.K. responsible for oversight of the Accountancy and Actuarial professions and for corporate governance standards, from June 2001 to June 2007. Sir Donald has extensive experience in a number of areas, including European regulation and telecommunications. His career has included assignments at McKinsey & Co. Inc., Times Newspapers, Virgin Group plc., Wandsworth Health Authority and the National Health Service in Scotland. Sir Donald served as Chairman of the London Stock Exchange plc. from 2000 to 2003 and as Director General of the U.K.’s Office of Telecommunications (Oftel) from 1993 to 1998. From 1997 to 2000, he served as Chairman of Action 2000, the U.K.’s Millennium Bug campaign. In 1998, Chancellor Gordon Brown appointed him as Chairman of the Government’s Review of the U.K. banking sector, and from 1999 to 2004, he served as Chairman of SMG plc., one of Scotland’s leading broadcasters. Sir Donald holds an M.A. degree in law and an honorary L.L.D. degree from the University of Aberdeen and an M.B.A. degree from Manchester Business School, the University of Manchester. We believe Sir Donald’s qualifications to serve on our Board include his extensive management experience in a diverse range of companies, his many years of experience in working with governmental organizations, his extensive experience in European regulation and telecommunications policies and administration and his broad experience in international business matters. In addition, as a native of the United Kingdom, with significant pan-European experience, Sir Donald brings a non-U.S. centric perspective which is beneficial to our Board. He has been designated as an audit committee financial expert.

RAYMOND V. DITTAMORE

 

 

 

LOGO

  

Age:  70

 

Director since:  2002

 

 

Mr. Dittamore retired in June 2001 as a partner of Ernst & Young LLP, an international public accounting firm, after 35 years of service. Mr. Dittamore has been a director of Life Technologies Corporation since July 2001. He

 

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previously served as a director of Gen-Probe Incorporated from August 2002 to September 2009 and Digirad Corporation from March 2004 to March 2008. Mr. Dittamore holds a B.S. degree in accounting from San Diego State University. We believe Mr. Dittamore’s qualifications to serve on our Board include his many years of financial and accounting experience, including his long service with an international accounting firm as an audit partner and as a member of that firm’s management. In addition, Mr. Dittamore has served and currently serves on other public company boards, where he has gained extensive audit committee experience as well as additional insight into the practices of other boards and their committees. He has been designated as an audit committee financial expert.

SUSAN HOCKFIELD

 

 

 

LOGO

  

Age:  62

 

Director since:  2012

 

 

Dr. Hockfield has been President Emerita of the Massachusetts Institute of Technology (MIT) since July 2012 and Professor of Neuroscience at MIT since 2004. She was President of MIT from December 2004 to July 2012. Dr. Hockfield joined the faculty of Yale University in 1985 and served as Provost from 2002 to 2004 and dean of the Graduate School of Arts and Sciences from 1998 to 2002. Dr. Hockfield was a member of the scientific staff of the Cold Spring Harbor Laboratory from 1980 to 1985 and a National Institutes of Health (NIH) postdoctoral fellow at the University of California at San Francisco in 1980. Dr. Hockfield has been a director of the General Electric Company since December 2006. She has been a trustee of the Carnegie Corporation of New York since September 2006. Dr. Hockfield holds honorary degrees from several U.S. and international universities and is a member of the American Academy of Arts and Sciences and a fellow of the American Association for the Advancement of Science. Dr. Hockfield holds a B.A. degree in biology from the University of Rochester and a Ph.D. degree in Anatomy from the Georgetown University School of Medicine. We believe Dr. Hockfield’s qualifications to serve on our Board include her significant management and leadership experience developed and demonstrated as President of MIT, a leading research university, and as Provost and a dean at Yale. Throughout our corporate history, we have valued and benefited from our interaction with academic institutions. Dr. Hockfield’s experience in education and her perspective as a scientist provides us with important insights as we develop and invest in new technologies and evaluate new ideas. In addition, her service on other public company boards brings valuable perspectives to our Board.

THOMAS W. HORTON

 

 

 

LOGO

  

Age:  52

 

Director since:  2008

 

 

Mr. Horton has been Chairman of American Airlines Group Inc. (formed upon the merger of AMR Corporation (AMR) and US Airways Group, Inc.) since December 2013 and Chairman of American Airlines, Inc. (American) since November 2011. He was Chairman and Chief Executive Officer of AMR and Chief Executive Officer of American from November 2011 to December 2013, and President of AMR and American from July 2010 to

 

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December 2013. He served as Executive Vice President and Chief Financial Officer of AMR and American from March 2006 to July 2010. He served as Vice Chairman and Chief Financial Officer of AT&T Corporation (AT&T) from January 2002 to February 2006. Prior to joining AT&T, Mr. Horton was Senior Vice President and Chief Financial Officer of AMR from January 2000 to 2002 and served in numerous management positions with AMR since 1985. In November 2011, AMR and American filed voluntary petitions for reorganization under Federal bankruptcy laws, and emerged from bankruptcy in December 2013. Mr. Horton holds a B.B.A. degree in accounting from Baylor University and an M.B.A. degree from Southern Methodist University. We believe Mr. Horton’s qualifications to serve on our Board include his management, financial and accounting experience, including his current position as President of AMR Corporation and his prior service as Vice Chairman and Chief Financial Officer of AT&T Corporation and as Executive Vice President and Chief Financial Officer of AMR. In particular, Mr. Horton’s roles in operational and financial management at AMR bring valuable insights to our Board, as well as providing a useful resource to our senior management.

PAUL E. JACOBS

 

 

 

LOGO

  

Age:  51

 

Director since:  2005

 

 

Dr. Jacobs has served as Chairman of the Board of Directors since March 2009, as a director since June 2005 and as Chief Executive Officer since July 2005. He served as Group President of our QWI segment from July 2001 to June 2005. In addition, he served as Executive Vice President from February 2000 to June 2005. Dr. Jacobs was a director of A123 Systems, Inc. from November 2002 to July 2012. Dr. Jacobs holds a B.S. degree in electrical engineering and computer science, an M.S. degree in electrical engineering and a Ph.D. degree in electrical engineering and computer science from the University of California, Berkeley. We believe Dr. Jacobs’s qualifications to serve on our Board include his extensive business, operational and management experience in the wireless telecommunications industry, including his current position as our Chairman and Chief Executive Officer. His extensive knowledge of our business, products, strategic relationships and opportunities, as well as the rapidly evolving technologies and competitive environment in our industry, bring valuable insights and knowledge to our Board.

SHERRY LANSING

 

 

 

LOGO

  

Age:  69

 

Director since:  2006

 

 

Ms. Lansing is the Founder and has been the Chair of the Sherry Lansing Foundation, a philanthropic organization focusing on cancer research, health and education, since 2005. From 1992 to 2005, she was the Chair of the Motion Picture Group of Paramount Pictures where she oversaw the release of more than 200 films, including Academy Award ® winners Forrest Gump, Braveheart and Titanic. From 1984 to 1990, she operated her own production company, Lansing Productions, and co-founded Jaffe/Lansing Productions. In 1980, she became the film industry’s first female to oversee all aspects of a studio’s motion picture production

 

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when she was appointed President of Production at 20th Century Fox. She holds additional trustee, chair and advisory positions with the Friends of Cancer Research, the American Association of Cancer Research, the Carter Center and Stop Cancer, a non-profit philanthropic group she founded in partnership with Dr. Armand Hammer. Ms. Lansing is also a regent of the University of California and serves as Chair of the University Health Services Committee. Ms. Lansing has been a director of Dole Food Company, Inc. since October 2009 and RealD Inc. since May 2010. She earned the 2004 Horatio Alger Humanitarian Award, the 2003 Woodrow Wilson Award for Corporate Citizenship, a 2003 honorary doctorate in fine arts from the American Film Institute, the 1989 Alfred P. Sloan, Jr. Memorial Award and the 1982 Distinguished Community Service Award from Brandeis University. She holds a B.S. degree in speech, with minors in English and mathematics, from Northwestern University. We believe that Ms. Lansing’s qualifications to serve on our Board include her management and operational experience in the entertainment and content production business. Given the convergence of content and delivery capability, as well as consumer driven technology and device capability, Ms. Lansing’s professional experience is of great value to the Board and Qualcomm. In addition, her past and current service on other public company boards brings valuable insights to our Board.

STEVEN M. MOLLENKOPF

 

 

 

LOGO

  

Age:  44

 

Director since:  2013

 

 

Mr. Mollenkopf has served as our Chief Executive Officer-elect and President, and as a director, since December 2013. He served as President and Chief Operating Officer from November 2011 to December 2013. He served as Executive Vice President and Group President from September 2010 to November 2011, as Executive Vice President and President of QCT from August 2008 to September 2010, as Executive Vice President, QCT Product Management from May 2008 to July 2008, as Senior Vice President, Engineering and Product Management from July 2006 to May 2008 and as Vice President, Engineering from April 2002 to July 2006. Mr. Mollenkopf joined Qualcomm in 1994 as an engineer and throughout his tenure at Qualcomm has held several other technical and leadership roles. Mr. Mollenkopf holds a B.S. degree in Electrical Engineering from Virginia Tech and an M.S. degree in Electrical Engineering from the University of Michigan. We believe Mr. Mollenkopf’s qualifications to serve on our Board include his extensive business, operational and management experience in the wireless telecommunications industry, including his current position as our Chief Executive Officer-elect and President. His extensive knowledge of our business, products, strategic relationships and opportunities, as well as the rapidly evolving technologies and competitive environment in our industry, bring valuable insights and knowledge to our Board.

DUANE A. NELLES

 

 

 

LOGO

  

Age:  70

 

Director since:  1988

 

 

Mr. Nelles has been in the personal investment business since 1987. Prior to that time, he was a partner in the international public accounting firm of Coopers & Lybrand LLP, which he joined in 1968. Mr. Nelles served as a

 

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director of American Assets Trust, Inc. since February 2011, WFS Financial Inc. from July 1995 to March 2006 and Westcorp Inc. from February 2003 to March 2006. He holds a B.A. degree in economics and mathematics from Albion College and an M.B.A. degree from the University of Michigan. We believe Mr. Nelles’s qualifications to serve on our Board include his financial and accounting experience, including his nearly 20 years of service as a partner in an international public accounting firm and his many years as a private investor and businessman. In addition, Mr. Nelles’s service as a director of Qualcomm for over 20 years provides important context and historical perspective to Board deliberations.

CLARK T. “SANDY ” RANDT , JR .

 

 

 

LOGO

  

Age:  68

 

Director since:  2013

 

 

Mr. Randt has been President of Randt & Co. LLC, a company that advises firms with interests in China, since August 2009. He is a former U.S. ambassador to the People’s Republic of China, where he served from July 2001 until January 2009. From January 1994 through June 2001, he was a partner resident in the Hong Kong office of Shearman & Sterling, a major international law firm, where he headed the firm’s China practice. From August 1982 through October 1984, Mr. Randt served as First Secretary and Commercial Attaché at the U.S. Embassy in Beijing. In 1974, he was the China representative of the National Council for United States-China Trade, and from August 1968 to March 1972, he served in the U.S. Air Force Security Service. Mr. Randt is a member of the New York bar association and the Council on Foreign Relations. He is a former governor and first vice president of the American Chamber of Commerce in Hong Kong. Mr. Randt has been a director of Valmont Industries, Inc. since February 2009, a director of the United Parcel Service, Inc. since August 2010, and serves on the Board of Governors of the Yale-National University of Singapore liberal arts college. He is fluent in Chinese Mandarin. Mr. Randt graduated from Yale University with a B.A. degree in English literature and received a J.D. degree from the University of Michigan. He also attended Harvard Law School where he was awarded the East Asia Legal Studies Traveling Fellowship to China. We believe that Mr. Randt’s qualifications to serve on our Board include his deep understanding of Asia and experience in facilitating business throughout Asia, which is one of the most important regions in the world. He brings to our Board substantial experience in both diplomacy and international trade, including service as the U.S. Ambassador to The People’s Republic of China. His international experience and knowledge of Asian business operations provides valuable insights to our Board.

FRANCISCO ROS

 

 

 

LOGO

  

Age:  63

 

Director since:  2010

 

 

Dr. Ros is President of First International Partners, S.L., a business consulting firm he founded in 2002. He was Secretary of State (vice minister) of the Government of Spain from May 2004 to July 2010. He served as a senior director of business development of Qualcomm from July 2003 to April 2004. From January 2000 to June 2002, he was Chairman and CEO of Alua Broadband Optical Access, a company he co-founded. From May 1996 to

 

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October 1998, Dr. Ros served as President and CEO of Unisource (a joint venture among KPN, Telia, Swisscom and Telefónica). From April 1983 to November 1996, Dr. Ros headed several business areas within the Telefónica Group and became Managing Director of the holding company and member of its Executive Management Board. In 2011, he was the recipient of the Great Cross of the Order of Civil Merit and the Great Plate of Telecommunications and the Information Society, both granted by the Government of Spain. Dr. Ros was a director of Proteccion On-Line S.L. from October 2012 to June 2013. Dr. Ros holds an engineer and Ph.D. degrees in telecommunications from the Universidad Politecnica de Madrid, an M.S. degree in electrical engineering and a Ph.D. degree in electrical engineering and computer science from the Massachusetts Institute of Technology (MIT) and an advanced management degree from the Instituto de Estudios Superiores de la Empresa (IESE, Business School) in Madrid. We believe Dr. Ros’s qualifications to serve on our Board include his significant experience related to the regulatory environment in Europe for wireless technology, as well as his technical and business background and education. In addition, Dr. Ros brings a non-U.S. perspective to issues facing us, enhancing the understanding of our Board.

JONATHAN J. RUBINSTEIN

 

 

 

LOGO

  

Age:  57

 

Director since:  2013

 

 

Mr. Rubinstein was Senior Vice President, Product Innovation for the Personal Systems Group of the Hewlett-Packard Company (HP) from July 2011 to January 2012, and Senior Vice President and General Manager, Palm Global Business Unit of HP from July 2010 through July 2011. Mr. Rubinstein was Chief Executive Officer and President of Palm, Inc. (Palm) from June 2009 until its acquisition by HP in July 2010 and Chairman of the Board of Palm from October 2007 through the date of acquisition. He was Senior Vice President, iPod Division of Apple Inc. (Apple) from 2003 to 2006 and Senior Vice President, Hardware Engineering of Apple from 1997 to 2003. Mr. Rubinstein is a member of the National Academy of Engineering. Mr. Rubinstein has been a director of Amazon.com, Inc. since December 2010. Mr. Rubinstein holds B.S. and M.Eng. degrees in electrical engineering from Cornell University and an M.S. degree in computer science from Colorado State University. We believe that Mr. Rubinstein’s qualifications to serve on our Board include his substantial operational and executive management experience at a range of large technology companies, including senior management responsibilities at HP, Palm and Apple. His experience in addressing product development issues in emerging and evolving technology environments provides our Board with valuable knowledge and insights.

BRENT SCOWCROFT

 

 

 

LOGO

  

Age:  88

 

Director since:  1994

 

 

General Scowcroft is the President of The Scowcroft Group, Inc., an international business consulting firm he founded in June 1994. He served as Assistant to the President for National Security Affairs for President George H.W. Bush from January 1989 until January 1993; he also held that position for President Gerald R. Ford

 

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during his term. A retired U.S. Air Force Lieutenant General, General Scowcroft served in numerous national security posts in the Pentagon and the White House prior to his appointments as Assistant to the President for National Security Affairs. General Scowcroft holds numerous honorary degrees, a B.S. degree in engineering from West Point and M.A. and Ph.D. degrees in political science from Columbia University. We believe General Scowcroft’s qualifications to serve on our Board include his significant experience in the management of large scale organizations during his years of active military service and his extensive knowledge of international business and governmental affairs, which have been gained at the highest levels of governmental service and through working with numerous international businesses. In particular, General Scowcroft is a recognized expert on China, one of the most important regions in the world.

MARC I. STERN

 

 

 

LOGO

  

Age:  69

 

Director since:  1994

 

 

Mr. Stern is Chairman of The TCW Group, Inc. (TCW), a Los Angeles-based asset-management firm with approximately $130 billion of assets under management, and has served as a director of TCW since September 1992. Prior to being named Chairman of TCW in February 2013, Mr. Stern served as TCW’s Vice Chairman from July 2005 to February 2013, Chief Executive Officer from July 2009 to August 2012 and as President from May 1992 to October 2005. From May 2007 to February 2013, he was a member of the Management Committee of Société Générale Group and Chairman of Société Générale Global Investment Management and Services (GIMS) North America unit. TCW was acquired by Société Générale in 2001. Société Générale sold its interest in TCW in 2013 to The Carlyle Group and TCW management. Mr. Stern served as a director of Rockefeller & Co., Inc., a wealth management firm, from June 2008 to September 2012. Mr. Stern served as President and a director of SunAmerica, Inc., a financial services company, from 1988 to 1990. Prior to joining SunAmerica, Mr. Stern was Managing Director and Chief Administrative Officer of The Henley Group, Inc., a diversified manufacturing company, and prior to that was Senior Vice President of Allied-Signal Inc., a diversified manufacturing company. Mr. Stern holds a B.A. degree in political science and history from Dickinson College, an M.A. degree in government from the Columbia University Graduate School of Public Law and Government and a J.D. degree from the Columbia University School of Law. We believe that Mr. Stern’s qualification’s to serve on our Board include his many years of business, operational and financial management experience. In addition, his current and prior service on other public company boards permits him to contribute valuable strategic management insight to our Board, both with respect to specific governance and compensation related issues, as well as general leadership. Finally, as a member of our Board since 1994, Mr. Stern brings a valuable historical perspective on the development of the Company’s business and its leadership.

