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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨
Preliminary Proxy Statement
¨
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)
x
Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Pursuant to Section 240.14a-12
INTUITIVE SURGICAL, INC.
(Name of Registrant as Specified In Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x
No fee required.
¨
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
 
 
 
(2)
Aggregate number of securities to which transaction applies:
 
 
 
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
 
(4)
Proposed maximum aggregate value of transaction:
 
 
 
 
(5)
Total fee paid:
 
 
 
¨
Fee paid previously with preliminary materials.
¨
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
 
 
 
(2)
Form, Schedule or Registration Statement No.:
 
 
 
 
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(4)
Date Filed:
 
 
 




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NOTICE OF THE 2019 ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT














The terms “Intuitive Surgical,” the “Company,” “Intuitive,” “we,” “our,” and “us” in this Proxy Statement refer to Intuitive Surgical, Inc.


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NOTICE OF THE 2019 ANNUAL MEETING OF STOCKHOLDERS

To the stockholders of Intuitive Surgical, Inc.:
We are pleased to provide notice of the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Intuitive Surgical, Inc. that will be held at 1020 Kifer Road, Sunnyvale, California 94086 on Thursday, April 25, 2019, at 3:00 p.m. Pacific Daylight Time.
Items of Business:
1.
To elect nine members to the Board of Directors of the Company to serve until the 2020 Annual Meeting of Stockholders (Proposal No. 1).
2.
To consider and approve, on an advisory basis, the compensation of the Company’s Named Executive Officers (“NEOs”) as disclosed in the Proxy Statement (Proposal No. 2).
3.
To ratify the appointment of PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019 (Proposal No. 3).
4.
To approve the amendment and restatement of the 2010 Incentive Award Plan (Proposal No. 4).
5.
To consider and vote upon a stockholder proposal regarding elimination of supermajority voting provisions, (Proposal No. 5), if properly presented at the Annual Meeting.
6.
To transact any other business which is properly brought before the Annual Meeting or adjournments or postponements thereof.
Record Date:
Only stockholders of record at the close of business on March 1, 2019, are entitled to notice of, and to vote at, the Annual Meeting or any adjournments or postponements thereof.
Proxy Materials:
We are pleased to continue to provide access to our proxy materials over the Internet instead of mailing printed documents. We believe that this process allows us to provide information regarding the Annual Meeting in a more timely manner, while reducing the environmental impact and the cost of our Annual Meeting. The Notice will be mailed to stockholders starting on or about March 15, 2019, and contains instructions on how to access our proxy materials over the Internet. The Notice also contains instructions on how to request a copy of our proxy materials, including the attached Proxy Statement, our 2018 Annual Report and a form of proxy card or voting instruction card.
Your vote is important. Whether or not you are able to attend the Annual Meeting in person, it is important that your shares be represented. Please vote as soon as possible.
On behalf of our Board of Directors, thank you for your participation in this important annual process.
 
By order of the Board of Directors
 
 
 
/s/ Gary S. Guthart, Ph.D.
 
Gary S. Guthart, Ph.D.
 
President and Chief Executive Officer
Sunnyvale, California
March 8, 2019

Please note that attendance at the Annual Meeting will be limited to stockholders as of the record date, or their authorized representatives, and guests of Intuitive Surgical.


