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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant Filed by a Party other than the Registrant      

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  Preliminary Proxy Statement
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Definitive Proxy Statement
  Definitive Additional Materials
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Western Digital Corporation

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Our strategy supports our mission to be recognized as the world’s leading data infrastructure company

We continue to pursue a long-term value-creation strategy underpinned by growth in Big Data and Fast Data applications. Western Digital’s platform is strategically positioned to play a key role in supporting long-term growth trends.

Our strategy is dependent on continuing to build a culture of growth and innovation to accomplish four major strategic pillars:

 

Lead in HDD and Flash Technology

Lead in Enterprise Data Infrastructure

Lead in Rapid Edge and Endpoint Adoption

Lead in Consumer Solutions

Maintaining leadership in core storage technologies

Focusing on thought and market leadership

Building leadership in emerging segments

Expanding leadership position in consumer business

       

Lead in energy-assisted technologies to drive long-term growth in Capacity HDD

_______

Lead in flash 3D node transitions, design parameters and capital efficiency

_______

Drive future storage interface standards, architectures and software ecosystems

Establish Western Digital as a thought leader and trusted partner for Data Center system architecture, building more strategic and collaborative relationships with key customers

_______

Be the recognized market leader in the Data Center with HDD and SSD products

_______

Achieve zoned storage (ZNS) leadership position in industry standards and Cloud/OEM adoption

Reach leadership position in Gaming consoles

_______

Address the growing demand for storage in consumer IoT segment

_______

Establish leadership in Automotive and expand reach in Industrial segments

Establish security platform across consumer solutions portfolio

_______

Expand on market, product and technology while reinforcing brand leadership

_______

Continually engage users and reach new users through our solutions, experiences and services


       
  Culture of Growth and Innovation  
   
       


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Letter from Our Chairman

                                   
 
            
                                   
       

“Western Digital continues to transform itself to address the global need for a larger and more capable storage infrastructure by providing what we believe to be the broadest range of storage technologies in the technology industry.”

Dear Fellow Stockholders:

                

On behalf of the Board of Directors, I thank you for your continued support and investment in Western Digital. As we reflect on fiscal 2020, the year represented an important transition for Western Digital marked by leadership changes, Board changes as well as unprecedented circumstances for our employees, suppliers and customers in light of the COVID-19 pandemic.

CEO Transition
In March 2020, after over seven years of service as CEO to Western Digital, Stephen D. Milligan stepped down and David V. Goeckeler was appointed as CEO and a member of the Board. Mr. Goeckeler brings to Western Digital an exceptional track record of driving highly profitable, core businesses at scale while guiding innovation to expand into new markets and generate new revenue sources. His experience as a software engineer as well as running large semiconductor development projects, breadth of technology expertise and history of building and operating world-class organizations make him the right person to lead Western Digital in a world increasingly driven by applications and data.

Digital Transformation Presents an Important Opportunity for Western Digital
Western Digital continues to transform itself to address the global need for a larger and more capable storage infrastructure by providing what we believe to be the broadest range of storage technologies in the technology industry. We are well-positioned to benefit in an environment where customers of every size, vertical and geography are deploying business infrastructure that is software-driven, enabled by data and powered by the cloud. We have a strong portfolio, operational scale, powerful, global brands and extensive customer relationships from the cloud to the edge to the endpoint. We are focused on growing our market share in expanding markets such as the cloud and the edge (e.g., gaming and virtual reality) and generating new sources of revenue that are less cyclical.

COVID-19 Response
Amid the COVID-19 global pandemic, our priority has been the health, safety and well-being of our employees and our communities. To that end, we implemented robust safety measures for our workforce, including early adoption of personal protective equipment (“PPE”) for our employees, social distancing and work from home policies and contact tracing at our sites. Additionally, we recognized the contributions of our employees by providing premium pay for certain hourly essential workers, continued pay for employees who could not work from home and by providing care packages for employees in lockdown in the Hubei province of China.

We have also supported our communities by building face shields for medical personnel, having our procurement team source and ship PPE and making donations focused on COVID-19 and hunger relief funds. During this challenging and uncertain time, we remain committed to the health, safety and well-being of our employees and communities.

Passing of Director Len Lauer
Our former Lead Independent Director, Len Lauer, unexpectedly passed away in April 2020. After his passing, the Board appointed Kathleen A. Cote, Martin I. Cole and Stephanie A. Streeter to new leadership roles as the Lead Independent Director, Chair of the Compensation and Talent Committee and Chair of the Governance Committee, respectively. I was honored to serve alongside Len for the past 10 years and his presence on our Board is missed.

As we navigate through this unprecedented time, we remain optimistic about our ability to deliver long-term stockholder value. We recognize and greatly appreciate the trust and confidence you have placed in us.


MATTHEW E. MASSENGILL
Independent Chairman of the Board

            

2020 PROXY STATEMENT     1            


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                 Letter from Our Lead
Independent Director
            
       
                                                                      

“I am proud to represent a Board that is now comprised of an equal number of female and male directors. We remain committed to ensuring a balanced and effective Board with diverse viewpoints and skills, as well as deep industry expertise, that align with the needs of Western Digital.”

Dear Fellow Stockholders:

 

                

In April 2020, I was named Lead Independent Director of Western Digital’s Board of Directors. I am proud to continue the independent leadership that Len Lauer provided and would like to take this opportunity to share how our Board is addressing key areas of stockholder interest, as we approach our 2020 Annual Meeting.

Continuous Board Refreshment and Current Composition Supports Long-Term Value Creation
Since 2018, we have added four new independent directors to our Board of Directors. Most recently, Paula A. Price rejoined our Board in June 2020 and was appointed as a member of the Audit Committee. Ms. Price previously served on our Board from July 2014 to February 2019 and brings more than 30 years of financial and operational experience at some of the world’s most prominent retail brands. With the addition of Ms. Price to our Board, I am proud to represent a Board that is now comprised of an equal number of female and male directors.

We remain committed to ensuring a balanced and effective Board with diverse viewpoints and skills, as well as deep industry expertise, that align with the needs of Western Digital.

Commitment to Stockholder Engagement
As a continuation of our robust Board-driven stockholder engagement program, over the past year, we reached out to stockholders representing approximately 60% of shares outstanding. Our engagement team conducted calls with 14 of our top 25 stockholders, as well as several other holders, composed of investors with a variety of investment styles and geographic locations. The feedback and perspectives we gain during these discussions routinely informs changes to our executive compensation program and related disclosures, including a number of executive compensation program changes that are being implemented this year and which are discussed in detail in the Compensation Discussion and Analysis section of the Proxy Statement.

Corporate Responsibility and Sustainability
Sound corporate responsibility in all aspects of our business is a focus of our Board, and sustainability has been a consistent theme throughout our recent investor conversations, including the addition of a new cycle of stockholder engagement this year specifically focused on sustainability topics. We believe that being an industry leader is not just about having talented employees or innovative products, but also about doing business the right way, every day. That is why our commitment to sound corporate responsibility is deeply rooted in all aspects of our business.

In August 2020, we published our 2020 Sustainability Report, which was based on an updated 2020 materiality assessment as well as strategic priorities. This is our first report that aligns with standards set by both the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI). Highlights from our 2020 Sustainability Report can be found on page 29 of the Proxy Statement, while we also invite you to review the full report on our Corporate Sustainability page at www.westerndigital.com.

On behalf of our Board, we appreciate our stockholders’ feedback and very much look forward to our continued dialogue. We are excited about the future of Western Digital, and we thank you for the trust you have placed in our Board.

Sincerely,


KATHLEEN A. COTE
Lead Independent Director

The duties of our Lead Independent Director include:

Acting as a liaison between our independent directors and management
Assisting our Chairman of the Board in establishing the agenda for Board meetings
Coordinating the agenda for, and chairing, the executive sessions of our independent directors
Presiding at any Board meetings at which our Chairman is not present
Overseeing our stockholder engagement efforts
Engaging with stockholders as appropriate
Participating in the performance evaluation of our Chief Executive Officer
            

                2     WESTERN DIGITAL


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Notice of Annual Meeting of Stockholders
Western Digital Corporation
5601 Great Oaks Parkway, San Jose, California 95119

Date
November 18, 2020


          Matters to be voted on
Proposal         Board
Recommendation

Time
8:00 a.m. Pacific Time

1     Election of the eight director nominees named in the attached Proxy Statement to serve until our next annual meeting of stockholders and until their respective successors are duly elected and qualified
VOTE FOR

Location
Our annual meeting will be a completely virtual meeting of stockholders. To participate, vote or submit questions during the annual meeting via live webcast, please visit: www.virtualshareholdermeeting. com/WDC2020.
You will not be able to attend the annual meeting in person. Please see “Virtual Annual Meeting” on the following page for additional information.





2 Approval on an advisory basis of the named executive officer compensation disclosed in the attached Proxy Statement
VOTE FOR
3 Approval of the amendment and restatement of our 2017 Performance Incentive Plan to increase by 9.8 million the number of shares of our common stock available for issuance under that plan
VOTE FOR
4 Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2021
VOTE FOR

Who can vote
Stockholders of record at the close of business on September 21, 2020 will be entitled to notice of and to vote at our annual meeting and any adjournments or postponements of the meeting.

At the meeting, we will also consider any other business that may properly come before our annual meeting or any postponement or adjournment of the meeting

How to Vote Your Shares in Advance of the Meeting
Your vote is very important. Please submit your proxy as soon as possible via the Internet, telephone or mail. Submitting your proxy by one of these methods will ensure your representation at our annual meeting regardless of whether you attend the meeting.

VIA THE INTERNET
Visit the website listed on your proxy card, notice or voting instruction form
BY PHONE
Call the phone number listed on your proxy card or voting instruction form
BY MAIL
Complete, sign, date and return your proxy card or voting instruction form in the envelope provided

By Order of our Board of Directors,
MICHAEL C. RAY
Executive Vice President, Chief Legal Officer and Secretary
October 5, 2020

Important notice regarding the availability of proxy materials for our annual meeting of stockholders to be held on November 18, 2020: On or about October 5, 2020, proxy materials for the annual meeting, including the attached Proxy Statement and our 2020 Annual Report to stockholders, are being furnished to stockholders entitled to vote at the annual meeting. The Proxy Statement and 2020 Annual Report to stockholders are available on our Investor Relations website at investor.wdc.com. You can also view these materials at www.proxyvote.com by using the control number provided on your proxy card or Notice of Internet Availability of Proxy Materials.

2020 PROXY STATEMENT     3


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VIRTUAL ANNUAL MEETING

Our 2020 annual meeting of stockholders (the “Annual Meeting”) will be an audio-only meeting conducted virtually, via an online virtual annual meeting platform that will allow stockholders to participate and submit questions directly to our Board of Directors and management. We are implementing a virtual annual meeting format this year in order to leverage technology to enhance stockholder access to the Annual Meeting by enabling attendance and participation from any location around the world by visiting www.virtualshareholdermeeting.com/WDC2020. We believe that the virtual annual meeting format will give stockholders the opportunity to exercise the same rights as if they had attended an in-person meeting and believe that these measures will enhance stockholder access and encourage participation and communication with our Board of Directors and management.

Benefits of a Virtual Annual Meeting

We believe a virtual annual meeting format facilitates stockholder attendance and participation by enabling all stockholders to participate fully, equally and without cost, using an Internet-connected device from any location around the world. In addition, the virtual annual meeting format increases our ability to engage with all stockholders, regardless of size, resources or physical location and enables us to protect the health and safety of all attendees, particularly in light of the COVID-19 pandemic.
Stockholders of record and beneficial owners as of September 21, 2020, the record date, will have the ability to submit questions directly to our management and Board of Directors and vote electronically at the Annual Meeting via the online virtual annual meeting platform.

Attendance at the Virtual Annual Meeting

Attendance at the Annual Meeting is open to the public online at www.virtualshareholdermeeting.com/WDC2020, but you are entitled to participate in the Annual Meeting by voting or asking questions only if you were a stockholder of record or beneficial owner as of September 21, 2020, the record date, or you hold a valid legal proxy for the Annual Meeting.
To participate in the Annual Meeting by voting or asking questions, you will need the 16-digit control number included on your Notice of Internet Availability of the Proxy Materials, on your proxy card or on the instructions that accompanied your proxy materials.
If you were a stockholder as of September 21, 2020, the record date, you may vote shares held in your name as the stockholder of record or shares for which you are the beneficial owner but not the stockholder of record electronically during the Annual Meeting through the online virtual annual meeting platform by following the instructions provided when you log in to the online virtual annual meeting platform.
On the day of the Annual Meeting (November 18, 2020), stockholders may begin to log in to the online virtual annual meeting platform beginning at 7:45 a.m. Pacific Time, and the meeting will begin promptly at 8:00 a.m. Pacific Time. Please allow ample time for online login.
We will have technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting. If you encounter any difficulties accessing or logging in to the Annual Meeting, please call the technical support number displayed on the login page of the online virtual annual meeting platform.

Questions at the Virtual Annual Meeting

During the Annual Meeting, we will answer as many stockholder-submitted questions as time permits, and any questions that we are unable to address during the Annual Meeting will be published and answered on our website following the meeting with the exception of any questions that are irrelevant to the purpose of the Annual Meeting or our business or that contain inappropriate or derogatory references which are not in good taste. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.

YOU WILL NOT BE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON

4     WESTERN DIGITAL


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Table of Contents

1 Letter from Our Chairman
     
2 Letter from Our Lead Independent Director
     
3 Notice of Annual Meeting of Stockholders
4 Virtual Annual Meeting
6 Disclaimers
     
7 Proxy Summary
     
16 Corporate Governance Matters
16  Proposal 1  Election of Directors
17 Nominees for Election
21 Director Skills and Expertise
23 Director Nominations and Board Refreshment
27 Board’s Role and Responsibilities
27 Stockholder Engagement
29 Corporate Responsibility and Sustainability
31 Risk Oversight and Compensation Risk Assessment
33 Board Structure
34 Lead Independent Director
37 Board Processes and Policies
38 Board Evaluation
39 Director Compensation
44 Executive Officers
     
46 Executive Compensation
46  Proposal 2  Advisory Vote on Executive Compensation
47   Letter to Stockholders from the Compensation and Talent Committee
48 Report of the Compensation and Talent Committee
49 Compensation Discussion and Analysis
50 Fiscal 2020 Executive Summary and Chief Executive Officer Transition Discussion
59 Fiscal 2020 Philosophy, Objectives and Process
64 Fiscal 2020 Decisions and Outcomes
71 Fiscal 2021 Decisions
74 Other Program Features and Policies
77 Executive Compensation Tables and Narratives
77 Fiscal 2018—2020 Summary Compensation Table
79 Fiscal 2020 Grants of Plan-Based Awards Table
80 Description of Compensation Arrangements for Named Executive Officers
82 Outstanding Equity Awards at Fiscal 2020 Year-End Table
84 Fiscal 2020 Option Exercises and Stock Vested Table
85 Fiscal 2020 Non-Qualified Deferred Compensation Table
86 Potential Payments upon Termination or Change in Control
92 CEO Pay Ratio
93 Equity Compensation Plan Information
     
94 Stock Ownership Information
     
96 Equity Plan Proposal
96  Proposal 3  Approval of the Amendment and Restatement of Our 2017 Performance Incentive Plan
109 Audit Committee Matters
109  Proposal 4  Ratification of Appointment of Our Independent Registered Public Accounting Firm
110 Report of the Audit Committee
112 Additional Information
112 General Information about the Annual Meeting
117 Availability of Annual Report
117 Communication with the Company
A-1 Appendix A—Non-GAAP Financial Measures
     
B-1 Appendix B—Amended and Restated 2017 Performance Incentive Plan

2020 PROXY STATEMENT     5


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Disclaimers

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement contains forward-looking statements, including but not limited to, statements concerning our product and technology portfolio, views with respect to the growth of digital data, our business strategy and strategic priorities, our ability to execute our strategy, our expectations regarding the impact of COVID-19, our director succession plans, plans for our sustainability program including policies and reporting in the area of human rights and our diversity and inclusion efforts. These forward-looking statements are based on our current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including: future responses to and effect of the COVID-19 pandemic; volatility in global economic conditions; business conditions and growth in the storage ecosystem; impact of restructuring activities and cost saving initiatives; impact of competitive products and pricing; market acceptance and cost of commodity materials and specialized product components; actions by competitors; unexpected advances in competing technologies; our development and introduction of products based on new technologies and expansion into new data storage markets; risks associated with acquisitions, divestitures, mergers and joint ventures; difficulties or delays in manufacturing; the outcome of legal proceedings; and other risks and uncertainties listed in our Annual Report on Form 10-K for the fiscal year ended July 3, 2020 and our other reports filed with the Securities and Exchange Commission (the “SEC”), to which your attention is directed. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

WEBSITE REFERENCES

You may also access additional information about Western Digital at www.westerndigital.com. References to our website throughout this Proxy Statement are provided for convenience only and the content on our website does not constitute a part of this Proxy Statement.

6     WESTERN DIGITAL


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Proxy Summary

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. We encourage you to read the entire Proxy Statement for more information about these topics prior to voting.

                                                                          
OUR LONG-TERM VALUE CREATION STRATEGY

Our strategy is dependent on continuing to build a culture of growth and innovation to accomplish four major strategic pillars:

 

Lead in HDD and Flash Technology

Lead in Enterprise Data Infrastructure

Lead in Rapid Edge and Endpoint Adoption

Lead in Consumer Solutions

Maintaining leadership in core storage technologies

Focusing on thought and market leadership

Building leadership in emerging segments

Expanding leadership position in consumer business

KEY BUSINESS HIGHLIGHTS

                                                                          
POSITIONED FOR GROWTH IN A CHALLENGING MARKET

Despite a challenging year, we remained focused on driving innovation for customers and long-term value creation for our stockholders. Specifically, we broadened our product portfolio and enhanced our technology leadership with a keen focus on strategy and operations. We expect these actions to position us to emerge as a stronger company as the market environment improves. These factors, along with the hiring of our new Chief Executive Officer and stockholder feedback from our engagement efforts, provided important context for the Compensation and Talent Committee’s decisions regarding executive pay for the year in review, and as described further in the section entitled “Executive Compensation—Compensation Discussion and Analysis,” fiscal 2020 compensation levels to our executive team reflect the shift in performance results.

Our fiscal 2020 business results were adversely impacted by the ongoing COVID-19 pandemic, the start of a global economic contraction and trade-related geopolitical dynamics. We delivered fiscal 2020 revenues of $16.7 billion, non-GAAP gross margin of 26.9% and $3.04 in non-GAAP diluted earnings per share (“EPS”).(1) Our business generated $824 million in operating cash flow and we returned $595 million to stockholders through cash dividends. We also repaid $982 million of debt (consisting of $257 million in scheduled principal payments and $725 million in voluntary prepayments).

Strength of Product Portfolio

Our ability to continually drive innovation and expand our differentiated product base is an integral component to maintaining leadership and a competitive advantage in the rapidly evolving data storage industry. To that end, we made significant strides in broadening and enhancing our product offerings and delivering the strongest product portfolio in our history. Achievements of particular note include:

Enterprise SSD revenue share increased to the low double digits and will remain an important area of focus within our flash portfolio.
In hard drives, we were the first in the industry to ship energy-assisted drives designed for mass production, including our 16-, 18- and 20-terabyte drives.

(1) See Appendix A to this Proxy Statement for reconciliations of GAAP gross margin and GAAP EPS to non-GAAP gross margin and non-GAAP EPS, respectively.

2020 PROXY STATEMENT     7


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PROXY SUMMARY

We began shipping our new 10-terabyte air-based product powered by our innovative airflow architecture, underscoring our areal density and mechanical design leadership.
Retail solutions continued to benefit from the trust and reputation of our brands.

Technology Advances

With approximately 13,500 patents worldwide and a broad approach to innovation across our entire technology portfolio, we are continuously developing and investing in new technologies and partnerships to build on our existing technology leadership:

In flash, we launched our next generation 3D NAND technology, BiCS5, which delivers exceptional capacity, performance and reliability, all at an attractive cost.
We celebrated the first production wafer shipment from our K1 fab, our new manufacturing facility for 3D BiCS flash memory. This is another important milestone reflecting the successful 20-year partnership we’ve had with our joint venture partner, Kioxia Corporation.
We expanded our capacity enterprise product offerings with the 16-, 18- and 20-terabyte drives all enabled by our energy-assisted recording technology. This technology is a critical step to driving continued areal density improvements in next generation capacity enterprise products.

Strategic and Operational

Our Board of Directors and management team remain focused on the development and execution of our strategy, including aligning our structure, improving operational efficiency and attracting and retaining talent that is critical to our continued success:

In March 2020, David V. Goeckeler was appointed as our new Chief Executive Officer.
In April 2020, we announced the suspension of our dividend program to support continued efforts to invest in the business and reduce debt.
We navigated through COVID-19 complexities to provide continuity and high-quality products for our customers, deliver value to our stockholders and, importantly, prioritize the health and safety of our employees. We’ve limited the business impact of the pandemic, which primarily impacted our HDD business, by making important investments and changes to minimize manufacturing and logistical challenges caused by the pandemic.

Looking Ahead

Our strategic priorities are centered on driving innovation for customers and value for stockholders. In this complex and dynamic environment, we believe the most important thing we can do is to keep our foot on the innovation pedal by executing on our strategic business objectives and delivering on our product roadmap. We have an extremely talented team that will continue to work on bolstering our flash and HDD portfolios while we transition to BiCS5 and ramp our energy-assisted capacity enterprise drives to high volume.

While there are near-term challenges, the secular trends of data growth and its increasing value – key drivers of our business opportunities – remain strong. We believe the actions we are taking to evolve our portfolio to drive long-term revenue growth, gross margin improvement and cash generation, while also paying down debt and investing in the future, set us up well for long-term success.

8     WESTERN DIGITAL


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PROXY SUMMARY

OUR DIRECTOR NOMINEES

Name and Principal Occupation Age Director
Since
Board
Committees
Other Current Public
Directorships

KIMBERLY E. ALEXY INDEPENDENT

Principal, Alexy Capital Management

50 2018

Alteryx, Inc.

FireEye, Inc.

Five9, Inc.

MARTIN I. COLE INDEPENDENT

Former Group Chief Executive, Technology of Accenture plc.

64 2014 The Western Union Company

KATHLEEN A. COTE LEAD INDEPENDENT DIRECTOR

Former Chief Executive Officer of Worldport Communications, Inc.

71 2001 VeriSign, Inc.

TUNÇ DOLUCA INDEPENDENT

President and Chief Executive Officer of Maxim Integrated

62 2018 Maxim Integrated

DAVID V. GOECKELER

Chief Executive Officer of Western Digital Corporation

58 2020 None

MATTHEW E. MASSENGILL INDEPENDENT CHAIRMAN OF THE BOARD

Former President and Chief Executive Officer of Western Digital Corporation

59 2000 None

PAULA A. PRICE INDEPENDENT

Former Executive Vice President and Chief Financial Officer of Macy’s, Inc.

58 2020

Accenture plc

Bristol-Myers Squibb Company

DaVita Inc.

STEPHANIE A. STREETER INDEPENDENT

Former Chief Executive Officer of Libbey Inc.

63 2018

Goodyear Tire & Rubber Company

Kohl’s Corporation


Audit Compensation and Talent Executive Governance Committee Chair

                                                                          
BOARD NOMINEE HIGHLIGHTS

Board Snapshot

87.5% Independent | 50% Women | 7.2 Years Average Tenure(1)

INDEPENDENCE GENDER
AGE TENURE(1)
(1) Calculation includes Ms. Price’s tenure as a director from July 2014 to February 2019.
Strong Director Engagement

Average director attendance at fiscal 2020 Board and committee meetings

Board       Audit
96% 97%
Compensation and Talent Governance
98% 97%
Executive
100%

Over 96% Board and committee meeting aggregate attendance in fiscal 2020.



Women in Board Leadership Roles

Lead Independent Director Audit Committee Chair Governance Committee Chair

2020 PROXY STATEMENT     9


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PROXY SUMMARY

Director Nominee Skills and Experience

EXECUTIVE EXPERIENCE
Experience in executive-level positions is important to gain a practical understanding of complex organizations, corporate governance, operations, talent development, strategic planning and risk management

SEMICONDUCTOR EXPERIENCE
Experience in the semiconductor industry is important in understanding our technology, products and operations, which is critical for our future growth

DATA INFRASTRUCTURE EXPERIENCE
Experience in data infrastructure, including related software, hardware and data centers, storage, protection and management is important to understanding the issues and opportunities facing our business

MANUFACTURING
Experience with sophisticated, large-scale manufacturing increases our Board’s understanding of our distribution, supply chain and manufacturing facilities

OPERATIONS AND INFRASTRUCTURE
Experience with complex, global operations assists our Board in fostering our operational excellence and adapting to evolving market conditions

TECHNOLOGY/INNOVATION
Experience in researching, developing or designing leading-edge technologies is critical for the continued growth and innovation of our business

GLOBAL EXPERIENCE
Experience with businesses with substantial international operations provides critical business and cultural perspectives to our Board and is important in understanding the strategic opportunities and risks relating to our business

SALES/MARKETING
Experience developing and executing on strategies to grow sales and market share assists our Board in advising management as we seek to develop new products and new markets for our products

FINANCE AND ACCOUNTING
Experience overseeing accounting and financial reporting is key to our Board’s oversight of our financial reporting process and internal controls

CYBERSECURITY
Experience understanding and managing information technology and cybersecurity threats is increasingly important to mitigate risks to our business

RISK MANAGEMENT
Experience in assessing and managing enterprise risks is critical to our Board’s role in overseeing our enterprise risk management program

CORPORATE SUSTAINABILITY AND RESPONSIBILITY
Experience in assessing corporate social responsibility initiatives is critical to our Board’s role in overseeing our corporate responsibility and sustainability policies and programs

STRATEGY PLANNING
Experience setting and executing long-term corporate strategy is critical as we continue to grow our business

HUMAN CAPITAL MANAGEMENT
Experience in human capital management in large organizations assists our Board in overseeing succession planning, talent development and our executive compensation program

indicates “Technical or Managerial Expertise” (expertise derived from direct and hands-on experience or direct managerial experience with the subject matter during his/her career)
indicates “Working Knowledge” (experience derived through: (i) board or relevant committee membership at our company or another public company; (ii) executive leadership or board membership of a public company in the relevant industry; or (iii) consulting, investment banking, private equity investing or legal experience)

10     WESTERN DIGITAL


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PROXY SUMMARY

CORPORATE GOVERNANCE HIGHLIGHTS

Our Board of Directors is committed to maintaining the highest standards of corporate governance. We believe our strong corporate governance practices help promote the long-term interests of our stockholders and build public trust in us.