REQUIRED VOTE AND BOARD RECOMMENDATION

 

 

If a quorum is present and voting, each of the 14 nominees for director will be elected by a vote of a majority of the votes cast, meaning that the number of shares cast “for” a director’s election exceeds the number of votes cast “against” that director. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have no effect on the vote. If you hold your shares through a broker and you do not instruct the broker on how to vote for each of the 14 nominees, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the vote.

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH NAMED NOMINEE.

 

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PROPOSAL 2:  RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC

ACCOUNTING FIRM

The Audit Committee of the Board has selected PricewaterhouseCoopers LLP as our independent public accountants for the fiscal year ending September 28, 2014, and the Board has directed that management submit the selection of independent public accountants for ratification by the stockholders at the Annual Meeting. PricewaterhouseCoopers LLP has audited our consolidated financial statements since we commenced operations in 1985.

Stockholder ratification of the selection of PricewaterhouseCoopers LLP as our independent public accountants is not required by our Amended and Restated Bylaws or otherwise. However, the Board is submitting the selection of PricewaterhouseCoopers LLP to stockholders for ratification as a matter of good corporate practice. If stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee at its discretion may direct the appointment of a different independent accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

FEES FOR PROFESSIONAL SERVICES

 

 

The following table presents fees for professional services rendered by PricewaterhouseCoopers LLP for the audit of our annual financial statements for the fiscal years ended September 29, 2013 and September 30, 2012 and fees for other services rendered by PricewaterhouseCoopers LLP during those periods. All of the services described in the following fee table were approved in conformity with the Audit Committee’s pre-approval process described below.

 

       Fiscal
2013
       Fiscal
2012
 

Audit fees (1)

     $ 7,094,000             $ 7,701,000     

Audit-related fees (2)

     3,152,000             3,464,000     

Tax fees (3)

     101,000             348,000     

All other fees (4)

     561,000             656,000     
    

 

 

      

 

 

 

Total

     $   10,908,000             $  12,169,000     
    

 

 

      

 

 

 

 

  (1) Audit fees consist of fees for professional services rendered for the audit of our annual consolidated financial statements and the effectiveness of our internal control over financial reporting, the review of our interim condensed consolidated financial statements included in quarterly reports and audits of certain subsidiaries and businesses for statutory, regulatory and other purposes.

 

  (2) Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “audit fees.” This category includes fees principally related to field verification of royalties from certain licensees.

 

  (3) Tax fees consist of fees for professional services rendered for a real estate cost segregation study.

 

  (4) All other fees consist of fees for permissible advisory services provided in connection with an operational readiness study and technical publications purchased from the independent public accountants.

 

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POLICY ON AUDIT COMMITTEE PRE -APPROVAL OF AUDIT AND NON -AUDIT SERVICES OF INDEPENDENT PUBLIC ACCOUNTANTS

 

 

The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent public accountants. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and an estimated fee. The Audit Committee has delegated pre-approval authority to certain committee members when expedition of approval is necessary. The independent public accountants and management periodically report to the full Audit Committee regarding the extent of services provided by the independent public accountants and the fees for the services performed to date. All services rendered by PricewaterhouseCoopers LLP during fiscal 2013 and 2012 were pre-approved by the Audit Committee.

REPRESENTATION FROM PRICEWATERHOUSE COOPERS AT THE ANNUAL MEETING

 

 

Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

REQUIRED VOTE AND BOARD RECOMMENDATION

 

 

The affirmative vote of a majority of the votes cast at the meeting at which a quorum is present, either in person or by proxy, is required to approve this proposal. Abstentions will be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.

THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 28, 2014.

 

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PROPOSAL 3:  ADVISORY VOTE FOR APPROVAL OF OUR EXECUTIVE

COMPENSATION

The Compensation Committee and the Board believe that our policies, procedures and fiscal 2013 compensation amounts were effective in implementing our compensation philosophy and in achieving its goals. This stockholder advisory vote, commonly known as “Say-on-Pay,” is required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended and gives our stockholders the opportunity to approve or not approve, on a non-binding advisory basis, the compensation paid to our named executive officers (NEOs). The Board recommends a vote for the following resolution:

“Resolved, that the stockholders of QUALCOMM Incorporated approve, on a non-binding advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative disclosures.”

At the March 8, 2011 annual meeting, stockholders were first asked to advise the Compensation Committee and the Board of Directors regarding how frequently to conduct the advisory vote on executive compensation. A majority of shares voted indicated a preference for an annual “Say-on-Pay” advisory vote, and the Compensation Committee adopted an annual “Say-on-Pay” voting practice.

PAY AND PERFORMANCE ALIGNMENT

 

 

For fiscal 2013, we believe that our CEO’s compensation was appropriately aligned with our business performance. The Compensation Committee considered our financial growth relative to our peer companies, our absolute total shareholder return (TSR) for 1- and 3-year periods and our TSR for 1- and 3-year periods relative to our peer companies. Our CEO earned an amount under the Annual Cash Incentive Plan (ACIP) and an aggregate grant date fair value of equity in fiscal 2013 similar to those he received in fiscal 2012.

COMPENSATION PROGRAM BEST PRACTICES

 

 

We continued the many ongoing practices that promote consistent leadership, decision-making and actions without taking inappropriate or unnecessary risks. These practices are discussed in detail in the Compensation Discussion and Analysis (CD&A) section and include:

 

    A majority of our long-term incentive equity awards are performance-based.

 

    A significant portion of our NEOs’ compensation varies with Company financial and stock performance.

 

    We have a balanced approach to incentive programs including a mix of short- and long-term incentives and performance measures.

 

    We have limits on incentive amounts that may be earned in the event we significantly exceed our annual financial performance objectives or exceptional performance relative to peer companies.

 

    We have an enterprise risk management process that includes compensation, talent management and succession planning.

 

    We have stock ownership guidelines.

 

    We have no tax gross-ups, except as provided to all eligible employees for business-related expenses, such as relocation.

 

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    We have a cash incentive compensation clawback policy in the event of an accounting restatement.

 

    Our insider trading policy includes a prohibition on hedging and pledging of our common stock covering all employees and outside directors.

 

    Our NEOs do not have severance agreements or employment contracts, and our equity acceleration in the event of a change-in-control is “double-trigger.”

 

    Our compensation decisions are made with both prevalent practices and comparative performance information as background, using objectively selected smaller and larger peers where the Company is reasonably positioned in the middle of the range.

MODIFICATIONS TO OUR COMPENSATION PROGRAMS

 

 

The Compensation Committee approved modifications to our compensation program and practices for fiscal 2013 in response to a decline in the percentage of votes cast in favor of the compensation of our NEOs from 95% in fiscal 2011 to 69% in fiscal 2012. We disclosed these modifications in the proxy statement for the 2013 annual meeting of stockholders, at which time the percentage of votes cast in favor of the compensation of our NEOs increased to 95%. These modifications included:

 

    Added revenues as a secondary quantitative criterion for selecting peer companies.

 

    Reduced the maximum ACIP amount from 2.5 times to 2.0 times the target amount.

 

    Reduced the rate of increase in the ACIP funding formula for financial performance that exceeds objectives.

 

    Changed the timing of equity awards to better align the disclosure of the awards with the fiscal year performance for which they are earned.

 

    Prohibited the pledging of our common stock.

EFFECT OF THIS RESOLUTION

 

 

Because your vote is advisory, it will not be binding upon the Company, the Board or the Compensation Committee. However, our Board and Compensation Committee value the opinions of our stockholders, and the Compensation Committee will take into account the outcome of this vote when considering future compensation decisions.

BOARD RECOMMENDATION

 

 

The Board believes that the compensation of our NEOs, as described in the CD&A, compensation tables and narrative disclosures, is appropriate for the reasons discussed herein.

THE BOARD RECOMMENDS AN ADVISORY VOTE “FOR” APPROVAL OF OUR EXECUTIVE COMPENSATION.

 

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PROPOSAL 4:  ADVISORY VOTE ON THE FREQUENCY OF ADVISORY

VOTE ON EXECUTIVE COMPENSATION

We are required by Section 14A of the Securities Exchange Act to seek stockholder input at least every six years regarding the frequency of advisory votes on executive compensation, commonly known as “Say-on-Pay” votes. At the Annual Meeting, we are requesting that our stockholders indicate their preference for an annual, biennial (every two years) or triennial (every three years) frequency of future “Say-on-Pay” advisory votes.

REASON FOR THE PROPOSAL AT THIS TIME

 

 

At our 2011 annual meeting of stockholders, we asked our stockholders to indicate their preference regarding how frequently we should conduct future advisory votes on executive compensation. In the 2011 Proxy Statement, the Board noted that the “Say-on-Pay” advisory vote was, at that time, an emerging and newly regulated practice. As a result, although we are only required to seek stockholder input on the frequency of “Say-on-Pay” advisory votes every six years, at that time the Board committed to solicit again in three years our stockholders’ preferences regarding the frequency of the “Say-on-Pay” advisory vote. Even though we adopted an annual “Say-on-Pay” advisory vote based on our stockholders’ preference 2011, the Board is fulfilling its commitment to our stockholders by soliciting their advice at the Annual Meeting on the frequency of future “Say-on-Pay” advisory votes.

EFFECT OF THIS RESOLUTION

 

 

Because your vote is advisory, it will not be binding upon the Company, the Board or the Compensation Committee. However, the Compensation Committee will take into account the outcome of this vote when considering the frequency of future advisory votes on executive compensation.

BOARD RECOMMENDATION

 

 

Although we recognize the potential benefits of having less frequent “Say-on-Pay” votes (including providing us with the time to implement changes before the next vote), we acknowledge current governance expectations related to providing stockholders an annual opportunity to express their opinion about NEO compensation in light of company performance. We also note the wide adoption of annual “Say-on-Pay” votes, both among our peer companies and more broadly. We have been responsive to previous “Say-on-Pay” outcomes and the feedback we have received from investors, including making numerous changes to our compensation program following the 2012 “Say-on-Pay” advisory vote, which we disclosed in both this proxy statement and in the proxy statement for the 2013 annual meeting of stockholders. As a result of both the current expectations of investors and prevailing practices, the Board recommends an “Annual” advisory vote on executive compensation.

THE BOARD RECOMMENDS AN ANNUAL ADVISORY VOTE ON EXECUTIVE COMPENSATION.

 

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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT

The following table sets forth certain information regarding the ownership of our common stock as of December 16, 2013 by: (i) each stockholder known to us to have greater than a 5% ownership interest (based solely on our review of Schedules 13D and 13G filed with the SEC); (ii) each of our executive officers named in the Fiscal 2013 Summary Compensation Table under “Executive Compensation and Related Information” (the Named Executive Officers or NEOs); (iii) each current director and nominee for director; and (iv) all of our executive officers and directors as a group.

 

       Amount and Nature of
Beneficial Ownership (1)
 
      

 

         

 

 

Name of Beneficial Owner

   Number of
Shares
          Percent of   
Class   
 

BlackRock, Inc.

          

40 East 52 nd Street

          

New York, NY 10022 (2)

     107,162,364            6.35%   

Paul E. Jacobs (3)

     4,019,099            *   

George S. Davis

     -                *   

William E. Keitel (4)

     43,974            *   

Derek K. Aberle (5)

     228,165            *   

Steven M. Mollenkopf

     40,919            *   

Donald J. Rosenberg (6)

     252,642            *   

Barbara T. Alexander (7)

     36,968            *   

Donald G. Cruickshank (8)

     78,200            *   

Raymond V. Dittamore (9)

     85,429            *   

Susan Hockfield (10)

     -                *   

Thomas W. Horton (11)

     9,973            *   

Sherry Lansing (12)

     41,587            *   

Duane A. Nelles (13)

     116,613            *   

Clark T. Randt, Jr.

     -                *   

Francisco Ros (14)

     475            *   

Jonathan J. Rubinstein (15)

     797            *   

Brent Scowcroft (16)

     456,972            *   

Marc I. Stern (17)

     465,685            *   

All Executive Officers and Directors as a Group (27 persons) (18)

     6,943,045              *   

 

  * Less than 1%

 

  (1) This table is based upon information supplied by officers and directors. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 1,686,810,716 shares outstanding on December 16, 2013, adjusted as required by rules promulgated by the SEC.

 

  (2) This information is as of December 31, 2012 and based on the Schedule 13G filed with the SEC by BlackRock, Inc.

 

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  (3) Includes 523,852 shares held in family trusts, 845,808 shares held in Grantor Retained Annuity Trusts for the benefit of Dr. Paul Jacobs and his spouse and 212,387 shares held for benefit of his children. Dr. Paul Jacobs disclaims all beneficial ownership for the shares held in trust for the benefit of his children. Also includes 2,408,198 shares issuable upon exercise of options exercisable within 60 days, of which 721,763 shares are held in trusts for the benefit of Dr. Paul Jacobs and/or his spouse, and 698,899 shares are held by Dr. Paul Jacobs’s spouse.

 

  (4) Includes 43,974 shares and dividends from the Qualcomm Non-Qualified Deferred Compensation Plan, not yet distributed.

 

  (5) Includes 219,185 shares issuable upon exercise of options exercisable within 60 days.

 

  (6) Includes 18,292 shares held in family trusts and 234,350 shares issuable upon exercise of options exercisable within 60 days.

 

  (7) Includes 14,704 shares held in family trusts, 22,000 shares issuable upon exercise of options exercisable within 60 days and 264 fully vested deferred stock units and dividend equivalents to be released within 60 days. Excludes 9,365 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.

 

  (8) Includes 8,200 shares held in a pension plan pursuant to which Sir Donald Cruickshank has voting rights or discretion over the holdings in the plan. Also includes 70,000 shares issuable upon exercise of options exercisable within 60 days.

 

  (9) Includes 7,400 shares held in family trusts and 78,000 shares issuable upon exercise of options exercisable within 60 days. Excludes 17,597 fully vested deferred stock units and dividend equivalents that settle on December 31, 2020.

 

  (10) Excludes 2,157 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.

 

  (11) Includes 7,473 shares held jointly with Mr. Horton’s spouse and 2,500 shares issuable upon exercise of options exercisable within 60 days. Excludes 6,989 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.

 

  (12) Includes 7,498 shares held in family trusts and 34,089 shares issuable upon exercise of options exercisable within 60 days. Excludes 6,989 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.

 

  (13) Includes 116,613 shares held in family trusts. Excludes 6,989 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.

 

  (14) Excludes 6,989 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.

 

  (15) Shares held in family trusts.

 

  (16) Includes 377,972 shares held in family trusts and 78,000 shares issuable upon exercise of options exercisable within 60 days. Excludes 6,989 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.

 

  (17) Includes 343,906 shares owned through a grantor trust and 23,250 shares owned by The Marc and Eva Stern Foundation (the Foundation), of which Mr. Stern is the trustee for the grantor trust and the Foundation. Mr. Stern disclaims all beneficial ownership for the shares owned by the Foundation. Also includes 98,000 shares issuable upon exercise of options exercisable within 60 days. Excludes 11,743 fully vested deferred stock units and dividend equivalents that settle upon retirement from the Board.

 

  (18) Includes 4,138,533 shares issuable upon exercise of options exercisable within 60 days and 793 fully vested deferred stock units and dividend equivalents to be released within 60 days for all directors and executive officers as a group. Excludes 75,809 fully vested deferred stock units, restricted stock units and related dividend equivalents.

 

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SECTION  16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

 

Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, all Section 16(a) filing requirements were complied with during fiscal 2013, except for the following executive officer transactions: an amended Form 3 was filed in January 2013 to report shares held in the Qualcomm Non-Qualified Deferred Compensation (QNQDC) Plan by Mr. Amon; a late Form 4 was filed in December 2012 to report shares acquired under the QNQDC Plan by Mr. Thompson; a late Form 4 was filed in May 2013 to report a sale of shares by Mr. Amon that was reported late by his broker; a late Form 4 was filed in May 2013 to report a sale of shares by Mr. Renduchintala that was reported late by his broker; and a Form 5 was filed in November 2013 by Mr. Lederer to report shares sold by his son in 2009 and 2012.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS

 

 

None of the members of our Compensation Committee are, or have been, employees or officers of the Company. During fiscal 2013, no member of the Compensation Committee had any relationship with us requiring disclosure under Item 404 of Regulation S-K. During fiscal 2013, none of our executive officers served on the compensation committee (or equivalent) or board of another entity whose executive officer(s) served on our Compensation Committee or Board.