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GENERAL INFORMATION
Why am I receiving these materials?
Our Board of Directors (the “Board”) has made these materials available to you on the Internet, or has delivered printed versions of these materials to you by mail, in connection with the solicitation of proxies to be voted at our Annual Meeting of Stockholders to be held on April 25, 2019, at 3:00 p.m., Pacific Daylight Time, at the location and for the purposes as set forth in the “Notice of Annual Meeting of Stockholders.” Our stockholders are invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement. The approximate date on which this Proxy Statement and form of proxy will be first sent and made available to stockholders is March 15, 2019.
What is included in these materials?
These materials include:
This Proxy Statement for the Annual Meeting; and
Our 2018 Annual Report to Stockholders, which includes our audited consolidated financial statements.
If you received printed versions of these materials by mail, these materials also include the proxy card or voting instruction form for the Annual Meeting.
What items will be voted on at the Annual Meeting?
You will be voting on the following proposals:
1.
The election of nine members to the Board to serve until the 2020 Annual Meeting of Stockholders (Proposal No. 1);
2.
The advisory approval of the compensation of the Company’s NEOs (Proposal No. 2);
3.
The ratification of the appointment of PwC as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019 (Proposal No. 3);
4.
The approval of the amendment and restatement of the 2010 Incentive Award Plan (Proposal No. 4); and
5.
Stockholder proposal regarding elimination of supermajority voting provisions (Proposal No. 5).
What are the Board’s voting recommendations?
The Board recommends that you vote your shares:
“FOR” the election of each of the nominees to the Board (Proposal No. 1);
“FOR” the approval, on an advisory basis, of the compensation of the Company’s NEOs (Proposal No. 2);
“FOR” the ratification of the appointment of PwC as the Company’s independent registered accounting firm for the fiscal year ending December 31, 2019 (Proposal No. 3);
“FOR” the approval of the amendment and restatement of the 2010 Incentive Award Plan (Proposal No. 4); and
“AGAINST” the stockholder proposal regarding elimination of supermajority voting provisions (Proposal No. 5).
Where are Intuitive Surgical’s principal executive offices located, and what is Intuitive Surgical’s main telephone number?
Our principal executive offices are located at 1020 Kifer Road, Sunnyvale, California 94086, and our main telephone number is (408) 523-2100.
Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
We are pleased to continue to take advantage of the SEC rules that allow us to furnish our proxy materials to our stockholders by providing access to such documents on the Internet instead of mailing printed copies. Accordingly, most of our stockholders of record and beneficial owners have received a Notice of Internet Availability of Proxy Materials (“Notice”) and will not receive a full set of proxy materials in the mail unless requested. Instructions on how to access the proxy materials on the Internet may be found on the website referred to in the Notice. If you would like


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to receive our proxy materials electronically by email, you should follow the instructions for requesting such materials provided in the Notice. Your election to receive proxy materials electronically by email will remain in effect until you terminate such election. Choosing to receive future proxy materials electronically by email will reduce the environmental impact and the costs incurred by us in printing and mailing the proxy materials.
How can I get electronic access to the proxy materials?
Registered and Beneficial Stockholders
You can view the proxy materials for the Annual Meeting on the Internet at www.proxyvote.com.
Who may vote at the Annual Meeting?
The Board set March 1, 2019, as the record date for the Annual Meeting. All stockholders of record who owned Intuitive Surgical common stock at the close of business on March 1, 2019, are entitled to receive notice of, to attend, and to vote at the Annual Meeting. Each share of the Intuitive Surgical common stock has one vote on each matter, and there is no cumulative voting. At the close of business on the record date, there were 115,361,354 shares of common stock outstanding.
What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Stockholder of Record. If your shares are registered directly in your name with the Company’s transfer agent, Computershare Investor Services, LLC (“Computershare”), you are considered the stockholder of record with respect to those shares, and the Notice was sent directly to you by the Company. If you request printed copies of the proxy materials, you will receive a proxy card by mail.
Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice is forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account. If you request printed copies of the proxy materials, you will receive a voting instruction form by mail.
How can I vote my shares?
In Person — If you are a stockholder of record, you may vote in person at the Annual Meeting. If your shares are held in a brokerage account or by another nominee or trustee, you are considered the beneficial owner of shares held in street name. If you are a beneficial owner, you are also invited to attend the Annual Meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from the organization that holds your shares, giving you the right to vote the shares at the Annual Meeting.
Via the Internet — You may vote by proxy via the Internet by visiting www.proxyvote.com.
By Telephone — If you requested printed copies of the proxy materials by mail, you may vote by proxy by calling the toll free number found on the voting instruction form.
By Mail — If you requested printed copies of the proxy materials by mail, and if you are a stockholder of record, you may also vote by proxy by filling out the proxy card and sending it back in the envelope provided. If you requested printed copies of the proxy materials by mail and you are a beneficial owner, you may vote by proxy by filling out the voting instruction form and sending it back in the envelope provided.
What is the quorum requirement for the Annual Meeting?
The holders of a majority of the shares entitled to vote at the Annual Meeting must be present at the Annual Meeting for the transaction of business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against, or abstained, if you:
are present and vote in person at the Annual Meeting; or
have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction form by mail.