                                                                          
CORPORATE GOVERNANCE CHANGES

Below is a description of some recent key changes to our corporate governance practices:

 
Expanded Responsibilities
of Compensation and Talent
Committee to Include Human
Capital Management
Board Composition and
Leadership Transitions
New Stockholder
Engagement Cycle Regarding
Sustainability Topics
In March 2020, we expanded the responsibilities of the Compensation and Talent Committee to include oversight of human capital issues that impact our ability to attract and retain top talent and initiatives to help minimize talent-related risks
In connection with this expanded oversight responsibility, the committee periodically reviews our human capital management policies, programs and initiatives, such as those focusing on culture, talent development, retention and diversity and inclusion
Our Chief Human Resources Officer also provides periodic talent-related updates to the committee for review and input
Accordingly, we also renamed the committee the Compensation and Talent Committee to reflect its expanded area of responsibility
In November 2019, Henry DeNero and Michael D. Lambert retired from our Board of Directors in accordance with our retirement policy
Following the unexpected passing of Mr. Lauer in April 2020, our Board acted quickly to designate appropriate successors for his Board leadership roles, with Ms. Cote, Mr. Cole and Ms. Streeter moving into leadership roles as our Lead Independent Director, Chair of the Compensation and Talent Committee and Chair of the Governance Committee, respectively
In June 2020, Paula A. Price, former chief financial officer at Macy’s, Inc. who previously served on our Board from July 2014 to February 2019, was re-appointed and serves on the Audit Committee
Our Board is now comprised of an equal number of female and male directors, with three of our female directors serving in Board leadership roles
In early 2020, we supplemented our robust stockholder engagement program with a new cycle of stockholder engagement specifically focused on sustainability topics to open a dialogue on stockholder priorities and concerns relating to sustainability
We reached out to stockholders who expressed an interest in sustainability topics based on prior conversations, representing 37% of our shares outstanding, and conducted calls with investors representing approximately 19% of our shares outstanding
These engagements reflect the deep commitment of our Board and executive leadership team to creating long-term stockholder value through active management of prioritized sustainability issues
We published our 2020 Sustainability Report that aligns with both Sustainability Accounting Standards Board (“SASB”) and Global Reporting Initiative (“GRI”) standards

2020 PROXY STATEMENT     11


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PROXY SUMMARY

                                                                          
CORPORATE GOVERNANCE BEST PRACTICES

Robust year-round Board-led stockholder engagement program that informs Board decisions
Independent Board leadership, including a Lead Independent Director with clearly defined roles and responsibilities
Commitment to Board diversity, achieving 50% female representation on our Board in fiscal 2020
All directors elected annually by a simple majority of votes cast
Seven of eight director nominees are independent
Director retirement policy
Active Board oversight of strategic planning and risk management
Board-level oversight of corporate responsibility, sustainability and human capital management
Succession planning for directors, our Chief Executive Officer and other key officers
Annual third-party facilitated Board and committee self-evaluations
Individual assessments of directors
Code of conduct for directors, officers and employees
All non-employee directors are subject to stock ownership requirements
All executive officers achieved stock ownership requirements pursuant to our guidelines

FISCAL 2020 EXECUTIVE COMPENSATION HIGHLIGHTS

                                                                          
FISCAL 2020 PAY ALIGNED WITH PERFORMANCE

Our overriding executive compensation philosophy is clear and consistent — we pay for performance. Our executives are accountable for our performance and the operations they manage and are compensated primarily based on that performance.

Pay for Performance Design

The charts below illustrate the mix of fiscal 2020 fixed pay (annualized base salary as in effect at the end of fiscal 2020) and variable or performance-based pay (annual Short-Term Incentive (“STI”) target and annual Long-Term Incentive (“LTI”) awards based on the target award value approved by the Compensation and Talent Committee) for our former Chief Executive Officer, Stephen D. Milligan, and our other named executive officers (on average). Our current Chief Executive Officer, Mr. Goeckeler, received transition awards in fiscal 2020 in connection with his appointment as our Chief Executive Officer in March 2020, and his annual STI target was prorated for fiscal 2020. Therefore, his compensation arrangements for fiscal 2020 were not comparable to our other named executive officers and are not included in the charts below. For a summary of Mr. Goeckeler’s fiscal 2020 compensation, please refer to our discussion on pages 52 to 55 in the section entitled “Executive Compensation—Compensation Discussion and Analysis—Chief Executive Officer Transition.”

  Chief Executive Officer Pay Mix                       Named Executive Officer Average
Pay Mix (other than Chief Executive
Officer)
 
 

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PROXY SUMMARY

                                                                          
2020 STOCKHOLDER ENGAGEMENT

           
Fall     Winter     Spring     Summer
October 2019: Active Board-led engagement with over 20% of our stockholders to discuss the executive compensation and governance items to be considered at our 2019 annual meeting of stockholders, in addition to sustainability and other areas of investor focus
January/February 2020: Reached out to investors representing 37% of shares outstanding and conducted engagements with stockholders representing 19% of shares outstanding to specifically discuss sustainability-related focus areas and help inform our go-forward practices
March 2020: Reviewed feedback and vote results from 2019 annual meeting and stockholder feedback from January and February 2020 and discussed possible changes to governance, compensation and sustainability practices
May 2020: Reached out to investors representing 60% of shares outstanding to schedule calls to solicit feedback on our sustainability initiatives and potential executive compensation changes to our fiscal 2021 program being considered by the Compensation and Talent Committee
July/August 2020: Conducted meetings with 14 of our top 25 holders, as well as several other holders composed of investors with a variety of investment styles and geographic locations. Our Chair of the Compensation and Talent Committee, an independent director, led several meetings with stockholders, and shared stockholder feedback with the Compensation and Talent and Governance Committees, as well as our Board

As a continuation of our robust Board-driven stockholder engagement program, over the past year, we reached out to over 30 of our stockholders representing approximately 60% of shares outstanding. Our engagement team conducted calls with 14 of our top 25 holders, as well as several other holders, composed of investors with a variety of investment styles and geographic locations. The remainder of the stockholders we contacted confirmed that a follow-up discussion was not necessary at that time or did not respond. Our Chair of the Compensation and Talent Committee, an independent director, led several of these stockholder calls. In addition, we added a new cycle of stockholder engagement this year specifically focused on sustainability topics, reaching out to stockholders representing approximately 37% of shares outstanding and conducting calls with investors representing approximately 19% of shares outstanding.

BY THE NUMBERS: SUMMER 2020 STOCKHOLDER ENGAGEMENT EFFORT

We reached out
to stockholders
representing over:
Our engagement
included:

2020 PROXY STATEMENT     13


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PROXY SUMMARY

While our discussions with investors covered a variety of topics, there were a few key areas of focus in our conversations:

updates to Board composition and Board and committee leadership roles, as well as Board succession;
leadership transition with Mr. Goeckeler’s appointment as our Chief Executive Officer following a comprehensive search process;
executive compensation philosophy and program design, including Mr. Goeckeler’s compensation package and how investor feedback drove recent program enhancements;
Board oversight and guidance during the COVID-19 pandemic and any long-term changes to our practices or operations that may result from the pandemic;
culture, diversity and inclusion at Western Digital, including recent developments and enhanced disclosure in our 2020 Sustainability Report; and
with respect to our specific sustainability outreach, our ongoing progress and disclosures regarding sustainability and human capital management.

Stockholders generally provided positive feedback on our response to the COVID-19 pandemic, the diversity of our Board, which is 50% female, recent Board leadership transitions and ongoing Board refreshment efforts and sustainability initiatives. For a discussion on stockholder feedback relating to compensation matters, please refer to page 50 in the section entitled “Executive Compensation—Compensation Discussion and Analysis.” These views were shared with our Board and its committees, where applicable, for their consideration.

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PROXY SUMMARY

                                                                          
CORPORATE RESPONSIBILITY AND SUSTAINABILITY

We believe responsible and sustainable business practices support our long-term success as a company. Certainly, those practices help keep our communities and our environment vibrant and healthy. But they also lead us to more efficient and resilient business operations. They help us meet our customers’ efficiency targets. They reduce risks of misconduct and legal liability. They enhance the reliability of our supply chain. And they improve the health, well-being, engagement and productivity of our employees. We believe that being an industry leader is not just about having talented employees or innovative products. It is also about doing business the right way, every day. That is why our commitment to sound corporate responsibility is deeply rooted in all aspects of our business.

We are happy to share more details about our recent progress in this area through our 2020 Sustainability Report located on our Corporate Sustainability page at www.westerndigital.com. Our 2020 Sustainability Report topics were selected based on an updated 2020 materiality assessment, which incorporated input from investors, customers and other stakeholders, as well as strategic priorities. This is our first report that aligns with both SASB and GRI standards. As further described below, the Governance Committee oversees our corporate responsibility and sustainability policies and programs pursuant to its charter. Below are some highlights from our 2020 Sustainability Report:

 
Human Rights and Labor Energy and Emissions Lifecycle Impacts
Respecting human rights is a foundational aspect of how we do business. We work diligently to foster a working environment where Western Digital employees and employees of our suppliers can be treated with respect and dignity, and are provided with fair and safe working conditions.
__________
Published a new Global Human Rights Policy, applicable both to our own operations and to our supply chain
__________
Expanded our disclosure of human rights and labor management practices in our Modern Slavery Compliance Statement
__________
Initiating a global human rights impact assessment in fiscal 2021
We aim to do our part in helping build an environmentally sustainable future by reducing our energy consumption, investing in conservation projects and managing our impacts on the environment.
__________
44% decrease in manufacturing energy intensity (kWh/PB) since 2016
__________
Developing robust Scope 3 emissions data in fiscal 2021 in preparation for evaluation of targets
__________
Currently exceeding our target of 1.5% annual reduction in energy usage
We care for our world at every step, everywhere we operate. Since our products are used widely throughout the world, we’re committed to delivering products designed and manufactured with long-term sustainability in mind.
__________
Product takeback program launched in April 2020 to encourage and facilitate product recycling
__________
Performing several ISO-conformant lifecycle assessments in fiscal 2021 to evaluate the impacts of our products
__________
730,000 kg less paper used annually in packaging (compared to 2010 base year)
   
 
Diversity and Inclusion Health and Safety/COVID-19 Integrity
Our people are Western Digital’s most valuable resource. We believe we can achieve the best business outcomes by empowering our diverse and talented employees to make an impact, together.
__________
Recognized for the second consecutive year by Women’s Choice Award as a Best Company for Millennials, and received a perfect score from Human Rights Campaign in their Corporate Equality Index
__________
Promoted a Global Anti-Harassment and Discrimination Policy with associated training worldwide
__________
Led in-person training on unconscious bias with members of our management team in the U.S.
As a company that has positioned itself to be the world’s leading data infrastructure company, we remained committed to provide essential infrastructure to support our world community during this worldwide pandemic. We did so with the health and safety of our employees as our first priority.
__________
Promptly transitioned all possible employees to continue work from home
__________
Early adopter of PPE and temperature screening at our worldwide factories to protect essential employees and anyone visiting our sites
__________
Provided emergency leave for employees impacted by COVID-19
__________
Offered premium pay for hourly essential workers
As a global company operating across a wide range of geographies, Western Digital is committed to doing business fairly and legally. We set a consistent tone across our organization to form our global culture of integrity.
__________
Recognized by Ethisphere Institute for the 2nd consecutive year as one of the World’s Most Ethical Companies
__________
100% of operations assessed for risks related to corruption since 2016
__________
Zero reportable breaches of personal data in 2019 or to date in 2020

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Corporate Governance Matters

PROPOSAL 1 ELECTION OF DIRECTORS
  
Our Board of Directors recommends a vote FOR each of the eight director nominees named in this Proxy Statement.
All directors elected annually by a simple majority of votes cast
Independent Board leadership, including a Lead Independent Director with clearly defined roles and responsibilities
Seven of eight director nominees are independent
     

Our Board of Directors is presenting eight nominees for election as directors at the Annual Meeting. Each of the nominees is currently a member of our Board and, other than Mr. Goeckeler, who joined our Board in March 2020, and Ms. Price, who rejoined our Board in June 2020, was elected to our Board at the 2019 annual meeting of stockholders. Each director elected at the Annual Meeting will serve until our 2021 annual meeting of stockholders and until a successor is duly elected and qualified. Each of the nominees has consented to be named in this Proxy Statement and to serve as a director if elected. If any nominee is unable or unwilling for good cause to stand for election or serve as a director if elected, the persons named as proxies may vote for a substitute nominee designated by our existing Board of Directors, or our Board may choose to reduce its size.

                                                                          
VOTE REQUIRED FOR APPROVAL

Each director nominee will be elected as a director if the nominee receives the affirmative vote of a majority of the votes cast with respect to his or her election (in other words, the number of shares voted “for” a director must exceed the number of votes cast “against” that director).

If a nominee who is serving as a director is not elected at the Annual Meeting by the requisite majority of votes cast, Delaware law provides that the director would continue to serve on our Board of Directors as a “holdover director.” However, under our By-laws, any incumbent director who fails to be elected must offer to tender his or her resignation to our Board. If the director conditions his or her resignation on acceptance by our Board, the Governance Committee will then make a recommendation to our Board on whether to accept or reject the resignation or whether other action should be taken. Our Board will act on the Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in our Board’s or the Governance Committee’s decision. Any nominee who was not already serving as a director and is not elected at the Annual Meeting by a majority of the votes cast with respect to such director’s election would not be elected to our Board.

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CORPORATE GOVERNANCE MATTERS

NOMINEES FOR ELECTION

Below is information about the experience and other key qualifications and attributes of each of our Board’s eight director nominees.

KIMBERLY E. ALEXY
INDEPENDENT

 

AGE
50

DIRECTOR SINCE
November 2018

COMMITTEES
Audit (Chair)
Executive
Governance

PROFESSIONAL EXPERIENCE
Ms. Alexy is a seasoned financial services professional with more than 20 years of experience in capital markets, corporate finance and investments. She founded Alexy Capital Management, a private investment fund, in 2005 and serves as its principal.
Previously, Ms. Alexy served as a sell-side equity research analyst on Wall Street for nearly a decade, specializing in the technology and corporate finance industries at Prudential Securities, Lehman Brothers and Wachovia Bank.
Within the last five years, Ms. Alexy served as a director of Microsemi Corporation and CalAmp Corp.
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
Alteryx, Inc.
FireEye, Inc.
Five9, Inc.
 
BOARD SKILLS, QUALIFICATIONS AND EXPERTISE
Ms. Alexy’s deep expertise in finance, securities and corporate governance at several financial institutions and publicly held companies is directly relevant to our business. Her service on numerous public company boards of directors, including having served as a chair of the audit or governance committees of many of those boards, provides our Board with valuable insights and perspectives. We believe these experiences, qualifications, attributes and skills qualify her to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS
Audit Committee Chair
Ms. Alexy’s financial skills and prior experience as a financial analyst for nearly a decade and her service as a member of several public company audit committees qualify her as an audit committee financial expert under SEC rules. In addition, Ms. Alexy contributes her specialized knowledge of cybersecurity issues, which includes a CERT Certificate in Cybersecurity Oversight for corporate directors issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University.

Governance Committee Member
Ms. Alexy has substantial governance experience as the chair of the nominating and corporate governance committee at Alteryx and as a director of a number of public companies.

MARTIN I. COLE
INDEPENDENT

 

AGE
64

DIRECTOR SINCE
December 2014

COMMITTEES
Compensation and Talent (Chair)
Audit

PROFESSIONAL EXPERIENCE
Mr. Cole served as the chief executive of the technology group of Accenture plc, a leading global management consulting and professional services company, with responsibility for the full range of Accenture’s technology consulting and outsourcing solutions and delivery capabilities, including its global delivery network, from March 2012 until he retired in August 2014. Mr. Cole currently serves as a senior adviser to 3i Group plc.
Previously, Mr. Cole served as the chief executive of Accenture’s communications, media and technology operating group from September 2006 to March 2012, the chief executive of its government operating group from September 2004 to August 2006, the managing partner of its outsourcing and infrastructure delivery group from September 2002 to August 2004 and in a variety of capacities at Accenture since 1980.
Within the last five years, Mr. Cole served as a director of Cloudera, Inc. and as its board chairman. He also served as its interim chief executive officer from July 2019 to January 2020.
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
The Western Union Company
 
BOARD SKILLS, QUALIFICATIONS AND EXPERTISE
Mr. Cole brings to our Board extensive senior executive leadership experience across a variety of business sectors and geographies. This demonstrates his ability to provide strategic advice and lead multiple teams across a variety of business sectors, and provides him with wide-ranging insights, including relating to technology solutions, which are an important part of our business. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS
Compensation and Talent Committee Chair
Mr. Cole has significant experience establishing and overseeing executive compensation programs as a former executive, chief executive officer and as a board and compensation committee member at other public companies.

Audit Committee Member
Mr. Cole’s financial skills and prior experience as a chief executive qualify him as an audit committee financial expert under SEC rules.

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CORPORATE GOVERNANCE MATTERS

KATHLEEN A. COTE
LEAD INDEPENDENT DIRECTOR

 

AGE
71

DIRECTOR SINCE
January 2001

COMMITTEES
Compensation and Talent
Governance

PROFESSIONAL EXPERIENCE
Ms. Cote was the chief executive officer of Worldport Communications, Inc., a European provider of Internet managed services, from May 2001 to June 2003.
Prior to that, Ms. Cote served as president of Seagrass Partners, a provider of expertise in business planning and strategic development for early stage companies, from September 1998 to May 2001. From November 1996 to January 1998, she served as president and chief executive officer of Computervision Corporation, an international supplier of product development and data management software.
Within the last five years, Ms. Cote served as a director of GT Advanced Technologies, Inc.
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
VeriSign, Inc.
 
BOARD SKILLS, QUALIFICATIONS AND EXPERTISE
Ms. Cote is a seasoned business executive with numerous years of experience overseeing global companies focused on technology and operations, which is directly relevant to our business. She has served on numerous public company boards of directors, including on the audit and governance committees of those boards, providing our Board with valuable board-level experience. Her tenure on our Board also provides us with specific expertise and insight into our business and the transformations it has undergone. We believe these experiences, qualifications, attributes and skills qualify her to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS
Compensation and Talent Committee Member
Ms. Cote has significant experience establishing and overseeing executive compensation programs as a former chief executive officer and as a public company board member.

Governance Committee Member
Ms. Cote has substantial governance experience as a director of VeriSign and as a former director of a number of public companies.

TUNÇ DOLUCA
INDEPENDENT

 

AGE
62

DIRECTOR SINCE
August 2018

COMMITTEES
Compensation and Talent

PROFESSIONAL EXPERIENCE
Mr. Doluca is the president and chief executive officer of Maxim Integrated, which designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits.
Prior to being named Maxim Integrated’s president and chief executive officer in January 2007, Mr. Doluca served as its group president from May 2005 to January 2007, senior vice president from 2004 to 2005 and vice president from 1994 to 2004. Prior to 1994, Mr. Doluca served in a number of integrated circuit development positions at Maxim Integrated since joining the company in 1984.
Mr. Doluca is a board member of the Semiconductor Industry Association and served as its chairman from 2017 to 2018.
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
Maxim Integrated
 
BOARD SKILLS, QUALIFICATIONS AND EXPERTISE
Mr. Doluca brings to our Board over 30 years of executive leadership and technical experience in the semiconductor industry, which provides our Board with valuable perspectives directly relevant to our business. As a seasoned chief executive officer and director of a large public technology company, he has expertise in corporate strategy, financial management, operations, marketing and research and development, which are all critical to achieving our strategic objectives. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS
Compensation and Talent Committee Member
Mr. Doluca has significant experience establishing and overseeing executive compensation programs as the chief executive officer of Maxim Integrated.

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CORPORATE GOVERNANCE MATTERS

DAVID V. GOECKELER
CHIEF EXECUTIVE OFFICER

 

AGE
58

DIRECTOR SINCE
March 2020

COMMITTEES
Executive (Chair)

PROFESSIONAL EXPERIENCE
Mr. Goeckeler has served as our Chief Executive Officer since March 2020.
Prior to that, Mr. Goeckeler served as executive vice president and general manager of the networking and security business of Cisco, Inc., a large, multi-national technology company, from July 2017 to March 2020. From May 2016 to August 2017, Mr. Goeckeler served as senior vice president and general manager for Cisco’s networking and security business group, and served as senior vice president and general manager for its security business from November 2014 to May 2016.
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
None
 
BOARD SKILLS, QUALIFICATIONS AND EXPERTISE
Mr. Goeckeler’s 20 years of experience in technical and leadership positions at Cisco, including more than six years in senior management positions there, and his current position as our Chief Executive Officer, contributes indispensable knowledge and expertise to our Board. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS
Executive Committee Chair
Mr. Goeckeler serves as our Chief Executive Officer and has held numerous senior executive roles at Cisco, most recently overseeing its networking and security business.

MATTHEW E. MASSENGILL
INDEPENDENT CHAIRMAN OF THE BOARD

 

AGE
59

DIRECTOR SINCE
January 2000

COMMITTEES
Executive

PROFESSIONAL EXPERIENCE
Mr. Massengill served as the President of Western Digital Corporation from January 2000 to January 2002, Chief Executive Officer from January 2000 to October 2005 and Chairman of the Board from November 2001 to March 2007.
Prior to that, Mr. Massengill served as Western Digital’s Chief Operating Officer from October 1999 to January 2000 and in various executive capacities since joining our company in 1985.
Within the last five years, Mr. Massengill served as a director of GT Advanced Technologies, Inc. and Microsemi Corporation.
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
None
 
BOARD SKILLS, QUALIFICATIONS AND EXPERTISE
Mr. Massengill’s many years of service to Western Digital as an executive and Board member provide our Board with extensive and significant experience directly relevant to our business. As our former Chief Executive Officer, he has a deep understanding of our operations, provides valuable knowledge to our Board on the issues we face to achieve our strategic objectives and has extensive international experience. His prior service on numerous other public company boards of directors also provides our Board with important board-level perspective. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS
Executive Committee Member
Mr. Massengill has extensive and significant experience as an executive, including as a former Chief Executive Officer, Chief Operating Officer and Board member of our company.

2020 PROXY STATEMENT     19


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CORPORATE GOVERNANCE MATTERS

PAULA A. PRICE
INDEPENDENT

 

AGE
58

DIRECTOR SINCE
June 2020

COMMITTEES
Audit

PROFESSIONAL EXPERIENCE
Ms. Price currently serves as an advisor to Macy’s, Inc., an omni-channel retailer that operates more than 800 stores, after serving as its executive vice president and chief financial officer from July 2018 to May 2020. Ms. Price has also served as a visiting executive for Harvard Business School since July 2018.
Prior to joining Macy’s, Ms. Price was a senior lecturer for Harvard Business School in the Accounting and Management Unit from July 2014 to July 2018. From May 2009 to January 2014, Ms. Price served as executive vice president and chief financial officer at Ahold USA, a retailer that operates more than 700 supermarkets and an online grocery delivery service, where she was responsible for finance and accounting, strategic planning, real estate and information technology. From July 2006 to August 2008, she was the senior vice president, controller and chief accounting officer at CVS Caremark and from August 2002 to September 2005, she was the senior vice president and chief financial officer for the institutional trust services division of JPMorgan Chase. Prior to that, she held several other senior management positions in the U.S. and the U.K. in the financial services and consumer products industries at Prudential Insurance Co. of America, Diageo and Kraft Foods.
Within the last five years, Ms. Price served as a director of Western Digital (from July 2014 to February 2019) and Dollar General Corporation.
Ms. Price is a certified public accountant.
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
Accenture plc
Bristol-Myers Squibb Company
DaVita Inc.
 
BOARD SKILLS, QUALIFICATIONS AND EXPERTISE
Ms. Price’s numerous years of experience as a certified public accountant, chief financial officer and chief accounting officer provide our Board with valuable experience and insight into accounting and finance matters. She also brings expertise and knowledge of the complexities of growing and managing a global business. She has extensive experience overseeing and integrating merger and acquisition transactions at the executive level, which is experience highly valued by our Board of Directors. We believe these experiences, qualifications, attributes and skills qualify her to serve as a member of our Board.

COMMITTEE EXPERTISE HIGHLIGHTS
Audit Committee Member
Ms. Price’s years of experience as a chief financial officer, chief accounting officer and certified public accountant qualify her as an audit committee financial expert under SEC rules.