EQUITY COMPENSATION PLAN INFORMATION

 

 

The following table sets forth information regarding outstanding options and shares reserved for future issuance under our equity compensation plans as of September 29, 2013 (number of shares in millions):

 

  Plan Category

  Number of
Shares to be
Issued Upon
  Exercise / Vesting  
of Outstanding
Awards
    Weighted
Average Exercise
Price of
Outstanding
Options (6)
     Number of
Shares
Remaining
Available for
  Future Issuance  
 

  Equity compensation plans approved by stockholders (1)

                            103    (4)                $ 41.35                                 111    (7) 

  Equity compensation plans not approved by stockholders (2)

    3    (5)                $ 32.53         1     
   

 

 

      

 

 

 

  Total (3)

    106                    $ 41.20         112     
   

 

 

            

 

 

 

 

  (1) Consists of four plans: the Company’s 2001 Stock Option Plan, 2006 Long-Term Incentive Plan, 2001 Non-Employee Directors’ Stock Option Plan and 2001 Employee Stock Purchase Plan.

 

  (2)

Consists of the Atheros Communications, Inc. (Atheros) 2004 Stock Incentive Plan (the Atheros Plan), which was assumed in connection with our acquisition of Atheros in May of 2011. The Atheros Plan provides for the issuance of the Company’s common stock in connection with stock options, stock

 

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  appreciation rights, restricted stock and restricted stock units, which may be granted to certain employees who were employed by Atheros immediately prior to the acquisition. The terms and conditions of awards granted under the Atheros Plan are determined pursuant to equity grant administration procedures established by the Company’s Compensation Committee.

 

  (3) Excludes awards assumed in connection with mergers and acquisitions, with the exception of Atheros. 185,000 shares of the Company’s common stock were issuable upon exercise of assumed options. These options have a weighted average exercise price of $40.28 per share. No additional awards may be granted under the other assumed arrangements.

 

  (4) Includes approximately 33,367,000 shares that may be issued upon the satisfaction of performance objectives or other conditions pursuant to PSUs, RSUs with time-based vesting and RSUs with performance-contingent vesting granted under the 2006 Long-Term Incentive Plan. The PSUs include the maximum number of shares that may be issued.

 

  (5) Includes 886,000 shares that may be issued under the Atheros Plan pursuant to awards granted by Qualcomm subsequent to the acquisition of Atheros.

 

  (6) Does not include outstanding PSUs, RSUs with time-based vesting and RSUs with performance-contingent vesting.

 

  (7) Includes approximately 10,713,000 shares reserved for issuance under the 2001 Employee Stock Purchase Plan subject to purchase under the current offering period.

 

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CERTAIN RELATIONSHIPS AND RELATED-PERSON TRANSACTIONS

Our Code of Ethics states that our executive officers and directors, including their immediate family members, are charged with avoiding situations in which their personal, family or financial interests conflict with those of the Company. Our Conflicts of Interest and Outside Activities policy provides additional rules regarding the employment of relatives. In accordance with its charter, the Audit Committee is responsible for reviewing and approving transactions between the Company and any directors or executive officers or any of such person’s immediate family members or affiliates, which would be reportable as a related-person transaction under SEC rules. The Audit Committee’s charter also provides that the Audit Committee may delegate review and approval of employment-related related-person transactions to the Compensation Committee. In considering the proposed arrangement, the Audit Committee or Compensation Committee, as appropriate, will consider the relevant facts and circumstances and the potential for conflicts of interest or improprieties.

During fiscal 2013, we employed the family members of certain directors and executive officers. The Audit Committee reviewed, and delegated to the Compensation Committee the approval of, such related-person transactions, and the Compensation Committee approved the related-person transactions below.

Those employees whose compensation (salary, cash incentives and grant date fair value of equity awards) exceeded $120,000 are discussed below, all of whom were adults who did not live with the related director or executive officer. Each family member is compensated according to our standard practices, including participation in our employee benefit plans generally made available to employees of a similar responsibility level. We do not view any of the directors or executive officers as having a beneficial interest in the compensation of family members described below that is material to them or the Company. Restricted stock units were granted under our 2006 Long-Term Incentive Plan and generally vest over three years from the grant date, contingent upon continued service with the Company.

Duane A. Nelles’s son, Duane A. Nelles III, serves as Vice President, QCT Corporate Development, Qualcomm Technologies, Inc. During fiscal 2013, Duane A. Nelles III earned $259,807 in base salary and $94,000 in cash incentives and received restricted stock unit grants totaling 6,274 shares with an aggregate grant date fair value of $400,031. Duane A. Nelles’s son, Paul S. Nelles, serves as a Senior Program Manager. During fiscal 2013, Paul Nelles earned $120,453 in base salary and $18,870 in cash incentives and received restricted stock unit grants totaling 613 shares with a grant date fair value of $39,054.

Steven R. Altman’s brother, Jeffrey S. Altman, serves as Vice President, Business Development, Qualcomm Incorporated. Jeffrey Altman earned $245,202 in base salary and $111,000 in cash incentives during fiscal 2013 and received restricted stock unit grants totaling 4,382 shares with an aggregate grant date fair value of $280,035.

Cristiano Amon’s brother, Rogerio Amon, serves as Director, Program Management, Qualcomm Technologies, Inc. Rogerio Amon earned $173,069 in base salary and $47,500 in cash incentives during fiscal 2013 and received restricted stock unit grants totaling 2,061 shares with an aggregate grant date fair value of $131,521.

Steven M. Mollenkopf’s brother, James D. Mollenkopf, serves as Senior Director, Strategic Development, Qualcomm Technologies, Inc. James Mollenkopf earned $213,269 in base salary and $81,600 in cash incentives during fiscal 2013 and received restricted stock unit grants totaling 3,476 shares with an aggregate grant date fair value of $222,075.

Donald J. Rosenberg’s son-in-law, Lucian Iancovici, serves as Manager, Ventures, Qualcomm Technologies, Inc. Lucian Iancovici earned $160,814 in base salary and $56,560 in cash incentives, including a new hire bonus, during fiscal 2013 and received restricted stock unit grants totaling 842 shares with an aggregate grant date fair value of $53,058.

 

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Daniel L. Sullivan’s daughter, Megan Delgado, serves as Staff Manager, Marketing, Qualcomm Incorporated. Megan Delgado earned $88,873 in base salary and $18,340 in cash incentives during fiscal 2013 and received restricted stock unit grants totaling 613 shares with an aggregate grant date fair value of $39,054.

 

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COMPENSATION COMMITTEE REPORT

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis (CD&A) with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in our 2014 Proxy Statement.

COMPENSATION COMMITTEE

Marc I. Stern, Chair

Barbara T. Alexander

Susan Hockfield

 

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EXECUTIVE COMPENSATION AND RELATED INFORMATION

COMPENSATION DISCUSSION AND ANALYSIS

 

 

Our Named Executive Officers for Fiscal 2013.

Our Named Executive Officers, or “NEOs,” for fiscal 2013 are as follows:

 

       

LOGO

  Dr. Paul E. Jacobs, Chairman and Chief Executive Officer (CEO), has 23 years of service with Qualcomm and has been CEO since July 2005 and Chairman since March 2009.   LOGO     Mr. George S. Davis, Executive Vice President and Chief Financial Officer (CFO), joined Qualcomm as CFO in March 2013.
     

LOGO

  Mr. Steven M. Mollenkopf, President and Chief Operating Officer, has 19 years of service with Qualcomm and has been President and COO since November 2011.   LOGO     Mr. Donald J. Rosenberg, Executive Vice President, General Counsel and Corporate Secretary, has 6 years of service with Qualcomm.
     

LOGO

  Mr. Derek K. Aberle, Executive Vice President and Group President, has 13 years of service with Qualcomm and has been Group President since November 2011.   LOGO     Mr. William E. Keitel, former Executive Vice President and CFO, retired from Qualcomm in November 2013, following 17 years of service and having served as CFO from February 2002 to March 2013.

Dr. Jacobs will step down as the Company’s Chief Executive Officer following the Annual Meeting. Dr. Jacobs will remain an employee of the Company, and will continue to serve as the Company’s Chairman of the Board of Directors, as Executive Chairman. Throughout fiscal 2013, Mr. Mollenkopf served as our President and Chief Operating Officer. On December 12, 2013, the Company’s Board of Directors appointed Mr. Mollenkopf to the position of Chief Executive Officer-elect. Mr. Mollenkopf continues to serve as our President, and will commence his service as our Chief Executive Officer following the Annual Meeting.

 

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EXECUTIVE SUMMARY

 

 

The executive summary includes (1) business highlights, (2) a summary of our compensation program, (3) a summary of our pay and performance alignment, (4) a review of key changes we made to our executive compensation program for fiscal 2013 and (5) highlights of our compensation program best practices.

Business Highlights

Figure 1 illustrates the Company’s Non-GAAP revenues and Non-GAAP operating income results for fiscal 2011, 2012 and 2013. Our Non-GAAP revenues grew by 30%, 34% and 30%, and our Non-GAAP operating income grew by 35%, 22% and 22%, in fiscal 2011, 2012 and 2013, respectively. The most directly comparable GAAP financial measures and information reconciling these Non-GAAP financial measures to our financial results prepared in accordance with GAAP are included in Appendix 3.

Figure 1:  Non-GAAP Financial Performance and Year-over-Year Growth

 

LOGO

 

  (1) Fiscal 2011 Non-GAAP revenues and Non-GAAP operating income were adjusted to exclude certain items for calculating financial performance.

Our fiscal 2013 business highlights include:

 

    Our Qualcomm Snapdragon products were prominent in a broad set of flagship smartphones, and 3G/4G device average selling prices were stronger than expected.

 

    We focused on return of capital to stockholders and increased our stock repurchases and dividends paid during the year. We repurchased and retired 71.7 million shares of common stock for $4.6 billion.

 

    Non-GAAP net income was $7.9 billion (up 22% year-over-year).

 

    Non-GAAP diluted earnings per share were $4.51 (up 22% year-over-year).

 

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    Free cash flow (defined as net cash from operating activities less capital expenditures) was $8.1 billion (up 55% year-over-year); 32% of revenues.

 

    We shipped approximately 716 million Mobile Station Modem (MSM) integrated circuits (up 21% year-over-year).

 

    Total reported device sales were approximately $231.2 billion (up 23% year-over-year).

 

    Cash, cash equivalents and marketable securities totaled $29.4 billion at the end of fiscal 2013.

Our Total Compensation Program

Figure 2 depicts the key components of our compensation program and each component’s relationship to broader compensation terms such as “Total Cash Compensation,” “Direct Compensation” and ultimately the total compensation amounts disclosed in the Fiscal 2013 Summary Compensation Table. Discussions of these specific components are included in later sections of this Compensation Discussion and Analysis (CD&A).

Figure 2:  Graphic Representation of Our Compensation Program

 

LOGO

Pay and Performance Alignment

Direct compensation includes amounts determined by the Compensation Committee that are intended to align the interests of our NEOs’ with our stockholders by aligning the NEOs’ compensation with Company and individual performance. Between 87% and 94% of direct compensation is variable (ACIP earnings and long-term incentive awards). The long-term incentive awards comprise 73% to 84% of our NEOs’ direct compensation.

We provide an annual cash incentive plan (ACIP) in which the potential amount that the NEOs may earn varies by the extent to which we achieve our annual Non-GAAP revenues (weighted 40%) and Non-GAAP operating income (weighted 60%) objectives. Figure 3 illustrates how our CEO’s ACIP earnings have varied by the extent to which our financial performance exceeded the objectives for fiscal 2011, 2012 and 2013. Additional information about the ACIP is included in later sections of this CD&A and in the “Fiscal 2013 Grants of Plan-Based Awards” table.

 

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The CEO’s fiscal 2013 total direct compensation was less than 1% above the amount he earned in fiscal 2012.

In fiscal 2013, we exceeded the Non-GAAP revenues objective by 5% and the Non-GAAP operating income objective by 3%, resulting in an overall weighted financial performance that exceeded objectives by 4%. Our CEO’s ACIP amount for fiscal 2013 was $3.5 million, which was 2% greater than his 2012 ACIP amount when we exceeded objectives by 2%.

Figure 3:  Non-GAAP Financial Performance Compared to Objectives and CEO’s ACIP Amount.

 

LOGO

 

  (1) Fiscal 2011 Non-GAAP revenues and Non-GAAP operating income were adjusted to exclude certain items for calculating financial performance.

Later in this CD&A, we provide additional information about the factors that the Compensation Committee considered in determining the long-term incentive equity awards for the CEO. These factors included our fiscal 2013 financial performance, our financial growth, our absolute total shareholder return (TSR) for 1- and 3-year periods and our TSR for 1- and 3-year periods relative to our peer companies. In addition to exceeding our fiscal 2013 financial performance objectives, our financial growth (i.e., percentage increases in Non-GAAP revenues and Non-GAAP operating income) has been in the top quartile relative to our peer companies, yet our TSR has been below the median relative to our peers. TSR is not an operating metric and is not in our executive team’s direct control. The Compensation Committee considered our strong operating performance and growth and the fact that TSR percentile rankings were not as high relative to operating measures and determined that it would be appropriate to award the CEO a combination of PSUs and RSUs with an aggregate grant date fair value of $15 million, the same amount that he received in fiscal 2012. Our CEO’s direct compensation (salary, ACIP earnings and aggregate grant date fair value of PSUs and RSUs) was within 1% of his direct compensation for fiscal 2012, and his fiscal 2013 total compensation as disclosed in the Fiscal 2013 Summary Compensation Table was 1% less than his total compensation for fiscal 2012.

 

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Key Changes to Our Executive Compensation Program

The Compensation Committee approved several modifications to the compensation program and practices for our NEOs. The changes, as described below, were implemented in fiscal 2013 in response to the 69% “FOR” voting results on the non-binding advisory vote on executive compensation (“Say-on-Pay”) at the March 2012 annual meeting (relating to the fiscal year ended September 25, 2011), compared to the 95% “FOR” voting results at the March 2011 annual meeting.

Added revenues as a secondary quantitative criterion for selecting peer companies.

We continue to believe that market capitalization is appropriate as the primary quantitative criterion. However, we now include revenues as a secondary quantitative criterion to provide additional screening so that companies with comparable market capitalization but with revenues in excess of four times (or below one-quarter of) our revenues would generally be excluded from the peer group. Relative to our peer companies, we are below the median for revenue and above the median for profit, margin and market capitalization (see Figures 7 through 10).

Reduced the maximum Annual Cash Incentive Plan (ACIP) amount from 2.5 times to 2.0 times the target amount.

Based on feedback from stockholders and a review of prevalent practices, the Compensation Committee reduced the maximum ACIP amount in order to limit incentive earnings for the NEOs. The CEO’s ACIP amount is limited to 5x his base salary, and 2x the ACIP target amounts, in the event we significantly exceed our financial performance objectives.

Reduced the rate of increase to the funding rate (Incentive Multiple) for financial performance that exceeds objectives.

Figure 4 illustrates the reduced rate of increase to the Incentive Multiple compared to prior fiscal years. The Incentive Multiple is calculated based on the weighted financial performance ratio and is applied to a target ACIP amount to determine the performance-adjusted ACIP amount for individual awards.

 

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Figure 4:  Fiscal 2013 ACIP Funding vs. Prior Fiscal Years

 

LOGO

Changed the timing of equity awards to the fourth quarter to better align the disclosure of the awards with the fiscal year financial performance for which they were earned.

Our prior practice resulted in a perceived disconnect between the disclosure of equity awards and the fiscal year financial performance for which they were earned. The Compensation Committee had granted equity awards to the executive officers after the fiscal year’s financial performance was finalized and reported, but because of this timing the equity awards were disclosed the following fiscal year. Although for many years this has been the prevalent practice, it makes proxy statement disclosure tables difficult to understand. Hence, to enhance clarity and alignment, no equity awards were granted to executive officers in November 2012 based on fiscal 2012 reported results. As a result, the equity awards for the CEO, the other NEOs and other executive officers were effectively postponed until late in fiscal 2013, and the disclosure of the equity awards is now more clearly aligned with the fiscal year for which they are awarded.

Prohibited the pledging of our common stock.

The Governance Committee adopted a policy that prohibits the pledging of our common stock . All of our executive officers and directors are in compliance with this new pledging policy.

Compensation Program Best Practices

Our compensation program reflects what we believe are best practices, including:

 

    We emphasize performance-based long-term incentive equity awards.

 

    A significant portion of our CEO’s and other NEOs’ compensation varies with Company performance.

 

    We have a balance of short-term and long-term performance measures.

 

    We have limits on the amounts of variable compensation that may be earned.

