The primary goal for our executive compensation program is to attract and retain a talented, innovative and entrepreneurial team of executives who will provide leadership for our success in a dynamic, competitive market.
The Compensation Committee believes that a mix of both cash and equity incentives is appropriate, as cash incentives reward executives for near-term results, while equity incentives motivate executives to increase stockholder value in the longer term.
Given the global economic conditions and our cost saving efforts, for fiscal year 2010 our executive officers received a 5 percent base salary reduction and were not eligible for any variable cash compensation (except for our recently hired CFO). As a result of these compensation decisions, equity compensation in fiscal year 2010 had a significantly higher weight relative to cash compensation.
To learn more, please see our proxy materials.
Compensation Recovery Policy
In April 2009, our Board adopted a Compensation Recovery Policy pursuant to which, if (i) we are required to prepare an accounting restatement to correct an accounting error on an interim or annual financial statement included in a report on Form 10-Q or Form 10-K due to material noncompliance with any financial reporting requirement under the federal securities laws, or a Restatement, and (ii) the Board or a committee of independent directors concludes that our CEO or CFO had received a variable compensation payment, or portion thereof, that would not have been payable if the original interim or annual financial statements reflected the Restatement, then our CEO or CFO shall disgorge to NVIDIA the net after-tax amount of such variable compensation payment.
NVIDIA’s SOX Compliance Group is responsible for evaluating the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting.
Based on their evaluation as of January 31, 2010, our management has concluded that our disclosure controls and procedures and internal control over financial reporting were effective.
For more information, please visit our FY2010 10-K, Item 9A.
Conducting our business in an ethical manner is of paramount importance to our ability to run a responsible, innovative business and maintain our reputation.
We have a Worldwide Code of Conduct that applies to all of our executive officers, directors and employees, including our principal executive officer and principal financial and accounting officer. We also have a Financial Team Code of Conduct that applies to our executive officers, directors and members of our finance, accounting and treasury departments.
Both the Worldwide Code of Conduct and the Financial Team Code of Conduct are available under Corporate Governance in the Investor Relations section of our website at www.nvidia.com. If we make any amendments to the Worldwide Code of Conduct or the Financial Team Code of Conduct or grant any waiver from a provision of either code to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website.
Our code of conduct prohibits engaging in transactions or activities that are a conflict of interest. Employees must certify when entering Purchase Requisitions that they don't have a conflict of interest. Employees are encouraged to report suspected conflicts of interest to their manager or HR representative through a third-party hosted portal. We recently moved this facility to an external organization to enhance our employees’ comfort level with anonymous reporting and for administrative reasons. We have a strict “no retaliation” policy regarding reports of activities that run counter to our ethical expectations.
If an employee is found to have violated our codes of conduct, we would take appropriate actions up to and including termination of employment.
All NVIDIA employees receive some form of ethics training. Starting in 2005, we instituted sexual harassment training for all employees. In 2009 we conducted legal training for leaders (director and above), and in 2010 we plan to expand training to cover our Worldwide Code of Conduct for all employees. We have a goal to achieve 100% training on key issues.
We engineer and design our own products, which are made by carefully selected third-party manufacturers. We work with our suppliers to ensure high quality and set strict quality controls. In the event of any problems related to product design and manufacturing, we work quickly to correct and resolve these issues to our customers’ satisfaction.
For example, during fiscal years 2009 and 2010 and the second quarter of fiscal year 2011, we recorded net warranty charges against cost of revenue to cover anticipated customer warranty, repair, return, replacement and other costs arising from a weak die/packaging material set in certain versions of our previous generation MCP and GPU products used in notebook configurations. The weak die/packaging material combination is not used in any of our products that are currently in production.
The previous generation MCP and GPU products that are impacted were included in a number of notebook products that were shipped and sold in significant quantities. Certain notebook configurations of these products are failing in the field at higher than normal rates. Testing suggests a weak material set of die/package combination, system thermal management designs, and customer use patterns are contributing factors. We have worked with our customers to develop and have made available for download a software driver to cause the system fan to begin operation at the powering up of the system and reduce the thermal stress on these chips. We have also recommended to our customers that they consider changing the thermal management of the products in their notebook system designs. We intend to fully support our customers in their repair and replacement of these impacted products that fail, and their other efforts to mitigate the consequences of these failures.