STEPHANIE A. STREETER
INDEPENDENT

 

AGE
63

DIRECTOR SINCE
November 2018

COMMITTEES
Governance (Chair)
Audit

PROFESSIONAL EXPERIENCE
Ms. Streeter served as the chief executive officer of Libbey Inc., a producer of glass tableware and other tabletop products, from 2011 to 2016, where she developed and implemented a new corporate strategy and reconstructed the company’s balance sheet, manufacturing network and cost base.
Prior to that, Ms. Streeter served as the acting chief executive officer of the United States Olympic Committee from 2009 to 2010 and served on its board of directors from 2004 to 2009. Previously, Ms. Streeter held numerous senior management positions at Banta Corporation, a global technology, printing and supply-chain management company, where she served as chairman, president and chief executive officer, and at Avery Dennison Corporation, a global materials science and manufacturing company.
Within the last five years, Ms. Streeter served as a director of Olin Corporation.
OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS
Goodyear Tire & rubber Company
Kohl’s Corporation
 
BOARD SKILLS, QUALIFICATIONS AND EXPERTISE
Ms. Streeter brings to our Board extensive senior executive leadership experience overseeing companies with manufacturing and operations across the globe. She has served on several public company boards of directors. We believe these experiences, qualifications, attributes and skills qualify her to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS
Governance Committee Chair
Ms. Streeter has substantial governance experience as a director of Goodyear, as a director and member of the governance and nominating committee of Kohl’s and as a former director and governance committee member of several public companies.
Audit Committee Member
Ms. Streeter’s financial skills and years of experience as a chief executive officer and as an audit committee chair at Kohl’s qualify her as an audit committee financial expert under SEC rules.

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CORPORATE GOVERNANCE MATTERS

                                                                          
DIRECTOR MEETING ATTENDANCE

During fiscal 2020, our Board of Directors met 13 times. Each of the directors who served during fiscal 2020 attended 75% or more of the aggregate number of Board meetings and meetings of our Board committees on which he or she served during fiscal 2020. Our Board strongly encourages each director to attend our annual meeting of stockholders. All of our directors standing for election at the 2019 annual meeting of stockholders were in attendance.

Strong Director Engagement

Average director attendance at fiscal 2020 Board and committee meetings

Board Audit
96% 97%
Compensation
and Talent
                     Governance
97%
98%
Executive
100%

Over 96% Board and committee meeting aggregate attendance in fiscal 2020.

                                                                          
DIRECTOR SKILLS AND EXPERTISE

Our Board of Directors believes our nominees’ breadth of experience and their mix of qualifications, attributes, tenure and skills strengthen our Board’s independent leadership and effective oversight of management.

87.5% Independent

50% Women

7.2 Years Average Tenure(1)

       

INDEPENDENCE

GENDER

AGE

TENURE(1)


(1) Calculation includes Ms. Price’s tenure as a director from July 2014 to February 2019.

Women in Board Leadership Roles

Lead Independent Director               Audit Committee Chair               Governance Committee Chair

2020 PROXY STATEMENT     21


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CORPORATE GOVERNANCE MATTERS

Director Nominee Skills and Experience

EXECUTIVE EXPERIENCE
Experience in executive-level positions is important to gain a practical understanding of complex organizations, corporate governance, operations, talent development, strategic planning and risk management

SEMICONDUCTOR EXPERIENCE
Experience in the semiconductor industry is important in understanding our technology, products and operations, which is critical for our future growth
DATA INFRASTRUCTURE EXPERIENCE
Experience in data infrastructure, including related software, hardware and data centers, storage, protection and management is important to understanding the issues and opportunities facing our business
MANUFACTURING
Experience with sophisticated, large-scale manufacturing increases our Board’s understanding of our distribution, supply chain and manufacturing facilities
OPERATIONS AND INFRASTRUCTURE
Experience with complex, global operations assists our Board in fostering our operational excellence and adapting to evolving market conditions
TECHNOLOGY/INNOVATION
Experience in researching, developing or designing leading-edge technologies is critical for the continued growth and innovation of our business
GLOBAL EXPERIENCE
Experience with businesses with substantial international operations provides critical business and cultural perspectives to our Board and is important in understanding the strategic opportunities and risks relating to our business
SALES/MARKETING
Experience developing and executing on strategies to grow sales and market share assists our Board in advising management as we seek to develop new products and new markets for our products
FINANCE AND ACCOUNTING
Experience overseeing accounting and financial reporting is key to our Board’s oversight of our financial reporting process and internal controls
CYBERSECURITY
Experience understanding and managing information technology and cybersecurity threats is increasingly important to mitigate risks to our business
RISK MANAGEMENT
Experience in assessing and managing enterprise risks is critical to our Board’s role in overseeing our enterprise risk management program
CORPORATE SUSTAINABILITY AND RESPONSIBILITY
Experience in assessing corporate social responsibility initiatives is critical to our Board’s role in overseeing our corporate responsibility and sustainability policies and programs
STRATEGY PLANNING Experience
setting and executing long-term corporate strategy is critical as we continue to grow our business
HUMAN CAPITAL MANAGEMENT
Experience in human capital management in large organizations assists our Board in overseeing succession planning, talent development and our executive compensation program

indicates “Technical or Managerial Expertise” (expertise derived from direct and hands-on experience or direct managerial experience with the subject matter during his/her career)
indicates “Working Knowledge” (experience derived through: (i) board or relevant committee membership at our company or another public company; (ii) executive leadership or board membership of a public company in the relevant industry; or (iii) consulting, investment banking, private equity investing or legal experience)

                                                                                                   
                                     

Our Board is highly engaged and well qualified, and all director nominees possess the skills and experiences necessary to oversee our evolving and growing business.

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CORPORATE GOVERNANCE MATTERS

                                                                          
DIRECTOR INDEPENDENCE

Our Board of Directors has reviewed and discussed information provided by the directors and our company with regard to each director’s business and personal activities, as well as those of the director’s immediate family members, as they may relate to our company or our management. The purpose of this review is to determine whether there are any transactions or relationships that would be inconsistent with a determination that a director is independent under the listing standards of the Nasdaq Stock Market. Based on its review, our Board has affirmatively determined that, except for serving as a member of our Board of Directors, none of the non-employee director nominees for the Annual Meeting (Messrs. Cole, Doluca or Massengill, or Mses. Alexy, Cote, Price or Streeter) has any relationship that, in the opinion of our Board, would interfere with such director’s exercise of independent judgment in carrying out his or her responsibilities as a director, and that each such director qualifies as “independent” as defined by the listing standards of the Nasdaq Stock Market. Our Board also previously affirmatively determined that each of the other individuals who served as a non-employee director during any part of fiscal 2020 (Messrs. DeNero, Lambert and Lauer) qualified as “independent” as defined by the listing standards of the Nasdaq Stock Market during the period of his service in fiscal 2020. Mr. Goeckeler is currently a full-time, executive-level employee of our company and, therefore, is not “independent” as defined by the listing standards of the Nasdaq Stock Market.

DIRECTOR NOMINATIONS AND BOARD REFRESHMENT

                                                                          
KEY DIRECTOR CRITERIA

The Governance Committee has adopted a policy regarding critical factors to be considered in selecting director nominees, which include: the nominee’s personal and professional ethics, integrity and values; the nominee’s intellect, judgment, foresight, skills, experience (including understanding of marketing, finance, our technology and other elements relevant to the success of a company such as ours) and achievements, all of which are viewed in the context of the overall composition of our Board of Directors; the absence of any conflict of interest (whether due to a business or personal relationship) or legal impediment to, or restriction on, the nominee serving as a director; having a majority of independent directors on our Board; and representation of the long-term interests of our stockholders as a whole and a diversity of backgrounds and expertise, which are most needed and beneficial to our Board and our company. Although our Board of Directors has not established specific diversity guidelines, the Governance Committee is committed to Board diversity and takes into account the personal characteristics, experience and skills of current and prospective directors, including gender, race and ethnicity, to ensure that a broad range of perspectives is represented on our Board to effectively perform its governance role and oversee the execution of our strategy.

As further detailed below, the Governance Committee annually evaluates the size and composition of our Board and assesses whether the composition appropriately aligns with our evolving business and strategic needs. The focus of this exercise is on ensuring that our Board is composed of directors who possess a wide variety of relevant skills, expertise and backgrounds, bring diverse viewpoints and perspectives and effectively represent the long-term interests of stockholders. Through this process, our Board, upon the recommendation of the Governance Committee, develops a list of qualifications and skills sought in director candidates. Specific director criteria evolve over time to reflect our strategic and business needs and the changing composition of our Board.

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DIRECTOR NOMINATION PROCESS

          Assess
      Our Board of Directors, led by the Governance Committee, evaluates the size and composition of our Board at least annually, giving consideration to evolving skills, perspective and experience needed on our Board to perform its governance and oversight role as the business transforms and the underlying risks change over time. Among other factors, the Governance Committee considers our strategy and needs, as well as our directors’ skills, expertise, experiences, gender, race, ethnicity, tenure and age. As part of the process, our Board assesses the skills and expertise of our current directors to then develop criteria for potential candidates to be additive and complementary to the overall composition of our Board. Specific director criteria evolve over time to reflect our strategic and business needs and the changing composition of our Board. Please see the section entitled “Board Processes and Policies—Board Evaluation” below for additional information on our Board’s self-assessment process.

          Identify
      The Governance Committee is authorized to use any methods it deems appropriate for identifying candidates for membership on our Board of Directors, including considering recommendations from incumbent directors, management or stockholders and engaging the services of an outside search firm to identify suitable potential director candidates.

          Evaluate
      The Governance Committee has established a process for evaluating director candidates that it follows regardless of who recommends a candidate for consideration. Through this process, the Governance Committee considers a candidate’s skills and experience and other available information regarding each candidate. For incumbent director candidates, this process includes consideration of the results of the annual Board and committee evaluations. See the section entitled “Board Processes and Policies—Board Evaluation” below. Following the evaluation, the Governance Committee recommends nominees to our Board.

          Nominate
      Our Board of Directors considers the Governance Committee’s recommended nominees, analyzes their independence and qualifications and selects nominees to be presented to our stockholders for election to our Board.

                                                                          
STOCKHOLDER NOMINATIONS AND RECOMMENDATIONS OF DIRECTOR CANDIDATES

The Governance Committee may receive recommendations for director candidates from our stockholders. Additionally, our stockholders may nominate director candidates for inclusion in our proxy materials pursuant to the proxy access right set forth in our By-laws or may nominate directors for election at future annual meetings of our stockholders pursuant to the advance notice provisions set forth in our By-laws, in each case as described further below.

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Stockholder Recommendations of Director Candidates

A stockholder may recommend a director candidate to the Governance Committee by delivering a written notice to our Secretary at our principal executive offices and including the following in the notice: the name and address of the stockholder as they appear on our books or other proof of share ownership; the class and number of shares of our common stock beneficially owned by the stockholder as of the date the stockholder gives written notice; a description of all arrangements or understandings between the stockholder and the director candidate and any other person(s) pursuant to which the recommendation or nomination is to be made by the stockholder; the name, age, business address and residence address of the director candidate and a description of the director candidate’s business experience for at least the previous five years; the principal occupation or employment of the director candidate; the class and number of shares of our common stock beneficially owned by the director candidate; the consent of the director candidate to serve as a member of our Board of Directors if appointed or elected; and any other information required to be disclosed with respect to a director nominee in solicitations for proxies for the election of directors pursuant to applicable rules of the SEC.

The Governance Committee may require additional information as it deems reasonably required to determine the eligibility of the director candidate to serve as a member of our Board of Directors. Stockholders recommending candidates for consideration by our Board in connection with the next annual meeting of stockholders should submit their written recommendation no later than June 1 of the year of that meeting.

The Governance Committee will evaluate director candidates recommended by stockholders for election to our Board in the same manner and using the same criteria as it uses for any other director candidate. If the Governance Committee determines that a stockholder-recommended candidate is suitable for membership on our Board of Directors, it will include the candidate in the pool of candidates to be considered for nomination upon the occurrence of the next vacancy on our Board or in connection with the next annual meeting of stockholders.

Proxy Access

Our By-laws provide for proxy access, a means for our stockholders to include stockholder-nominated director candidates in our proxy materials for annual meetings of stockholders. A stockholder, or group of not more than 20 stockholders (collectively, an “eligible stockholder”), meeting specified eligibility requirements is generally permitted to nominate the greater of: (i) two director nominees; and (ii) 20% of the number of directors on our Board. In order to be eligible to use the proxy access process, an eligible stockholder must, among other requirements, have owned 3% or more of our outstanding common stock continuously for at least three years and deliver written notice of the nomination to our Secretary in the manner described in Section 2.14 of our By-laws and within the time periods set forth in this Proxy Statement in the section entitled “Additional Information—General Information About the Annual Meeting—Submission of Stockholder Proposals and Director Nominations.” Use of the proxy access process to submit stockholder nominees is subject to additional eligibility, procedural and disclosure requirements set forth in Section 2.14 of our By-laws.

An individual or group of stockholders representing 3% of outstanding shares for 3 years Has the ability to nominate the greater of 2 nominees or 20% of directors

Other Director Nominations

Stockholders who wish to nominate a person for election as a director in connection with an annual meeting of stockholders (as opposed to making a recommendation to the Governance Committee as described above) and who do not intend for the nomination to be included in our proxy materials pursuant to the proxy access process described above must comply with the advance notice requirement set forth in our By-laws. Pursuant to this advance notice requirement, a stockholder must deliver written notice of the nomination to our Secretary in the manner described in Section 2.11 of our By-laws and within the time periods set forth in this Proxy Statement in the section entitled “Additional Information—General Information About the Annual Meeting—Submission of Stockholder Proposals and Director Nominations.”

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BOARD REFRESHMENT

Our Board of Directors believes that periodic Board refreshment can provide new experiences and fresh perspectives to our Board and is most effective if it is sufficiently balanced to maintain continuity among Board members that will allow for the sharing of historical perspectives and experiences relevant to our company. Our Board seeks to achieve this balance through its director succession planning process and director retirement policy described below. Our Board also utilizes the annual Board and individual director assessment process discussed below under “Board Processes and Policies—Board Evaluation” to help inform its assessment of our Board’s composition and Board refreshment needs. In keeping with our commitment to Board refreshment, we have currently engaged an executive search firm to assist us in identifying and evaluating potential independent director nominees to join our Board of Directors.

Succession Planning

Our Board of Directors is focused on ensuring that it has members with diverse skills, expertise, experience, tenure, age and backgrounds, including gender, race and ethnicity, because a broad range of perspectives is critical to effective corporate governance and overseeing the execution of our strategy. The Governance Committee has developed a long-range succession plan to identify and recruit new directors, and our Board has appointed five new directors in the past three years, including the reappointment of Ms. Price, who previously served on our Board from July 2014 to February 2019. The Governance Committee also plans for the orderly succession of the Chairs of our Board’s committees, providing for their identification and development and the transition of responsibilities.

PASSING OF LEN J. LAUER

Our former Lead Independent Director, Mr. Lauer, unexpectedly passed away in April 2020. Mr. Lauer also served as the Compensation and Talent Committee Chair and Governance Committee Chair. Aided by our succession planning process, our Board of Directors acted quickly to determine appropriate successors for Mr. Lauer’s leadership roles after evaluating the skills and experience of its members. Our Board appointed Ms. Cote as Lead Independent Director, Mr. Cole as Chair of the Compensation and Talent Committee and Ms. Streeter as Chair of the Governance Committee. In addition, Ms. Alexy was appointed to replace Mr. Cole as a member of the Governance Committee.

Ms. Cote’s deep executive experience, expertise in corporate governance and public company oversight and almost 20 years of service on our Board positions her well for our Lead Independent Director role. Mr. Cole’s experience setting and overseeing executive compensation in his prior roles as a chief executive officer and as a board member and compensation committee member at other public companies, as well as his understanding of our company and strategy from his six years of service on our Board, makes him well-qualified to serve as our Compensation and Talent Committee Chair. Ms. Streeter chaired the CEO Search Committee, leading the comprehensive process that resulted in the hiring of Mr. Goeckeler in March 2020. Her service on several public company boards and governance committees provide her corporate governance expertise, which, combined with her service on the Governance Committee for the past two years, makes her well qualified to serve as our Chair of the Governance Committee.

APPOINTMENT OF PAULA A. PRICE

Ms. Price rejoined our Board of Directors in June 2020 and was appointed as a member of the Audit Committee. Ms. Price previously served on our Board from July 2014 to February 2019. Ms. Price brings more than 30 years of financial and operational experience from her service for some of the world’s most prominent retail brands. Ms. Price originally stepped down from our Board due to increased commitments as the chief financial officer of Macy’s, Inc. Now that she has transitioned out of that role, she returns to our Board with additional retail knowledge and experience, which is highly beneficial to us as retail is an important aspect of our overall strategy.

Retirement Policy

To help facilitate the periodic refreshment of our Board of Directors, our Corporate Governance Guidelines provide that no director shall be nominated for re-election after the director has reached the age of 72, unless our Board determines in a particular instance that longer tenure is in the best interests of our company and our stockholders.

In accordance with our retirement policy, Ms. Cote will reach retirement age in 2021.

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BOARD’S ROLE AND RESPONSIBILITIES

                                                                          
STOCKHOLDER ENGAGEMENT

Our Board of Directors and management are committed to regular engagement with our stockholders and soliciting their views and input on important performance, executive compensation, governance, environmental, social, human capital management and other matters.

Board-Driven Engagement. In addition to the Governance Committee’s oversight of the stockholder engagement process and the periodic review and assessment of stockholder input, our directors also engage directly with our stockholders by periodically participating in stockholder outreach, as appropriate.
Year-Round Engagement and Board Reporting. Our executive management members and directors, together with our investor relations and legal teams, conduct outreach to stockholders throughout the year to obtain their input on key matters and keep our management and Board informed about the issues that our stockholders tell us matter most to them.
Transparency and Informed Compensation Decisions and Governance Enhancements. The Compensation and Talent and Governance Committees routinely review our executive compensation design and governance practices and policies, respectively, with an eye towards continual improvement and enhancements. Stockholder input is regularly shared with our Board, its committees and management, facilitating a dialogue that provides stockholders with transparency into our executive compensation design and governance practices and considerations, and informs our company’s enhancement of those practices.

2020 Stockholder Engagement

           
Fall     Winter     Spring     Summer
October 2019: Active Board-led engagement with over 20% of our stockholders to discuss the executive compensation and governance items to be considered at our 2019 annual meeting of stockholders, in addition to sustainability and other areas of investor focus
January/February 2020: Reached out to investors representing 37% of shares outstanding and conducted engagements with stockholders representing 19% of shares outstanding to specifically discuss sustainability-related focus areas and help inform our go-forward practices
March 2020: Reviewed feedback and vote results from 2019 annual meeting and stockholder feedback from January and February 2020 and discussed possible changes to governance, compensation and sustainability practices
May 2020: Reached out to investors representing 60% of shares outstanding to schedule calls to solicit feedback on our sustainability initiatives and potential executive compensation changes to our fiscal 2021 program being considered by the Compensation and Talent Committee
July/August 2020: Conducted meetings with 14 of our top 25 holders, as well as several other holders composed of investors with a variety of investment styles and geographic locations. Our Chair of the Compensation and Talent Committee, an independent director, led several meetings with stockholders, and shared stockholder feedback with the Compensation and Talent and Governance Committees, as well as our Board

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As a continuation of our robust Board-driven stockholder engagement program, over the past year, we reached out to over 30 of our stockholders representing approximately 60% of shares outstanding. Our engagement team conducted calls with 14 of our top 25 holders, as well as several other holders, composed of investors with a variety of investment styles and geographic locations. The remainder of the stockholders we contacted confirmed that a follow-up discussion was not necessary at that time or did not respond. Our Chair of the Compensation and Talent Committee, an independent director, led several of these stockholder calls. In addition, we added a new cycle of stockholder engagement this year specifically focused on sustainability topics, reaching out to stockholders representing approximately 37% of shares outstanding and conducting calls with investors representing approximately 19% of shares outstanding.

BY THE NUMBERS: SUMMER 2020 STOCKHOLDER ENGAGEMENT EFFORT

We reached out
to stockholders
representing over:
Our engagement
included:

While our discussions with investors covered a variety of topics, there were a few key areas of focus in our conversations:

updates to Board composition and Board and committee leadership roles, as well as Board succession;
leadership transition with Mr. Goeckeler’s appointment as our Chief Executive Officer following a comprehensive search process;
executive compensation philosophy and program design, including Mr. Goeckeler’s compensation package and how investor feedback drove recent program enhancements;
Board oversight and guidance during the COVID-19 pandemic and any long-term changes to our practices or operations that may result from the pandemic;
culture, diversity and inclusion at Western Digital, including recent developments and enhanced disclosure in our 2020 Sustainability Report; and
with respect to our specific sustainability outreach, our ongoing progress and disclosures regarding sustainability and human capital management. 

Stockholders generally provided positive feedback on our response to the COVID-19 pandemic, the diversity of our Board, which is 50% female, recent Board leadership transitions and ongoing Board refreshment efforts and sustainability initiatives. For a discussion on stockholder feedback relating to compensation matters, please refer to page 50 in the section entitled “Executive Compensation—Compensation Discussion and Analysis.” These views were shared with our Board and its committees, where applicable, for their consideration.

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CORPORATE RESPONSIBILITY AND SUSTAINABILITY

We believe responsible and sustainable business practices support our long-term success as a company. Certainly, those practices help keep our communities and our environment vibrant and healthy. But they also lead us to more efficient and resilient business operations. They help us meet our customers’ efficiency targets. They reduce risks of misconduct and legal liability. They enhance the reliability of our supply chain. And they improve the health, well-being, engagement and productivity of our employees. We believe that being an industry leader is not just about having talented employees or innovative products. It is also about doing business the right way, every day. That is why our commitment to sound corporate responsibility is deeply rooted in all aspects of our business.

We are happy to share more details about our recent progress in this area through our 2020 Sustainability Report located on our Corporate Sustainability page at www.westerndigital.com. Our 2020 Sustainability Report topics were selected based on an updated 2020 materiality assessment, which incorporated input from investors, customers and other stakeholders, as well as strategic priorities. This is our first report that aligns with both SASB and GRI standards. As further described below, the Governance Committee oversees our corporate responsibility and sustainability policies and programs pursuant to its charter. Below are some highlights from our 2020 Sustainability Report:

           
 
Human Rights and Labor
Respecting human rights is a foundational aspect of how we do business. We work diligently to foster a working environment where Western Digital employees and employees of our suppliers can be treated with respect and dignity, and are provided with fair and safe working conditions.

__________
Published a new Global Human Rights Policy, applicable both to our own operations and to our supply chain

__________
Expanded our disclosure of human rights and labor management practices in our Modern Slavery Compliance Statement

__________
Initiating a global human rights impact assessment in fiscal 2021

Energy and Emissions
We aim to do our part in helping build an environmentally sustainable future by reducing our energy consumption, investing in conservation projects and managing our impacts on the environment.

__________
44% decrease in manufacturing energy intensity (kWh/PB) since 2016

__________
Developing robust Scope 3 emissions data in fiscal 2021 in preparation for evaluation of targets

__________
Currently exceeding our target of 1.5% annual reduction in energy usage

Lifecycle Impacts
We care for our world at every step, everywhere we operate. Since our products are used widely throughout the world, we’re committed to delivering products designed and manufactured with long-term sustainability in mind.

__________
Product takeback program launched in April 2020 to encourage and facilitate product recycling

__________
Performing several ISO-conformant lifecycle assessments in fiscal 2021 to evaluate the impacts of our products

__________
730,000 kg less paper used annually in packaging (compared to 2010 base year)

 
           
 
Diversity and Inclusion
Our people are Western Digital’s most valuable resource. We believe we can achieve the best business outcomes by empowering our diverse and talented employees to make an impact, together.

__________
Recognized for the second consecutive year by Women’s Choice Award as a Best Company for Millennials, and received a perfect score from Human Rights Campaign in their Corporate Equality Index

__________
Promoted a Global Anti-Harassment and Discrimination Policy with associated training worldwide

__________
Led in-person training on unconscious bias with members of our management team in the U.S.

Health and Safety/COVID-19
As a company that has positioned itself to be the world’s leading data infrastructure company, we remained committed to provide essential infrastructure to support our world community during this worldwide pandemic. We did so with the health and safety of our employees as our first priority.

__________
Promptly transitioned all possible employees to continue work from home

__________
Early adopter of PPE and temperature screening at our worldwide factories to protect essential employees and anyone visiting our sites

__________
Provided emergency leave for employees impacted by COVID-19

__________
Offered premium pay for hourly essential workers

Integrity
As a global company operating across a wide range of geographies, Western Digital is committed to doing business fairly and legally. We set a consistent tone across our organization to form our global culture of integrity.

__________
Recognized by Ethisphere Institute for the 2nd consecutive year as one of the World’s Most Ethical Companies

__________
100% of operations assessed for risks related to corruption since 2016

__________
Zero reportable breaches of personal data in 2019 or to date in 2020

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Oversight by Our Board of Directors

Sound corporate responsibility in all aspects of our business is a focus of our Board. The Governance Committee is responsible for assisting our Board in overseeing our corporate responsibility and sustainability policies and programs. The Governance Committee provides Board-level input on our social, environmental and human rights policies and programs. In addition, the Compensation and Talent Committee periodically reviews our human capital management policies, programs and initiatives, including those focusing on culture, diversity and inclusion.

Unified Culture

Our employees drive our success and shape our future. To continue leading the data storage infrastructure industry, we rely on highly skilled individuals to drive our culture of innovation. We work diligently to foster a working environment where all of our employees, regardless of where in the world they are located or what roles they have, can be treated fairly and with respect and dignity, and are provided with safe working conditions. We strive to create an environment where employees feel connected and committed to our mission and vision: to be recognized as the world’s leading data infrastructure company, architecting how data enables the world to solve its biggest challenges.

This was another milestone year for our workforce, as we continued to focus on creating a unified culture that amplifies the best aspects of our three legacy companies and is anchored to our renewed mission and vision. After a robust listening effort across the organization, our executive team officially launched our “Culture Journey” in February 2020, introducing 11 global culture attributes linked to our values that are critical in achieving our mission and vision, including a focus on inclusivity as one of the culture attributes. Since then, our business leaders and employees have been embracing the attributes and bringing them to life.

One of our other culture attributes focuses on giving back to the communities that support our employees and operations. Our Global Giving and Doing program is committed to maintaining Western Digital’s reputation as a good corporate citizen. Our charitable donations and volunteerism track the issues that mean the most to us. This year, given our focus on diversity and inclusion, we added a new equality focus to our giving program, which empowers employees to make an impact together, to help ensure that the communities where we live and work are safe and just for all.