 

    We have a risk management process.

 

    We have stock ownership guidelines.

 

    We do not provide tax gross-ups for executive perquisites, except for benefits provided in a policy applicable to all eligible employees.

 

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    We have a cash incentive plan clawback policy.

 

    Our insider trading policy includes a prohibition on the pledging of our common stock.

 

    Our NEOs do not have severance agreements or employment contracts, and our equity acceleration in the event of a change-in-control is “double-trigger.”

 

    The largest pay decision (equity awards) is made late in our fiscal year when we can anticipate financial performance results and we know the results of the “Say-on-Pay” advisory vote.

This concludes the Executive Summary section of the CD&A. We invite you to continue reading the following sections of the CD&A, which provide additional information, discussion and analysis of our executive compensation program.

 

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DISCUSSION AND ANALYSIS

 

 

This section of the CD&A provides additional information about our compensation program. Figure 5 illustrates the topical structure of this section.

Figure 5: Topical Structure of the Discussion and Analysis Section

 

LOGO

The Objectives of Our Compensation Program

Our compensation program is designed to support the Company’s objectives to attract, retain, motivate and engage highly talented and experienced NEOs by focusing on the following six objectives:

Align the interests of our NEOs and long-term stockholders.

The majority of compensation we deliver to our NEOs is in the form of long-term equity awards. Ultimately, the value that each NEO may realize at the time equity awards vest increases with the appreciation in our stock price, thus motivating our NEOs to build stockholder value.

Variable compensation from year to year based on the Company’s performance (“pay for performance”).

Our NEOs’ Annual Cash Incentive Plan (ACIP) earnings vary with our financial performance compared to our objectives. The amount of compensation delivered with RSUs varies with the price of our common stock and dividends earned, and the amount of compensation delivered with PSUs varies when our TSR, relative to the NASDAQ-100, meets or exceeds a minimum threshold.

Competitively reasonable and appropriate compensation for our business needs and circumstances.

The Compensation Committee considers competitive compensation practices by other companies as reference points for comparative purposes. The Compensation Committee does not target specific benchmark percentiles.

Internally fair and equitable compensation relative to roles, responsibilities and work relationships.

The Compensation Committee may consider certain business and individual performance factors to evaluate internal fairness and equity and may monitor the internal compensation relationships among the NEOs, but it does not attempt to establish specific internal relationships.

Reflect high standards for corporate governance and compensation-related risk management.

Our compensation programs are subject to a thorough evaluation process that includes Compensation Committee review and approval of program design and practices and advice of an independent, third-party compensation consultant engaged by the Compensation Committee. We have many practices that promote sound leadership, decision-making and actions among our executives that are consistent with our values of innovation, execution and partnership without taking inappropriate or unnecessary risks.

 

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Tax efficiency for the Company.

Our compensation program is designed to comply with the requirements of Internal Revenue Service Code Sections 162(m) and 409A.

The Key Components of Our Compensation Program and How They Align With These Objectives

The key components of our compensation program align with the objectives outlined above:

 

    The ACIP program and equity awards align the interests of our NEOs with stockholders, provide compensation that varies from year-to-year based on Company and individual performance and are tax efficient for the Company.

 

    Salary, the ACIP program and equity awards provide reasonable and appropriate compensation that is internally fair and equitable in order to attract and retain experienced and successful executives.

 

    Non-incentive plan bonus payments align the interests of our NEOs with stockholders and help to attract and retain experienced and successful executives and All Other Compensation amounts help to provide programs to attract, retain and engage executives.

 

    We believe all components of our compensation program are designed and administered to reflect high standards of corporate governance and compensation-related risk management.

Salary. In setting base salary, the Compensation Committee considers competitive practices, internal comparisons and individual performance. Salary amounts reflect each NEO’s level of responsibility, expertise, skills, knowledge and experience. Base salary amounts are effective at the beginning of the fiscal year.

Annual Cash Incentive Plan (ACIP). Potential award amounts vary by the extent to which we achieve our annual financial performance objectives. To maximize tax deductibility, amounts earned under the terms of the ACIP were designed to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code (IRC). The actual amounts earned were based on the Company’s achievement of the ACIP financial performance metrics, and the Compensation Committee’s consideration of other strategic and operational achievements and its exercise of negative discretion to pay amounts that are less than the maximum amounts it established for Section 162(m) purposes.

Performance Stock Units (PSUs). A variable number of shares of common stock are awarded based on relative performance of our TSR compared to that of the NASDAQ-100. Eligible participants must also satisfy time-based service requirements. The PSUs are designed to qualify as performance-based compensation under IRC Section 162(m). At its sole discretion, the Compensation Committee determines the mix of equity awards, the target value of PSUs, the achievement of the performance measures and the potential maximum number of PSUs that may be earned.

Restricted Stock Units (RSUs). A fixed number of shares of common stock may be awarded subject to eligible participants satisfying time-based service requirements. At its sole discretion, the Compensation Committee determines the mix of equity awards and, subject to the exercise of negative discretion to pay amounts that are less than the maximum amounts it established for Section 162(m) purposes, determines the value of equity awards granted each year.

Bonus (non-incentive plan awards). Employees, including NEOs, as part of an offer of employment, may receive a cash payment to encourage acceptance of the offer. The Compensation Committee approves all offers of employment to executive officers. All employees, including the NEOs, are also eligible to receive cash payments under the terms of our patent award program that encourages and rewards innovation.

 

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All Other Compensation. These programs offer tax-deferred retirement savings, financial planning services, insurance, flexible travel arrangements and travel security. The Compensation Committee is responsible for the design of all compensation and benefit plans.

How We Determine the Amount of Compensation for Each NEO

We consider several factors to determine the compensation amounts and opportunities, including:

 

    Competitive practices;

 

    Business and individual performance factors;

 

    The results of stockholder advisory votes on executive compensation and communications with stockholders;

 

    The CEO’s recommendations for the other NEOs; and

 

    The perspectives provided by the Compensation Committee’s independent advisors.

The Compensation Committee does not have a predefined framework that determines which of these factors may be more or less important, and the emphasis placed on specific factors may vary among the NEOs. Ultimately, it is the Compensation Committee’s judgment about these factors, along with the other factors discussed in this section, that forms the basis for determining the CEO’s, the other NEOs’ and other executive officers’ compensation.

We discuss each of these factors in the following sections.

We review the compensation practices of other companies with whom we compete.

The Compensation Committee identified the peer companies to use for competitive analyses, taking into account the recommendations made by Frederic W. Cook and Co., Inc. (FWC), based on the following characteristics:

 

    Principal business in technology, telecommunications and media (excluding those that are primarily content producers) based on the Global Industry Classification System (GICS);

 

    Generally comparable in market capitalization and revenues (using a guideline of one-quarter to four times our amounts);

We believe that market capitalization is appropriate as the primary quantitative criterion because:

 

  ¡     Market capitalization, a key component of which is stock price, is the key driver of equity compensation grant value, and equity compensation grant value is the single largest component of CEO compensation among technology companies with large market capitalization;

 

  ¡     Market capitalization is directly related to stockholder benefit;

 

  ¡     A significant portion of our business is technology licensing, which is a high-margin business, and as such Qualcomm typically has higher market capitalization and profit than companies with similar revenues; but

 

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We include revenues as a secondary quantitative criterion because:

 

  ¡     Revenues are commonly used as a selection criterion by our peer companies, independent, third-party compensation survey providers and proxy advisory services.

 

    Comparable performance-based compensation model;

 

    Commonly used as peers of peers (i.e., the peer companies disclosed by the companies we use as peers).

At its May 2013 meeting, the Compensation Committee selected the following as peer companies:

Figure 6:  Current Peer Companies

 

     

ADP

  Amazon.com   Broadcom
     

Cisco

  Comcast   Corning
     

DirecTV

  eBay   EMC
     

Google

  Honeywell   Intel
     

Lockheed Martin

  Microsoft   Oracle
     

Texas Instruments

  Time Warner Cable   United Technologies
     

Yahoo!

       

Broadcom, Corning and Yahoo! had market capitalization values slightly below the one-quarter of Qualcomm threshold but are included in the current peer group for continuity with the prior group and to maintain a sufficiently robust sample size. Changes from the peer companies we disclosed in our proxy statement for 2013 are:

 

    The exclusion of Apple, AT&T, Hewlett Packard, IBM and Verizon because they had revenues more than four times our revenues;

 

    The exclusion of Motorola Mobility and Dell because of completed or pending corporate transactions; and

 

    The additions of Honeywell and Lockheed Martin because they fulfill the selection criteria and are broadly comparable as large-scope technology companies.

 

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Figures 7 through 10 set forth our relative ranking among the peer companies and illustrate that our market capitalization is strongly supported by our levels of net income and margin, which in turn reinforces the prioritization of the peer selection criteria. Relative to our peer companies, we are below the median for revenue and above the median for profit, margin and market capitalization. The Company and peer company data reflected in these figures was reported in the Standard & Poor’s Compustat reports as of March 2013, the time at which FWC prepared the peer company selection analysis used by the Compensation Committee.

 

Figure 7: Revenues Ranking among Peers    Figure 8: Net Income Ranking among Peers
LOGO    LOGO

 

Figure 9: EBITDA Margin Ranking among Peers   Figure 10: Market Capitalization Ranking among Peers
LOGO   LOGO

We consider business and individual performance factors.

The Compensation Committee intends our compensation amounts to be internally fair and equitable relative to roles, responsibilities and relationships among our NEOs, in addition to being competitively reasonable and appropriate. Accordingly, the Compensation Committee also considers the following factors in the process of determining compensation levels for each NEO:

 

    The Compensation Committee’s evaluation of the CEO and the other NEOs;

 

    Individual performance and contributions to financial goals;

 

    Labor market conditions, the need to retain and motivate the NEOs and each NEO’s potential to assume increased responsibilities and contribute long-term value to the Company;

 

    Management succession plans and bench strength;

 

    Operational management, such as project milestones and process improvements;

 

    Internal working and reporting relationships and our desire to encourage partnership and teamwork among our NEOs;

 

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    Individual expertise, skills, knowledge and tenure in position; and

 

    Leadership, including developing and motivating employees, collaborating within Qualcomm, attracting and retaining employees and personal development.

We consider the results of stockholder advisory votes on executive compensation.

During fiscal 2013, the Compensation Committee implemented the following changes in response to the 69% “FOR” voting result on the non-binding advisory vote on executive compensation (“Say-on-Pay”) at the 2012 annual meeting, compared to the 95% “FOR” voting result at the 2011 annual meeting:

 

    Added revenues as a secondary quantitative criterion for selecting peer companies;

 

    Reduced the maximum ACIP amount from 2.5 times to 2.0 times the target amount;

 

    Reduced the rate of increase to the ACIP funding rate (Incentive Multiple) for financial performance that exceeds objectives;

 

    Changed the timing of equity awards to better align the disclosure of the awards with the fiscal year for which they were earned; and

 

    Prohibited the pledging of our common stock.

We discuss with the CEO his recommendations for the other NEOs and other executive officers.

The Compensation Committee and the CEO discussed (a) our business performance, (b) our CEO’s performance and (c) our CEO’s evaluation of and compensation recommendations for the other NEOs. The Compensation Committee, without the CEO present, determined the CEO’s base salary for fiscal 2014 and his ACIP amount and equity awards for fiscal 2013, and approved the base salaries, ACIP amounts and long-term equity awards for the other NEOs and other executive officers.

We engage independent compensation consultants and other advisors to obtain advice and assistance.

The Compensation Committee has the authority to retain and terminate any third-party compensation consultant and to obtain advice and assistance from external legal, accounting and other advisors. During fiscal 2013, the Compensation Committee engaged an independent executive compensation consulting firm, Frederic W. Cook & Co., Inc. (FWC), to advise it on compensation matters. FWC reported directly to the Compensation Committee. We did not engage FWC for any additional services during fiscal 2013 beyond its support of the Compensation Committee. The engagement did not raise any conflicts of interest. Pursuant to this engagement, FWC:

 

    Provided information, insights and advice regarding compensation philosophy, objectives and strategy;

 

    Recommended peer group selection criteria and identified and recommended potential peer companies;

 

    Provided analyses of competitive compensation practices for executive officers and non-employee directors;

 

    Provided analyses of potential risks arising from our executive and non-executive programs;

 

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    Provided analyses of aggregate equity compensation spending and related dilution;

 

    Reviewed and commented on recommendations regarding NEO compensation; and

 

    Advised the Compensation Committee on specific issues as they arose.

Representatives from FWC attended all Compensation Committee meetings during fiscal 2013 and interacted with the Committee Chair, members of our human resources staff and outside legal counsel prior to and following Compensation Committee meetings. We incurred $242,810 in fees to FWC during fiscal 2013 (compared to $347,541 during fiscal 2012), all for work that was directly in support of the Compensation Committee and execution of the Committee’s responsibilities under its charter.

The Compensation Committee also sought and received advice from our outside legal counsel, DLA Piper LLP. Our human resources department supported the Compensation Committee in its work, collaborated with FWC and DLA Piper, conducted analyses and managed our compensation and benefit programs.

The Amounts of Compensation Our NEOs Received For Fiscal 2013

At its September 2012 meeting, the Compensation Committee approved the fiscal 2013 base salary amounts and ACIP target amounts as a percentage of base salary for our executive officers. Based on its consideration of competitive practices and discussions with the CEO and FWC, the Compensation Committee maintained the same base salary and ACIP target amounts from fiscal 2012 for fiscal 2013. The Committee observed that base salaries and ACIP target amounts were appropriate in the context of competitive practices at that time and that the design of our ACIP program provided reasonable opportunities to earn additional cash compensation. Maintaining base salary amounts was not a negative reflection of the performance of the Company or the individual NEOs.

The Compensation Committee determined the NEOs’ ACIP earnings and long-term incentive equity awards for fiscal 2013. Specific details on these amounts are provided in the following sections. Figure 11 provides an overview of the contribution of each pay component to the total compensation amounts disclosed in the Fiscal 2013 Summary Compensation Table (excluding Mr. Keitel). A few relationships to note include:

 

    Of the CEO’s total compensation, 73% is in the form of long-term compensation (the grant date fair value of PSUs and RSUs) and 90% is variable (ACIP earnings, PSUs and RSUs ); and

 

    Among the other NEOs’ total compensation, an average of 78% is in the form of long-term compensation and 90% is variable.

 

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Figure 11: Contribution of Each Pay Component to Total Compensation for Fiscal 2013 (1)(2)

 

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  (1) Excludes Mr. Keitel because he stepped down from his role as CFO in March 2013.

 

  (2) Sums may not equal totals due to rounding.

 

  (3) Excludes special, one-time payments related to Mr. Davis’s employment offer.

How Our Company Performance Affected Our CEO’s and Other NEOs’ Compensation

Fiscal 2013 financial performance and ACIP earnings

During the first quarter of fiscal 2013, the Compensation Committee, after consultation with the CEO and review by the Board of Directors, established Non-GAAP revenues and Non-GAAP operating income objectives for the fiscal 2013 ACIP. Figure 12 illustrates the double-digit growth in our Non-GAAP financial objectives compared to the prior fiscal year results. The fiscal 2013 objectives reflected 23% and 18% growth over fiscal 2012 Non-GAAP revenues and Non-GAAP operating income, respectively. These growth objectives were above the 90 th percentile of our peer companies’ financial performance results. We believe that this demonstrates the Compensation Committee’s desire to set financial performance objectives that genuinely reflect high performance. The most directly comparable GAAP financial measures and information reconciling these Non-GAAP financial measures to our financial results prepared in accordance with GAAP are included in Appendix 3.

 

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Figure 12:  Non-GAAP Revenues and Operating Income Targets and Actual Results

 

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  (1) Fiscal 2011 Non-GAAP revenues and Non-GAAP operating income were adjusted to exclude certain items for calculating financial performance.

To maximize tax deductibility, amounts earned under the terms of the fiscal 2013 ACIP are intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. The Compensation Committee applied negative discretion in determining the ACIP earnings for each NEO that were less than the maximum amounts it established for Section 162(m) purposes.

Figure 13 illustrates the calculation of the performance-adjusted ACIP amount that is the foundation upon which the Compensation Committee determines the ACIP earned amounts for each NEO, and Figure 14 discloses the calculations for determining the fiscal 2013 performance-adjusted amounts and earned amounts for each NEO.

Figure 13:  Process for Determining ACIP Amounts (1)

 

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  (1) Sums may not equal totals due to rounding.