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Broker non-votes will also be counted as present and entitled to vote for purposes of determining if there is a quorum. If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.
How are proxies voted?
All shares represented by valid proxies received prior to the Annual Meeting will be voted and, where a stockholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the stockholder’s instructions.
What happens if I do not give specific voting instructions?
Stockholders of Record. If you are a stockholder of record and you:
indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or
sign and return a proxy card without giving specific voting instructions,
then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.
Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.”
Which ballot measures are considered “routine” or “non-routine”?
The ratification of the appointment of PwC as the Company’s independent registered public accounting firm for fiscal year ending December 31, 2019 (Proposal No. 3) is considered a routine matter under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal No. 3.
The election of directors (Proposal No. 1), the advisory approval of the compensation of our NEOs (Proposal No. 2), the approval of the amendment and restatement of the 2010 Incentive Award Plan (Proposal No. 4), and the stockholder proposal regarding elimination of supermajority voting provisions (Proposal No. 5) are matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on these five proposals.
What is the voting requirement to approve each of the proposals?
For Proposal No. 1, each director must be elected by the affirmative vote of a majority of the votes cast with respect to such director by the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. This means that the number of votes cast “FOR” a director must exceed the number of votes cast “AGAINST” that director, with abstentions and broker non-votes not counted as votes cast as either “FOR” or “AGAINST” such director’s election.
Approval of Proposals No. 2, No. 3, No. 4, and No. 5 requires the affirmative vote of a majority of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the proposal. Abstentions will have the same effect as a vote “AGAINST” Proposals No. 2, No. 3, No. 4, and No. 5. Broker non-votes will have no effect on the vote for Proposal No. 2, No. 4, and No. 5 and broker non-votes are generally not expected for Proposal No. 3.
How are abstentions and broker non-votes treated?
Shares represented by proxies that reflect abstentions or broker non-votes will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Shares voted “ABSTAIN” on proposals other than Proposal No. 1 will have the same effect as voting against the matter. Brokers, banks, and other nominees have the power to vote without receiving voting instructions from beneficial owners on Proposal No. 3, so the Company expects no broker non-votes on this proposal. For Proposals No. 1, No. 2, No. 4, and No. 5, broker non-votes are not deemed to be entitled to vote for purposes of determining whether stockholder approval of a matter has been obtained. As a result, broker non-votes are not included in the tabulation of voting results for these proposals for