As part of our Culture Journey and focus on people strategy, we also regularly review our talent attraction strategy, including our employer brand, employee value proposition and competition for talent. Our goal is to continue our positive track record of attracting and retaining talent.

Diversity and Inclusion

Western Digital, led by our executive team and Board of Directors, is committed to creating a culture of belonging for all of our employees—all genders, races, ages and any other dimensions of diversity—across all levels of our organization, starting with our Board. We believe that the more diverse our backgrounds and experiences, the greater our opportunity for success. Embracing this philosophy, we have continued executing on our global diversity and inclusion strategy and have made additional progress in a number of key areas. For example, we led in-person training on unconscious bias with members of our management team in the U.S., thereby heightening their awareness to the value that all employees bring to our work teams. We have also focused on enhancing our business resource groups by expanding their charters to strengthen their connection to business outcomes in areas such as attracting high-quality, diverse talent and creating opportunities to further innovation. These groups partner with our Diversity and Inclusion team and business leaders to raise awareness on issues of pay equity and employee advancement and to advocate for equality in general.

Our commitment to fairness and equality is reflected in our promotion of racial understanding amidst the social injustices seen across the U.S. during the second half of fiscal 2020. Led by our Chief Executive Officer, our executive team has engaged in open and honest dialogue with employees across our company on the importance of embracing diversity, practicing inclusion and eliminating racism. In addition, our Diversity and Inclusion team has focused on further developing its programs to improve processes, including reviewing our compensation practices. In the U.S., we review pay equity annually to assess the fairness of pay to women and underrepresented ethnic groups.

In fiscal 2021, we are continuing to focus on the attraction and retention of diverse talent. For example, we are dedicating staff to the development of a more diverse talent pipeline by enhancing our relationships with universities and professional organizations that focus on producing diverse candidates. We are expanding our women’s leadership program to address the development of women at all levels, and we are being intentional about including our male managers to support them in becoming more inclusive leaders. We recently published our workforce diversity data in our 2020 Sustainability Report.

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RISK OVERSIGHT AND COMPENSATION RISK ASSESSMENT

Board’s Role in Risk Oversight

Our Board of Directors’ role in risk oversight involves both our full Board and its committees. Individual committees are charged with identifying potential risks to our company during the course of their respective committee work. If a committee identifies a potential risk during the course of its work, the potential risk is raised to the Audit Committee and full Board for inclusion in our enterprise risk management (“ERM”) process described below. Our Board of Directors believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks, and therefore such processes do not materially affect its choice of leadership structure as described in the section entitled “Board Leadership Structure” below.

   

Board of Directors

   

Our Board as a whole is updated throughout the year on specific risks and mitigating measures in the course of its review of our strategy and business plan, and through reports to our Board by its respective committees and senior members of management.

                                                                                                                     
Audit Committee
Oversees our ERM process on behalf of our Board
Our chief audit executive, who reports directly to the Audit Committee, oversees and facilitates the ERM process as part of our strategic planning process
Reviews and discusses with management our risk assessment and enterprise risk management policies as related to the Audit Committee’s areas of responsibility
Oversees the following additional risk topics:
Financial reporting, accounting, internal controls and fraud
Compliance with legal and regulatory requirements
Cybersecurity, including quarterly updates from our Vice President of Information Security
Tax and transfer pricing matters
Global political and market conditions
Other business risks, including strategic partner and supplier relationships, industry cycles, product development, expansion into new markets and other risks identified in our 2020 Annual Report on Form 10-K
ERM Process
1
Each of our major business unit and functional area heads, with the assistance of their staff, meet periodically with representatives from the ERM function to identify risks that could affect achievement of our business goals and strategy, and develop risk mitigation measures and contingency plans.

2
After input from these individuals is received, our ERM function summarizes the results of these meetings and creates a consolidated risk profile.

3
The risk profile is provided to our Chief Executive Officer and Chief Financial Officer for final review.

4
The risk profile is reviewed and discussed by the Audit Committee and made available to our Board on an annual basis. The Audit Committee discusses the risk profile analysis with our Board as the Audit Committee deems necessary. On a quarterly basis, senior management reviews the risk profile and action plan progress and shares significant updates with the Audit Committee, which are also made available to our Board.

5
The final analysis, including any input from the Audit Committee and full Board, is reviewed and used by our internal audit function in its internal audit planning.

 
Compensation and Talent Committee
Oversees the following risk topics:
Compensation programs, policies and practices
Equity and other incentive plans
Recruiting and retention
Human capital management
 
Governance Committee
Oversees the following risk topics:
Board and committee composition, including Board leadership structure
Director succession planning
Corporate governance policies and practices
Corporate responsibility and sustainability policies and programs
                                                            
                                                            

Management

 
Major business unit and functional area heads work with the internal audit department and ERM function to identify risks that could affect achievement of business goals and strategy.
Our Chief Executive Officer and Chief Financial Officer review and discuss the consolidated risk profile with our chief audit executive as part of the ERM process.
Senior management makes the risk profile available to our Board on an annual basis, as well as any significant quarterly updates.
 
   

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COVID-19 Pandemic

In response to the COVID-19 pandemic, our priority is to safeguard the health, safety and well-being of our employees and communities, while continuing to serve our global customers. We have been deemed an “essential business” everywhere we operate, and as such, our Board of Directors has been fully engaged with actively monitoring and overseeing management’s responses to the pandemic, including weekly meetings with management in the initial months after the pandemic was declared.

In response to the pandemic, we implemented robust safety measures for our workforce, including:

Early adoption of PPE for our employees
More thorough sanitation practices as outlined by health organizations
Social distancing and working from home policies
Reductions in the number of people at our sites at any one time
Contact tracing and temperature screening at our sites
Company-provided housing in some locations to reduce travel for necessary employees to remain onsite

While our first response to the COVID-19 pandemic was to quickly transition all employees who could to working from home, we also created an emergency leave program to support those who could not work from home. As additional support for our essential workers, we provided premium pay for certain groups and supported our employees who were unable to return home due to lockdowns in the Hubei province in China with care packages. We have also committed to effective, regular communication with our workforce, including regular global and local town halls, weekly video updates, frequent e-mail updates and consistent communication by site-level crisis management teams, including locally-relevant information. We quickly established sites on the internal social network to provide information on COVID-19 and to support the shift to working from home.

We have also supported our communities by building face shields for medical personnel, having our procurement function source and ship PPE, making donations focused on COVID-19 and hunger relief and establishing a logistics helpline for communities to manage transportation of donations.

As an essential business, we continue to provide products and solutions that enable the proliferation of data and facilitate the sharing of information remotely, which has become more critical as much of the world is interacting from areas of self-isolation. All of our manufacturing facilities are currently operational, in some cases with exemptions from government restrictions. Management and our Board of Directors will continue to actively respond to the COVID-19 pandemic and are prepared to take further measures in the best interests of our employees, customers and stockholders, or as required by governmental authorities.

Compensation Risk Assessment

Consistent with SEC disclosure requirements, we reviewed our fiscal 2020 compensation policies and practices to determine whether they encourage excessive risk taking. We concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on our company.

Chief Executive Officer Evaluation and Succession Planning

EVALUATION

The Governance Committee is responsible for developing and overseeing the process for annually evaluating our Chief Executive Officer’s performance. Our Chairman of the Board, our Lead Independent Director and the Compensation and Talent Committee review and approve our Chief Executive Officer’s goals and objectives and evaluate our Chief Executive Officer’s performance in light of those goals and objectives, with input from our Board. Following the evaluation of our Chief Executive Officer’s performance, the Compensation and Talent Committee determines and approves our Chief Executive Officer’s compensation.

ONGOING SUCCESSION PLANNING

Our Board of Directors oversees Chief Executive Officer and key management personnel succession planning, which is reviewed at least annually. Our Board of Directors reviews potential internal candidates with our Chief Executive Officer and Chief Human Resources Officer, including the qualifications, experience and development priorities for these individuals. Our Board of Directors also reviews and discusses potential external candidate profiles from time to time, and such review may also involve an executive search firm. Directors engage with potential Chief Executive Officer and key management personnel successors at Board and committee meetings and in less formal settings to allow directors to personally assess candidates. Further, our Board annually reviews the overall composition of our key management personnel’s qualifications, tenure and experience.

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CORPORATE GOVERNANCE MATTERS

RECENT CHIEF EXECUTIVE OFFICER SUCCESSION PROCESS

In October 2019, we announced that our then-current Chief Executive Officer, Mr. Milligan, intended to retire. Mr. Milligan agreed to serve as our Chief Executive Officer until we appointed his successor; Mr. Milligan further agreed to continue in an advisory role following the appointment of our new Chief Executive Officer through September 2020 to facilitate a seamless leadership transition. Our Board of Directors established the CEO Search Committee to oversee a search to identify potential candidates to succeed Mr. Milligan. Our ongoing Chief Executive Officer evaluation and succession planning process provided a strong foundation for the development of the key candidate criteria utilized by the committee. The CEO Search Committee conducted a comprehensive and robust search, supported by a leading executive recruiting firm, meeting 27 times. Ms. Streeter chaired the CEO Search Committee, and Ms. Cote and Messrs. Cole, Lauer and Massengill also served on the committee.

The CEO Search Committee directed the executive recruiting firm to identify internal and external candidates who would bring strategic vision, deep operational expertise from a technology company at scale and innovation leadership, with a particular emphasis on diverse candidates, including female and underrepresented minority candidates. The CEO Search Committee then assessed the slate of candidates through an in-depth evaluation and interview process with the candidates. Following this extensive search, our Board of Directors appointed Mr. Goeckeler to serve as our new Chief Executive Officer in March 2020.

EMERGENCY SUCCESSION

Our Board of Directors has also adopted an emergency Chief Executive Officer succession plan. The plan will become effective in the event our Chief Executive Officer becomes unable to perform his or her duties in order to minimize potential disruption or loss of continuity to our business and operations. Our emergency Chief Executive Officer succession plan is reviewed annually by the Governance Committee and our Board.

BOARD STRUCTURE

                                                                          
BOARD LEADERSHIP STRUCTURE

Our Board of Directors does not have a policy with respect to whether the roles of Chairman of the Board and Chief Executive Officer should be separate and, if they are to be separate, whether our Chairman of the Board should be selected from our directors who are not our employees (referred to in this Proxy Statement as our “non-employee directors”) or should be an employee. We currently separate the roles of Chief Executive Officer and Chairman of the Board, with Mr. Massengill currently serving as Chairman of the Board. Our Board of Directors believes this is the appropriate leadership for our company at this time because it permits Mr. Goeckeler, as our Chief Executive Officer, to focus on setting our strategic direction, day-to-day leadership and our performance, while permitting our Chairman of the Board to focus on providing guidance to our Chief Executive Officer and setting the agenda for Board meetings. Our Board of Directors also believes that the separation of our Chief Executive Officer and Chairman of the Board roles assists our Board in providing robust discussion and evaluation of strategic goals and objectives.

Our Corporate Governance Guidelines provide that our Board will appoint a Lead Independent Director if our Chairman of the Board is not an independent director under the Nasdaq Stock Market listing standards or if our Board otherwise deems it appropriate. Although our Board has determined that Mr. Massengill is independent under the Nasdaq Stock Market listing standards, because he is a former executive Chairman of the Board, President and Chief Executive Officer of our company, our Board determined it was appropriate to appoint Ms. Cote as our Lead Independent Director.

Our Board of Directors acknowledges that no single leadership model is right for all companies at all times. As such, our Board periodically reviews its leadership structure and may, depending on the circumstances, choose a different leadership structure in the future.

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LEAD INDEPENDENT DIRECTOR

The duties of our Lead Independent Director include:

acting as a liaison between our independent directors and management;
assisting our Chairman of the Board in establishing the agenda for Board meetings;
coordinating the agenda for, and chairing, the executive sessions of our independent directors;
presiding at any Board meeting at which our Chairman is not present;
reviewing and approving goals for and evaluating the performance of our Chief Executive Officer with our Chairman of the Board and Compensation and Talent Committee Chair;
overseeing our stockholder engagement efforts and being available for engagement with stockholders as appropriate; and
performing such other duties as may be specified by our Board of Directors from time to time.

Our independent directors also meet regularly in executive sessions without management to review, among other things, our strategy, financial performance, management effectiveness and succession planning.

                                                                          
COMMITTEES

Our Board of Directors has standing Audit, Compensation and Talent, Governance and Executive Committees. Each of the standing committees operates pursuant to a written charter that is available on our website under “Leadership & Governance” at investor.wdc.com. Our Board has affirmatively determined that all members of the Audit, Compensation and Talent and Governance Committees are independent as defined under the listing standards of the Nasdaq Stock Market.

AUDIT COMMITTEE
                        
KEY RESPONSIBILITIES
Solely responsible for appointing, compensating and overseeing independent accountants, with input from management
Pre-approves all audit and non-audit services
Reviews annual and quarterly financial statements
Reviews adequacy of accounting and financial personnel resources
Oversees and appoints our chief audit executive and reviews our internal audit plan and internal controls
Reviews and discusses with management risk assessment and enterprise risk management policies, including risks related to financial reporting, accounting, internal controls, fraud, legal and regulatory compliance and cybersecurity
Oversees ethics and compliance program









     

COMMITTEE MEMBERS

Kimberly
E. Alexy
(Chair)

 

Martin I.
Cole

Paula A.
Price

Stephanie A.
Streeter

 

   

Meetings Held in Fiscal 2020: 11

Committee Report page 110
 

Our Board has affirmatively determined that each member of the Audit Committee is independent as defined under the listing standards of the Nasdaq Stock Market and applicable rules of the SEC and that all members are “audit committee financial experts” as defined by rules of the SEC.

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COMPENSATION AND TALENT COMMITTEE
                    
KEY RESPONSIBILITIES
Evaluates and approves executive officer compensation
Reviews our human capital management programs and initiatives
Reviews and makes recommendations on non-employee director compensation
Reviews and approves corporate goals and objectives for our Chief Executive Officer’s compensation and evaluates our Chief Executive Officer’s performance in light of those goals and objectives
Oversees incentive and equity-based compensation plans
Reviews and recommends changes to benefit plans requiring Board approval
Reviews and approves any compensation recovery (clawback) policy or stock ownership guidelines applicable to executive officers
 

COMMITTEE MEMBERS

Martin I.
Cole
(Chair)

Kathleen A.
Cote

Tunç Doluca

 

Meetings Held in Fiscal 2020: 12

Committee Report page 48
 

Our Board has affirmatively determined that each member of the Compensation and Talent Committee is independent as defined under the listing standards of the Nasdaq Stock Market.

The Compensation and Talent Committee retained Willis Towers Watson as its compensation consultant during fiscal 2020 to provide objective advice and counsel to the Compensation and Talent Committee on all matters related to the compensation of executive officers and directors. Please see the section entitled “Executive Compensation—Compensation Discussion and Analysis—Fiscal 2020 Philosophy, Objectives and Process—Role of the Independent Compensation Consultant” for more information. Certain of our executive officers and other employees also assist the Compensation and Talent Committee in the administration of our executive compensation program, as explained further in the section entitled “Executive Compensation—Compensation Discussion and Analysis—Fiscal 2020 Philosophy, Objectives and Process—Role of Management.” The Compensation and Talent Committee’s processes and procedures for determining non-employee director compensation are described in the section entitled “Director Compensation” below.


GOVERNANCE COMMITTEE
                    
KEY RESPONSIBILITIES
Develops and recommends a set of corporate governance principles
Evaluates and recommends the size and composition of our Board and committees and functions of committees
Develops and recommends Board membership criteria
Identifies, evaluates and recommends director candidates
Reviews corporate governance issues and practices
Manages annual Board and committee evaluation process
Oversees evaluation of our Chief Executive Officer by our Board and the Compensation and Talent Committee
Develops and oversees our Chief Executive Officer succession planning process
Assists our Board in overseeing corporate responsibility and sustainability policies and programs
Reviews and oversees responses regarding stockholder proposals relating to corporate governance, corporate responsibility or sustainability matters

COMMITTEE MEMBERS

Stephanie A.
Streeter
(Chair)

Kimberly E.
Alexy

Kathleen A.
Cote

Meetings Held in Fiscal 2020: 9

     

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EXECUTIVE COMMITTEE
                    
KEY RESPONSIBILITIES
Has powers of our Board in management of our business affairs in between meetings of our Board, subject to applicable law or the rules and regulations of the SEC or the Nasdaq Stock Market and specific directions given by our Board
 

COMMITTEE MEMBERS

David V.
Goeckeler
(Chair)

Kimberly E.
Alexy

Matthew E.
Massengill

 

Meetings Held in Fiscal 2020: 1


                                                                          
EQUITY AWARDS COMMITTEE

Our Board of Directors has also established an Equity Awards Committee as a Board committee with limited delegated authority to approve and establish the terms of restricted stock unit (“RSU”) awards granted to eligible participants under our 2017 Performance Incentive Plan who are vice president-level or below, subject to individual and aggregate award limits, on pre-determined, fixed grant dates. Mr. Goeckeler is currently the sole director serving on the Equity Awards Committee. The Equity Awards Committee is required to report periodically to our Board or the Compensation and Talent Committee.

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BOARD PROCESSES AND POLICIES

                                                                          
CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS ETHICS

Our Board of Directors has adopted Corporate Governance Guidelines, which provide the framework for governance of our company and represent our Board’s current views with respect to selected corporate governance issues considered to be of significance to stockholders, including:

the role and responsibilities of our Lead Independent Director;
director nomination procedures and qualifications;
director independence;
director orientation and continuing education;
annual performance evaluations of our Board and committees; and
succession planning and management development.

Our Board of Directors has also adopted a Code of Business Ethics that applies to all of our directors, employees and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The current versions of the Corporate Governance Guidelines and the Code of Business Ethics are available on our website under “Leadership & Governance” at investor.wdc.com. To the extent required by applicable rules and regulations of the SEC or the Nasdaq Stock Market, we intend to promptly disclose future amendments to certain provisions of the Code of Business Ethics, or waivers of such provisions granted to executive officers and directors, on our website under “Leadership & Governance” at investor.wdc.com.

                                                                          
COMMUNICATION WITH MANAGEMENT

We have devoted significant effort in recent years to enhancing communication between our Board and management and have adopted the following practices to promote clear, timely and regular communication between directors and management:

Business Updates. In between Board meetings, management provides our Board with updates on our business performance.
Meeting Agendas and Presentations. Our Chairman of the Board and committee Chairs regularly communicate with management to discuss the development of meeting agendas and presentations.
Developing Matters. In between Board meetings, directors receive prompt updates from management on developing matters affecting our company and our business. These updates occurred weekly in the initial months after the pandemic was declared to facilitate increased communication and oversight in the dynamic environment created by COVID-19.
Reference Materials. Directors also regularly receive quarterly strategy updates, securities analysts’ reports, investor communications, company publications, news articles and other reference materials.

                                                                          
DIRECTOR ORIENTATION AND EDUCATION

All new directors participate in an extensive director orientation program. New directors engage with members of the executive team and senior management to review, among other things, our historical business and go-forward strategy, technology, finance matters (tax, treasury and accounting), internal audit and enterprise risk matters, human resources matters, corporate governance policies and practices, Global Code of Conduct and legal matters. We provide new directors with written materials to supplement the management meetings to permit them to further understand our business, industry and product portfolio. We have also implemented a mentorship program to pair new directors with longer tenured directors to facilitate a smooth transition onto our Board of Directors. Based on input from our directors, we believe our director orientation program, coupled with participation in regular Board and committee meetings, provides new directors with a strong foundation in our business, connects directors with members of management with whom they will interact and accelerates their effectiveness to engage fully in Board deliberations. Directors are provided additional orientation and educational opportunities upon acceptance of new or additional responsibilities on our Board and in committees that focus on those specific responsibilities.

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Because our Board believes that ongoing director education is vital to the ability of directors to fulfill their roles, directors are encouraged to participate in external continuing director education programs, and we reimburse directors for their expenses associated with this participation. We also periodically invite speakers to present during Board meetings on director education topics, such as emerging corporate governance matters.

                                                                          
BOARD EVALUATION

Our Board of Directors believes that it is important to assess the performance of our Board, its committees and individual directors and to solicit and act upon the feedback received. Accordingly, the Governance Committee oversees an annual performance evaluation process. In 2020, our Board evaluation was conducted by an external advisor on corporate governance and board effectiveness. This third-party facilitator met with our Chairman of the Board, Lead Independent Director and Chair of the Governance Committee to develop evaluation topics to guide one-on-one discussions between the third-party facilitator and each Board member.

Board and Committee Evaluation Process
1 Third-party
facilitator
interviewed each
Board member
The third-party facilitator conducted an interview with each director covering various topics, including:
effectiveness of Board materials and meetings, including scheduling, discussion and participation;
Board involvement in strategy, particularly in response to significant events including the COVID-19 pandemic;
oversight of and relationships with management;
management and Board succession planning;
committee performance; and
overall Board effectiveness.
   




   
 
 
2 Third-party
facilitator discussed
evaluation
results with
Board leadership
The third-party facilitator discussed the feedback regarding each Board committee with the respective committee chair and discussed the overall Board evaluation results with our Chairman of the Board, Lead Independent Director and Chair of the Governance Committee.
   




   
 
3 Results discussed
with the full
Board and
each committee
The third-party facilitator led discussions with the full Board, and each committee chair held discussions with the respective committees regarding the evaluation results.

Evaluation Results

Our Board of Directors utilizes the results of our Board and committee evaluations in making decisions on the structure of our Board, Board and committee responsibilities, agendas and meeting schedules for our Board and its committees, changes in the performance or functioning of our Board and continued service of individual directors on our Board. As a result of our annual performance evaluation process this year, enhancements have been made and are continuing to be made to Board processes and procedures, including streamlining Board presentations and materials to facilitate more effective and efficient Board meetings and establishing comprehensive annual Board and committee agendas to improve visibility into upcoming meeting topics throughout the year.

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COMMUNICATING WITH DIRECTORS

Our Board of Directors provides a process for stockholders to send communications to our Board or to individual directors or groups of directors. In addition, interested parties may communicate with our Chairman of the Board or Lead Independent Director (who presides over executive sessions of our independent directors) or with our independent directors as a group. Our Board of Directors recommends that stockholders and other interested parties initiate any communications with our Board (or individual directors or groups of directors) in writing. These communications should be sent by mail to our Secretary at Western Digital Corporation, 5601 Great Oaks Parkway, San Jose, California 95119. This centralized process will assist our Board in reviewing and responding to stockholder and interested party communications in an appropriate manner. The name of any specific intended Board recipient or recipients should be clearly noted in the communication (including whether the communication is intended only for our non-executive Chairman of the Board, Lead Independent Director or for the non-management directors as a group). Our Board of Directors has instructed our Secretary to forward such correspondence only to the intended recipients; however, our Board has also instructed our Secretary, prior to forwarding any correspondence, to review such correspondence and not to forward any items deemed to be of a purely commercial or frivolous nature (such as spam) or otherwise obviously inappropriate for the intended recipient’s consideration. In such cases, our Secretary may forward some of the correspondence elsewhere within our company for review and possible response.

                                                                          
TRANSACTIONS WITH RELATED PERSONS

Policies and Procedures for Approval of Related Person Transactions

Our Board of Directors has adopted a written Related Person Transactions Policy. The purpose of this policy is to describe the procedures used to identify, review, approve and disclose, if necessary, any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which: (i) we were, are or will be a participant; (ii) the aggregate amount involved exceeds or is expected to exceed $120,000 in any fiscal year; and (iii) a related person has or will have a direct or indirect material interest. For purposes of the policy, a related person is: (i) any person who is, or at any time since the beginning of our last fiscal year was, one of our directors or executive officers or a nominee to become a director; (ii) any person who is known to be the beneficial owner of more than 5% of our common stock; or (iii) any immediate family member of any of the foregoing persons.

Under the policy, once a related person transaction has been identified, the Audit Committee must review the transaction for approval or ratification. In determining whether to approve or ratify a related person transaction, the Audit Committee is to consider all relevant facts and circumstances of the related person transaction available to the Audit Committee. The Audit Committee may approve only those related person transactions that are in, or not inconsistent with, our best interests and the best interests of our stockholders, as the Audit Committee determines in good faith. No member of the Audit Committee will participate in any consideration of a related party transaction with respect to which that member or any member of his or her immediate family is a related person.

Certain Transactions with Related Persons

We have not participated in any transaction with a related person since the beginning of fiscal 2020.

DIRECTOR COMPENSATION

                                                                          
EXECUTIVE SUMMARY

We believe that it is important to attract and retain exceptional and experienced directors who understand our business, and to offer compensation opportunities that further align the interests of our directors with those of our stockholders. Our Board of Directors works with the independent compensation consultant to the Compensation and Talent Committee to regularly assess the competitiveness and reasonableness of our directors’ compensation. To that end, we established a compensation program for fiscal 2020 for each of our non-employee directors that consisted of a combination of:

annual cash retainer fees; and
equity incentive awards in the form of RSUs.

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We also permit directors to participate in our Deferred Compensation Plan. Any director who is employed by us is not entitled to additional compensation under our director compensation program for serving as a director. Our director compensation program for fiscal 2020 is described in more detail in the tables and narrative that follow.

Director Compensation Program Review Process
 
1 Periodic Review by Compensation and Talent Committee       The Compensation and Talent Committee regularly reviews our non-employee director compensation and trends concerning director compensation.
           
2 Evaluation by Compensation Consultant The Compensation and Talent Committee’s independent compensation consultant periodically reviews and evaluates the competitiveness and reasonableness of our non-employee director compensation program in light of general trends and the director compensation practices of our peer group companies identified in the section entitled “Executive Compensation—Compensation Discussion and Analysis.”
           
3 Recommendation to Full Board After receiving input from the independent compensation consultant, the Compensation and Talent Committee makes recommendations to the full Board regarding any changes in our nonemployee director compensation program that the Compensation and Talent Committee determines are advisable.
           