 

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Figure 14:  Fiscal 2013 ACIP Target, Performance Adjusted and Earned Amounts

 

Name   ACIP Target Award
($)
   

 

x

 

 

Incentive
Multiple

    =  

Performance
Adjusted
Amount

($)

         

Earned Amount
Awarded by
Compensation
Committee

($)

          Variance of
Earned Amount
vs. Performance
Adjusted Amount
 

Paul E. Jacobs

    3,000,035          1.16          3,480,001          3,480,000          0.0

Steven M. Mollenkopf

    1,141,008          1.16          1,323,570          1,325,000          0.1

Derek K. Aberle

    900,016          1.16          1,056,065          1,045,000          -1.0

George S. Davis (1)

    510,417          1.16          592,084          590,000          -0.4

Donald J. Rosenberg

    742,502          1.16          861,303          860,000          -0.2

William E. Keitel (2)

    671,394            1.16            778,817            775,000            -0.5

 

  (1) Mr. Davis’s ACIP target amount was prorated to reflect his partial year of employment with Qualcomm during fiscal 2013.

 

  (2) Mr. Keitel’s ACIP target amount was prorated to reflect his partial year of service as CFO and as Senior Advisor during fiscal 2013.

Consistent with past practice, we applied a relative weighting of 40% to Non-GAAP revenues and 60% to Non-GAAP operating income to emphasize the relative importance of operating income on stockholder value creation. We use Non-GAAP financial objectives because they:

 

    Are the key metrics we use to manage the business;

 

    Focus the executive team on the performance and efficiency of our core reporting businesses, including our QCT, QTL and QWI segments;

 

    Provide a direct link between decisions and outcomes; and

 

    Are key factors that influence stockholder value.

These Non-GAAP objectives exclude the Qualcomm Strategic Initiatives (QSI) segment and certain share-based compensation, acquisition-related items and tax items because we view such items as unrelated to the operating activities and performance of our ongoing core businesses, which is consistent with the focus of the ACIP.

The Compensation Committee considered fiscal 2013 Non-GAAP revenues and Non-GAAP operating income when it determined the fiscal 2013 ACIP amounts for the CEO and other NEOs. Our financial performance resulted in an Incentive Multiple of 1.16, which is reflected in Figure 13 that discloses actual Non-GAAP results.

The Compensation Committee is authorized under the fiscal 2013 ACIP to adjust reported Non-GAAP revenues and Non-GAAP operating income for calculating financial performance on which fiscal 2013 cash incentives were determined. Adjustments are intended to eliminate the distorting effect of certain unusual income or expense items on year-over-year growth percentages if the Compensation Committee determines, in its discretion, that the items do not reflect a fair measurement of our operating performance. The Compensation Committee did not make any such adjustments for fiscal 2013.

Long-Term Financial and TSR Performance and Fiscal 2013 Equity Awards

The Compensation Committee granted equity awards during the fourth quarter of fiscal 2013. Within the context of the nearly completed fiscal year, the Compensation Committee was able to consider anticipated absolute and relative financial performance, absolute and relative total shareholder returns, and anticipated year-over-year growth for fiscal 2014. Further, since equity compensation is the largest part of our NEOs’

 

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annual compensation, granting awards after the annual meeting of stockholders (which takes place during the second quarter of the fiscal year) allowed consideration of stockholders’ “Say-on-Pay” feedback. By changing the timing of equity award grants to near the end of the fiscal year, the equity award amounts are more clearly aligned with performance for the fiscal year in which the awards are granted and with the feedback provided by stockholders through the advisory vote.

The Compensation Committee considered the following financial and TSR performance results in determining equity awards for the CEO and other NEOs:

 

    Our fiscal 2013 financial performance exceeded the objectives for the year;

 

    Our revenues and operating income growth for 1- and 3-year periods were at or above the 95th percentile among our peer companies. (See Figures 15 and 16. The Company and peer company data reflected in these figures was reported in the Standard & Poor’s Compustat reports as of March 2013, the time at which FWC prepared the peer company selection analysis used by the Compensation Committee.);

 

Figure 15:  1-Year Relative Financial Growth   Figure 16:  3-Year Relative Financial Growth

 

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    We believe our absolute 1-and 3-year TSRs do not reflect the financial growth we have experienced in recent years. At September 30, 2013, the last trading day of the month in which fiscal 2013 ended, our 1-and 3-year TSRs were 9.8% and 16.2%, respectively. This TSR does not align with our financial performance growth rates; and

 

    Compared to our peer companies, our relative 1- and 3-year TSRs ranked 16th out of 20 and 12th out of 20, respectively.

The Compensation Committee noted the disparities between our financial results and TSR performance. The Compensation Committee acknowledged the Company’s sustained, record-breaking financial performance, strong relative growth among its peer companies and market leadership in high-tier mobile devices. With regard to TSR, the Compensation Committee noted that, while some stockholders and third-party advisory firms may emphasize TSR as the preferred measure of stockholder value creation, it may also be a volatile metric in that it is calculated by stock price (and reinvested dividends, if any) on two specific dates. Relative TSR may also be distorted if there were, among the peers, companies that had experienced stock price declines or no growth followed by accelerated price appreciation relative to consistent, less volatile companies.

 

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Figure 17 sets forth the grant date fair values of the PSUs and RSUs awarded to our NEOs in fiscal 2013. The ongoing awards represent the amounts the Compensation Committee considers appropriate for annual total direct compensation, and the special awards represent the amounts the Compensation Committee considered appropriate to recognize Messrs. Mollenkopf’s and Aberle’s contributions to our record-breaking financial performance and to certain strategic initiatives.

Figure 17: Fiscal 2013 PSU and RSU Awards

 

            Fiscal 2013 Equity Awards  
Name   Fiscal 2012
Aggregate Grant
Date Fair Value
($)
    Grant Date Fair
Value of
Ongoing PSU
Award
($) (1)
    Grant Date Fair
Value of
Ongoing RSU
Award
($) (2)
   

Grant Date Fair
Value of Special

PSU Award
($) (1)

   

Grant Date Fair
Value of Special

RSU Award
($) (3)(4)

    Total Aggregate
Grant Date Fair
Value
($)
 

Paul E. Jacobs

    14,999,985        8,100,020        6,900,049        -        -        15,000,069   

Steven M. Mollenkopf (5)

    11,999,974        4,860,000        4,140,029        1,620,040        1,380,010        12,000,079   

Derek K. Aberle (5)

    9,000,026        3,240,020        2,760,020        1,080,007        920,006        8,000,053   

George S. Davis (6)

    -        2,700,046        2,300,016        -        6,500,048        11,500,110   

Donald J. Rosenberg

    4,400,011        2,430,030        2,070,048        -        -        4,500,078   

 

  (1) The PSUs cliff-vest on September 27, 2015.

 

  (2) Except for Mr. Davis, the RSUs vest in equal amounts on November 20, 2013, 2014 and 2015. Mr. Davis’s RSUs vest in equal amounts on September 29, 2014, 2015 and 2016.

 

  (3) Except for Mr. Davis, the RSUs vest in equal amounts on November 20, 2014, 2015 and 2016.

 

  (4) Mr. Davis received a new hire grant of RSUs in March 2013 that vest in equal amounts on March 11, 2014, 2015 and 2016.

 

  (5) Fiscal 2012 amounts include promotion grants of PSUs and RSUs with aggregate grant date fair values of $5 million for Mr. Mollenkopf and $4 million for Mr. Aberle.

 

  (6) Mr. Davis was not a Qualcomm employee in fiscal 2012.

The fiscal 2013 equity grants to the CEO, the other NEOs and the other executive officers reflected a combination of Performance Stock Units (PSUs) and Restricted Stock Units (RSUs), with a majority of the equity awards in the form of PSUs. The PSUs and RSUs are consistent with our long-term incentive program because they align the interests of our NEOs and our stockholders by rewarding absolute and relative stock price performance, and they provide additional retention value. Awarding PSUs and RSUs to our executive officers and other employees also enables us to address certain strategic compensation objectives, such as:

 

    Reducing our equity burn rate (the number of shares subject to equity awards granted during the year divided by total shares outstanding), while we increase our staffing levels and maintain a broad-based equity program in which substantially all of our employees are eligible to receive equity awards; and

 

    Reducing our overhang (the number of outstanding unexercised stock options and unvested PSUs and RSUs).

The number of shares distributed through our PSU program is based on both relative and absolute TSR. For fiscal 2013, we modified the structure of the PSU program. Prior programs (granted in fiscal 2010, 2011 and 2012) were structured to award a variable number of shares of our common stock based on the comparison of our TSR relative to the NASDAQ-100 TSR. For example, if the ratio of Qualcomm’s TSR to the NASDAQ-100 TSR was 1.00, the program would award 100% of the target PSUs. If the ratio was 1.33, the program would award 200% of the target PSUs. The comparison is now in terms of our TSR percentile rank among the companies comprising the NASDAQ-100 at the end of each of two measurement periods. For example, if our TSR is at the

 

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60 th percentile, the program would award 100% of the target PSUs, and if the TSR is at the 90 th percentile, the program would award 200% of the target PSUs. Below the 33 rd percentile, no PSUs would be earned. The fiscal 2013 PSU award structure is set forth below in Figure 18. We modified the basis for comparison because:

 

    We believe the percentile rank comparison provides a more readily communicated and understood structure; and

 

    As the more prevalent design structure, it facilitates comparisons to other programs.

We continue to use the NASDAQ-100 as the basis of comparison because it:

 

    Represents a broader capital market with which we compete for talent and capital investments;

 

    Represents the broad range of our business operations, which include licensing of intellectual property and sales of products and services; and

 

    Is both objectively determined and readily available, and our performance compared to the index can be evaluated by an independent, third party.

Figure 18:  Fiscal 2013 PSU Award Structure

 

LOGO

We noted in the proxy statement for the 2013 annual meeting that the change in timing of granting equity awards caused the Compensation Committee to consider an alternative to the 3-year annual vesting schedule used for prior awards so that the change in the timing of the grants did not result in a delay of the vesting of equity awards. The change in timing resulted in a 22-month period (rather than the historical 12-month period) between grants of equity awards (from November 2011 to September 2013) for our NEOs (except Mr. Davis, who joined Qualcomm in March 2013). Accordingly, the Compensation Committee reduced the PSU performance period from the 36-month period established in prior PSU programs to a 24-month performance period from the grant date (i.e., from the beginning of fiscal 2014 (9/30/2013) through the end of fiscal 2015 (9/27/2015)). Any PSUs earned will cliff vest on September 27, 2015, following completion of the performance period and will be distributed following certification by the Compensation Committee. This generally aligns the vest date with what would have been the vest date had the PSUs been granted under the former schedule.

 

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Other features of the fiscal 2013 PSU program include:

 

    Our TSR for the performance period must be positive to earn more than the target award amount. The total award amount earned may not exceed the target amount if our TSR for the performance period is negative. This feature limits compensation for positive relative performance against the peer group, when stockholders may incur a loss on their investment over the period (as may occur in a volatile or depressed securities market).

 

    The performance period has two separate measurement periods of 18 and 24 months. Both measurement periods begin on September 30, 2013 (the first day of fiscal 2014). Measurement Period 1 concludes on March 29, 2015, and Measurement Period 2 concludes on September 27, 2015. Separate measurement periods encourage and reward sustained and continuous growth throughout the performance period and align our executive officers’ interests with our stockholders’ interests.

 

    The PSUs will not vest until the end of the performance period and include dividend equivalent rights. The dividend equivalents will accrue, in the form of additional shares of common stock, on earned shares with vesting and distribution consistent with the vesting and distribution of the underlying shares. No dividends are paid on unvested and unearned PSUs.

The RSU program design for fiscal 2013 was intended to qualify the RSUs for tax deductibility under Section 162(m) of the Internal Revenue Code. The Compensation Committee established (1) an adjusted GAAP operating income goal for the first nine months of fiscal 2013, (2) a service condition that required the executive officer be employed by Qualcomm from the beginning of fiscal 2013 through the date on which the RSUs were granted (i.e., September 29, 2013) and (3) a maximum grant date fair value that each recipient would be eligible to receive provided the operating income goal and recipient service requirements had been satisfied. The 3-year service period for vesting purposes began on October 1, 2012 (the first day of fiscal 2013). The RSUs vest annually in three equal tranches commencing in November 2013. The special RSUs granted to Messrs. Aberle and Mollenkopf were also intended to qualify for tax deductibility under Section 162(m). For the special RSUs, the Compensation Committee established an adjusted GAAP operating income goal for the first nine months of fiscal 2014 that the Company must meet or exceed in order for the RSUs to vest and a service condition that requires that the executive officer be employed by Qualcomm on the vesting dates set forth in footnote 3 of Figure 17.

In establishing compensation amounts for fiscal 2013, the Compensation Committee excluded from consideration the ACIP amounts for fiscal 2012 and the amounts realized or realizable from prior equity awards because we award cash incentives for fiscal year performance, and equity awards are forward-looking long-term incentives granted as part of the direct compensation that the Compensation Committee establishes each year. The Compensation Committee believes that reducing equity award grant values because of prior gains and ownership could penalize our executive officers for their long-term service and past performance and for exceeding our stock ownership guidelines.

 

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Compensation for Dr. Paul E. Jacobs, Chairman and Chief Executive Officer

 

 

Figure 19:  Compensation for Dr. Paul E. Jacobs – Fiscal 2011 - 2013

 

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Our CEO’s total compensation has been relatively consistent for fiscal 2011 through 2013. His total compensation for fiscal 2013 was approximately 1% less than fiscal 2012 while our Non-GAAP revenues and Non-GAAP operating income grew by 30% and 22%, respectively, and our TSR was up 10% during fiscal 2013.

The Compensation Committee considered the following as part of its determination of the ACIP earnings and equity awards for Dr. Jacobs.

 

    He led the Company to record Non-GAAP revenues, Non-GAAP operating income and MSM integrated circuit shipments. Additionally, we continued our commitment of returning capital to stockholders in the form of cash dividends and repurchases of our common stock and introduced a new $5 billion stock repurchase program.

 

    He successfully positioned Qualcomm for growth again in fiscal 2014 as we continued to invest in and execute on our strategic priorities, including our broad licensing program and industry-leading Snapdragon and 3G/LTE integrated circuit roadmap. He continued to strengthen relationships with key industry players and a broad range of global operators, especially in the emerging regions of China, India and Brazil. Additionally, we supported advocacy efforts on corporate tax reform, high-skilled immigration reform, spectrum policy and funding basic research.

 

    Our capabilities and capacity for continued growth and success lie in our values (innovation, execution and partnership), leadership, employee development, engagement and retention and in our culture of high performance, ethical standards and code of business conduct. We were named to Fortune Magazines’ 100 Best Companies to Work for in America for the 15th consecutive year.

 

    Relative to our peer companies, we sustained upper-quartile financial growth and below-median TSR for both 1- and 3-year periods.

 

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Accordingly, the Compensation Committee approved the following amounts:

 

    Fiscal 2013 ACIP earnings of $3.5 million, which were 2% above the amount he received for fiscal 2012.

 

    A combination of PSUs and RSUs with an aggregate grant date fair value of $15.0 million. The Compensation Committee considered the fact that TSR percentile rankings were not as high relative to operating measures and approved fiscal 2013 equity awards with the same aggregate grant date fair value as he received in fiscal 2012.

Dr. Jacobs’s total direct compensation (salary, ACIP earnings and aggregate grant date fair value of equity awards) was essentially the same as he received in fiscal 2012, and his total compensation, as reported in the Fiscal 2013 Summary Compensation Table, was 1% less than in fiscal 2012 because of reduced amounts of All Other Compensation.

Figures 20 and 21 show the percentile ranking of our CEO’s total compensation relative to our peer companies’ 1-year percentile ranking for revenue growth and operating income, respectively. Our Company’s financial growth was in the top (fourth) quartile yet our CEO’s total compensation was in the third quartile. The same relationships were found for 3-year average total compensation and 3-year revenue and operating income growth (which are not displayed here). The Company and peer company data reflected in these figures was reported in the Standard & Poor’s Compustat reports as of March 2013, the time at which FWC prepared the peer company selection analysis used by the Compensation Committee.

 

Figure 20:  Qualcomm and Peer Companies  CEOs’ 1-Year Total Compensation Percentile Ranking Relative to

1-Year Revenues Growth

 

Figure 21:  Qualcomm and Peer Companies CEOs’ 1-Year Total Compensation Percentile Ranking Relative to

1-Year Operating Income Growth

 

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Compensation for Mr. Steven M. Mollenkopf, President and Chief Operating Officer

 

 

Figure 22:  Compensation for Mr. Steven M. Mollenkopf – Fiscal 2011 – 2013

 

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The Compensation Committee considered the following as part of its determination of the ACIP earnings and equity awards for Mr. Mollenkopf.

 

    In his role as President & COO, Mr. Mollenkopf provided leadership and oversight to our QCT and QTL segments. Our QCT segment exceeded its revenue, earnings and units objectives for the fiscal year, and our QTL segment grew its licensee base and achieved record revenue and earnings.

 

    Mr. Mollenkopf developed and executed strategies to enhance our business operations and strengthen relationships with key customers and partners.

 

    Mr. Mollenkopf continued to provide guidance related to the development of new products and expansion of new industry segments.

Accordingly, the Compensation Committee approved the following amounts:

 

    Fiscal 2013 ACIP earnings of $1.3 million, which were 2% above the amount he received for fiscal 2012.