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purposes of determining whether proposals have been approved. In order to minimize the number of broker non-votes, the Company encourages you to provide voting instructions to the organization that holds your shares by carefully following instructions provided on the Notice.
Can I change my vote?
You may revoke your proxy at any time before it is actually voted at the Annual Meeting by any of the following:
Delivering written notice of revocation to our Corporate Secretary at 1020 Kifer Road, Sunnyvale, California 94086.
Submitting a later dated proxy.
Attending the Annual Meeting and voting in person.
Your attendance at the Annual Meeting will not, by itself, constitute revocation of your proxy. You may also be represented by another person present at the Annual Meeting by executing a form of proxy designating that person to act on your behalf. Shares may only be voted by or on behalf of the record holder of shares as indicated in our stock transfer records. If you are a beneficial stockholder but your shares are held of record by another person, such as a stock brokerage firm or bank, that person must vote the shares as the record holder in accordance with the beneficial holder’s instructions.
Who bears the cost of proxy solicitation and who is soliciting proxies on our behalf?
We will bear the expense of soliciting proxies, including the expense of preparing, printing and mailing this proxy statement and the proxies we solicit. Proxies will be solicited by mail, telephone, personal contact and electronic means. We have retained Mackenzie Partners, Inc. to solicit proxies for a fee of $12,000 plus a reasonable amount to cover out-of-pocket expenses for proxy solicitation services. Proxies may also be solicited by our directors, officers, and employees in person, by the Internet, by telephone or by fax, without additional remuneration. Copies of proxy materials and our 2018 Annual Report will be supplied to brokers and other nominees for the purpose of soliciting proxies from beneficial owners, and we will reimburse such brokers or other nominees for their reasonable expenses.
Who will serve as the inspector of election?
A representative from Veaco Group will serve as the inspector of election to determine whether or not a quorum is present and to tabulate votes cast by proxy or in person at the Annual Meeting.
Where can I find the voting results of the Annual Meeting?
The preliminary voting results will be announced at the Annual Meeting. The final voting results will be tallied by the inspector of election and published in our current report on Form 8-K within four business days after the Annual Meeting.
How can I attend the Annual Meeting?
Attendance at the Annual Meeting is limited to stockholders of record as of the close of business on March 1, 2019. Admission to the Annual Meeting will be on a first-come, first-served basis. Each stockholder may be asked to present valid picture identification, such as a driver’s license or passport, and proof of stock ownership as of the record date. The use of cell phones, smartphones, pagers, recording and photographic equipment, and/or computers is not permitted in the meeting rooms at the Annual Meeting.


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Deadline for receipt of stockholder proposals for the 2020 Annual Meeting of Stockholders.
Any stockholder who meets the requirements of the proxy rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), may submit to the Board proposals to be considered for submission to the stockholders at the 2020 Annual Meeting of Stockholders. In order to be considered for inclusion in the proxy material to be disseminated by the Board, your proposal must comply with the requirements of Rule 14a-8 under the Exchange Act and be submitted in writing by notice delivered or mailed by first-class United States mail, postage prepaid, to our Corporate Secretary at:
Intuitive Surgical, Inc.
Attn: Corporate Secretary
1020 Kifer Road
Sunnyvale, CA 94086-5301
and must be received no later than November 16, 2019. Your notice must include the following:
Your name and address and the text of the proposal to be introduced.
The number of shares of stock you hold of record, beneficially own and represent by proxy as of the date of your notice.
A representation that you intend to appear in person or by proxy at the 2020 Annual Meeting of Stockholders to introduce the proposal specified in your notice.
The chairperson of the meeting may refuse to acknowledge the introduction of your proposal if it is not made in compliance with the foregoing procedures or the applicable provisions of our Amended and Restated Bylaws (“Bylaws”). Our Bylaws also provide for separate notice procedures to recommend a person for nomination as a director or to propose business to be considered by stockholders at a meeting outside the processes of Rule 14a-8. To be considered timely under these provisions, the stockholder’s notice must be received by our Corporate Secretary at our principal executive offices at the address set forth above no earlier than December 27, 2019, and no later than January 26, 2020. If the date of our 2020 Annual Meeting of Stockholders is more than 30 days before or more than 60 days after April 25, 2020, the stockholder’s notice must be received not later than the 90th day prior to such annual meeting or, if later, the 10th day following the day on which public announcement of the date of such annual meeting was first made. A stockholder providing such notice must also further update and supplement such notice so that the information provided or required to be provided is true and correct as of the record date for the meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement must be received by our Corporate Secretary at our principal executive offices not later than 5 business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date) and not later than 8 business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof). Our Bylaws also specify requirements as to the form and content of a stockholder’s notice. We recommend that any stockholder wishing to make a nomination for director or to bring any other item before an annual meeting, other than proposals intended to be included in the proxy materials pursuant to Rule 14a-8, review a copy of our Bylaws, as amended and restated to date, which can be found at www.intuitive.com or, without charge, from our Corporate Secretary at the address above.
In addition, our Bylaws permit certain of our stockholders who have beneficially owned 3% or more of our outstanding common stock continuously for at least three years to submit nominations to be included in the our proxy materials for up to 25% of the total number of directors then serving. Notice of proxy access director nominations for the 2020 Annual Meeting of Stockholders must be delivered to our Corporate Secretary at our principal executive offices at the address noted above no earlier than December 27, 2019 and no later than the close of business on January 26, 2020. The notice must set forth the information required by our Bylaws with respect to each proxy access director nomination that an eligible stockholder or stockholders intend to present at the 2020 Annual Meeting of Stockholders and must otherwise be in compliance with our Bylaws.