4 Outcomes After reviewing this input, our Board determines whether any changes should be made to our non-employee director compensation program. No changes were made to our non-employee director compensation program for fiscal 2020, except providing the director retainer fees discussed below to the members of the CEO Search Committee.

                                                                          
FISCAL 2020 DIRECTOR COMPENSATION PROGRAM

The following section describes the elements and other features of our director compensation program for fiscal 2020 for non-employee directors.

Non-Employee Director Cash Retainer Fees

Other than the CEO Search Committee retainers, which were paid in a single lump sum, cash retainer fees are paid to our non-employee directors based on Board and committee service from annual meeting to annual meeting and are paid in a lump sum immediately following the annual meeting marking the start of the year.

The following table sets forth the schedule of the annual cash retainer and committee membership fees for non-employee directors for fiscal 2020.

Type of Fee Current
Annual Fee
($)
Annual Cash Retainer 75,000
Additional Non-Executive Chairman of the Board Cash Retainer 100,000
Additional Committee Member Cash Retainers
       Audit Committee 15,000
       Compensation and Talent Committee 12,500
       Governance Committee 10,000
Additional Committee Chair Cash Retainers
       Audit Committee 25,000
       Compensation and Talent Committee 22,500
       Governance Committee 12,500
Additional CEO Search Committee Member Cash Retainer 10,000
Additional CEO Search Committee Chair Cash Retainer 2,500

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If our Chairman of the Board is not one of our employees, he or she is entitled to both the Annual Cash Retainer and the Additional Non-Executive Chairman of the Board Cash Retainer referred to above. A non-employee director serving as Chair of a Board committee receives both the Additional Committee Chair Cash Retainer for that committee and the Additional Committee Member Cash Retainer paid to all members of that committee. A non-employee director serving as Chair of the special CEO Search Committee received both the Additional Special CEO Search Committee Chair Cash Retainer and the Additional CEO Search Committee Member Cash Retainer. Directors who are appointed to our Board, a Board committee, or to one of our Chair positions noted above during the year are paid a pro rata amount of the annual retainer fees for that position based on service to be rendered for the remaining part of the year after appointment.

Non-employee directors do not receive a separate fee for each Board or committee meeting they attend. However, we reimburse our non-employee directors for reasonable out-of-pocket expenses incurred to attend each Board or committee meeting.

Non-Employee Director Equity Awards

Our Board of Directors has adopted a Non-Employee Director Restricted Stock Unit Grant Program under our 2017 Performance Incentive Plan. For fiscal 2020, the Non-Employee Director Restricted Stock Unit Grant Program provided that each of our non-employee directors automatically receive, immediately following each annual meeting of stockholders if he or she has been reelected as a director at that annual meeting, an award of RSUs equal in value to $240,000 (or, in the case of our non-employee director serving as Chairman of the Board, $290,000, or, in the case of our Lead Independent Director, $270,000), based on the closing price of our common stock on the Nasdaq Stock Market on the grant date, rounded down to the nearest whole share.

We award non-employee directors who are newly elected or appointed to our Board after the date of the annual meeting for a given year a prorated award of RSUs for that year. If a non-employee director is appointed after the date of the annual meeting for a given year as Chairman of the Board or Lead Independent Director, our Board may award the non-employee director an incremental RSU award reflecting the additional annual value of the RSU award for that position, prorated for the portion of the year remaining after the appointment. We also award Board members a prorated award of RSUs upon or as soon as practical after first becoming a non-employee director by virtue of retiring or otherwise ceasing to be employed by us after the annual meeting for a given year. Each award of RSUs represents the right to receive an equivalent number of shares of our common stock on the applicable vesting date.

The RSUs granted in fiscal 2020 vest 100% upon the earlier of: (i) the first anniversary of the grant date; and (ii) immediately prior to the first annual meeting of stockholders held after the grant date. If dividends are paid prior to the vesting and payment of any RSUs granted to our non-employee directors, the director is credited with additional RSUs as dividend equivalents that are subject to the same vesting requirements as the underlying RSUs.

Our stockholders have approved a cap on the value of equity awards that can be granted to our non-employee directors under our 2017 Performance Incentive Plan. Under that cap, the aggregate value of RSUs granted to our non-employee directors cannot exceed $900,000 during the one-year period between our annual meetings of stockholders (or such other annual period as our Board may determine), based on the grant date fair value of the awards.

Deferred Compensation Plan for Non-Employee Directors

For each calendar year, we permit each non-employee director to defer payment of up to 80% of any cash compensation to be paid to the director during the following calendar year in accordance with our Deferred Compensation Plan. We also permit non-employee directors to defer payment of any RSUs awarded under our Non-Employee Director Restricted Stock Unit Grant Program beyond the vesting date of the award. RSUs and other amounts deferred in cash by a director are generally credited and payable in the same manner as amounts deferred by our executive officers and other participants in our Deferred Compensation Plan as further described in the “Fiscal 2020 Non-Qualified Deferred Compensation Table.”

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DIRECTOR COMPENSATION TABLE FOR FISCAL 2020

The table below summarizes the compensation for fiscal 2020 for each of our non-employee directors. Messrs. Milligan and Goeckeler were named executive officers for fiscal 2020 and information regarding their compensation for fiscal 2020 is presented in the “Fiscal 2018—2020 Summary Compensation Table” and the related explanatory tables. As our employees, Messrs. Milligan and Goeckeler did not receive any additional compensation for their services as directors during fiscal 2020.

Name Fees
Earned or
Paid in
Cash
($)(1)
Stock
Awards
($)(2)
Total
($)
Kimberly E. Alexy 130,059 (3) 239,960 370,019
Martin I. Cole 130,716 (4) 239,960 370,676
Kathleen A. Cote 107,500 (5) 257,715 365,215
Henry T. DeNero(6)
Tunç Doluca 87,500 239,960 327,460
Michael D. Lambert(6)
Len J. Lauer(7) 142,500 (5) 269,986 412,486
Matthew E. Massengill 185,000 (5) 289,987 474,987
Paula A. Price(8) 36,243 (9) 87,694 123,937
Stephanie A. Streeter 119,899 (10) 239,960 359,859
(1) For a description of the fees earned by the non-employee directors during fiscal 2020, see the disclosure in the section entitled “Fiscal 2020 Director Compensation Program” above.
(2) The amounts shown reflect the aggregate grant date fair value of equity awards granted in fiscal 2020 computed in accordance with Accounting Standards Codification 718 (“ASC 718”). On the date of our 2019 annual meeting of stockholders (November 14, 2019), each non-employee director at that time was automatically granted 4,763 RSUs (5,756 RSUs for our Chairman of the Board and 5,359 RSUs for our Lead Independent Director). The grant date fair value of each of these awards, calculated using the closing price of our common stock on the Nasdaq Stock Market on the grant date, was $239,960 ($289,987 for our Chairman of the Board and $269,986 for our Lead Independent Director). In addition, Ms. Cote, who was elected as our Lead Independent Director in April 2020 after Mr. Lauer’s passing, received 437 RSUs at that time, representing a prorated portion of the non-employee director annual equity award for our Lead Independent Director, with a grant date fair value of $17,755. Ms. Price received 1,944 RSUs, representing a prorated portion of the non-employee director annual equity award, in connection with her appointment to our Board in June 2020, with a grant date fair value of $87,694. Our Non-Employee Director Restricted Stock Unit Grant Program is more fully described above in the section entitled “Non-Employee Director Equity Awards” above.

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In addition, the following table presents the aggregate number of shares of our common stock covered by stock awards (and corresponding dividend equivalents settled in stock) held by each of our non-employee directors on July 3, 2020:

Name Aggregate
Number
of Unvested
Restricted
Stock Units
Aggregate
Number of
Deferred
Stock
Units
(a)
Kimberly E. Alexy 4,854
Martin I. Cole 4,854
Kathleen A. Cote 5,291 29,188
Henry T. DeNero 40,939
Tunç Doluca 4,854
Michael D. Lambert
Len J. Lauer
Matthew E. Massengill 5,866
Paula A. Price 1,944
Stephanie A. Streeter 4,854
(a) This amount consists of stock units (and corresponding dividend equivalents settled in stock) that the director has elected to defer under our Deferred Compensation Plan pursuant to: (i) our Non-Employee Directors Stock-for-Fees Plan in lieu of all or a portion of annual retainer or meeting fees earned by the director during the year of the election; and/or (ii) our Non-Employee Director Restricted Stock Unit Grant Program. The deferred stock units are fully vested and payable in an equivalent number of shares of our common stock on the payment date specified in accordance with the non-employee director’s deferral election. For a description of the Non-Employee Director Restricted Stock Unit Grant Program and our Deferred Compensation Plan, see the section entitled “Fiscal 2020 Director Compensation Program” above. The Non-Employee Directors Stock-for-Fees Plan expired in fiscal 2013, and no new awards are permitted under that plan. Directors are entitled to receive dividend equivalents settled in cash on stock units previously deferred under the Non-Employee Directors Stock-for-Fees Plan.
(3) Includes a prorated annual Audit Committee Chair retainer in the amount of $9,140 paid to Ms. Alexy in connection with her appointment as our Audit Committee Chair in July 2019 and a prorated annual Governance Committee retainer in the amount of $5,919 in connection with her appointment to the Governance Committee following Mr. Lauer’s passing in April 2020.
(4) Includes the CEO Search Committee retainer in the amount of $10,000 and a prorated annual Compensation and Talent Committee Chair retainer in the amount of $13,317 and a prorated annual Compensation and Talent Committee retainer in the amount of $7,399 paid to Mr. Cole in connection with his appointment as our Compensation and Talent Committee Chair following Mr. Lauer’s passing in April 2020.
(5) Includes the CEO Search Committee retainer in the amount of $10,000.
(6) Messrs. DeNero and Lambert retired from our Board according to our Board retirement policy at our 2019 annual meeting of stockholders.
(7) Mr. Lauer passed away in April 2020.
(8) Ms. Price was appointed to our Board effective June 22, 2020.
(9) Consists of a prorated annual retainer in the amount of $30,203 and prorated annual Audit Committee retainer in the amount of $6,040 paid to Ms. Price in connection with her appointment to our Board and the Audit Committee in June 2020.
(10) Includes the CEO Search Committee retainer in the amount of $10,000, the CEO Search Committee Chair retainer in the amount of $2,500 and a prorated annual Governance Committee Chair retainer in the amount of $7,399 paid to Ms. Streeter in connection with her appointment as our Governance Committee Chair following Mr. Lauer’s passing in April 2020.

                                                                          
DIRECTOR STOCK OWNERSHIP GUIDELINES

Under our director stock ownership guidelines, directors are prohibited from selling any shares of our common stock (other than in a same-day sale in connection with an option exercise to pay the exercise price of the option or to satisfy any applicable tax withholding obligations) unless they own “qualifying shares” with a market value of at least $375,000. Common stock, RSUs, deferred stock units and common stock beneficially owned by the director by virtue of being held in a trust, by a spouse or by the director’s minor children are considered qualifying shares for purposes of the stock ownership requirement. Shares the director has a right to acquire through the exercise of stock options (whether or not vested) are not counted towards the stock ownership requirement.

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Executive Officers

Listed below are all of our executive officers, followed by a brief account of their business experience. Executive officers are normally appointed annually by our Board of Directors at a meeting immediately following the annual meeting of stockholders. There are no family relationships among these officers nor any arrangements or understandings between any officer and any other person pursuant to which an officer was selected.

DAVID V. GOECKELER   58, CHIEF EXECUTIVE OFFICER
        
Mr. Goeckeler was appointed Chief Executive Officer in March 2020. Biographical information regarding Mr. Goeckeler is set forth in the section entitled “Corporate Governance Matters—Proposal 1: Election of Directors.”

ROBERT K. EULAU   58, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
        
Mr. Eulau joined our company in April 2019 and has served as our Executive Vice President and Chief Financial Officer since May 2019.
Prior to that, Mr. Eulau served as chief executive officer and director of Sanmina Corporation, an electronics manufacturing services provider, from October 2017 to August 2018, and as its executive vice president and chief financial officer from September 2009 to October 2017. From March 2006 to June 2008, Mr. Eulau served as executive vice president, chief operating officer and chief financial officer of Alien Technology Corporation, a developer of radio frequency identification products, and as senior vice president and chief financial officer of Rambus Inc., a technology licensing company, from May 2001 to March 2006. Mr. Eulau previously served over 15 years with Hewlett Packard Company in various leadership roles, including vice president and chief financial officer of its business customer organization and vice president and chief financial officer of its computing products business.

SRINIVASAN SIVARAM   60, PRESIDENT, TECHNOLOGY AND STRATEGY
        
Dr. Sivaram has served as our President, Technology and Strategy, since August 2019, having previously served as our Executive Vice President, Silicon Technology & Manufacturing, from November 2017 to August 2019 and our Executive Vice President, Memory Technology, from May 2016 to November 2017.
Prior to that, Dr. Sivaram served as SanDisk’s executive vice president, memory technology, from February 2015 until our acquisition of SanDisk in May 2016, senior vice president, memory technology, from June 2013 to February 2015 and vice president, technology, from January 2006 to March 2007. Dr. Sivaram previously served as chief operating officer for Matrix Semiconductor, Inc. from November 1999 until it was acquired by SanDisk in January 2006. From July 1986 to October 1999, Dr. Sivaram held various engineering and management positions at Intel Corporation. Dr. Sivaram also served as chief executive officer of Twin Creeks Technologies, Inc. from January 2008 to December 2012.

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EXECUTIVE OFFICERS

ROBERT W. SODERBERY   54, EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER, FLASH BUSINESS
        
Mr. Soderbery has served as our Executive Vice President and General Manager, Flash Business, since September 2020.
Prior to that, Mr. Soderbery served as president of UpLift, Inc., a travel finance company, from May 2017 to September 2020 and has served as a member of UpLift’s board of directors since January 2015. He has also served as an advisor to Rockwell Automation, Inc. since May 2017 and as managing member of Acclimate Ventures LLC, a consulting, advisory and investment firm, since October 2016. Mr. Soderbery previously served as senior vice president and general manager, enterprise products, and in other senior leadership roles at Cisco Systems from October 2009 to October 2016. Prior to that, he served as senior vice president, storage and availability management group, and in other leadership roles at Symantec Corporation.

SEAN HUNKLER   58, EXECUTIVE VICE PRESIDENT, GLOBAL OPERATIONS
        
Mr. Hunkler has served as our Executive Vice President, Global Operations, since August 2020, having previously served as our Senior Vice President, Global Operations, from February 2019 to August 2020 and as our Senior Vice President, Manufacturing Operations, from August 2018 to February 2019.
Prior to that, Mr. Hunkler served as chief operating officer of Nexperia Semiconductors, a global semiconductor manufacturer created after its divestiture from NXP Semiconductors, from February 2017 to August 2018. From July 2012 to February 2017, he served as executive vice president, global operations of NXP Semiconductors, a global semiconductor manufacturer. Mr. Hunkler also served in senior leadership roles at Freescale Semiconductor, Motorola and SunEdison (formerly MEMC Electronic Materials).

MICHAEL C. RAY   53, EXECUTIVE VICE PRESIDENT, CHIEF LEGAL OFFICER AND SECRETARY
        
Mr. Ray has served as our Executive Vice President, Chief Legal Officer and Secretary since November 2015, having previously served as our Senior Vice President, General Counsel and Secretary from April 2011 to November 2015, our Vice President, General Counsel and Secretary from October 2010 to April 2011, and in a number of positions in our legal department, ranging from Senior Counsel to Vice President, Legal Services, from September 2000 to October 2010.
Prior to that, Mr. Ray served as corporate counsel for Wynn’s International, Inc. from September 1998 to September 2000. Mr. Ray previously served as a judicial clerk to the U.S. District Court, Central District of California, and practiced law at O’Melveny & Myers LLP.

LORI S. SUNDBERG   56, EXECUTIVE VICE PRESIDENT AND CHIEF HUMAN RESOURCES OFFICER
        
Ms. Sundberg has served as our Chief Human Resources Officer since February 2018 and was also appointed Executive Vice President in March 2018.
Prior to that, Ms. Sundberg served as senior vice president, global human resources for Jacobs Engineering Group Inc., a technical professional services firm, from April 2013 to July 2017. From July 2017 to February 2018, Ms. Sundberg was on sabbatical. Ms. Sundberg served as the senior vice president of human resources and ethics for Arizona Public Service Company, an electric utility company, from November 2007 to April 2013. From 1998 to 2007, Ms. Sundberg served in a number of global human resources leadership roles with American Express, a financial services company.

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Executive Compensation

PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION
  
Our Board of Directors recommends a vote FOR this Proposal 2 based on the efforts of the Compensation and Talent Committee and our Board to design an executive compensation program that provides:
Strong linkage between management and stockholders’ interests
Excellent pay for performance alignment and rewards for long-term value creation
Robust oversight by our Board and the Compensation and Talent Committee
     

PROPOSAL DETAILS

We currently provide our stockholders with the opportunity to cast a non-binding, advisory “Say on Pay” vote every year at our annual meeting of stockholders as required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Please read the section entitled “Executive Compensation—Compensation Discussion and Analysis” (and the various compensation tables and narratives accompanying those tables included under “Executive Compensation Tables and Narratives”) for information necessary to inform your vote on this Proposal 2.

BOARD RECOMMENDATION AND VOTE REQUIRED FOR APPROVAL

                                                                          
BOARD RECOMMENDATION

Our Board of Directors recommends that you vote to approve, on a non-binding advisory basis, our executive compensation program for our named executive officers as disclosed in these proxy materials:

RESOLVED, that the compensation paid to the named executive officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.

Proxies received by our Board will be voted FOR this Proposal 2 unless specified otherwise. The next advisory vote on the compensation of our named executive officers will occur at our 2021 annual meeting of stockholders.

                                                                          
VOTE REQUIRED FOR APPROVAL

The affirmative vote of a majority of the shares of our common stock represented in person or by proxy at the Annual Meeting and entitled to vote on this Proposal 2 is required to approve the non-binding advisory vote on the compensation of our named executive officers.

While this vote is nonbinding on our company and our Board of Directors, and will not be construed as overruling a decision by our company or our Board or creating or implying any additional fiduciary duty for our company or our Board, our Board and the Compensation and Talent Committee value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions for named executive officers under our executive compensation program.

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EXECUTIVE COMPENSATION

Letter from the Compensation and Talent Committee

Dear Fellow Stockholders:

As the Compensation and Talent Committee of Western Digital, our most important mandate is to structure our executive compensation programs to attract and retain talented executives in a way that aligns with our stockholders’ interests and drives long-term value creation.

Following the unexpected passing of Len Lauer in April 2020, Martin I. Cole joined the committee as our Chair. Mr. Cole’s experience in overseeing executive compensation programs at public companies as an executive, board member and compensation committee member, coupled with his understanding of our company given his Board service since 2014, make him well-suited to serve as our Chair.

CEO Transition and Related Compensation Structure

Effective in March 2020, after over seven years of dedicated service as Western Digital’s CEO, Stephen D. Milligan retired and David V. Goeckeler was appointed as our new CEO. Mr. Goeckeler joins Western Digital from Cisco where he had a track record of running highly profitable businesses and driving innovation. In attracting Mr. Goeckeler to Western Digital and establishing an initial incentive structure, the committee believed it was paramount that Mr. Goeckeler’s incentives align with our performance and stockholders’ interests and provide the appropriate and necessary compensation to attract Mr. Goeckeler. To that end, the one-time transition awards provided to Mr. Goeckeler as incoming CEO were denominated approximately 90% in equity that vests over multiple years with approximately two-thirds of his transition equity awards granted in the form of a PSU award that includes robust out-performance requirements over a three-year period for Mr. Goeckeler to receive a target payout under the award, thereby creating further alignment with his interests and those of our stockholders. A majority of Mr. Goeckeler’s transition awards were intended to cover foregone compensation opportunities with his prior employer of 19 years. We are excited about Mr. Goeckeler’s leadership and we believe the incentives he received upon joining our company establish direct alignment with our long-term performance – alignment that we believe is critical for a new CEO.

Stockholder Feedback

We believe that engaging with investors is fundamental to our commitment to good governance and essential to maintaining strong corporate governance and executive compensation practices. Since our 2019 annual meeting of stockholders, members of the Board and management proactively reached out to over 30 of our stockholders owning approximately 60% of Western Digital’s outstanding shares and conducted calls with 14 of our top 25 holders, as well as several other stockholders. Our Chair led several of these discussions, which are described in more detail on pages 27 to 28 and 50 to 51 of this Proxy Statement.

In these discussions, a majority of our stockholders commended the Board’s appointment of Mr. Goeckeler as our CEO; a majority of these stockholders also appreciated the fact that we needed to make an investment to attract Mr. Goeckeler to join Western Digital and supported the design of Mr. Goeckeler’s transition awards to align his interests with those of our stockholders. Finally, we received positive feedback from a majority of these stockholders regarding the fiscal 2021 program design under consideration by the committee. We considered this input in finalizing our fiscal 2021 program changes described below.

Fiscal 2021 Compensation Program Updates

In evaluating our executive compensation program for fiscal 2021, we considered investor feedback, as well as professional advice from the Compensation and Talent Committee's independent compensation consultant, and approved changes for fiscal 2021, as described in more detail below on page 71. Effective for fiscal 2021, we increased the performance period for all PSUs to three years to further align executives’ compensation with long-term value creation, as this was feedback we’ve heard consistently from investors in recent conversations. Further, we replaced the custom TSR peer group used for fiscal 2020 for PSU grants with the companies within the S&P 500, as this broader peer set better reflects the broader equity market investment opportunity for our stockholders and provides our executives with more visibility to our relative performance. We also expanded the short-term incentive plan beyond a single metric to better capture Western Digital’s overall performance, with a shift from non-GAAP net income to non-GAAP operating income, inclusion of a new operational metric of exabytes shipped, as well as a new individual metric that will allow for differentiation between executives based on individual contributions.

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EXECUTIVE COMPENSATION

We welcome the opportunity to continue the dialogue with our stockholders, who may reach out with any questions or concerns related to our executive compensation program. Correspondence can be addressed to our Secretary, as set forth on page 117 of this Proxy Statement.

REPORT OF THE COMPENSATION AND TALENT COMMITTEE

The Compensation and Talent Committee, comprised of independent directors, has reviewed and discussed the following Compensation Discussion and Analysis with management. Based on that review and discussion, the Compensation and Talent Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement for our 2020 annual meeting of stockholders and incorporated by reference into our 2020 Annual Report on Form 10-K.

THE COMPENSATION AND TALENT COMMITTEE

           

MARTIN I. COLE
Chair

KATHLEEN A. COTE TUNÇ DOLUCA

COMPENSATION AND TALENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All of the Compensation and Talent Committee members whose names appear on the Compensation and Talent Committee Report above, other than Mr. Cole, were members of the Compensation and Talent Committee during all of fiscal 2020; Mr. Cole was appointed to the Compensation and Talent Committee in April 2020 following the passing of our former Compensation and Talent Committee Chair, Mr. Lauer. All members of the Compensation and Talent Committee during fiscal 2020 were independent directors and none of them were our employees or former employees or had any relationship with us requiring disclosure of certain transactions with related persons under SEC rules. There are no compensation committee interlocks between us and other entities in which one of our executive officers served on the compensation committee (or equivalent body) or the board of directors of another entity whose executive officer(s) served on the Compensation and Talent Committee or our Board of Directors.

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COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
OUR NAMED EXECUTIVE OFFICERS

When we refer to our “named executive officers,” we mean:

David V. Goeckeler
Chief Executive
Officer

Robert K. Eulau
Executive Vice
President and Chief
Financial Officer

Srinivasan Sivaram
President,
Technology
and Strategy

Michael C. Ray
Executive Vice
President, Chief
Legal Officer
and Secretary

Lori S. Sundberg
Executive Vice
President and
Chief Human
Resources Officer

Under SEC rules, the individuals listed above, as well as Mr. Milligan, our former Chief Executive Officer, who stepped down from that role in March 2020 and retired in September 2020, and Michael D. Cordano, our former President and Chief Operating Officer, who transitioned to a new role as part of a reorganized management structure in April 2020 and departed our company in August 2020, are our named executive officers for fiscal 2020 and are listed in the “Fiscal 2018—2020 Summary Compensation Table.”

                                                                          
OVERVIEW

Fiscal 2020 Executive Summary and Chief Executive Officer Transition Discussion 50
Fiscal 2020 Philosophy, Objectives and Process 59
Fiscal 2020 Decisions and Outcomes 64
Fiscal 2021 Decisions 71
Other Program Features and Policies 74

                                                                                                   
                                     
Our compensation philosophy for executive officers is based on the belief that the interests of our executives should be closely aligned with our stockholders. Our program is focused on aligning executive pay with company and individual performance and identifying performance metrics and targets designed to create long-term stockholder value.

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COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2020 EXECUTIVE SUMMARY AND CHIEF EXECUTIVE OFFICER TRANSITION DISCUSSION

Stockholder Engagement

While our executive compensation program received the support of 92% of votes cast at our 2019 annual meeting of stockholders, our Board of Directors remains focused on stockholder outreach to ensure the Compensation and Talent Committee receives stockholder input as it evaluates updates to our program. In the summer of 2020, we reached out to over 30 of our stockholders representing approximately 60% of shares outstanding. Our engagement team included participation by Mr. Cole, our Compensation and Talent Committee Chair, as well as members of management from our Human Resources, Investor Relations, Sustainability and Legal teams. The engagement team conducted calls with 14 of our top 25 holders as well as several other holders, composed of investors with a variety of investment styles and geographic locations. The remainder of the stockholders we contacted confirmed that a follow-up discussion was not necessary at that time or did not respond. Our Chair of the Compensation and Talent Committee, an independent director, led several of these stockholder calls. The Compensation and Talent Committee considered the input from our stockholders in finalizing our fiscal 2021 executive compensation program changes described below.