 

    A combination of ongoing PSUs and RSUs with an aggregate grant date fair value of $9.0 million, which represents a 29% increase from the aggregate grant date fair value of the ongoing equity awards he received in fiscal 2012. In addition, the Compensation Committee granted Mr. Mollenkopf a special award of PSUs and RSUs with an aggregate grant date fair value of $3.0 million to recognize his contributions to fiscal 2013 financial performance and strategic initiatives.

Excluding special awards, Mr. Mollenkopf’s total direct compensation for fiscal 2013 was 22% above the fiscal 2012 amount primarily due to the $2.0 million increase in aggregate grant date fair value of ongoing awards of PSUs and RSUs he received, and his total compensation, as reported in the Fiscal 2013 Summary Compensation Table, was essentially the same as he received in fiscal 2012.

 

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Compensation for Mr. Derek K. Aberle, EVP & Group President

 

 

Figure 23:  Compensation for Mr. Derek K. Aberle – Fiscal 2012 – 2013 (1)

 

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  (1) Mr. Aberle was not an NEO in fiscal 2011.

The Compensation Committee considered the following as part of its determination of the ACIP earnings and equity awards for Mr. Aberle.

 

    In his role as EVP & Group President, Mr. Aberle led the QTL segment to another year of record revenues and earnings and led the negotiations of significant license and patent agreements. He also provided strategic guidance and oversight of our new licensing opportunities.

 

    Mr. Aberle provided leadership in our Company’s strategy to sharpen the focus on our portfolio businesses to maximize technology, product and service investments, including the sale of our North and Latin American operations of Omnitracs and strategic leadership of our display and mobile health initiatives.

 

    Mr. Aberle also provided leadership and guidance in our initiatives to influence patent reform and intellectual property rights policy and enforcement.

Accordingly, the Compensation Committee approved the following amounts:

 

    Fiscal 2013 ACIP earnings of $1.1 million, which were 5% less than the amount he received for fiscal 2012.

 

    A combination of ongoing PSUs and RSUs with an aggregate grant date fair value of $6.0 million, which represents a 20% increase from the aggregate grant date fair value of the ongoing equity awards he received in fiscal 2012. In addition, the Compensation Committee granted Mr. Aberle a special award of PSUs and RSUs with an aggregate grant date fair value of $2.0 million to recognize his contributions to fiscal 2013 financial performance and strategic initiatives.

 

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Excluding special equity awards, Mr. Aberle’s total direct compensation for fiscal 2013 was 14% above the fiscal 2012 amount primarily due to the $1.0 million increase in aggregate grant date fair value of ongoing PSUs and RSUs he received, and his total compensation, as reported in the Fiscal 2013 Summary Compensation Table, was 10% less than he received in fiscal 2012.

 

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Compensation for Mr. George S. Davis, EVP & Chief Financial Officer

 

 

Figure 24:  Compensation for Mr. George S. Davis – Fiscal 2013

 

LOGO

Mr. Davis joined Qualcomm in March 2013 as our EVP & CFO. His offer of employment included a base salary of $700,000, an RSU award with a grant date fair value of $6.5 million that vests in three equal installments on the first, second and third anniversaries of the grant date and a $1.0 million new hire bonus. The Compensation Committee considered the following as part of its determination of the ACIP earnings and equity awards for Mr. Davis.

 

    In his role as CFO, Mr. Davis provided leadership and oversight to our record-breaking financial performance.

 

    He provided leadership and oversight to our investor relations organization. He led an investor outreach initiative to gain more in-depth insight into and understanding of their investment views of the Company. We upheld best practices on earnings conference calls, analyst meetings and financial disclosures.

 

    He continued our excellence in the quality of our accounting and reporting practices, including transparent and robust disclosures and quarterly SEC reports filed simultaneously with our earnings releases. In addition, we continued to participate in the Internal Revenue Service Compliance Assurance Program, a process where we endeavor to agree on the treatment of all tax issues prior to our tax return being filed.

 

    Mr. Davis provided leadership and guidance to the portfolio businesses review and helped guide negotiation teams and on the process for the sale of our North and Latin American operations of Omnitracs and our India spectrum assets.

Accordingly, the Compensation Committee approved the following amounts:

 

    Fiscal 2013 ACIP earnings of $590,000, which represents the performance-adjusted ACIP amount prorated for his partial year of service as CFO during fiscal 2013.

 

    A combination of PSUs and RSUs with an aggregate grant date fair value of $5.0 million.

 

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Compensation for Mr. Donald J. Rosenberg, EVP, General Counsel and Corporate Secretary

 

 

Figure 25:  Compensation for Mr. Donald J. Rosenberg – Fiscal 2011 – 2013

 

LOGO

The Compensation Committee considered the following as part of its determination of the ACIP earnings and equity awards for Mr. Rosenberg.

 

    He oversaw continued excellence in the quality of our litigation management, discovery management practices and protection of our intellectual property.

 

    We continued to implement new procedures and upgraded software to increase the quality and efficiency of patent filing and prosecuting processes and continued to reduce the backlog of unfiled patent applications despite an increase in invention submissions. We also continued to optimize the strength of our worldwide patent portfolio.

 

    Mr. Rosenberg also provided leadership and guidance in our initiatives to influence patent reform and intellectual property rights policy and enforcement.

Accordingly, the Compensation Committee approved the following amounts:

 

    Fiscal 2013 ACIP earnings of $860,000, which were 1% above the amount he received for fiscal 2012.

 

    A combination of PSUs and RSUs with an aggregate grant date fair value of $4.5 million, which was 2% above the aggregate grant date fair value of the ongoing equity awards he received in fiscal 2012.

Mr. Rosenberg’s total direct compensation for fiscal 2013 was 2% above the amount he received for fiscal 2012, and his total compensation, as reported in the Fiscal 2013 Summary Compensation Table, was essentially the same as he received in fiscal 2012.

 

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Compensation for Mr. William E. Keitel, Former EVP and Chief Financial Officer

 

 

Figure 26:  Compensation for Mr. William E. Keitel – Fiscal 2011—2013

 

LOGO

Mr. Keitel stepped down from his role as CFO in March 2013 and retired from Qualcomm in November 2013. In March 2013, he assumed the role of Senior Advisor to assist in the transition of CFO responsibilities and to complete other projects. At that time, the Compensation Committee reduced his base salary from $710,000 to $500,000, reduced his target ACIP percent from 125% to 100% and approved a method for prorating his target ACIP amount to account for his service in each role. The Compensation Committee considered the following as part of its determination of the ACIP earnings for Mr. Keitel.

 

    He partnered with Qualcomm’s executive leadership to develop the fiscal 2013 annual operating plan for continued strong growth in revenues, operating income and cash flows.

 

    During his service as CFO, he continued our excellence in the quality of our accounting and reporting practices, including transparent and robust disclosures and quarterly SEC reports filed simultaneously with our earnings releases. In addition, we continued to participate in the Internal Revenue Service Compliance Assurance Program, a process where we endeavor to agree on the treatment of all tax issues prior to our tax return being filed.

 

    He provided leadership and oversight to our investor relations organization. We upheld best practices on earnings conference calls, analyst meetings and financial disclosures.

Accordingly, the Compensation Committee approved fiscal 2013 ACIP earnings of $775,000, which represents the performance-adjusted ACIP amount prorated for his partial year of service as CFO and as Senior Advisor.

 

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Compensation Decisions for the NEOs for Fiscal 2014

In November 2013, the Compensation Committee approved fiscal 2014 base salary and ACIP targets (as a percentage of base salary) for our executive officers.

 

    The base salary and ACIP target increases reflect the Compensation Committee’s consideration of current competitive practices and its intent that while base salaries should be competitive, increases in earnings opportunities should emphasize variable compensation components. To ensure continued competitive total cash compensation opportunities, the Compensation Committee approved the base salary and target ACIP amounts set forth in Figure 27.

Figure 27:  Fiscal 2014 Base Salary and ACIP Targets

 

     Base Salary     ACIP Target %     ACIP Target $     Target Total Cash  
Name   2013     2014       2013         2014       2013     2014     2013     2014  

Paul E. Jacobs

  $ 1,200,000      $ 1,250,000        250     250   $ 3,000,035      $ 3,125,000      $ 4,200,000      $ 4,375,000   

Steven M. Mollenkopf

    815,000        865,000        140     150     1,141,008        1,297,500        1,956,000        2,162,500   

Derek K. Aberle

    720,000        750,000        125     130     900,016        975,000        1,620,000        1,725,000   

George S. Davis

    700,000        725,000        125     130     510,417        942,500        1,210,417        1,667,500   

Donald J. Rosenberg

    675,000        700,000        110     110     742,502        770,000        1,417,500        1,470,000   

Effective December 12, 2013, in connection with Mr. Mollenkopf’s appointment to the position of Chief Executive Officer-elect, the Compensation Committee increased his 2014 base salary to $1.1 million and increased his 2014 ACIP target percentage to 200% of his base salary. Also on December 12, 2013, the Compensation Committee granted Mr. Mollenkopf two promotion grants of restricted stock units (RSUs). The promotion grants consist of (i) special retention RSUs with a grant date fair value of $20 million, which will vest in three equal installments on the third, fourth and fifth anniversaries of the date of grant, and (ii) additional RSUs with a grant date fair value of $30 million, which will vest annually in five equal installments with the first installment vesting on December 12, 2014. This latter grant is a “multi-year” grant, which front-loaded the annual RSU grants that the Compensation Committee anticipated that it would have granted to Mr. Mollenkopf in his role as CEO over the next five years.

COMPENSATION PROGRAM BEST PRACTICES

 

 

The preceding discussion and analysis of the components and total compensation for our CEO and other NEOs reflects what we believe to be compensation program best practices. We listed these best practices in Proposal 3, the Advisory vote on executive compensation and in the Executive Summary of the CD&A. In this section, we provide a more thorough description of these best practices.

We emphasize performance-based equity awards . In fiscal 2013, a majority of the long-term incentive awards granted to our CEO, the other NEOs and other executive officers were in the form of performance-based awards that align the interests of our stockholders and executive officers. The awards included a mix of performance stock units (PSUs) and restricted stock units (RSUs).

A significant portion of our NEOs’ compensation varies with Company performance . On average, 77% of our NEOs’ fiscal 2013 target compensation was attributable to the aggregate grant date fair value of long-term incentive equity awards, and 90% of their fiscal 2013 target compensation was variable in the form of ACIP amounts and long-term incentive equity awards.

 

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We have a balanced approach to incentive programs. We have a balance of short-term (Non-GAAP revenues and Non-GAAP operating income) and long-term (relative TSR) performance measures. We have a balance of time horizons for our ongoing incentive awards, including an annual cash incentive program (ACIP), overlapping multi-year PSU performance periods with interim measurement periods, and RSUs that generally require three years of service to become fully vested.

We have limits on the amounts of variable compensation that may be earned. We limit the potential ACIP amounts that the NEOs may earn to 2.0 times the target amount. We limit the potential number of shares of our common stock that our NEOs may earn under the PSU program to 2.0 times the target amount.

We have a risk management process. We perform annual risk assessments for our executive compensation program. This review includes an assessment by the Compensation Committee’s independent compensation consultant, FWC.

We have stock ownership guidelines. Our stock ownership guidelines for our executive officers, including our NEOs, help ensure that they maintain an equity stake in the Company, and by doing so, appropriately link their interests with those of other stockholders. Only shares actually owned and deferred stock units under the Qualcomm Non-Qualified Deferred Compensation (QNQDC) Plan count toward the stock ownership requirement. Outstanding unexercised stock options and unvested PSUs and RSUs do not count toward the requirement.

 

    Dr. Jacobs and Messrs. Mollenkopf, Aberle and Rosenberg have met their ownership guidelines.

 

    Mr. Davis will be required to meet his ownership guideline in March 2018, on the fifth anniversary of his date of employment with Qualcomm.

If an NEO has not met the guidelines by the deadline, we require that the NEO retain at least 50% of the net shares remaining after required tax withholdings upon payment of any full-value award or upon stock option exercise until they meet the minimum guideline. The guidelines are as follows:

Figure 28:  Stock Ownership Guidelines for Executive Officers

 

   

Role

 

   

 

Multiple of Base Salary

 

  

 

CEO

    6x   

President

    3x   

All other executive officers

    2x   

We do not provide tax gross-up for executive perquisites. We do not provide tax gross-up payments on executive perquisites, such as financial planning reimbursements, except for benefits provided in a policy applicable to all eligible employees, such as relocation.

We have a cash incentive compensation repayment (“clawback”) policy. We require an executive officer, including an NEO, to repay to us the amount of any annual cash incentive that an executive officer received to the extent that:

 

    The amount of such payment was based on the achievement of certain financial results that were subsequently the subject of a restatement that occurred within 12 months of such payment;

 

    The executive officer had engaged in theft, dishonesty or intentional falsification of documents or records that resulted in the obligation to restate our financial results; and

 

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    A lower annual cash incentive would have been paid to the executive officer based upon the restated financial results.

The Compensation Committee is responsible for the interpretation and enforcement of this clawback policy. We plan to amend this policy as needed to comply with the additional requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) after the SEC adopts new regulations implementing those requirements.

Our insider trading policy includes a prohibition on pledging of our common stock. Our insider trading policy for executive officers and non-employee directors prohibits the pledging of our common stock and transactions involving “short-swing” profits, short sales and derivatives, including put and call options.

Our compensation arrangements for the NEOs do not include severance agreements or employment contracts, and our equity acceleration in the event of a change-in-control is “double-trigger.” We employ almost all U.S.-based employees, including all our NEOs, “at will” without severance agreements or employment contracts. This is consistent with our objective of providing compensation related to individual contributions that improve our market leadership, competitive advantage and stockholder value. It enables our Board to terminate employment with discretion as to the terms and conditions of any separation. Our CEO and other NEOs do not have guaranteed arrangements for cash compensation or severance upon a change-in-control or excise tax gross-up for change-in-control payments. In the event of a change-in-control in which the acquirer assumed outstanding unvested equity awards, the vesting of an NEO’s awards would accelerate only if the NEO was involuntarily terminated or the NEO voluntarily resigns “for good reason” during a specified period after the change-in-control (i.e., “double-trigger” treatment of unvested awards).

We do not have a pre-defined severance plan. We do not have a pre-defined severance plan covering the involuntary termination of employees, including the NEOs. We do not accelerate unvested stock options, RSUs or PSUs in the event of an involuntary “for cause” termination. Such terminations may involve theft, dishonesty, falsification, actions that are detrimental to the Company, conviction of a criminal act that impairs the performance of duties required by the Company or violation of a material Company policy.

Figure 29 summarizes the treatment of unvested stock options, PSUs and RSUs following involuntary terminations without cause and the “double-trigger” provisions for terminations after a change-in-control.

 

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Figure 29: Treatment of Unvested Equity Awards in Certain Termination Situations

 

 

Termination Situation

 

 

 

Stock Options

 

 

 

RSUs

 

 

 

PSUs

 

       

Involuntary terminations

without cause.

  10% of the total amount granted is automatically accelerated, and up to an additional 10% may be accelerated using a pre-defined formula, subject to execution of a general release of claims.   All unvested awards are forfeited.  

All unvested PSUs are forfeited. The Compensation Committee, in its sole discretion, may waive the automatic forfeiture of all or any portion of the award. This is consistent with the above-mentioned practice that allows our Board to terminate employment with discretion as to the terms and conditions of separation.

 

     

Involuntary terminations

without cause or

voluntary resignation for

good reason after a

change-in-control.

  “Double-trigger” treatment of unvested awards: If, within 24 months after a change in control, the recipient is involuntarily terminated for any reason other than for cause or if the recipient voluntarily resigns “for good reason” (as defined in the award agreements), then vesting of stock options and RSUs is accelerated in full.  

Accelerate the vesting of PSUs that remain outstanding after a change-in-control. The number of shares of stock that may be issued will be prorated using a pre-defined formula.

 

We Design and Administer Compensation Programs So That They Are Tax Efficient

A goal of the Compensation Committee is to comply with the requirements of Internal Revenue Service Code (IRC) Sections 162(m) and 409A.

Section 162(m)

IRC Section 162(m) places a $1 million annual limit on the amount that a public company may deduct for compensation paid to the CEO and the other three most highly compensated NEOs, excluding the CFO. The $1 million limit does not apply if the compensation meets Section 162(m) requirements for performance-based compensation. Compliance with Section 162(m) did not influence the allocation of compensation among base salary, target annual cash incentives and long-term incentives for fiscal 2013. From time to time, we may pay compensation to our Section 162(m) covered officers that may not be tax deductible if there are compelling business reasons to do so.

 

    We designed and administered our fiscal 2013 ACIP as cash-denominated performance units granted under the 2006 LTIP to be eligible for tax deductions to the extent permitted by the relevant tax regulations, including Section 162(m).