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DIRECTORS AND CORPORATE GOVERNANCE
General Information
The Board is composed of a group of leaders with broad and diverse experience in many fields, including: management of large global enterprises, technology and innovation leadership, and healthcare. In these positions, they have also gained industry knowledge and significant and diverse management experience, including strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. Many of the directors also have experience serving as executive officers, or on boards of directors and board committees of other public companies, and have an understanding of corporate governance practices and trends. Other directors have significant academic and research experience and bring unique perspectives to the Board.
The Governance and Nominating Committee of the Board and the Board believe the skills, qualities, attributes, and experiences of its current directors provide the Company with business acumen and a diverse range of perspectives to engage each other and management to effectively address the evolving needs of the Company and represent the best interests of the Company’s stockholders.
The Governance and Nominating Committee evaluates candidates recommended by stockholders using the same criteria as used for other candidates recommended by its members, other members of the Board, or other persons. The criteria are described in detail in the Nomination Process section below. In addition, our Bylaws permit a stockholder, or group of up to 20 stockholders, owning 3% or more of the Company’s common stock continuously for at least three years to nominate and include in the Company’s proxy materials for an annual meeting of stockholders, director candidates constituting up to 25% of the Board, provided that the stockholder (or group) and each nominee satisfy the requirements specified in the Bylaws.
The Bylaws provide for a majority voting standard in uncontested elections of directors. As such, in an election where the number of nominees for director does not exceed the number of directors to be elected, a nominee for director will be elected to the Board if the number of shares voted for the nominee exceeds the number of shares voted against the nominee. The majority voting standard would not apply, however, if the number of nominees for director exceeds the number of directors to be elected. In that case, the nominees receiving the highest number of affirmative votes of the shares entitled to vote at the meeting would be elected.
The majority voting standard will apply to the election taking place at the meeting. Consequently, in order to be elected, a nominee must receive more “for” votes than “against” votes. Proxies may not be voted for more than the nine nominees, and stockholders may not cumulate votes in the election of directors. In the event any nominee is unable or declines to serve as a director at the time of the meeting, the proxies will be voted for such nominee, if any, as may be designated by the Board to fill the vacancy. As of the date of this Proxy Statement, the Board is not aware that any nominee is unable or will decline to serve as a director.
Nominees for Director
The names of the directors being nominated for election and their ages as of February 15, 2019, are set forth below. The following biographies describe the principal occupations, positions, and directorships for at least the past five years of the nominees for director, as well as certain information regarding their individual experiences, qualifications, attributes, and skills that led the Board to conclude that they should serve on the Board, are described below. There are no family relationships among any of our director nominees or executive officers.


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Craig H. Barratt, Ph.D.
President and Chief Executive Officer of Barefoot Networks, Inc.

Director since 2011
 
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Gary S. Guthart, Ph.D.
President and Chief Executive Officer, Intuitive Surgical, Inc.

Director since 2009
 
 
 