BY THE NUMBERS: SUMMER 2020 STOCKHOLDER ENGAGEMENT EFFORT

We reached out
to stockholders
representing over:
Our engagement
included:

WHAT WE HEARD FROM STOCKHOLDERS:

In our conversations with stockholders during the past few years, including our summer 2020 stockholder engagement effort, we heard a few themes outlined in the table below. After accounting for investor feedback and evaluating our existing programs, the Compensation and Talent Committee updated our executive compensation program in fiscal 2021. The section entitled “Fiscal 2021 Decisions” on page 71 provides additional details regarding these changes, including the Compensation and Talent Committee’s rationale in making these changes.

In our summer 2020 stockholder discussions, we also solicited input regarding Mr. Goeckeler’s transition awards, and we received the following feedback:

A substantial majority of stockholders with whom we engaged commended our Board’s appointment of Mr. Goeckeler as our Chief Executive Officer and understood the fact that we needed to make an investment to attract an executive of Mr. Goeckeler’s caliber to join Western Digital.
Most of these stockholders supported the transition award designed to attract Mr. Goeckeler and to replace his foregone compensation opportunities with his prior employer.
Most of these stockholders also appreciated the fact that a majority of Mr. Goeckeler’s transition award value is tied to multi-year performance-vesting requirements that align his interests with those of our stockholders.

The section entitled “Chief Executive Officer Transition” on page 52 provides additional details regarding Mr. Goeckeler’s transition awards.

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COMPENSATION DISCUSSION AND ANALYSIS

FISCAL 2019-FISCAL 2020
PROGRAM DESIGN
        WHAT WE HEARD
FROM STOCKHOLDERS
        UPDATES IN FISCAL
2021 PROGRAM
 
Annual Incentive Program
 
100% non-GAAP net income
Incorporate additional metrics into the STI plan
Changed financial metric to non-GAAP operating income (50% weighting)
Added operational metric for exabytes shipped (25% weighting)
Added individual performance factor (25% weighting)
 
Long-Term Incentive Program
 
Financial metrics include a mix of two- and three-year performance periods:
6.25% non-GAAP EPS (two-year performance)
18.75% non-GAAP EPS (three-year performance)
6.25% revenue (two-year performance)
18.75% revenue (three-year performance)
Move all PSUs to a three-year performance period
Moved 100% of PSUs to three-year performance period

Business Highlights

We entered fiscal 2020 cautiously optimistic after successfully navigating dynamic market conditions and coming out of what we believed to be a cyclical trough in the flash industry. In the first half of fiscal 2020, we experienced an improving flash market environment and strength in our HDD portfolio, led by the success of our capacity enterprise product line. We encountered challenges, primarily in the second half of the fiscal year, due to the ongoing COVID-19 pandemic, the start of a global economic contraction and trade-related geopolitical dynamics, which adversely impacted our fiscal 2020 business results.

In April 2020, we suspended our dividend to strengthen our reinvestment in growth and innovation and to support our ongoing deleveraging efforts. While this impacted our stock price in the short term, we believe the reinvestment of cash in our business and improvement to our balance sheet will benefit our stockholders in the long term. The challenging market for our business in fiscal 2020 is reflected in the compensation received by our executives with respect to the fiscal year. Our two-year performance stock unit (“PSU”) performance was below target and the executives’ payout with respect to this award that will be made following fiscal 2021 is 92% of target. The Compensation and Talent Committee also used downward discretion and capped executives’ STI payout for fiscal 2020 at 100% of target to reflect our fiscal 2020 performance in the context of market conditions.

Despite a challenging year, we remained focused on driving innovation for customers and long-term value creation for our stockholders. Specifically, we broadened our product portfolio and enhanced our technology leadership with a keen focus on strategy and operations. We expect these actions to position us to emerge as a stronger company as the market environment improves. These factors, along with the hiring of our new Chief Executive Officer and stockholder feedback from our engagement efforts, provided important context for the Compensation and Talent Committee’s decisions regarding executive pay in fiscal 2020.

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COMPENSATION DISCUSSION AND ANALYSIS

Chief Executive Officer Transition

In October 2019, we announced that our then-current Chief Executive Officer, Mr. Milligan, intended to retire. Mr. Milligan agreed to serve as our Chief Executive Officer until we appointed his successor; he further agreed to continue in an advisory role following the appointment of our new Chief Executive Officer through September 2020 to facilitate a seamless leadership transition. Following an extensive search led by the CEO Search Committee, a Board committee composed of independent directors and supported by a leading executive recruiting firm, our Board of Directors appointed Mr. Goeckeler in March 2020 to serve as our new Chief Executive Officer.

SEARCH PROCESS

The CEO Search Committee conducted a comprehensive and robust search, meeting 27 times. Ms. Streeter chaired the search committee, and Ms. Cote and Messrs. Cole, Lauer and Massengill served on the committee. The CEO Search Committee challenged the executive recruiting firm to identify internal and external candidates who would bring strategic vision, deep operational expertise from a technology company at scale and innovation leadership, with a particular emphasis on diverse candidates, including female and underrepresented minority candidates. The committee then assessed the slate of candidates through an in-depth evaluation and interview process.

WHY OUR BOARD APPOINTED MR. GOECKELER

Prior to joining Western Digital, Mr. Goeckeler led Cisco’s $34 billion networking and security business, with a team of over 25,000 engineers. In that role, Mr. Goeckeler oversaw Cisco’s networking and security strategy and market acceleration, including development operations for an expansive technology portfolio and strategic acquisitions. Our Board of Directors believes that Mr. Goeckeler’s track record of driving highly profitable businesses while innovating successful business strategies and generating new revenue sources makes him an ideal leader to create long-term value for our stockholders.

MR. GOECKELER’S TARGET TOTAL DIRECT COMPENSATION

In setting Mr. Goeckeler’s target total direct compensation, the Compensation and Talent Committee, advised by the independent compensation consultant, considered Mr. Goeckeler’s target total direct compensation with his prior employer, target total direct compensation of our prior Chief Executive Officer and market data for chief executive officers in our peer group identified on page 63. Mr. Goeckeler’s fiscal 2020 target total direct compensation with his prior employer, as disclosed in its 2019 proxy statement, totaled approximately $13.8 million and included the following components:

Base Salary: $825,000
STI Target: $1,320,000 (160% of base salary)
Target LTI: $11,676,163 (determined by multiplying the target number of stock units granted to Mr. Goeckeler on September 18, 2019 by the closing price of his prior employer’s common stock on the Nasdaq Stock Market on the grant date)

Following its review, the Compensation and Talent Committee approved target total direct compensation for Mr. Goeckeler that represents a small premium to his fiscal 2020 target total direct compensation with his prior employer to reflect his expanded duties as our Chief Executive Officer; Mr. Goeckeler’s target total direct compensation at Western Digital is also comparable to Mr. Milligan’s fiscal 2020 target total direct compensation. The Compensation and Talent Committee increased Mr. Goeckeler’s target STI percentage above Mr. Milligan’s to align more closely with target STI percentages for our peer companies and due to Mr. Goeckeler’s higher target STI percentage opportunity at his prior employer.

As used in this Compensation Discussion and Analysis, “target total direct compensation” refers to an executive’s base salary, target (not actual) annual STI award and the target value of the executive’s LTI award at the time of grant of the award (determined using the values of the awards as approved by the Compensation and Talent Committee as contrasted with the grant date fair value of the executive’s LTI award for financial reporting purposes, which uses a Monte Carlo simulation to determine the grant date fair value of relative total stockholder return (“TSR”) PSUs). For Mr. Goeckeler, “target total direct compensation with his prior employer” refers to his base salary, STI target and target LTI as described above.

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COMPENSATION DISCUSSION AND ANALYSIS

Compensation Element
Base
Salary ($)
Target
STI ($)
                       Target LTI ($)                        Target
Total Direct
Compensation ($)
David V. Goeckeler 15,437,500
Stephen D. Milligan (Fiscal 2020) 15,125,000
(1) For fiscal 2020, Mr. Goeckeler was only entitled to receive a prorated portion of this amount for the portion of the fiscal year he was employed.
(2) Represents Mr. Goeckeler’s target annual LTI equity award grant value for fiscal 2021. Mr. Goeckeler did not receive an annual LTI award from our company in fiscal 2020 but received transition awards, discussed below, in connection with joining our company.
(3) Represents Mr. Milligan’s target annual LTI equity award grant value for fiscal 2020. Based on a Monte Carlo simulation used to determine the value of Mr. Milligan’s relative TSR PSU award, the accounting grant date fair value of his fiscal 2020 LTI equity award (RSUs and PSUs) as reported in the Summary Compensation Table is $14,405,144.

MR. GOECKELER’S ONE-TIME TRANSITION AWARDS

Considerations in Approving Mr. Goeckeler’s Transition Awards

In evaluating Mr. Goeckeler’s transition awards, the Compensation and Talent Committee considered the following factors:

The competitive market in our industry, and in particular Silicon Valley, and the need to attract and retain top-tier talent
Mr. Goeckeler’s career with his prior employer spanned 19 years and he was one of his prior employer’s most senior executives; Mr. Goeckeler’s prior employer is one of the largest and most successful technology companies in the world and our Board believes that our company and stockholders will benefit from the leadership of such a high-caliber executive
Mr. Goeckeler was a successful and well-compensated executive with his prior employer, and he incurred a risk in leaving his company after 19 years to join a new company
The magnitude of Mr. Goeckeler’s foregone compensation with his prior employer, and the need to replace substantial lost compensation opportunities in the near term, including:
Approximately $26.5 million in outstanding PSUs at the target level of performance(1)
Approximately $12.0 million in outstanding RSUs, of which approximately $10.7 million in outstanding RSUs were scheduled to vest before the end of July 2022(1)
Approximately $1.3 million fiscal 2020 target annual incentive award opportunity
Mr. Goeckeler’s transition awards should be structured to align his interests with the long-term interests of our stockholders and a majority of the awards should be subject to rigorous performance conditions covering a multi-year period

(1) The values for Mr. Goeckeler’s foregone equity awards are presented based on the number of his unvested PSUs (at the applicable target level of performance) and RSUs as disclosed in his prior employer’s 2019 proxy statement, multiplied by the closing price of his prior employer’s common stock on the Nasdaq Stock Market on February 14, 2020 ($46.97), which the Compensation and Talent Committee used in evaluating the PSUs and RSUs. The “Outstanding Equity Awards At 2019 Fiscal Year-End” table in his prior employer’s 2019 proxy statement reflects the PSUs at the maximum performance level for the awards scheduled to vest in his prior employer’s fiscal 2021 and 2022; the values above include these awards at the applicable target (not maximum) level of performance. A portion of the PSUs were forfeited when Mr. Goeckeler’s employment with his prior employer terminated, and Mr. Goeckeler remained eligible to vest in a portion of the PSUs under the award provisions for retirement. All of the RSUs were forfeited.

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COMPENSATION DISCUSSION AND ANALYSIS

Transition Award Structure

After considering the foregoing factors, the Compensation and Talent Committee approved the following transition arrangements for Mr. Goeckeler:

Transition Award Component Material Terms Design Considerations
$3.5 Million Cash Award
This award is subject to forfeiture if Mr. Goeckeler’s employment terminates (other than by us without cause) within 12 months of his first day of employment.
100% of the transition awards include service-based vesting requirements.
Approximately 90% of the transition awards were granted in equity that vests over multiple years.
Approximately 60% of the transition awards (and approximately 67% of the transition equity awards) were granted in the form of a PSU that includes robust performance requirements for Mr. Goeckeler to receive a target payout under the award.
$10 Million RSU
Make-Whole Award
This award vests 50% on each of the first two anniversaries of the grant date (subject to acceleration upon termination of Mr. Goeckeler’s employment under certain circumstances).
Intended to replace the forfeited RSU values during the next two fiscal years with Mr. Goeckeler’s prior employer.
$20.5 Million PSU Award(1)
Three-year relative TSR PSU award that vests based upon our TSR performance relative to the TSR of the S&P 500 constituent companies (determined as of the beginning of the performance period) over a three-year period.
Our performance must exceed the 57th percentile relative to S&P 500 constituents for Mr. Goeckeler to receive a target payout under the award.
The maximum payout under the award is capped at 150% of target value.
(1) The value of the PSU award is based on the value approved by the Compensation and Talent Committee, rather than the grant date fair value of the equity award for financial reporting purposes ($21,140,062) determined using a Monte Carlo simulation and as reported in the Summary Compensation Table.

Pay-for-Performance Alignment of Mr. Goeckeler’s Transition Awards

Mr. Goeckeler’s three-year relative TSR PSU represents approximately 60% of the target value of his transition awards and we must substantially outperform the S&P 500 constituent companies during the performance period for Mr. Goeckeler to receive a target payout. The relative TSR PSU design also reflects the Compensation and Talent Committee’s philosophy that a majority of our Chief Executive Officer’s transition awards should be aligned with our market performance.

As of September 1, 2020, our TSR performance relative to the S&P 500 constituent peer group for Mr. Goeckeler’s transition award was tracking at the 5th percentile, which would have resulted in a payout of 0% if the performance period had ended on this date. Our TSR performance relative to this peer group must improve substantially during the rest of the performance period for Mr. Goeckeler to receive a target payout under the award.

3-Year Relative TSR PSU

3-Year Relative TSR PSU S&P 500 Constituent Peer Group
Payout Level Western Digital's
Percentile Rank
PSU Payout %
Max 75% 150%
Target 57% 100%
50% 80%
Threshold 25% 50%

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COMPENSATION DISCUSSION AND ANALYSIS

MR. GOECKELER’S ANNUAL COMPENSATION OPPORTUNITY

The table below summarizes Mr. Goeckeler’s intended annual compensation opportunity for each fiscal year from fiscal 2020 through fiscal 2024. For purposes of this presentation, Mr. Goeckeler’s “annual compensation opportunity” for each fiscal year includes his base salary, target STI amount, transition cash award and the annual vesting value (calculated as described below below) of his transition equity awards and annual LTI awards.

The table incorporates information that the Compensation and Talent Committee reviewed in approving Mr. Goeckeler’s transition awards and his target total direct compensation. It demonstrates that Mr. Goeckeler’s annual compensation opportunities are heavily weighted toward multi-year PSU awards that align his compensation with long-term value creation for our stockholders.

Mr. Goeckeler’s transition cash award and transition RSU award provide him with a lower annual compensation opportunity in each of fiscal 2020 through fiscal 2022 than in fiscal 2023 and fiscal 2024 as he transitions into multi-year PSU performance periods.
If our performance is below target with respect to the applicable PSU performance criteria, Mr. Goeckeler’s actual compensation in fiscal 2023 and fiscal 2024 will be lower than the annual compensation opportunity reflected in the table below for those fiscal years, assuming no change in our stock price over the performance period.

Mr. Goeckeler’s average annual compensation opportunity during fiscal 2021 through 2024 ($14,662,500) is less than his target total direct compensation ($15,437,500) described above.

Annual Compensation Opportunity Fiscal 2020
($)(1)
Fiscal 2021
($)
Fiscal 2022
($)
Fiscal 2023
($)
Fiscal 2024
($)
Base Salary(2) 408,654 1,250,000 1,250,000 1,250,000 1,250,000
Target STI(2) 673,077 2,187,500 2,187,500 2,187,500 2,187,500
Transition Cash Award 3,500,000
Transition Equity Award(3) PSUs 20,500,000 (4)
RSUs 5,000,000 5,000,000
Fiscal 2021 Annual LTI Award(3) PSUs 7,200,000
RSUs 1,200,000 1,200,000 1,200,000
Fiscal 2022 Annual LTI Award(3) RSUs 1,200,000 1,200,000
Fiscal 2023 Annual LTI Award(3) RSUs 1,200,000
Total 4,581,731 8,437,500 9,637,500 26,337,500 14,237,500
(1)

The fiscal 2020 annual compensation opportunity includes Mr. Goeckeler’s actual base salary and STI payout for fiscal 2020 as set forth in the “Fiscal 2018-2020 Summary Compensation Table.” Mr. Goeckeler received a pro rata target STI payout for fiscal 2020.

(2)

Mr. Goeckeler’s base salary and target STI amounts for fiscal 2021 through fiscal 2024 are presented assuming that Mr. Goeckeler receives the same base salary and target STI amounts in each of those years.

(3)

Amounts reflect the value of PSUs and RSUs at vesting assuming that Mr. Goeckeler receives the same target grant value, same award mix (PSUs and RSUs) and same award structure in each of those fiscal years as his fiscal 2021 annual LTI award. Equity vesting amounts assume that our stock price does not change following the applicable grant date.

(4)

As of September 1, 2020, our TSR performance relative to the S&P 500 constituent peer group for Mr. Goeckeler’s transition PSU award was tracking at the 5th percentile, which would have resulted in a payout of 0% of the award if the performance period had ended on that date.

MR. MILLIGAN’S ADVISORY ROLE AND RETIREMENT

During the term of Mr. Milligan’s role as an advisor from March 2020 through September 2020, he continued to receive his annual base salary and his fiscal 2020 STI and to vest in his outstanding LTI awards. Mr. Milligan did not receive an STI award or an LTI award for fiscal 2021. Upon his retirement in September 2020, Mr. Milligan received no severance benefits. As a long-serving executive, Mr. Milligan satisfied the age and service requirements to receive retirement benefits under his applicable RSU and PSU awards, which provide for prorated vesting based on service performed during the performance or vesting period. Please see the section entitled “Qualified Retirement” on page 88 below for a summary of retirement benefits in Mr. Milligan’s applicable equity awards.

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COMPENSATION DISCUSSION AND ANALYSIS

As a result of Mr. Milligan’s retirement, he forfeited a majority of his fiscal 2020 annual LTI awards granted in September 2019 that are reported in the Summary Compensation Table on page 77. The grant date fair value of those awards was $14,405,144.

Upon his retirement, Mr. Milligan forfeited approximately 63% of the target stock units (RSUs and target PSUs) granted in September 2019
10% of Mr. Milligan’s target stock units granted in September 2019 vested in September 2020 prior to his retirement (one vesting tranche of his September 2019 RSUs) and approximately 27% of Mr. Milligan’s target stock units granted in September 2019 remained outstanding as of his retirement date
Of the approximately 27% of Mr. Milligan’s target stock units granted in September 2019 that remained outstanding as of his retirement date, approximately 97% of these stock units are subject to performance vesting conditions and the other 3% represent the pro rata portion of these stock units that are payable to Mr. Milligan in accordance with the retirement provisions of the awards

Mr. Milligan's Fiscal 2020 LTI Award

     

Mr. Milligan's Fiscal 2020 LTI
Award Outstanding Stock Units

     
     

MR. CORDANO’S EXECUTIVE TRANSITION ARRANGEMENT AND SEVERANCE BENEFITS

In April 2020, we reorganized our management structure to have all business, operations, engineering, sales and administrative functions report directly to Mr. Goeckeler. In connection with this change, Mr. Cordano ceased to serve as our President and Chief Operating Officer and transitioned to a new role as President, Western Digital Technologies, Inc., reporting to Mr. Goeckeler. To incentivize Mr. Cordano to remain with our company during a transition period to assist with Mr. Goeckeler’s onboarding, the Compensation and Talent Committee approved a cash retention payment of $75,000 if Mr. Cordano remained continuously employed through July 15, 2020 and a second cash retention payment of $150,000 if Mr. Cordano remained continuously employed through September 15, 2020.

We terminated Mr. Cordano’s employment in August 2020, prior to the payment date of his second cash retention payment, and Mr. Cordano forfeited that retention payment. Due to Mr. Cordano’s termination without cause within the meaning of our Executive Severance Plan, Mr. Cordano received severance benefits upon his qualifying termination. Please see the section entitled “Potential Payments Upon Termination or Change in Control” on page 86 below for additional details relating to such severance payments. Mr. Cordano did not receive any additional compensation outside of what he was entitled to receive under our Executive Severance Plan or the applicable equity award agreements.

MR. RAY’S RETENTION ARRANGEMENT

Mr. Ray received an offer to join another large public technology company as its Chief Legal Officer. Mr. Ray has been with our company since 2000 and is a key member of our management team. To induce Mr. Ray to remain with our company, the Compensation and Talent Committee approved the following compensation enhancements for Mr. Ray in August 2019: (i) a cash retention award in the amount of $2,000,000, payable with respect to $500,000 in fiscal 2020 (with a clawback if Mr. Ray voluntarily terminated employment within 12 months of payment), and payable with respect to an additional $500,000 in each of fiscal years 2021-2023, subject to Mr. Ray’s continuous employment; (ii) an LTI award for fiscal 2020 with a target value of $3,125,000, with the number of stock units under the award split evenly between RSUs and PSUs and subject to our standard RSU and PSU vesting requirements, as detailed in the section entitled “Long-Term Incentives” below; and (iii) an increase in Mr. Ray’s annual base salary from $575,000 to $625,000.

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COMPENSATION DISCUSSION AND ANALYSIS

Fiscal 2020 Program Overview

Each year, the Compensation and Talent Committee, advised by the independent compensation consultant, undertakes a rigorous process to review and determine executive compensation in the context of an overarching pay-for-performance philosophy. The Compensation and Talent Committee believes the majority of our executive compensation should be “incentive-based” and focused on long-term performance to help ensure that the interests of our executive officers are aligned with those of our stockholders. Our primary long-term objective is to drive sustainable value creation for our stockholders by attracting, retaining, developing and motivating a diverse group of executive talent through a comprehensive and market-competitive executive compensation program. The executive compensation program and the pay packages for our executive officers are reviewed annually.

Base Salary       Short-Term Cash Incentives       Long-Term Equity Incentives
We pay a competitive base level of compensation to attract, retain and motivate key talent. We determine salary based on scope of responsibility, performance and experience. We annually review our executive officers’ base salaries against our peers and the market to maintain competitive levels.     We incentivize our executive officers with cash incentive opportunities based on the achievement of annual financial performance objectives to reward executive officers for strong business performance.     We grant long-term incentive opportunities to our executive officers through a combination of performance-based and time-based equity awards that align management interests with long-term stockholder value creation. PSUs are earned by achieving pre-established financial goals over a two- or three-year period and based on our relative TSR that compares our stock performance to our industry peers over a three-year period. Time-based RSUs provide balance and retention for our key executives by vesting evenly over four years.

Paying for Performance: Fiscal 2020 Performance Results and Payouts

Award Fiscal 2020 Payouts Performance Link Page(s)
STI Performance Results and Payout for Fiscal 2020
Fiscal 2020 STI(1) 100%

Non-GAAP Net Income: achievement at 147% of pre-established target

66
No LTI Payout in Fiscal 2020
Fiscal 2019-2020 performance period under PSU Awards granted in fiscal 2019(2) N/A
Two-Year Non-GAAP EPS: achievement at 92% of pre-established target
Two-Year Revenue: achievement at 98% of pre-established target
70
(1)

As discussed below on page 66, the calculated payout under the fiscal 2020 STI plan was 194% of target and the Compensation and Talent Committee exercised negative discretion to cap the STI payout at 100% of target.

(2)

The two-year non-GAAP EPS metric and the two-year revenue metric each represent 6.25% of the target PSU awards. These portions of the PSU awards are subject to a one-year service period following the end of the performance period. As a result, none of the named executive officers received a PSU payout following fiscal 2020 and the portions of the awards eligible to vest based on the two-year performance period remain subject to time-based vesting until the end of the three-year vesting period. The remaining 87.5% of the target PSU awards is subject to a three-year performance period.

Due to the extension of the PSU vesting periods from two years to three years in our fiscal 2019 LTI awards, none of the named executive officers received a PSU award payout following fiscal 2020. The Compensation and Talent Committee considered granting “gap” RSU awards in fiscal 2019 in connection with the transition to a three-year vesting period to provide LTI payouts to our named executive officers with respect to fiscal 2020 but determined not to award any such grants to our executives. As a result of the transition to a three-year vesting program, the only incentive payouts that our named executive officers received with respect to fiscal 2020 was their fiscal 2020 STI payout.

PSU Payout Schedule
Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021
Fiscal 2018-2019 PSU                                                            
Fiscal 2019-2021 PSU
Fiscal 2018-2019
PSU Payout
Fiscal 2019-2021
PSU Payout
No PSU Payout

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COMPENSATION DISCUSSION AND ANALYSIS

COVID-19 Considerations in Executive Compensation Programs

As with many companies, we experienced both supply chain and demand disruptions in the second half of fiscal 2020 as a result of COVID-19 market-related slowdowns. However, COVID-related market disruptions did not impact our business as much in fiscal 2020 as those in other industries. The Compensation and Talent Committee has not adjusted the targets for any of our incentive awards to reflect COVID-related disruptions. The fiscal 2021 targets and performance ranges for our executive compensation programs accounted for an assessment, as of the time the awards were granted, of the ongoing market uncertainty associated with COVID-19.

Our Compensation Principles

                                                                          
WHAT WE DO     
Pay for performance by requiring that a substantial portion of our executives’ compensation be earned based on performance goals     
Actively engage with stockholders to obtain and consider their feedback in the future design of our executive compensation program
Link our executive compensation program to our long-term corporate growth strategy and key drivers of sustainable stockholder value creation
Use a mix of performance measures, cash- and equity-based vehicles, and short- and long-term incentive opportunities that hold our executive officers accountable for executing on our long-term corporate growth strategy
Cap maximum vesting or payout levels under our incentive awards, which are aligned with competitive market practices
Engage an independent compensation consultant to evaluate and advise the Compensation and Talent Committee on our executive compensation program design and pay decisions
Evaluate executive compensation data and practices of our peer group companies as selected annually by the Compensation and Talent Committee in coordination with guidance from the independent compensation consultant
Maintain executive stock ownership guidelines
Maintain a compensation recovery (clawback) policy applicable in the event an officer’s misconduct leads to an accounting restatement and provide for forfeiture of incentives in the event of an officer’s termination of employment due to misconduct
Provide limited executive perquisites
WHAT WE DON’T DO
No tax gross-up payments in connection with severance or change in control pay
No automatic vesting of equity awards upon a change in control (i.e., no single-trigger vesting)
No repricing of stock options without stockholder approval (other than equitable adjustments permitted under our plans)
No hedging, pledging or short-sale or derivative transactions by executive officers or directors
No dividend equivalent payments on awards that are not vested until earned

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COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2020 PHILOSOPHY, OBJECTIVES AND PROCESS

Our compensation philosophy for executive officers is based on the belief that the interests of our executives should be closely aligned with our long-term performance and sustainable value creation for our stockholders. To support this philosophy, a large portion of each executive officer’s compensation is placed “at risk” and linked to the accomplishment of specific financial and operational performance goals that we expect will lead to increased long-term value creation for our stockholders.