 

    Only actual shares distributed that are above the target PSU amount will qualify as deductible compensation under Section 162(m).

 

    The RSUs granted to our executive officers in fiscal 2013 are structured to satisfy the performance-based compensation exception of the Section 162(m) limit on deductible compensation.

 

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Section 409A

Under IRC Section 409A, a nonqualified deferred compensation plan (such as our QNQDC Plan) must comply with certain requirements related to the timing of deferral and distribution decisions. Otherwise amounts deferred under the plan could be included in gross income when earned and be subject to additional penalty taxes. We administer the QNQDC Plan and equity awards in accordance with Section 409A requirements. Nonqualified stock options are generally exempt from Section 409A if the options satisfy certain requirements. PSUs and RSUs are also generally exempt from Section 409A.

Other Components of the Executive Compensation Program

When we introduced the summary of the key components of our compensation program for NEOs, we noted that additional aspects of our executive compensation program would be summarized in this section.

 

    Figure 30 highlights the components that are available to U.S.-Based Executive Level Employees.

 

    Figure 31 highlights the components that are available to all U.S.-Based Employees.

Figure 30:  Components of Our Compensation Program Available to U.S.-Based Executive-Level Employees

 

 

Component

 

 

 

Form and Purpose

 

 

 

Comment

 

     

Nonqualified

deferred

compensation

program Company

match (QNQDC

Plan)

 

 

Company match on employees’ deferred contributions up to a predefined formula maximum amount. Provide a competitive, non-qualified, tax-efficient defined contribution retirement program for employees deemed to be “highly compensated.”

 

  We do not have a pension plan or other defined benefit retirement program. See the “Fiscal 2013 Nonqualified Deferred Compensation” table for a description of the Company match program.
     

Financial planning

reimbursement

 

Reimbursement of actual expenses incurred for financial, estate and tax planning. Attract and retain executive-level employees. Assist NEOs with managing their time.

 

  Annual maximum reimbursement of up to $12,500 for the Chairman and CEO and the President and up to $8,000 for the other NEOs.
     

Additional life

insurance

 

Additional coverage, above the amount provided to all employees. Attract and retain executive-level employees.

 

  The additional coverage is $1 million for the Chairman and CEO and $750,000 for the other NEOs.
     

Use of corporate

aircraft for

personal travel

 

Imputed taxable income for W-2 reporting and incremental cost to the Company for reporting the perquisite in this proxy statement. Facilitate flexible travel arrangements and provide security.

 

  In fiscal 2013, we implemented a timesharing program that limits the amount of compensation reported to $250,000 for the CEO and $650,000 for all NEOs in the aggregate.

 

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Figure 31:  Components of Our Compensation Program Available to All U.S.-Based Employees

 

 

Component

 

 

 

Form and Purpose

 

 

 

Comment

 

     

Tax qualified

deferred

compensation

  401(k) Plan. Provide a tax-efficient retirement savings opportunity. Attract and retain employees.  

The 401(k) Plan is a voluntary, tax-qualified deferred compensation plan. We match employee contributions in cash using a tiered structure in order to encourage participation among all employees.

 

     

Employee Stock

Purchase Plan (ESPP)

  Qualcomm stock. Encourage long-term stock ownership and align employee and stockholder interests. Attract and retain employees.  

The tax-qualified, voluntary ESPP is available to all U.S.-based employees. We also make a non-tax-qualified ESPP available to employees based in other countries provided we are able to comply with local regulations. Purchases through payroll deductions are limited to $12,500 in fair market value (FMV) of the stock per 6-month offering period (determined on the first day of each offering period). The purchase price is equal to 85% of the lower of: (1) the FMV on the first day of the offering period or (2) the FMV on the last day of the offering period.

 

     

Charitable

contribution match

  Matching cash paid to the charitable organization. Encourage and extend employees’ support of cultural, educational and community non-profit organizations.  

We match 100% of employee contributions, up to pre-defined maximum amounts, to qualified tax-exempt non-profit organizations, excluding organizations that further religious doctrine, exclusionary organizations and/or political non-profit organizations. The maximum annual amount we will match is based on the employee’s job level. We will match up to $125,000 for our Chairman and CEO, Vice Chairman and President and up to $100,000 annually for the other NEOs.

 

In addition to the programs identified above, we offer a supplemental dental and vision program that provides limited coverage above the basic dental and vision plans to senior-level, U.S.-based employees. The purpose of this program is to attract and retain experienced talent.

 

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Summary of PSU Programs.

Our PSU programs provide for a variable number of shares of common stock based on the relative performance of our TSR compared to that of the NASDAQ-100. In this section, we provide a summary of the key design features of our PSU programs, the payout multiples for completed measurement periods, and for each NEO except Mr. Davis, the shares earned and the values of shares earned for completed measurement periods. Mr. Davis joined Qualcomm in March 2013 and thus did not participate in the programs prior to fiscal 2013. Figure 32 provides an overview of the key design features of all four PSU programs.

Figure 32:  Overview of PSU Program Key Design Features

 

         
     

Fiscal 2010

 

 

Fiscal 2011

 

 

Fiscal 2012

 

 

Fiscal 2013

 

       

Status as of

12/31/13

  Completed   Completed   1 st and 2 nd measurement periods completed.  

Awards approved by

Compensation Committee

 

Performance

Period

  11/2/2009 – 10/31/2012   11/1/2010 – 10/31/2013  

9/26/2011 – 9/26/2014

 

 

9/30/2013 –

9/27/2015

Interim

Measurement

Periods End

Dates

 

1.      4/29/2011

2.      10/31/2011

3.      4/30/2012

4.      10/31/2012

 

1.      4/30/2012

2.      10/31/2012

3.      4/30/2013

4.      10/31/2013

 

1.      3/29/2013

2.      9/27/2013

3.      3/28/2014

4.      9/26/2014

 

 

1.      3/29/2015

2.      9/27/2015

     

Maximum

Award

  125% of target award if relative TSR is 150% or above the NASDAQ-100   200% of target award if relative TSR is 133% or above the NASDAQ-100  

200% of target award if relative TSR is at or above the 90 th percentile among NASDAQ-100

 

Target Award   100% of the target award if relative TSR is 100% of the NASDAQ-100   100% of the target award if relative TSR is 100% of the NASDAQ-100  

100% of target award if relative TSR is at the 60 th percentile among NASDAQ-100

 

Threshold

Award

  n/a   33% of target award if relative TSR is 66% of the NASDAQ-100  

33% of target award if relative TSR is at the 33 rd percentile among NASDAQ-100

 

Minimum

Award

  75% of target award if relative TSR is 50% or below the NASDAQ-100   0% if relative TSR is less than 66% of the NASDAQ-100  

0% of target award if relative TSR is below the 33 rd percentile among NASDAQ-100

 

Absolute TSR

Provision

  None  

If our TSR for the 3-year period is negative then the total award may not exceed the target amount so that high relative performance is not over-rewarded in a down market.

 

Dividend

Equivalents

  None  

Provides dividend equivalent rights that accrue, in the form of additional shares of our common stock, on earned units, but are not paid out on unearned performance awards and that vest at the same time as the underlying earned PSUs.

 

 

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The fiscal 2010, 2011 and 2012 PSU programs included four measurement periods of 18-, 24-, 30- and 36-months. We allocated 25% of the target PSU award disclosed in the “Fiscal 2013 Grants of Plan-Based Awards” table for the respective fiscal year proxy statement to each measurement period. Our TSR was compared to that of the NASDAQ-100 at the end of each measurement period, and an award was determined according to the relevant payout schedule. The number of shares of our common stock earned for a completed measurement period is considered “banked” but could be adjusted if our absolute TSR for the entire performance period was negative. The number of shares of our common stock to be distributed to each participant at the end of the three-year performance period is the sum of the shares earned for each of the four measurement periods and may include dividend equivalents as described above.

The fiscal 2010 and 2011 PSU programs are 100% complete, and earned shares, including dividend equivalents on earned shares for the 2011 program, are vested and settled. The fiscal 2012 program is 50% complete, and no earned shares or dividend equivalents are vested yet. The percentages of target awards earned for each measurement period that was complete as of December 31, 2013 are presented in Figure 33 and the PSU award amounts, shares earned and the values of the shares earned as of the end of fiscal 2013 are presented in Figure 34.

Figure 33:  Summary of Percent of Target Award Earned for Completed Measurement Periods

 

     Earned Awards
     Percent of Target Award Earned

Fiscal Year of

Grant

 

1st Measurement

Period

  2nd
Measurement
Period
   3rd
Measurement
Period
   4th
Measurement
Period
     Total

2012

  112.0%   90.0%    TBD    TBD      TBD

2011

  139.0%   112.0%    127.0%    96.0%       

2010

  98.0%   97.0%    100.5%    96.0%      98.0%

Figure 34:  Summary of PSU Awards and Earned Shares for Completed Measurement Period (1)

 

Name   Fiscal Year of
Grant
  Target Shares
Granted
(#)
    Grant Date Fair
Value of Target
Shares
($)
    Shares Earned
through Completed
Measurement
Periods
(#)
   

Value of Shares
Earned at September 29,

2013
($)

 

Paul E. Jacobs

 

  2012     125,523        8,099,999        63,389        4,271,151   
  2011     145,300        7,458,249        172,181        11,601,556   
  2010     153,980        6,983,378        150,711        10,154,907   

Steven M. Mollenkopf (2)

  2012     58,577        3,779,974        29,582        1,993,235   
  2012     41,841        2,700,000        21,130        1,423,739   
  2011     51,415        2,639,132        60,928        4,105,329   
  2010     52,270        2,370,575        51,161        3,447,228   

Derek K. Aberle (2)

  2012     41,841        2,700,000        21,130        1,423,739   
  2012     33,473        2,160,013        16,905        1,139,059   
  2011     46,945        2,409,687        55,632        3,748,484   
  2010     49,120        2,227,715        48,078        3,239,496   

Donald J. Rosenberg

 

  2012     36,820        2,375,995        18,595        1,252,931   
  2011     44,705        2,294,708        52,977        3,569,590   
  2010     50,380        2,284,859        49,312        3,322,643   

William E. Keitel

 

  2012     41,841        2,700,000        21,130        1,423,739   
  2011     52,530        2,696,365        62,249        4,194,338   
  2010     58,570        2,656,296        57,328        3,862,761   

 

  (1) Excludes Mr. Davis because he joined Qualcomm in fiscal 2013.

 

  (2) In fiscal 2012, the Compensation Committee granted to Messrs. Mollenkopf and Aberle both annual, ongoing equity awards and special, one-time equity awards (comprised of both PSUs and RSUs) to recognize their promotions to President & COO and EVP & Group President, respectively. These annual, ongoing PSUs cliff vest at completion of the 3-year performance period. These one-time, special equity awards vest on the third, fourth and fifth anniversaries of the grant dates.

 

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COMPENSATION RISK MANAGEMENT

The Compensation Committee engaged its independent compensation consultant, FWC, to collaborate with Qualcomm’s human resources staff to conduct an assessment of potential risks that may arise from our compensation programs. Based on this assessment, the Compensation Committee concluded that our policies and practices do not encourage excessive and unnecessary risk taking that would be reasonably likely to have a material adverse effect on Qualcomm. The assessment included executive, non-executive and sales incentive programs and focused on the variable components of cash incentives and equity awards. Our compensation programs are designed and administered through a corporate total rewards management office and are substantially identical among business units, corporate functions and global locations (with modifications to comply with local regulations as appropriate). The risk-mitigating factors considered in this assessment included:

 

    The alignment of pay philosophy, peer group companies and compensation amounts relative to competitive practices to support our business objectives;

 

    Effective balance of cash and equity, short- and long-term performance periods, limits on performance-based award schedules and Company financial metrics with individual performance factors and Compensation Committee and management discretion; and

 

    Ownership guidelines, a clawback policy, an insider trading policy, an equity award approval authorization policy and independent Compensation Committee oversight.

 

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COMPENSATION TABLES AND NARRATIVE DISCLOSURES

The following tables, narratives and footnotes describe the total compensation and benefits awarded to, earned by, or paid to our NEOs for fiscal 2013.

SUMMARY COMPENSATION TABLE

 

 

Salary. Salaries for NEOs as presented in this table may include vacation match payments payable under our vacation policy. Some portion of the NEOs’ salaries may have been deferred pursuant to the Qualcomm Non-Qualified Deferred Compensation (QNQDC) Plan (see “Fiscal 2013 Nonqualified Deferred Compensation” table).

Bonus. The amounts in this column represent amounts received under our patent award program and/or for new hire bonuses. We disclose annual cash incentives in the “Non-Equity Incentive Plan Compensation” column.

Stock Awards. Stock awards granted to NEOs include annual grants and may include special grants for new hires, promotions and/or retention. The amounts in this column represent the estimated grant date fair values of PSUs and RSUs granted during the fiscal year. The estimated RSU grant date fair values were determined based on the fair value of our common stock on the date of grant. The estimated PSU grant date fair values were determined based on a Monte Carlo simulation (which probability weights multiple potential outcomes). The amounts are not indicative of whether the NEO has or will realize the estimated fair value or any financial benefits from the award. See the “Fiscal 2013 Grants of Plan-Based Awards” table for details on the PSUs granted to the NEOs during fiscal 2013.

Non-Equity Incentive Plan Compensation. The amounts in this column represent cash awards under our annual cash incentive plan (ACIP). The relevant performance period was fiscal 2013. The Compensation Committee approved the ACIP amounts at the end of fiscal 2013; the NEOs received payment of their fiscal 2013 ACIP amounts in November 2013. See the “Compensation Discussion and Analysis” (CD&A) section and the “Fiscal 2013 Grants of Plan-Based Awards” table and related narrative for a description of the ACIP. Some portion of the NEOs’ ACIP amounts may have been deferred pursuant to our QNQDC Plan (see “Fiscal 2013 Nonqualified Deferred Compensation” table).

All Other Compensation. See the “Fiscal 2013 All Other Compensation” table for an itemized account of all other compensation reported in the Fiscal 2013 Summary Compensation Table.

 

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FISCAL 2013 SUMMARY COMPEN SATION TABLE (1)(2)

 

Name and Principal Position   Year    

Salary

($)

   

Bonus

($) (6)

   

Stock

Awards

($) (7)

   

Non-Equity
Incentive Plan
Compensation

($)

   

All Other
Compensation

($)

   

Total

($)

 

Paul E. Jacobs,

Chairman and Chief Executive

Officer

    2013        1,200,014        8,325        15,000,069        3,480,000        760,532        20,448,940   
    2012        1,189,246        2,775        14,999,985        3,400,000        1,138,867        20,730,873   
    2011        1,150,591        7,125        14,322,329        5,500,000        742,288        21,722,333   

George S. Davis,

Executive Vice President and

Chief Financial Officer (3)

    2013        363,463        1,000,000        11,500,110        590,000        192,023        13,645,596   
    2012        -        -        -        -        -        -   
    2011        -        -        -        -        -        -   

William E. Keitel,

    2013        600,971        -        -        775,000        345,956        1,721,927   

Executive Vice President and

Senior Advisor (Former Chief

    2012        731,934        -        5,000,014        1,000,000        306,556        7,038,504   

Financial Officer) (4)

    2011        684,632        -        5,177,902        1,600,000        254,303        7,716,837   

Derek K. Aberle,

Executive Vice President and

Group President (5)

    2013        728,321        -        8,000,053        1,045,000        284,061        10,057,435   
    2012        720,548        -        9,000,026        1,100,000        308,884        11,129,458   
    2011        -        -        -        -        -        -   

Steven M. Mollenkopf,

President and Chief Operating

Officer

    2013        815,006        1,500        12,000,079        1,325,000        166,481        14,308,066   
    2012        805,582        -        11,999,974        1,300,000        143,960        14,249,516   
    2011        801,706        -        5,067,850        2,000,000        68,614        7,938,170   

Donald J. Rosenberg,

Executive Vice President

General Counsel and Corporate

Secretary

    2013        675,002        -        4,500,078        860,000        256,411        6,291,491   
    2012        668,270        -        4,400,011        850,000        274,153        6,192,434   
    2011        641,925        -        7,639,369        1,350,000        208,890        9,840,184   

 

  (1) We did not grant any stock option awards to our NEOs during fiscal 2013. As a result, the “Option Awards” column has been omitted from the Fiscal 2013 Summary Compensation Table.

 

  (2) We do not offer a pension plan or other defined benefit retirement plan to our NEOs. We do not provide above-market or preferential earnings on deferred compensation, nor do we provide dividends on stock in the QNQDC Plan at a rate higher than dividends on our common stock. As a result, the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column has been omitted from the Fiscal 2013 Summary Compensation Table.

 

  (3) Mr. Davis joined Qualcomm as EVP and CFO in March 2013.

 

  (4) The 2013 amounts represent compensation for Mr. Keitel through March 11, 2013 as Executive Vice President and CFO and from March 11, 2013 through September 29, 2013 as Executive Vice President and Senior Advisor. Mr. Keitel’s salary was decreased in March 2013 when he stepped down from his role as CFO.