Craig H. Barratt, Ph.D., 56, has been a member of our Board since April 2011 and has served as the independent lead director (“Lead Director”) since April 2018. Dr. Barratt has been the President and Chief Executive Officer of Barefoot Networks, Inc., a computer networking company, since April 2017. He held several different roles at Google, Inc., an Internet company, from June 2013 to January 2017, including Senior Vice President, Access and Energy and Advisor. He previously served as President of Qualcomm Atheros, the networking and connectivity subsidiary of Qualcomm Inc. (“Qualcomm”), a mobile technology company, from May 2011 to February 2013. He served as President, Chief Executive Officer and a director of Atheros Communications, Inc., a fabless semiconductor company, from 2003 until its 2011 acquisition by Qualcomm. Prior to joining Atheros as Vice President of Technology in 2002, Dr. Barratt held a number of positions at ArrayComm, Inc., a company specializing in multi-antenna signal processing. Dr. Barratt holds Ph.D. and Master of Science degrees from Stanford University, as well as a Bachelor of Engineering degree in electrical engineering and a Bachelor of Science degree in pure mathematics and physics from the University of Sydney in Australia. Dr. Barratt is a co-inventor of a number of U.S. patents in fields including wireless communications and medical imaging and has co-authored a book on linear controller design.
Dr. Barratt’s qualifications to serve on our Board as Lead Director include his leadership roles at various high growth technology companies.
 
Gary S. Guthart, Ph.D., 53, joined Intuitive Surgical in April 1996. In July 2007, Dr. Guthart was promoted to President and in January 2010, he was appointed as Chief Executive Officer. Prior to that, in February 2006, Dr. Guthart assumed the role of Chief Operating Officer. Prior to joining Intuitive Surgical, Dr. Guthart was part of the core team developing foundation technology for computer enhanced-surgery at SRI International (formerly Stanford Research Institute). Dr. Guthart has served on the Board of Directors of Illumina, Inc. since December 2017 and previously served on the Board of Directors of Affymetrix, Inc. from May 2009 until its acquisition by Thermo Fisher Scientific Inc. in March 2016. He received a B.S. in Engineering from the University of California, Berkeley and an M.S. and a Ph.D. in Engineering Science from the California Institute of Technology.
Dr. Guthart brings to the Board business, operating, financial, and scientific experience. His service as the Chief Executive Officer of Intuitive Surgical enables the Board to perform its oversight function with the benefits of management’s perspectives on the business.


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Amal M. Johnson
Former Executive Chairman of the Board, Author-IT, Inc.

Director since 2010
 
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Don R. Kania, Ph.D.
Former President and Chief Executive Officer of FEI Company

Director since 2018
 
 
 
Amal M. Johnson, 66, has been a member of our Board since April 2010. Ms. Johnson has served on the Board of Directors of Essex Property Trust, Inc. since February 2018. From March 2012 to December 2017, Ms. Johnson was a member of the Board of Directors of Author-IT, Inc. (“Author-IT”), a Software as a Service (“SaaS”) private company that provides a platform for creating, maintaining, and distributing single-sourced technical content, and Executive Chairman from March 2012 to October 2016. Prior to joining Author-IT, Ms. Johnson led MarketTools, Inc. (“MarketTools”), a SaaS company as Chief Executive Officer from 2005 to 2008, and then as Chairman of the Board until the company was acquired in January 2012. Prior to MarketTools, Ms. Johnson was a general partner at Lightspeed Venture Partners, focusing on enterprise software and infrastructure, from March 1999 to March 2004. Previously, Ms. Johnson also held various positions at Baan Company N.V., including as President of Baan Supply Chain Solutions, President of Baan Affiliates, and President of Baan Americas, from October 1994 to January 1999. Prior to that, Ms. Johnson served as President of ASK Manufacturing Systems from August 1993 to July 1994 and held executive positions at IBM from 1977 to June 1993. Ms. Johnson holds a Bachelor of Arts in Mathematics from Montclair State University and studied Computer Science at Stevens Institute of Technology Graduate School of Engineering. Ms. Johnson has served on the Board of Directors of CalAmp since December 2013 and Mellanox Technologies, Ltd. since October 2006.
Ms. Johnson brings to the Board her leadership and operational experience, including from her service as the Chairman of the Board of Directors and Chief Executive Officer of a technology company.
 