Our executive compensation program and policies are designed to:

Attract, retain, develop and motivate highly qualified and talented individuals   

Motivate executives to improve our overall performance and profitability, as well as for the business group for which each executive officer is responsible, and reward executives when specific measurable results have been achieved/exceeded

Help ensure compensation levels are both externally competitive and internally equitable

  

Encourage accountability by giving the Compensation and Talent Committee flexibility to take each executive officer’s individual contribution and performance into account in determining salaries and incentive award opportunity/payout

Tie incentive awards to financial and market metrics that drive our performance over the long term to further reinforce the linkage between the interests of our stockholders and our executives

Elements of Our Fiscal 2020 Executive Compensation Program

We believe our emphasis on variable compensation is aligned with our focus on operating excellence, allowing our executive compensation levels to flex up or down depending on our performance. We use several methods to examine the various elements of our executive compensation program to determine the competitive market position for each pay element.

In general, the Compensation and Talent Committee considers peer group and survey compensation data when establishing base salary, STI and LTI opportunities. Our actual pay positioning varies by executive, considering peer group and survey market data, competitive pay levels, each executive’s role, past performance, scope of responsibility and expected contributions. Each executive’s compensation level, as well as the appropriate mix and types of compensation, reflects the Compensation and Talent Committee’s business judgment in consideration of the market data, our executive compensation philosophy, guidance from the independent compensation consultant and the other factors noted above.

We believe that our approach is necessary to provide the Compensation and Talent Committee with the flexibility it needs to attract, retain, develop and motivate a diverse and talented executive team. In addition to the elements reflected below, we also provide executives with relatively limited perquisites and certain other indirect benefits, as described in the section below entitled “Other Program Features and Policies.”

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COMPENSATION DISCUSSION AND ANALYSIS


  Element of Fiscal
2020 Target Total
Direct Compensation*
Characteristics Purpose Performance
Link/Key Benchmark
             

Base Salary

Fixed compensation
Attracts and retains highly qualified executive talent
Maintains stable management team
Compensates executives for sustained individual performance

Competitive with market and industry practices
Adjusted for experience, responsibility, potential and performance
 

STI

Annual performance-based cash incentive compensation
Motivates executives to drive overall performance
Encourages accountability by rewarding achievement of specific performance goals
Provides focus on achievement of near-term financial objectives

Non-GAAP net income
   
 
 
 

LTI

 

PSUs

Performance-based equity compensation
100% of award cliff vests after three years
At least 50% of our executive officers’ LTI mix is in the form of PSUs (60% for our Chief Executive Officer)
Creates direct alignment with stockholder interests by focusing executives on long-term value creation through specific multi-year financial objectives
Revenue and non-GAAP EPS goals are each weighted at 25%; financial metrics are subject to automatic adjustment pursuant to a relative market performance adjustment (“MPA”) factor (as described on page 69 below)
Relative TSR goal is weighted at 50%; for PSUs based on relative TSR, payout capped at 100% if absolute TSR is negative
   
 
 

RSUs

Variable long-term equity compensation
Vest ratably over 4 years
Provides alignment with stockholder interests by focusing executives on long-term value creation
Provides retention value
Value based on stock price
 
 

* The percentages shown for the elements of target total direct compensation in the table above are presented based on annualized base salary, target annual STI award and the target annual LTI award for our former Chief Executive Officer, Mr. Milligan, in fiscal 2020. Our current Chief Executive Officer, Mr. Goeckeler, was appointed in March 2020 and did not receive an annual LTI award like those granted to our named executive officers in September 2019. Mr. Goeckeler’s fiscal 2021 compensation elements are comparable to Mr. Milligan’s fiscal 2020 compensation elements.

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COMPENSATION DISCUSSION AND ANALYSIS

Allocation of Target Total Direct Compensation

The Compensation and Talent Committee believes that a substantial portion of target total direct compensation should be performance-based compensation, with the percentage of the executive’s compensation that is performance-based to increase as the executive’s responsibility increases. This philosophy motivates executives to improve our overall performance over the long term, encourages accountability and links the interests of our stockholders with those of our executives. Performance-based pay is based on our stock price performance and achievement of other specified financial performance goals.

The charts below illustrate the mix of fiscal 2020 fixed pay (annualized base salary as of the end of the fiscal year) and variable or performance-based pay (annual STI target and annual LTI awards based on the target award value) for our prior Chief Executive Officer, Mr. Milligan, and our other named executive officers (on average). Because Mr. Goeckeler, who was appointed as our Chief Executive Officer in March 2020, was not subject to the same compensation arrangements as our remaining named executive officers, the chart below reflects Mr. Milligan’s target compensation for fiscal 2020. Mr. Goeckeler’s compensation elements for fiscal 2021 are comparable to Mr. Milligan’s fiscal 2020 compensation elements.

  Chief Executive Officer Pay Mix                       Named Executive Officer Average
Pay Mix (other than Chief Executive
Officer)
 
 

Process for Determining Executive Compensation

ROLE OF THE COMPENSATION AND TALENT COMMITTEE

The Compensation and Talent Committee reviews and determines compensation for our executive officers. The Compensation and Talent Committee generally reviews the performance and compensation of our executive officers on an annual basis and at the time of hiring, promotion or other change in responsibilities. The Compensation and Talent Committee’s annual review typically occurs near the end of the prior fiscal year and beginning of the new fiscal year.

The Compensation and Talent Committee’s executive compensation decisions are informed by several factors, including:

External and Internal Factors
Our compensation philosophy and objectives
Our pay positioning relative to our peer group
The executive’s role, experience, performance and contributions
Internal pay equity
Succession planning and retention objectives
Current and historical company performance and strategic and financial goals
Market performance and general economic conditions
Compensation Consultant
Advice from the Compensation and Talent Committee’s independent compensation consultant
Survey and peer group company market data prepared by the independent compensation consultant
 
Management
Our Chief Executive Officer’s recommendations for other executive officers (not including our Chief Executive Officer)
Stockholders
Feedback received during stockholder engagement

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COMPENSATION DISCUSSION AND ANALYSIS

ROLE OF MANAGEMENT

Management assists the Compensation and Talent Committee in the administration of our executive compensation process. No executive participates in decisions regarding his or her own compensation.

Our Chief Executive Officer provides recommendations regarding compensation for his executive officer direct reports for consideration by the Compensation and Talent Committee during its annual review. While the Compensation and Talent Committee considers these recommendations, the Compensation and Talent Committee is solely responsible for making the final decision regarding the compensation of our executive officers.

Our Chief Human Resources Officer or her designee also provides internal and external compensation data to the Compensation and Talent Committee and the independent compensation consultant.

Our Chief Financial Officer or his designee provides input to the Compensation and Talent Committee on the financial targets for our performance-based executive compensation program and presents data regarding the impact of the program on our financial results.

Our Chief Legal Officer or his designee generally assesses and advises the Compensation and Talent Committee regarding legal implications or considerations involving our executive compensation program.

The Compensation and Talent Committee alone is charged with approving the compensation of our Chief Executive Officer, although in determining our Chief Executive Officer’s compensation, the Compensation and Talent Committee confers with other members of our Board of Directors, led by our Chairman of the Board and Lead Independent Director, who also evaluate our Chief Executive Officer’s performance. For a discussion of the process relating to the annual performance evaluation of our Chief Executive Officer, please see the section entitled “Corporate Governance Matters—Board’s Role and Responsibilities—Chief Executive Officer Evaluation and Succession Planning.”

ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT

The Compensation and Talent Committee retains an independent compensation consultant to provide objective advice and counsel to the Compensation and Talent Committee on all matters related to the compensation of our Board members and executive officers.

For fiscal 2020, the Compensation and Talent Committee retained Willis Towers Watson (“WTW”) as the independent compensation consultant. WTW reported directly to the Compensation and Talent Committee during fiscal 2020. WTW also communicated with management to gather information and review management proposals as needed. WTW attended all regularly scheduled meetings of the Compensation and Talent Committee held during fiscal 2020.

The independent compensation consultant’s responsibilities for fiscal 2020 generally included:

advising on our new Chief Executive Officer’s compensation arrangement and transition awards;
reviewing and advising on executive compensation, including the performance measures to be used under the executive compensation program;
providing recommendations regarding the composition and selection of our peer group companies;
analyzing pay survey data;
providing advice regarding executive compensation practices and trends; and
advising on the Compensation and Talent Committee’s charter.

The Compensation and Talent Committee assessed the independence of WTW pursuant to applicable rules and regulations of the SEC and the Nasdaq Stock Market and concluded that the engagement of WTW did not raise any conflicts of interest during fiscal 2020 and currently does not raise any conflicts of interest.

Comparative Market Data

The Compensation and Talent Committee determines the composition of our peer group and reevaluates this group on an annual basis with input from the independent compensation consultant.

For fiscal 2020, market data was also collected from the Radford Executive Survey, an independently published survey, and WTW’s High-Tech Compensation Survey. The survey data was filtered for high-technology companies and adjusted to screen for revenue size. With input from the independent compensation consultant, the Compensation and Talent Committee uses market data and industry practices during its annual review of the competitiveness of compensation levels and the appropriate mix of compensation elements for our executive officers. This market data provided the Compensation and Talent Committee a reference point, which was one of several factors that it used to make compensation decisions during its fiscal 2020 annual compensation review, as discussed in this section.

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COMPENSATION DISCUSSION AND ANALYSIS

Fiscal 2020 Peer Group Companies

As reflected in the table below, the peer group for fiscal 2020 consists of technology companies that compete with us for talent and have the size (primarily based on revenue) and business characteristics that we believe are comparable to ours. Most of the companies included in our fiscal 2020 peer group are, like us, included in the Dow Jones U.S. Technology Hardware & Equipment Index, which we selected as the industry index for purposes of the stock performance graph appearing in our 2020 Annual Report on Form 10-K.

In choosing peer group companies, the Compensation and Talent Committee focused primarily on industry, talent market and revenue size. Revenue is a commonly used proxy for organizational size and complexity and is relatively stable from year-to-year, making it a valuable metric when selecting appropriately-sized peers for compensation purposes. As part of its decision process, the Compensation and Talent Committee also references other metrics for informational purposes. However, the Compensation and Talent Committee recognizes that certain of these measures, in particular market capitalization, reflect in part non-operational factors and can be volatile year-to-year for companies in our industry, making these secondary indicators less-stable measures for peer group construction purposes than revenue.

                  
 
  
Advanced Micro Devices, Inc.
Applied Materials, Inc.
Broadcom Inc.
Cisco Systems, Inc.
Hewlett Packard
Enterprise Company
HP Inc.
Intel Corporation
LAM Research Corporation
Micron Technology, Inc.
Motorola Solutions, Inc.
NVIDIA Corporation
QUALCOMM Incorporated
Seagate Technology plc
Texas Instruments Incorporated
     
 

Western Digital Compared to Peer Group
 

(1) Represents annual revenue for the most recent fiscal year for which data was available through SEC filings as of August 31, 2020.

PEER GROUP CHANGES FOR FISCAL 2021

During fiscal 2020, following the Compensation and Talent Committee’s annual review of our peer group with the independent compensation consultant and reflecting input from our investors, the Compensation and Talent Committee expanded our peer group to include the three new companies identified below. Each of the added companies had, at the time the Compensation and Talent Committee approved the peer group changes, a market capitalization that was lower than most of our other fiscal 2020 peer group companies but otherwise fit within the primary criteria reviewed by the committee in selecting the peer group companies.

 ADDED
Flex Ltd. based on industry focus and market capitalization
NetApp, Inc. based industry focus, revenue and market capitalization
ON Semiconductor Corporation based on industry focus, revenue and market capitalization

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COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2020 DECISIONS AND OUTCOMES

Base Salary

The Compensation and Talent Committee approved Mr. Goeckeler’s annual base salary in connection with his appointment as our Chief Executive Officer in March 2020. The Compensation and Talent Committee increased Dr. Sivaram’s base salary in August 2019 to reflect his expanded role following his promotion to President, Technology and Strategy, and increased Mr. Ray’s base salary in connection with the retention arrangement discussed on page 56. In January 2020, the Compensation and Talent Committee approved base salary increases for Mr. Eulau and Ms. Sundberg to reflect the executives’ performance and competitive positioning of their base salaries relative to the market. Each named executive officer’s annualized base salary as in effect at the end of fiscal 2020 is reflected below:

Named Executive Officer Base Salary Level
($)
Change from
Fiscal 2019
David V. Goeckeler 1,250,000 N/A
Robert K. Eulau 715,000 2%
Srinivasan Sivaram 700,000 12%
Michael C. Ray 625,000 9%
Lori S. Sundberg 525,000 5%
Stephen D. Milligan 1,250,000 0%
Michael D. Cordano 800,000 0%

Short-Term Incentives

TARGET INCENTIVE LEVEL OPPORTUNITIES

The Compensation and Talent Committee approved Mr. Goeckeler’s target annual STI level in connection with his appointment as our Chief Executive Officer in March 2020. For our remaining named executive officers, the Compensation and Talent Committee concluded that target STI levels for fiscal 2019 remained appropriate and, as a result, no adjustments were made to their target incentive levels for fiscal 2020. Each named executive officer’s target STI opportunity for fiscal 2020 is reflected below:

Named Executive Officer Annual Target
Incentive Opportunity
(as Percentage of Base Salary)
Change from
Fiscal 2019
David V. Goeckeler 175% N/A
Robert K. Eulau 110% 0%
Srinivasan Sivaram 110% 0%
Michael C. Ray 85% 0%
Lori S. Sundberg 85% 0%
Stephen D. Milligan 150% 0%
Michael D. Cordano 125% 0%

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COMPENSATION DISCUSSION AND ANALYSIS

FISCAL 2020 STI GOAL SETTING

In setting the target non-GAAP net income performance level our fiscal 2020 STI plan, the Compensation and Talent Committee considered the following factors:

The reduction in flash pricing during fiscal 2019 dramatically impacted our non-GAAP net income throughout the fiscal year, with fourth quarter fiscal 2019 non-GAAP net income performance that was less than 6% of our first quarter fiscal 2019 non-GAAP net income performance (see table below)
In the first quarter of fiscal 2020, when the fiscal 2020 STI target was established, management believed that the flash market had reached its cyclical trough and that pricing would improve through fiscal 2020
Even with a favorable view of fiscal 2020 flash pricing improvement, management did not foresee an immediate rebound in pricing to the levels seen in the first half of fiscal 2019
In the first quarter of fiscal 2020, we faced market uncertainties given that the U.S. Commerce Department’s Bureau of Industry and Security prohibited shipping of certain products to entities within China and our customers moved some of their sourcing requirements to international competitors, reducing demand for some of our products

Non-GAAP Net Income ($, in millions)(1)
First Quarter
Fiscal 2019
Second Quarter
Fiscal 2019
Third Quarter
Fiscal 2019
Fourth Quarter
Fiscal 2019
Fiscal 2019
Total
906 424 49 50 1,429
(1) See Appendix A to this Proxy Statement for a reconciliation of GAAP net income to non-GAAP net income.

After accounting for these factors, the Compensation and Talent Committee approved a fiscal 2020 non-GAAP net income target of $599 million for the STI plan. Recognizing that the STI non-GAAP net income target for fiscal 2020 was lower than our fiscal 2019 non-GAAP net income performance level, the Compensation and Talent Committee extended the performance range above target to make it harder for executives to receive a maximum payout. The fiscal 2019 STI design required performance at 130% of target for executives to receive a maximum payout while the fiscal 2020 STI design required performance at 150% of target for maximum payout.

Fiscal 2019 STI Versus Fiscal 2020 STI Performance Curves

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COMPENSATION DISCUSSION AND ANALYSIS

FISCAL 2020 STI ACHIEVEMENT AND PAYOUTS

Our non-GAAP net income achievement under our fiscal 2020 STI plan was $882 million, which was 147% of target performance; the payout rate at this level of performance would have been 194% of target. Given our fiscal 2020 financial performance in the context of market conditions and considering the STI plan had a lower performance target in fiscal 2020 relative to fiscal 2019, our Chief Executive Officer recommended that the Compensation and Talent Committee cap the fiscal 2020 STI payouts for our executives at 100% of target. The Compensation and Talent Committee agreed with this recommendation and approved payouts under the plan at 100% of target, in the amounts below.

Non-GAAP
Net Income
Target (100%)
($, in millions)
Achievement
($, in millions)(1)
Plan
Achievement
Rate
Capped
Payout
Rate
Target STI
Opportunity
(as a percentage
of base salary)
Actual STI
Payout
Amount
($)
David V. Goeckeler(2) 599 882 147% 100% 175% 673,077
Robert K. Eulau 599 882 147% 100% 110% 778,123
Srinivasan Sivaram 599 882 147% 100% 110% 776,875
Michael C. Ray 599 882 147% 100% 85% 526,346
Lori S. Sundberg 599 882 147% 100% 85% 435,462
Stephen D. Milligan 599 882 147% 100% 150% 1,875,000
Michael D. Cordano 599 882 147% 100% 125% 1,000,000
(1) The figure shown in the table above reflects fiscal 2020 non-GAAP net income of $914 million less a benefit of $32 million due to capped STI payouts for fiscal 2020, and the figure shown was used to determine achievement against the non-GAAP net income target under our fiscal 2020 STI plan. See Appendix A to this Proxy Statement for a reconciliation of GAAP net income to non-GAAP net income.
(2) Mr. Goeckeler participated in our fiscal 2020 STI plan on a prorated basis for the portion of fiscal 2020 that he was employed.

RECENT STI PAYOUTS

The average annual STI payout (as a percentage of the applicable target payout level) made to executive officers participating in the STI program each fiscal year from fiscal 2018 through fiscal 2020 (a three-year period) was 72% of target, and from fiscal 2016 through fiscal 2020 (a five-year period) was 86% of target.

The Compensation and Talent Committee establishes performance targets at the beginning of each STI performance period by assessing our annual operating plan, but evaluating the rigor of these goals prospectively can be challenging in a cyclical industry. In instances in which the Compensation and Talent Committee believes the STI payout is too high after evaluating our performance in the context of our fiscal year and applicable market conditions, it may exercise negative discretion to reduce payouts under the plan. As noted above, given our fiscal 2020 financial performance in the context of market conditions and considering the STI plan had a lower performance target in fiscal 2020 relative to fiscal 2019, the Compensation and Talent Committee capped the fiscal 2020 STI payouts for our executives at 100% of target.

3-Year Average STI Actual
Payout vs. Target
5-Year Average STI Actual
Payout vs. Target

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COMPENSATION DISCUSSION AND ANALYSIS

Long-Term Incentives

Fiscal 2020 LTI Awards

The Compensation and Talent Committee approved Mr. Goeckeler’s fiscal 2020 LTI award upon his appointment as our Chief Executive Officer in March 2020. Our other named executive officers received the following annual LTI equity awards in September 2019. Each named executive officer’s fiscal 2020 LTI award consists of a mix of PSUs and RSUs. Mr. Goeckeler’s RSUs are scheduled to vest in two annual installments, generally subject to his continued employment through the applicable vesting date. As noted above on page 54, Mr. Goeckeler’s RSU award is intended to replace forfeited RSU values that he was scheduled to receive during the next two fiscal years at his prior employer. The RSUs for our other named executive officers are scheduled to vest in four annual installments, generally subject to the executive’s continued employment through the applicable vesting date. The vesting provisions of the PSUs are described below.

Total Awarded
Grant Value ($)
(1)
# Shares Underlying
LTI Grants(2)
LTI Vehicle Mix
Named Executive Officer PSUs RSUs
David V. Goeckeler 30,500,000 643,459 67% 33%
Robert K. Eulau 4,000,000 67,417 50% 50%
Srinivasan Sivaram 4,000,000 67,417 50% 50%
Michael C. Ray 3,125,000 52,669 50% 50%
Lori S. Sundberg 2,250,000 37,921 50% 50%
Stephen D. Milligan 12,000,000 202,257 60% 40%
Michael D. Cordano 4,800,000 80,901 50% 50%
(1) The differences between the target grant values approved by the Compensation and Talent Committee and reflected in the table above, and the grant date fair values of the awards as determined for financial reporting purposes and reflected in the Summary Compensation Table and the Grants of Plan-Based Awards Table below, is attributable to the use of a Monte Carlo simulation to determine the grant date fair value of the relative TSR PSUs for financial reporting purposes. 
(2) The number of shares, in the case of both PSUs at the target level of performance and RSUs, was determined by dividing the target awarded grant value by the closing price of our common stock on the Nasdaq Stock Market on the grant date, rounded down to the nearest share. The closing price of our common stock on March 9, 2020, the grant date for Mr. Goeckeler’s fiscal 2020 LTI awards, was $47.40 per share. The closing price of our common stock on September 4, 2019, the grant date for our other named executive officers’ fiscal 2020 LTI awards, was $59.33 per share.

Three-Year CEO Transition PSU Award

Mr. Goeckeler’s transition PSU award was granted in March 2020. He may earn shares under this award based on our stock performance, assuming reinvestment of dividends, relative to the performance of the S&P 500 constituent companies as of March 9, 2020 (the first day of the performance measurement period). The Compensation and Talent Committee chose S&P 500 constituent companies as the comparator group for the PSU award because these companies represent the broader U.S. equities market and the comparator group provides our Chief Executive Officer with a clear line of sight with respect to our stock performance relative to the broader market.

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COMPENSATION DISCUSSION AND ANALYSIS

The Compensation and Talent Committee established a rigorous target for Mr. Goeckeler’s PSU award, which requires our stock performance to exceed the 57th percentile relative to the peer group companies for Mr. Goeckeler to receive a target payout under the award. Further, the Compensation and Talent Committee determined that median relative TSR performance during this period would result in a meaningfully reduced payout, set at 80% of target. The award is also capped at 150% of the target payout to manage our potential dilution under the award.

The percentage of Mr. Goeckeler’s relative TSR PSUs that can be earned at the end of the three-year performance period is set forth below. Straight-line interpolation is used if performance falls between two points.

Payout Level Western Digital’s TSR Results Relative to S&P 500
Constituent Companies during the Measurement Period
Portion of the PSUs Subject to the
Award that Become Eligible to Vest
Max 75th percentile or greater 150%
Target 57th percentile 100%
50th percentile 80%
Threshold 25th percentile 50%
Less than the 25th percentile 0%

Fiscal 2020–2022 PSU Awards (Named Executive Officers other than CEO)

The fiscal 2020-2022 PSU awards granted in September 2019 become eligible to vest over a two-year performance period covering fiscal 2020 and 2021 and a three-year performance period covering fiscal 2020 through 2022, as discussed in more detail below. The financial targets included in the fiscal 2020-2022 PSU awards are aligned with our long-range plan and were approved by the Compensation and Talent Committee after comparing those targets to analysts’ projections to validate the rigor of our targets.

Two-Year Performance Period (12.5% of Target PSU Award)

Revenue (6.25% of target award)
Non-GAAP EPS (6.25% of target award)
Three-year service period (one year beyond the two-year performance period)

Three-Year Performance Period (87.5% of Target PSU Award)

Revenue (18.75% of target award)
Non-GAAP EPS (18.75% of target award)
Relative TSR (50% of target award)

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COMPENSATION DISCUSSION AND ANALYSIS

The Compensation and Talent Committee selected these performance metrics for the PSUs because non-GAAP EPS helps measure the effectiveness of our capital allocation strategy, revenue helps focus our executives on sustainable long-term corporate growth, and the relative TSR metric aligns our executives with our stockholders by rewarding our executives based on our stock performance relative to a comparison group of semiconductor and hardware and equipment companies over a multi-year period.

Performance Period and Payout Range

PSU awards granted prior to the fiscal 2019-2021 PSU awards included a two-year performance period. The fiscal 2019-2021 PSU awards extended the performance period for 87.5% of the target award to three years and retained a two-year performance period for just 12.5% of the target PSUs. The portion of the PSUs that include a two-year performance period also include a three-year service period (one year beyond the two-year performance period), which means 100% of the target PSUs will vest after three years. This design served as a transition to a full three-year performance period. The Compensation and Talent Committee retained this transition design for the fiscal 2020-2022 PSUs. As discussed in more detail below, the fiscal 2021-2023 PSUs granted in September 2020 include a full three-year performance period for 100% of the award.

The actual number of shares that may become earned and payable under the fiscal 2020-2022 PSU awards will range from 0% to 200% of the target number of stock units based on achievement of the specified performance goals. However, if our absolute TSR for the three-year performance period is negative, payout of the PSUs allocated to the TSR metric is capped at 100% of the target number of stock units.

Relative Market Performance Adjustment for Financial Metrics

The cumulative PSU financial goals are subject to a pre-established, objective adjustment at the end of the applicable performance period in a relative proportion (up or down) by which the total market for our products (measured by revenue) during the period exceeds or falls short of the total market forecast approved by the Compensation and Talent Committee at the time the goals are established, as reported by International Data Corporation (IDC), Forward Insights and Gartner. We refer to the relative market performance adjustment in this Proxy Statement as “relative MPA.”

