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We have nine directors on our board and three board committees (Audit, Compensation, and Nominating and Corporate Governance). At the time of our 2011 10-K filing, eight of our nine directors (89 percent) were independent, exceeding the majority threshold required by NASDAQ. Independence is determined by heightened compliance with NASDAQ rules on director independence. The sole non-independent director is Jen-Hsun Huang, the company's president and chief executive officer (CEO). Our bylaws and corporate governance policies permit the roles of chairman of the board and CEO to be filled by the same or different individuals. This provides the board flexibility in determining what is best for the company. At this time, NVIDIA has a lead director, William J. Miller, rather than a board chair.
NVIDIA's Code of Conduct outlines the expectations of our directors, executives and employees to conduct themselves with the highest degree of integrity, ethics and honesty.
The Nominating and Corporate Governance Committee reviewed the qualifications of each of the nominees for election and unanimously recommended that each nominee be submitted for election to the board. The board approved the recommendation on Feb. 23, 2012.
Our corporate governance practices are rated by external organizations such as Institutional Shareholder Services. According to ISS, NVIDIA Corporation's Governance Risk Indicator as of March 2012, is: Audit (Low Concern), Board (Low Concern), Compensation (Low Concern), Shareholder Rights (Low Concern). Shareholder Rights scoring improved from 2011, when it was listed as Medium Concern.
To learn more, please visit the Corporate Governance page of NVIDIA's website.
Our compensation program is administered under a rigorous process that includes review of peer group practices, advice of an independent third-party consultant (who reports to the Compensation Committee, not to the company) and long-standing, consistently applied practices with respect to the timing of equity grants and the pricing of stock options.Compensation Recovery Policy
To learn more about our executive compensation practices, please see our proxy materials.Internal Control
Based on their evaluation as of Jan. 29, 2012, our management has concluded that our disclosure controls and procedures and internal control over financial reporting were effective to provide reasonable assurance.
For more information, please visit our FY2012 10-K, Item 9A.
Nonexecutive Lead Director:
At our 2011 Annual Meeting of Stockholders, NVIDIA stockholders approved the declassification of our board of directors, so that by 2014 all directors will stand for election annually. This declassification will be phased in over several years. The two directors elected at the 2011 Annual Meeting were elected for three-year terms. The three directors who were up for reelection at our 2012 Annual Meeting were elected for a one-year term. The directors who are up for reelection at the 2013 Annual Meeting will be elected for a one-year term. Beginning at our 2014 Annual Meeting, all directors will stand for election annually.
Number of Independent Directors:
8/9 (see proxy for ages)
Number of Women on Board:
Number of Minorities on Board:
Audit, Compensation, and Nominating and Corporate Governance
The board and board committees evaluate their performance annually.
Our Worldwide Code of Conduct applies to all of our executive officers, directors and employees, including our principal executive officer and principal financial and accounting officer. In addition, we have established a Financial Team Code of Conduct that applies to our executive officers, directors and members of our finance, accounting and treasury departments.
The Worldwide Code of Conduct and the Financial Team Code of Conduct can be found in the Investor Relations section of our website under Corporate Governance. If we make any amendments to either code 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 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. To better protect us and our stockholders, we regularly review our code and related policies to ensure that they provide clear guidance to our directors, executives and employees.
We have established a corporate hotline (operated by a third party) to allow any employee to confidentially and anonymously lodge a complaint about any accounting, internal control, auditing or other matters of concern (unless prohibited by local privacy laws for employees located in the European Union). Employees are encouraged to report suspected conflicts of interest to their manager or HR representative or through the hotline. We decided to have an external organization operate the hotline for administrative reasons as well as to enhance our employees' comfort level with anonymous reporting. 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 either the Worldwide Code of Conduct or the Financial Team Code of Conduct, we would take appropriate actions up to and including termination of employment.Ethics Training
In late July 2011, Thailand began experiencing severe flooding that has caused widespread damage to the local manufacturing industry. PC manufacturers obtain disk drive components used in theirs PCs from suppliers with operations in Thailand that were and continue to be severely impacted by the flooding. These PC manufacturers have and expect to continue to experience a short-term reduction in the supply of these disk drive components. As a result, in our fourth quarter of fiscal year 2012 shipments of PCs by some PC manufacturers were reduced, which reduced the demand for our GPUs. In addition, higher disk-drive prices constrained the ability of some PC manufacturers to include a GPU in their systems which also reduced demand for our GPUs and negatively impacted our financial results for the fourth quarter of fiscal year 2012.
As an example of our responsiveness to customer needs, 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 media and communications processor (MCP) and GPU products previously used in notebook configurations. The weak material set is not used in any of our products currently in production.
The affected MCP and GPU products were included in a number of notebook products that were shipped and sold in significant quantities, some of which were failing in the field at higher than normal rates. Testing suggested contributing factors included a weak die/packaging material set, system thermal management designs and customer use patterns. We worked with our customers to develop and make available for download a software driver starts the system fan upon powering up a notebook to reduce the thermal stress on the affected chips. We also recommended our customers consider changing the thermal management of the products in their notebook system designs. We fully supported our customers in their repair and replacement of the products that failed as well as in their efforts to mitigate the consequences of these failures.