NVIDIA and its board of directors are committed to sound principles of corporate governance
. The company has adopted charters, codes of conduct and policies to define corporate governance at NVIDIA, promote the interests of our stockholders and establish common expectations as to how our business is conducted.
We have eight directors on our board and three board committees (audit, compensation, and nominating and corporate governance). At the time of our 2011 10-K filing, 7 of our 8 directors (87.5 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 CEO.
Our bylaws and corporate governance policies permit the roles of chairman of the board and chief executive officer to be filled by the same or different individuals. This allows the board flexibility in determining what is best for the company. At this time, NVIDIA has a lead director rather than a board chair. The lead director is William J. Miller.
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.
At the 2011 Annual Meeting of our Stockholders, or the 2011 Annual Meeting, our stockholders approved an amendment to our Amended and Restated Certificate of Incorporation, or the Amendment, to declassify our board and provide for the annual election of all directors. Pursuant to the Amendment, directors who have been elected to three-year terms prior to the filing of the Amendment (including directors elected at the 2011 Annual Meeting) will complete those terms. Thereafter, their successors will be elected to one-year terms and from and after the 2014 Annual Meeting, all directors will stand for election annually. At the 2011 Annual Meeting, our stockholders elected two directors to serve until our 2014 annual meeting of stockholders. Our 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. Our Board approved the recommendation at its meeting held on February 24, 2011.
To learn more, please visit the Corporate Governance page of NVIDIA’s website.
Our compensation program is designed to attract, retain and motivate a talented, innovative and entrepreneurial team of executives. To do so, we believe that the vast majority of their compensation should be based on performance, both of the individual and of the business. In addition, our variable compensation programs are structured to recognize both short-term and long-term contributions to the Company.
Our compensation program is administered under a rigorous process which 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
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.
To learn more about our executive compensation practices, please see our proxy materials.
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 Jan. 31, 2010, 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 FY2011 10-K, Item 9A.
Board of Directors at a Glance
Nonexecutive Lead Director
Beginning at our 2012 Annual Meeting of Stockholders, all directors will be elected annually.
Number of Independent Directors:
Number of Women on Board:
Number of Minorities on Board:
Oversight of Social and Environmental Issues:
Audit committee receives an annual report on environmental performance, specifically the company's report to the Carbon Disclosure Project.
Audit, Corporate Governance, Compensation, Nominating
The board and board committees evaluate their performance with respect to the latest trends in board governance.
We believe that the integrity with which we conduct ourselves and our business is key to our ability to run a successful, innovative business and maintain our reputation. We expect our directors, executives and employees to conduct themselves with the highest degree of integrity, ethics and honesty.
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 each be found in the Investor Relations section of our website, under Corporate Governance. 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 web training is mandatory for all global employees.
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. In order to better protect us and our stockholders, we regularly review our Code of Conduct 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 this portal. 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 of 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—employees who are at the director level and above—and in 2010 we expanded training to cover our Worldwide Code of Conduct
training for all employees. Our code of conduct training covers environmental and social responsibility issues. We have a goal to achieve 100% training on key issues and as of Q1 2011, 65% of global employees completed the Code of Conduct training (screenshot of online training tool above).
Our products, which NVIDIA engineers and designs, are made by carefully selected third-party manufacturers. We set high quality standards and strict quality controls for the manufacture of our products, and we work with our suppliers to ensure compliance with those standards and controls. In the event problems arise related to product design and manufacturing, we work quickly to correct and resolve these issues to our customers’ satisfaction. In addition we conduct a quarterly review together with our corporate customers to ensure that we are meeting their needs and addressing any concerns they may have.
As an example of our responsive 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 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.