Relative MPA is a pre-established modifier approved at the time the performance goals are set by the Compensation and Committee and not subject to discretion as to whether the adjustment should be applied.
Rationale: We believe the relative MPA is an important element of our PSU program to help ensure we are paying for performance relative to the market demand and opportunity available to us and not due to unforeseen swings in the market. For example, if there is a significant demand in the market that was not forecasted at the beginning of the performance period when the Compensation and Talent Committee approved the performance goals, the adjustment factor would automatically increase the goals – and make them harder to achieve – to ensure that our executives are not benefitting from the unforeseen upswing in demand.

Relative TSR Metric

The relative TSR metric measures our stock performance, assuming reinvestment of dividends, relative to two high-tech indices over a three-year performance period: the S&P 500 Technology Hardware & Equipment Index (comprised of 17 companies as of the grant date) and the PHLX Semiconductor Sector Index (comprised of 30 companies as of the grant date). The 47 companies within these indices as of the fiscal 2020-2022 PSU grant consist of the following:

Company Applicable Index
Advanced Micro Devices, Inc. PHLX
Amphenol Corporation S&P 500 TH&E
Analog Devices, Inc. PHLX
Apple Inc. S&P 500 TH&E
Applied Materials, Inc. PHLX
Arista Networks S&P 500 TH&E
ASML Holding N.V. PHLX
Broadcom Inc. PHLX
Company Applicable Index
Marvell Technology Group Ltd. PHLX
Maxim Integrated Products, Inc. PHLX
Microchip Technology Incorporated PHLX
Micron Technology, Inc. PHLX
MKS Instruments, Inc. PHLX
Monolithic Power Systems, Inc. PHLX
Motorola Solutions, Inc. S&P 500 TH&E
NetApp, Inc. S&P 500 TH&E

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Company Applicable Index
Cisco Systems, Inc. S&P 500 TH&E
Corning Incorporated S&P 500 TH&E
Cree, Inc. PHLX
Cypress Semiconductor Corporation PHLX
Entegris, Inc. PHLX
F5 Networks, Inc. S&P 500 TH&E
FLIR Systems, Inc. S&P 500 TH&E
Hewlett Packard Enterprise Company S&P 500 TH&E
HP Inc. S&P 500 TH&E
Inphi Corporation PHLX
Intel Corporation PHLX
IPG Photonics Corporation S&P 500 TH&E
Juniper Networks, Inc. S&P 500 TH&E
Keysight Technologies S&P 500 TH&E
KLA-Tencor Corporation PHLX
Lam Research Corporation PHLX
Company Applicable Index
NVIDIA Corporation PHLX
NXP Semiconductors N.V. PHLX
ON Semiconductor Corporation PHLX
Qorvo, Inc. PHLX
QUALCOMM Incorporated PHLX
Seagate Technology plc S&P 500 TH&E
Silicon Laboratories Inc. PHLX
Silicon Motion Technology Corporation PHLX
Skyworks Solutions, Inc. PHLX
Taiwan Semiconductor Manufacturing PHLX
TE Connectivity Ltd. S&P 500 TH&E
Teradyne, Inc. PHLX
Texas Instruments Incorporated PHLX
Xerox Holdings Corporation S&P 500 TH&E
Xilinx, Inc. PHLX

The percentage of relative TSR PSUs that can be earned at the end of the three-year performance period is set forth below.

Western Digital’s Relative TSR Results for the
Measurement Period
Portion of the PSUs Subject to the Award
that Become Eligible to Vest
75th percentile or greater 200%
50th percentile 100%
25th percentile 25%
Less than the 25th percentile 0%

Straight-line interpolation is used if performance falls between two points. If our absolute TSR is negative during the performance period, the relative TSR PSUs will be capped at a target payout (100%).

Achievement of Prior Year LTI Awards

Fiscal 2019–2021 PSU Awards

In August 2018, the Compensation and Talent Committee approved the grant of annual PSU awards to our named executive officers. These PSUs are earned based on the achievement of pre-established financial and market-based goals over a two- and three-year performance period, as discussed in more detail below.

Fiscal 2019-2020 Performance Period. The fiscal 2019-2021 PSUs include a two-year cumulative revenue metric, weighted at 6.25% of the target award, and a two-year cumulative non-GAAP EPS metric, weighted at 6.25% of the target award. Executives must remain employed with us for one year following the end of the two-year performance period to receive the payout on these PSUs.
Fiscal 2019-2021 Performance Period. The fiscal 2019-2021 PSUs include a three-year cumulative revenue metric, weighted at 18.75% of the target award, a three-year cumulative non-GAAP EPS metric, weighted at 18.75% of the target award, and a three-year relative TSR metric, weighted at 50% of the award.

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Relative MPA for Financial Metrics. The fiscal 2019-2021 PSUs include a relative MPA modifier as described above for the fiscal 2020-2022 PSUs on page 69. The actual total market for our products during the fiscal 2019-2020 performance period (measured by revenue) was lower than forecasted when the PSU goals were established, which resulted in a decrease in the target level of performance for both the revenue and non-GAAP EPS metrics relative to the targets established at grant. As a basis for comparison, the relative MPA modifier incorporated into our PSUs that vested following each of the last two fiscal years increased the financial targets relative to those established at grant.

Following the end of fiscal 2020, the Compensation and Talent Committee certified the performance for the portion of the fiscal 2019-2021 PSUs subject to the fiscal 2019-2020 performance period (12.5% of the target award), as outlined below. These PSUs remain subject to a one-year service requirement during fiscal 2021 in order for our named executive officers to receive the payout on these PSUs. Because of our transition from a two-year performance period to a three-year performance/vesting period, our named executive officers have a “gap” year with no PSU payouts. As a result of this gap, none of our named executive officers received a PSU payout following the end of fiscal 2020.

Fiscal 2019-2020 Performance Period Achievement

Cumulative Goals Threshold
(50%)
($)
Original
Target
(100%)
($)
Maximum
(200%)($)
Target After
Applying Relative
MPA Modifier
(100%)
($)
Actual
Performance
($)
Achievement
Rate
Final
Payout
Rate(1)
Two-Year Revenue (6.25%)
(in millions)
35,578 41,857 48,136 34,091 33,305 98% 94%
Two-Year Non-GAAP
EPS (6.25%)(2)
14.66 19.55 25.42 8.54 7.88 92% 90%
Weighted Overall Payout: 92%
(1) Payout will be made following fiscal 2021 and is generally subject to each executive’s continuous employment through the end of fiscal 2021.
(2) See Appendix A to this Proxy Statement for a reconciliation of GAAP EPS to non-GAAP EPS.

                                                                          
FISCAL 2021 DECISIONS

Fiscal 2021 STI Award Updates

The Compensation and Talent Committee updated the STI plan for fiscal 2021 to better align the plan with our core operations and to add operational and individual performance metrics, as reflected below.

In updating the STI plan for fiscal 2021, the Compensation and Talent Committee considered the following factors:

Non-GAAP operating income better reflects our core operating results than non-GAAP net income by excluding interest and taxes.
Exabytes shipped provides the executive team with tangible operational metrics in an uncertain market environment and the metric aligns with our short-term strategy. This metric is a primary driver for maintaining our market share and, given our fixed assets, shipping more exabytes improves our utilization of those assets. The inclusion of profit metrics in both the STI plan and LTI plan helps ensure that management does not ship exabytes unprofitably to maximize this metric.

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The individual performance metric provides the Compensation and Talent Committee with the ability to differentiate performance among executives and reward our strongest contributors. Weighting the metric at 25% ensures that the majority of each executive’s incentive opportunity is tied to financial and corporate objectives. Executives will be evaluated with respect to their leadership within the organization and their execution on our fiscal 2021 strategic and financial objectives. Our proxy statement for the 2021 annual meeting of stockholders will include a summary of the factors considered by the Compensation and Talent Committee in evaluating each named executive officer’s individual performance for the year.

Fiscal 2021 Updates Rationale
Performance Metrics
Shifted from non-GAAP net income to non-GAAP operating income
Shift from Non-GAAP Net Income to Non-GAAP Operating Income better reflects our core operations by excluding the impact of taxes and interest
Added a new pre-determined corporate metric, with a 25% target weighting: exabytes shipped (split between HDD and flash)
New Operational Metric (Exabytes Shipped) provides the executive team with tangible operational milestones; overall STI design emphasizes profit in achieving these milestones
Added an individual performance metric with a 25% weighting
New Individual Performance Metric allows for differentiation between executives based on individual contributions

Fiscal 2021-2023 PSU Award Updates

The Compensation and Talent Committee updated the PSU awards for fiscal 2021-2023 as follows:

PSU Performance Period: Extended the performance period for 100% of the PSUs to three years
Relative TSR PSUs: Replaced the custom peer index used in the fiscal 2019-2021 and fiscal 2020-2022 PSUs with the S&P 500 constituents; under this metric, our TSR will be compared to the TSR of the S&P 500 constituent companies, as determined at the beginning of the performance period, over a three-year period

In updating the fiscal 2021-2023 PSU awards, the Compensation and Talent Committee considered the following factors:

Three-Year Performance Period. The Compensation and Talent Committee evaluated our PSU design from the two previous fiscal years and determined that fiscal 2021 was the right time to move to a three-year performance period for 100% of the PSU awards. We discussed PSU performance periods with investors and they supported this three-year design. The fiscal 2021-2023 PSU awards do not include a two-year performance period for any portion of the awards.
Relative TSR Peer Group. The Compensation and Talent Committee’s primary considerations in making the change to the S&P 500 constituent TSR peer group include the following:
The Compensation and Talent Committee believes that the S&P 500 constituents is the right TSR peer group to include in our fiscal 2021-2023 PSU awards because it compares our performance to the broader equity market and will motivate our executives with a TSR peer group that is more visible and provides them with clear line of sight

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The custom TSR peer group included in our prior PSUs has a much smaller number of companies than the S&P 500 constituents and consolidation within the custom TSR peer group can impact our performance and payout curves disproportionately relative to a broader TSR peer group, such as the S&P 500 constituents
The Compensation and Talent Committee believes the new TSR peer group will be just as rigorous for executives as the custom TSR peer group used in prior PSU awards; back-testing performed by the Compensation and Talent Committee’s independent compensation consultant determined that payouts using the S&P 500 constituents as our TSR peer group were in line with payouts using the custom TSR peer group included in our prior PSU awards
Among the companies in our peer group that use relative TSR in their LTI programs, S&P 500 constituents is the most common TSR peer group

No changes were made to the RSU award design for fiscal 2021.

Fiscal 2021 Annual LTI Awards

The following LTI awards were granted to our named executive officers in fiscal 2021 as part of our regular annual LTI program:

Total Awarded
Grant Value
($)
# Shares Underlying
LTI Grants(2)
LTI Vehicle Mix
Named Executive Officer(1) PSUs RSUs
David V. Goeckeler 12,000,000 318,217 60% 40%
Robert K. Eulau 3,575,000 94,801 50% 50%
Srinivasan Sivaram 3,750,000 99,441 50% 50%
Michael C. Ray 2,187,500 58,008 50% 50%
Lori S. Sundberg 1,837,500 48,725 50% 50%
(1) Mr. Milligan and Mr. Cordano did not receive fiscal 2021 annual LTI awards due to Mr. Milligan’s retirement in September 2020 and Mr. Cordano’s termination without cause in August 2020.
(2) The number of shares, in the case of both PSUs at the target level of performance and RSUs, was determined by dividing the total awarded grant value by the closing price of our common stock on the Nasdaq Stock Market on the grant date, rounded to the nearest share. The closing price of our common stock on September 3, 2020, the grant date for the fiscal 2021 annual LTI awards, was $37.71 per share.

Dr. Sivaram’s Fiscal 2021 Compensation Enhancements

In August 2020, the Compensation and Talent Committee approved an increase in Dr. Sivaram’s annual base salary from $700,000 to $750,000 and approved an increase in his fiscal 2021 target STI opportunity from 110% to 120%. In approving these changes, the Compensation and Talent Committee considered Dr. Sivaram’s critical role for our flash business and his key relationships with our joint venture partner.

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OTHER PROGRAM FEATURES AND POLICIES

Perquisites

We provide our executive officers with limited perquisites, consisting principally of a $5,000 annual allowance for financial planning services (net of taxes), which is available to other officers, and a monthly transitional housing and travel allowance, which is available to other eligible officers who have families located outside of the San Jose, California area but are required to perform services in San Jose, California. The monthly transitional housing and travel allowance is provided to a small number of officers and is limited in duration as a transition into employment with our company. Ms. Sundberg is our only named executive officer who received a transitional housing and travel allowance in fiscal 2020.

We did not provide any tax gross-up payments to our named executive officers, except as to the modest financial planning services allowance in accordance with the terms of the program, to the extent permitted by applicable tax law and to the extent these benefits are taxable to the participant.

401(k) Plan Benefits

We provide retirement benefits to our executive officers and other eligible employees under the terms of our 401(k) Plan. Eligible employees may contribute up to 75% of their annual cash compensation up to a maximum amount allowed by the Internal Revenue Code, and are also eligible for matching contributions, which vest over a two-year service period. Our executive officers participate in the 401(k) Plan on substantially the same terms as our other participating employees. The 401(k) Plan and our matching contributions are designed to assist us in achieving our compensation objectives of attracting and retaining talented individuals and ensuring that our executive compensation program is competitive and equitable. We do not maintain any defined benefit supplemental retirement plans for our executive officers.

Deferred
Compensation
Opportunities

Our executives and certain other key employees who are subject to U.S. federal income taxes are eligible to participate in our Deferred Compensation Plan. Participants in the Deferred Compensation Plan can elect to defer certain compensation without regard to the tax code limitations applicable to tax-qualified plans. We did not make any company matching or discretionary contributions to the Deferred Compensation Plan on behalf of participants in fiscal 2020. The Deferred Compensation Plan is intended to promote retention by providing employees with an opportunity to save for retirement in a tax-efficient manner. Please see the “Fiscal 2020 Non-Qualified Deferred Compensation Table” and related narrative in the section entitled “Executive Compensation Tables and Narratives—Non-Qualified Deferred Compensation Plan” for a more detailed description of our Deferred Compensation Plan and the deferred compensation amounts that our named executive officers have deferred under the plan.

Severance Protections

Our philosophy is that, outside of a change in control context, severance protections are only appropriate in the event an executive is involuntarily terminated without “cause.” We believe these severance benefits are appropriate in light of severance protections available to executives at our peer group companies and are an important component of each executive’s overall compensation as they help us to attract and retain our key executives who could have other job alternatives that may appear to them to be more attractive absent these protections.

Please see the section entitled “Executive Compensation Tables and Narratives—Potential Payments upon Termination or Change in Control” for a description and quantification of the potential payments that may be made to our named executive officers in connection with their termination of employment or a change in control.

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Change in
Control Protections

We believe that the occurrence or potential occurrence of a change in control transaction will create uncertainty regarding the continued employment of our executive officers. This uncertainty results from the fact that many change in control transactions result in significant organizational changes, particularly at the senior executive level. To encourage executives to remain employed with us during an important time when their prospects for continued employment following the transaction are often uncertain, we provide our executives with additional severance protections under our Change of Control Severance Plan. We also provide these severance protections to help ensure that executives can objectively evaluate change in control transactions that may be in the best interests of stockholders despite the potential negative consequences such transactions may have on them personally.

Please see the section entitled “Executive Compensation Tables and Narratives—Potential Payments upon Termination or Change in Control” for a description and quantification of the potential payments that may be made to our named executive officers in connection with their termination of employment or a change in control.

Employment
Agreements

The Compensation and Talent Committee does not have an established policy for entering into employment agreements with executive officers. Generally, absent other factors, the Compensation and Talent Committee’s intent is to retain the flexibility to review and adjust compensation for our executive officers on at least an annual basis. None of our executive officers is currently party to an employment agreement with us.

Compensation
Recovery
(Clawback) Policy

Our Board of Directors previously adopted by resolution a compensation recovery (clawback) policy whereby in the event of a restatement of our audited financial statements involving misconduct by an executive officer, a Board committee will consider whether such officer engaged in intentional financial accounting misconduct such that the officer should disgorge any equity award proceeds (including PSUs, RSUs and stock options) or cash bonuses attributable to such misconduct.

Misconduct Policies

We maintain several policies relating to employee misconduct. In the event an executive’s employment is terminated for cause due to the executive’s misconduct or violation of company policy, among other reasons, the executive will forfeit all outstanding incentives, including unearned or unvested LTI and STI awards. In addition, the executive would not be eligible for severance benefits.

Policies Prohibiting
Hedging, Pledging
and Short Sale or
Derivative Transaction

We have an insider trading policy that, among other things, prohibits our executive officers (as well as our other employees and members of our Board of Directors) from engaging in hedging transactions or speculative transactions involving our company’s securities and from pledging company securities. Prohibited transactions include hedging or monetization transactions, such as prepaid variable forwards, equity swaps, collars and exchange funds that are designed to hedge or offset any decrease in the market value of our company’s securities, shorts sales, transactions in derivative securities, such as publicly traded options, related to our company’s securities and margining our company’s securities in a margin account or otherwise pledging company securities as collateral for a loan.

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Executive Stock
Ownership Guidelines
  

To help achieve our compensation objective of linking the interests of our stockholders with those of our executive officers, we established executive stock ownership guidelines covering our senior officers, including our named executive officers. The guidelines provide that each officer must achieve ownership of a number of “qualifying shares” with a market value equal to the specified multiple of the officer’s base salary in effect upon the date he or she first becomes subject to the guidelines shown below.

In fiscal 2020, the Compensation and Talent Committee our Chief Executive Officer’s ownership requirement from 5x annual base salary to 6x annual base salary and increased our Chief Financial Officer’s ownership requirement from 2x annual base salary to 3x annual base salary.

Position Multiple
Chief Executive Officer 6 x Salary
President, Chief Financial Officer and Division Presidents 3 x Salary
Executive Vice Presidents 2 x Salary
Senior Vice Presidents 1 x Salary

Each officer must achieve ownership of the required market value of shares within three years of becoming subject to the guidelines. Thereafter, the officer must maintain ownership of at least the number of shares that were necessary to meet the executive’s required market value of ownership on the date the requirement was first achieved (subject to certain adjustments in the event of a change in base salary or position). Ownership that counts toward the guidelines includes common stock, RSUs, PSUs, deferred stock units and common stock beneficially owned by the officer by virtue of being held in a trust, by a spouse or by the executive’s minor children. Shares the officer has a right to acquire through the exercise of stock options (whether or not vested) are not counted toward the stock ownership requirement. All of our current officers who are subject to these guidelines have met their required ownership level as of the date of this Proxy Statement or have sufficient time remaining in which to meet the required ownership level.

Internal Revenue Code
Section 162(m)

Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to a company’s chief executive officer and certain current and former executive officers. Certain awards granted before November 2, 2017 that were based upon attaining pre-established performance measures that were set by the Compensation and Talent Committee under a plan approved by our stockholders, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit. In order to achieve the objectives of our executive compensation program, we may continue to pay compensation that will not be deductible for federal income tax purposes.

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EXECUTIVE COMPENSATION TABLES AND NARRATIVES

                                                                          
FISCAL 2018—2020 SUMMARY COMPENSATION TABLE

The following table presents information regarding compensation earned for fiscal 2018, 2019 and 2020 by our named executive officers. Unless otherwise noted, the footnote disclosures apply to fiscal 2020 compensation. For an explanation of the amounts included in the table for fiscal 2018 or 2019, please see the footnote disclosures in our proxy statement for our annual meeting of stockholders for the corresponding fiscal year.

Name and Principal Position Fiscal
Year
Salary
($)(1)
Bonus
($)
Stock
Awards
($)(2)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)(3)
All Other
Compensation
($)(4)
Total
($)
David V. Goeckeler
Chief Executive Officer
2020 408,654 3,500,000 (5) 31,140,040 673,077 1,605 35,723,376
Robert K. Eulau
Executive Vice President
and Chief Financial Officer
2020 721,135 250,000 (6) 4,667,943 778,123 25,564 6,442,765
2019 134,615 250,000 1,999,970 3,231 2,387,816
Srinivasan Sivaram
President, Technology
and Strategy
2020 719,712 4,667,943 776,875 22,432 6,186,962
2019 625,000 3,038,291 10,158 3,673,449
2018 623,377 4,724,167 774,377 8,976 6,130,897
Michael C. Ray
Executive Vice President,
Chief Legal Officer
and Secretary
2020 631,250 500,000 (7) 3,646,792 526,346 7,491 5,311,879
Lori S. Sundberg
Executive Vice President
and Chief Human
Resources Officer
2020 522,404 2,625,640 435,462 135,746 3,719,252
Stephen D. Milligan
Former Chief
Executive Officer
2020 1,274,038 14,405,144 1,875,000 24,793 17,578,975
2019 1,250,000 11,601,177 15,292 12,866,469
2018 1,250,000 16,033,990 2,175,000 279,391 19,738,381
Michael D. Cordano
Former President and Chief
Operating Officer
2020 815,385 5,601,575 1,000,000 8,550 7,425,510
2019 800,000 4,666,984 8,400 5,475,384
2018 800,000 6,530,594 1,160,000 18,167 8,508,761
(1) The amounts shown reflect the base salary earned by our named executive officers for the corresponding year. Note that fiscal 2020 spanned 53 weeks.
(2) The amounts shown reflect the aggregate grant date fair value of stock awards granted in the applicable fiscal year computed in accordance with ASC 718. These amounts were calculated based on the assumptions described in Note 12 in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the applicable fiscal year, but exclude the impact of estimated forfeitures related to service-based vesting conditions. See the “Fiscal 2020 Grants of Plan-Based Awards Table” below for information on awards made in fiscal 2020.
The following amounts represent the grant date fair value of PSU awards granted to our named executive officers during fiscal 2018, 2019 and 2020 assuming the probable outcome of the awards on the grant date (which we considered the target level of performance for PSUs other than relative TSR PSUs, and determined using a Monte Carlo simulation in the case of relative TSR PSUs) and assuming maximum performance under the awards. The dollar value of the awards included in the Summary Compensation Table for the year of grant is based on the probable outcome of the awards on the grant date and do not reflect actual payouts.

2020 PROXY STATEMENT     77


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COMPENSATION DISCUSSION AND ANALYSIS

Grant Date Fair Value of PSU Awards Based on
Probable Outcome on the Grant Date
Grant Date Fair Value of PSU Awards
at Maximum Performance
      Named Executive Officer Fiscal 2018
($)
Fiscal 2019
($)
Fiscal 2020
($)
Fiscal 2018
($)
Fiscal 2019
($)
Fiscal 2020
($)
David V. Goeckeler 21,140,062 21,140,062
Robert K. Eulau 2,667,988 3,667,936
Srinivasan Sivaram 1,234,165 1,475,845 2,667,988 1,740,374 2,951,690 3,667,936
Michael C. Ray 2,084,336 2,865,534
Lori S. Sundberg 1,500,684 2,063,132
Stephen D. Milligan 8,739,188 6,801,199 9,605,169 12,323,686 13,602,398 13,205,136
Michael D. Cordano 3,311,701 2,267,027 3,201,618 4,670,041 4,534,054 4,401,567
(3) Reflects each named executive officer’s STI payment for the corresponding fiscal year. The STI payments for fiscal 2020 are more fully described in the sections entitled “Executive Compensation—Compensation Discussion and Analysis” and “Description of Compensation Arrangements for Named Executive Officers.”
(4) The table below summarizes all other compensation to each of our named executive officers for fiscal 2020:

      Name Perquisites(a)
($)
401(k) Plan Company
Matching Contributions
($)
David V. Goeckeler 1,605
Robert K. Eulau 12,156 (b) 13,408
Srinivasan Sivaram 13,599 (c) 8,833
Michael C. Ray 7,491
Lori S. Sundberg 127,304 (d) 8,442
Stephen D. Milligan 16,258 (e) 8,535
Michael D. Cordano 8,550
      (a) In accordance with applicable SEC rules, no amount is reflected if the aggregate amount of perquisites and other personal benefits paid to such individual for fiscal 2020 was less than $10,000.
(b) The amount shown reflects reimbursed financial planning services of $12,156.
(c) The amount shown reflects a taxable life insurance benefit of $6,358 and reimbursed financial planning services of $7,241.
(d) The amount shown reflects a taxable life insurance benefit of $4,996 and a transitional housing and travel allowance of $122,308.
(e) The amount shown reflects a taxable life insurance benefit of $4,996 and reimbursed financial planning services of $11,262.
(5) In connection with his appointment as Chief Executive Officer in March 2020, Mr. Goeckeler received a transition cash award of $3,500,000, which is subject to repayment if Mr. Goeckeler does not remain employed through March 9, 2021, unless his employment is terminated without cause.
(6) In connection with his appointment as Executive Vice President and Chief Financial Officer effective in May 2019, Mr. Eulau received a transition cash award of $500,000, with the first half being paid in fiscal 2019 and the second half in fiscal 2020.
(7) This amount is more fully described in the section entitled “Executive Compensation—Compensation Discussion and Analysis—Mr. Ray’s Retention Arrangement.”

78     WESTERN DIGITAL


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COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2020 GRANTS OF PLAN-BASED AWARDS TABLE

The following table presents information regarding all grants of plan-based awards made to our named executive officers during fiscal 2020.

Name Award
Type
(1)
Grant
Date
Estimated Possible Payouts
Under Non-Equity
Incentive Plan
Awards
 


Estimated Future Payouts
Under Equity Incentive Plan
Awards
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant
Date Fair
Value of
Stock
and
Option
Awards
($)(2)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
David V. Goeckeler STI 3/9/20 336,539 673,077 1,346,154
PSUs — TSR (3)  3/9/20 216,245 432,489 648,734 21,140,062
RSUs (4)  3/9/20 210,970 9,999,978
Robert K. Eulau STI 8/6/19 389,062 778,123 1,556,246
PSUs — Financial (5)  9/4/19 8,427 16,854 33,708 999,948
PSUs — TSR (6)  9/4/19 4,214 16,854 33,708 1,668,040
RSUs (7)  9/4/19