 

  (5) Mr. Aberle was not an NEO in fiscal 2011.

 

  (6) The amounts for Dr. Jacobs and Mr. Mollenkopf represent bonuses received under our patent award program, and the amount for Mr. Davis represents his new hire bonus.

 

  (7) Fiscal 2013 amounts in this column represent the estimated grant date fair values of PSUs and RSUs granted during the fiscal year. The RSU grant date fair values were determined based on the closing price of our common stock on the date of grant. The estimated PSU grant date fair values were determined using a Monte Carlo simulation (which probability weights multiple potential outcomes). For additional information on the valuation assumptions, refer to “Note 1—Basis of Presentation” of Qualcomm’s consolidated financial statements included in Appendix 1. If we assume that the highest level of performance conditions will be achieved with respect to the PSUs (and thus the maximum number of shares will be issued under the PSUs), using the fair value of our common stock on the grant date for such shares, the fiscal 2013 stock awards would be as follows: $23,100,089 for Dr. Jacobs; $14,200,158 for Mr. Davis; $12,320,079 for Mr. Aberle; $18,480,119 for Mr. Mollenkopf; and $6,930,108 for Mr. Rosenberg.

 

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ALL OTHER COMPENSATION

 

 

Perquisites and Other Personal Benefits .  Perquisites and personal benefits for a named executive officer are excluded if the total value of all of his perquisites and personal benefits is less than $10,000. If the total value of all perquisites and personal benefits for a named executive officer is $10,000 or more, then each perquisite or personal benefit, regardless of its amount, is identified by type. Each perquisite or personal benefit that exceeds the greater of $25,000 or 10% of the total amount of perquisites and personal benefits for that named executive officer is identified and quantified.

Nonqualified Deferred Compensation .  The amounts disclosed represent the dollar values of common stock used to match up to 8% of the aggregate of the participant’s base salary plus ACIP amounts deferred on a pre-tax basis under the QNQDC Plan. The dollar values are based on the average of the fair market value of the stock over the 200 trading days preceding the match date.

Charitable Match .  The amounts disclosed represent our matching contributions for NEO contributions to qualified, tax-exempt non-profit organizations.

Company Match on 401(k) Contributions .  The amounts disclosed represent the cash value of our matches to employee contributions to the 401(k) plan.

Life Insurance Premiums.  The amounts disclosed represent the premiums paid for group term life insurance greater than $50,000 and executive life insurance.

Payment of HSR Act Fees. During fiscal 2013, Dr. Jacobs submitted a filing under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, (the HSR Act), based on the acquisitions of our common stock through the vesting of previously granted RSUs and PSUs. The Compensation Committee reviewed the legal requirements under the HSR Act, the stock acquisitions triggering the filing requirement and the practices of other public companies with respect to HSR Act filings. Based on this review, the Compensation Committee approved the payment by the Company of the HSR Act filing fee otherwise payable by Dr. Jacobs. The Compensation Committee determined that this payment was appropriate because of the unavailability of an HSR Act exemption for acquisitions of stock by officers and directors and because the filing obligations arose as a direct result of Dr. Jacobs’s position as an officer of the Company.

Tax Gross-Ups. We pay tax liabilities associated with certain perquisites and other personal benefits that are provided in a policy applicable to all eligible employees, such as relocation.

FISCAL 2013 ALL OTHER COMPENSATION

 

                 
Name  

Perquisites
and Other
Personal
Benefits

($) (1)

   

Nonqualified
Deferred
Compensation
Plan Match

($)

   

Charitable
Match

($) (2)

   

Company
Matching
401k
Contributions

($)

   

Life
Insurance
Premiums

($)

   

Payment
of HSR Act
Fees

($)

   

Tax

Gross-

Ups

($) (3)

   

All Other
Compensation
Total

($)

 

Paul E. Jacobs

    123,000        451,511        124,800        6,525        9,696        45,000        -        760,532   

George S. Davis

    90,798        -        43,170        4,520        5,943        -        47,592        192,023   

William E. Keitel

    28,734        165,281        129,218        5,357        17,366        -        -        345,956   

Derek K. Aberle

    66,804        175,492        33,100        5,425        3,240        -        -        284,061   

Steven M. Mollenkopf

    36,800        65,061        54,350        5,425        4,845        -        -        166,481   

Donald J. Rosenberg

    19,680        144,002        65,370        5,975        21,384        -        -        256,411   

 

  (1)

The amounts in this column include: Dr. Jacobs – $87,658 for the personal use of our corporate aircraft and $35,342 for other insurance premiums and financial planning; Mr. Davis – $86,679 for relocation and

 

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  $4,119 for other insurance premiums; Mr. Keitel – for financial planning, other insurance premiums and the personal use of our corporate aircraft; Mr. Aberle – $40,099 for the personal use of our corporate aircraft and $26,705 for financial planning, other insurance premiums, home office costs and personal travel and entertainment; Mr. Mollenkopf – for the personal use of our corporate aircraft, financial planning and other insurance premiums; and Mr. Rosenberg – for financial planning, other insurance premiums and the personal use of our corporate aircraft. Under certain circumstances, NEOs may utilize our corporate aircraft for personal use. In those instances, the value of the benefit is based on the aggregate incremental cost to the Company. Incremental cost is calculated based on the variable costs to the Company, including fuel costs, mileage, certain maintenance, universal weather-monitoring costs, on-board catering, landing/ramp fees and certain other miscellaneous costs. Fixed costs that do not change based on usage, such as pilot salaries, are excluded. In 2013, the Company and Dr. Jacobs entered into aircraft time-sharing agreements pursuant to which Dr. Jacobs may use certain Company aircraft for his personal use and reimburse the Company for the expenses of each flight operated under such an agreement up to the maximum amount permitted under Federal Aviation Administration rules. Dr. Jacobs has discretion over which flights are operated under a time-sharing agreement. The amounts shown for Dr. Jacobs’s personal use of our corporate aircraft reflect the total aggregate incremental costs to the Company of his personal use of our corporate aircraft, less any payments made by Dr. Jacobs to the Company under a time-sharing agreement.

 

  (2) The amounts in this column include (i) matching contributions we made in fiscal 2013 for contributions made by an NEO in fiscal 2012 as follows: $40,120 for Mr. Keitel, $13,700 for Mr. Mollenkopf and $18,235 for Mr. Rosenberg; and (ii) $500 in matching contributions we made in fiscal 2014 for contributions made by Mr. Aberle in fiscal 2013.

 

  (3) The amount in this column represents the estimated tax liability associated with relocation costs incurred by Mr. Davis.

GRANTS OF PLAN -BASED AWARDS

 

 

Annual Cash Incentive Plan (ACIP). The Compensation Committee approved a target ACIP amount, expressed as a percentage of base salary, for each NEO. The target ACIP amount was the earnings opportunity for the NEO if we achieved 100% of our financial objectives for Non-GAAP revenues and Non-GAAP operating income. We structured the ACIP to provide different earnings opportunities at different levels of financial performance. The table below shows the relationship between various levels of our financial performance and the potential ACIP amount.

Potential Non-Equity Incentive Plan Payout and Associated Financial Performance Levels

 

Potential Payout Level   

Weighted

Financial Performance

Ratio (1)

   

ACIP

Incentive

Multiple (2)

 

Maximum

     125     2.0   
       110     1.4   

Target

     100     1.0   
       90     0.5   

Threshold

     80     0.0   

 

  (1) The Weighted Financial Performance Ratio is the result of actual financial results achieved for the fiscal year divided by the financial objectives established during the first quarter of the fiscal year.

 

 

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  (2) The ACIP Incentive Multiple is the percentage of the potential ACIP amount relative to the target ACIP amount. The ACIP Incentive Multiple is applied to each NEO’s target ACIP amount to calculate the company-performance-adjusted ACIP amount. For example, if we achieve 125% of our financial objectives, the NEOs’ target ACIP amounts would be multiplied by 2 to determine the NEOs’ ACIP payout.

The ACIP Incentive Multiple increases five percentage points for each one percentage point improvement in the Weighted Financial Performance Ratio from 80% to 100%, and four percentage points for each one percentage point improvement from 100% to 125%. The maximum ACIP Incentive Multiple is 2x and applies to Weighted Financial Performance Ratios of 125% and above. The ACIP is not funded if the Weighted Financial Performance Ratio is below 80%.

Equity Awards. The Compensation Committee approved equity awards granted under the 2006 LTIP. The awards consisted of PSUs and RSUs. The grant dates for both the PSUs and RSUs was the date that the Compensation Committee met and approved the awards.

Restricted Stock Units (RSUs) . RSUs were granted under the 2006 LTIP. Except for the RSUs granted to Mr. Davis, the Compensation Committee established (1) an adjusted GAAP operating income goal for the first nine months of fiscal 2013, (2) a service condition that required the executive officer be employed by the Company from the beginning of fiscal 2013 through the date on which the RSUs were granted (September 29, 2013) and (3) a maximum grant date fair value that each recipient is eligible to receive provided the operating income goal and recipient service requirements are satisfied. The RSUs vest annually in three equal tranches with the first tranche vesting on November 20, 2013. For the special RSUs granted to Messrs. Aberle and Mollenkopf to recognize contributions to fiscal 2013 financial performance and strategic initiatives, the Compensation Committee established an adjusted GAAP operating income goal for the first nine months of fiscal 2014 that the Company must meet or exceed in order for the RSUs to vest. These RSUs vest annually in three equal tranches with the first tranche vesting on November 20, 2014. The new hire RSUs granted to Mr. Davis vest in three equal tranches on the first, second and third anniversaries of the grant date (March 11, 2013). The ongoing RSUs granted to Mr. Davis vest in three equal tranches on the first, second and third anniversaries of the grant date (September 29, 2013).

Performance Stock Units (PSUs) . The PSUs provide for a variable number of shares of our common stock based on the relative performance of our TSR compared to that of the NASDAQ-100 (see table below). The performance period for the PSUs granted during fiscal 2013 has two separate measurement periods of 18 and 24 months. Both measurement periods began on September 30, 2013 (the first day of fiscal 2014). Measurement Period 1 concludes on March 29, 2015, and Measurement Period 2 concludes on September 27, 2015. The PSUs will not vest until the end of the performance period and include dividend equivalent rights. The dividend equivalent rights will accrue, in the form of additional shares of common stock, on earned shares with vesting and distribution consistent with the vesting and distribution of the underlying shares. No dividends are paid on unvested and unearned PSUs. The total award amount may not exceed the target award amount if our TSR for the performance period is negative. The percent of PSU award amount earned between award levels interpolates linearly with our TSR percentile ranking.

 

 

Qualcomm TSR Percentile Ranking

among NASDAQ-100

 

   Award Level   

 

Percent of PSU Award

Amount Earned

 

90 th percentile and above

   Maximum    200%

75 th percentile

      150%

60 th percentile

   Target    100%

33 rd percentile

   Threshold    33%

Less than 33 rd percentile

   Minimum    0%

 

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FISCAL 2013 GRANTS OF PLAN-BASED AWARDS (1)(2)

 

             
              

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards

   

Estimated Future Payouts Under

Equity Incentive Plan Awards

             
Name  

Type of

Award

  Grant Date    

Threshold

($)

   

Target

($)

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

   

All other

Stock

Awards:

Number

of shares

of stock

or units

(#)

   

Grant Date

Fair Value

of Stock

Awards

($) (6)

 

Paul E. Jacobs

  ACIP       30,000       3,000,035       6,000,070              
  RSUs     9/29/2013                    102,405       6,900,049  
  PSUs     9/29/2013                                -        135,952       271,904               8,100,020  

George S. Davis

  ACIP       5,104       510,417       1,020,833              
  RSUs (3)     3/11/2013                    97,452       6,500,048  
  RSUs     9/29/2013                    34,135       2,300,016  
  PSUs     9/29/2013                                -        45,318       90,636               2,700,046  

William E. Keitel

  ACIP             6,714       671,394       1,342,788                                          

Derek K. Aberle

  ACIP       9,000       900,016       1,800,033              
  RSUs     9/29/2013                    40,962       2,760,020  
  RSUs (4)     9/29/2013                    13,654       920,006  
  PSUs     9/29/2013              -        54,381       108,762         3,240,020  
  PSUs (5)     9/29/2013                                -        18,127       36,254               1,080,007  

Steven M.

Mollenkopf

  ACIP       11,410       1,141,008       2,282,017              
  RSUs     9/29/2013                    61,443       4,140,029  
  RSUs (4)     9/29/2013                    20,481       1,380,010  
  PSUs     9/29/2013              -        81,571       163,142         4,860,000  
  PSUs (5)     9/29/2013                                -        27,191       54,382               1,620,040  

Donald J.

Rosenberg

  ACIP       7,425       742,502       1,485,004              
  RSUs     9/29/2013                    30,722       2,070,048  
  PSUs     9/29/2013                                -        40,786       81,572               2,430,030  

 

  (1) Unless indicated otherwise, the Compensation Committee approved all equity grants on the grant dates.

 

  (2) We did not award any stock options to any NEOs in fiscal 2013. Therefore, we did not include the “All Other Option Awards” or “Exercise or Base Price of Option Awards” columns in this table.

 

  (3) Represents a new hire RSU grant, which vests annually in three equal tranches with the first tranche vesting one year after the grant date.

 

  (4) Represents special RSU grants as described in the narrative preceding this table.

 

  (5) Represents special PSU grants to recognize contributions to fiscal 2013 financial performance and strategic initiatives. These special PSUs have the same terms as the PSUs described in the narrative preceding this table.

 

  (6) The amounts for RSUs represent the grant date fair values based on the closing stock price of the Company’s stock on the dates of grant. The amounts for PSUs represent the grant date fair value as determined using a Monte Carlo simulation (which probability weights multiple potential outcomes). For additional information on the valuation assumptions, refer to “Note 1—Basis of Presentation” in Qualcomm’s consolidated financial statements included in Appendix 1.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

 

 

The “Outstanding Equity Awards at Fiscal Year End” table provides information on the current holdings of equity awards by the NEOs. The market value of stock reported is based on the closing price of the Company’s common stock at the end of the fiscal year. All stock options awarded to the NEOs were nonqualified stock options; stock options granted prior to September 10, 2010 are exercisable for ten years from the grant date, and stock options granted on or after September 10, 2010 are exercisable for seven years from the grant date.

OUTSTANDING EQUITY AWARDS AT SEPTEMBER 29, 2013(1)

 

              Option Awards     Stock Awards                  

Name

 

 

Grant Date

 

   

Number of

Securities

Underlying

Unexercised

Options (#

Exercisable)

 

   

Number of

Securities

Underlying

Unexercised

Options (#

Unexercisable)

 

   

Option

Exercise

Price

($)

 

   

Option

Expiration

Date

 

   

Number of

Shares or

Units of Stock

That Have Not

Vested

(#) (2)

 

   

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)

 

   

Equity Incentive

Plan Awards:

Number of

Unearned

Shares, Units or

Other Rights

That Have Not

Vested

(#) (3)

 

   

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights That

Have Not

Vested

($)

 

 

Paul E.

    12/3/2004        600,000        -            43.62        12/2/2014                       

Jacobs

    11/4/2005        900,000        -            44.02        11/3/2015                       
      11/10/2006        211,218        -            34.83        11/9/2016                       
      11/12/2007        632,230        -            37.29        11/11/2017                       
      11/7/2008        9,000        30,500        (5     35.66        11/6/2018                       
      11/9/2009        345,843        49,4079        (6     44.75        11/8/2019                       
      11/8/2010                          50,311        (8     3,389,933             
      11/9/2011                          85,904        (9     5,788,230             
      9/29/2013                          102,405        (10     6,900,049             
      11/8/2010                                    227,687        (16     15,341,583   
      11/9/2011                                    197,903        (17     13,334,701   
      9/29/2013                                                                        271,904        (18     18,320,892   

Total

            2,698,291 (4)      79,907                                238,620                16,078,212        697,494                46,997,176   

George S.

    3/11/2013                          98,508        (11     6,637,445             

Davis

    9/29/2013                          34,135        (12     2,300,016             
      9/29/2013                                                                        90,636        (18     6,107,054   

Total

            -        -                                132,643                8,937,461        90,636                6,107,054   

William E.

    11/7/2008        6,250        12,500        (5     35.66        11/6/2018                       

Keitel

    11/9/2009        -        18,794        (6     44.75        11/8/2019                       
      11/8/2010                          18,188        (13     1,225,537             
      11/9/2011                          28,635        (9     1,929,433             
      11/8/2010                                    82,316        (16     5,546,479   
      11/9/2011                                                                        65,969        (17     4,444,971   

Total

            6,250        31,294                                46,823                3,154,970        148,285                9,991,450   

Derek K.

    4/14/2006        32,000        -            51.48        4/13/2016                       

Aberle

    4/27/2007        1,667        -