Don R. Kania, Ph.D., 64, has been a member of our Board since July 2018. Dr. Kania has more than 25 years of experience that includes scientific research and development, global operations, and manufacturing. From August 2006 to September 2016, Dr. Kania served as Chief Executive Officer and President of FEI Company, a high-performance electron microscopy company, until its acquisition by Thermo Fisher Scientific Inc. From January 1998 to July 2006, Dr. Kania held various positions at Veeco Instruments Inc., ultimately as the Chief Operating Officer. Dr. Kania has served on the Board of Directors of Aldevron, LLC since May 2018 and previously served as a member of the Board of Directors and Chairman of the Audit Committee of American Science and Engineering, Inc. from February 2010 until its acquisition in September 2016. He also serves as an advisor to several privately held life sciences companies. Dr. Kania received his Ph.D. in Engineering and Bachelor and Master’s degrees in physics from the University of Michigan.
Dr. Kania’s qualifications to serve on our Board include his deep scientific and leadership expertise.


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Keith R. Leonard, Jr.
Chief Executive Officer, Unity Biotechnology, Inc.


Director since 2016
 
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Alan J. Levy, Ph.D.
Former Chief Executive Officer of Chrono Therapeutics Inc.

Director since 2000
 
 
 
Keith R. Leonard, Jr., 57, has been a member of our Board since January 2016. Mr. Leonard has more than 20 years of experience in the pharmaceutical industry and has served as the Chief Executive Officer of Unity Biotechnology, Inc., a biotechnology company, since October 2016 and Chairman of its Board of Directors since January 2016. Since February 2016, Mr. Leonard also has served as the Chairman of the Board of Directors of Sienna Biopharmaceuticals, Inc., a public biotechnology company. Previously, Mr. Leonard was President, Chief Executive Officer and a member of the Board of Directors of Kythera Biopharmaceuticals, Inc., a biopharmaceutical company that he co-founded, that focused on discovering, developing, and commercializing drugs for the aesthetic medicine market, from 2005 until its acquisition by Allergan plc in October 2015. From 1991 to 2004, Mr. Leonard held various positions at Amgen Inc., most recently as Senior Vice President and General Manager of Amgen Europe where he was responsible for all commercial operations in 28 European countries. Mr. Leonard received a B.S. in Engineering from the University of California, Los Angeles, a B.A. in History from the University of Maryland, an M.S. in Engineering from the University of California, Berkeley, and an M.B.A. from the Anderson School of Management at the University of California, Los Angeles. Mr. Leonard served on the Board of Directors of Anacor Pharmaceuticals, Inc. from June 2014 to June 2016. Mr. Leonard also serves on the Board of Directors of several private companies.
Mr. Leonard’s qualifications to serve on our Board include his operational and leadership experience with public companies in the pharmaceutical industry.
 
Alan J. Levy, Ph.D., 81, has been a member of our Board since February 2000 and served as the Lead Director from April 2013 to April 2018. Dr. Levy was the Founder, Chairman and Chief Executive Officer of Chrono Therapeutics, a privately-held digital medicine company, from February 2014 to February 2018. From 2012 to 2017, he was a Senior Advisor at Frazier Healthcare Ventures, and also a Venture Partner from 2007 to 2012. From June 2010 to January 2013, he was the Chief Executive Officer of Incline Therapeutics, Inc., a novel drug/device company that was acquired by the Medicines Company in 2013. He served as Chairman of the Board of Directors of Northstar Neuroscience, Inc. (“Northstar Neuroscience”), a medical device company he co-founded, from 2007 to 2009. Prior to that, he was the President and Chief Executive Officer of Northstar Neuroscience from 1999 to 2007. From 1993 to 1998, Dr. Levy served as President and Chief Executive Officer of Heartstream, Inc., a medical device company that was acquired by Hewlett-Packard in 1998. Prior to joining Heartstream, Inc., he was President of Heart Technology, Inc. (“Heart Technology”), a medical device company that was acquired by Boston Scientific in 1995. Before joining Heart Technology, Dr. Levy was Vice President of Research and New Business Development and a member of the Board of Directors of Ethicon, a division of Johnson & Johnson. Dr. Levy holds a B.S. in Chemistry from City University of New York and a Ph.D. in Organic Chemistry from Purdue University. Dr. Levy currently serves as a director of several private companies and not-for-profit organizations.
Dr. Levy’s qualifications to serve on our Board include his service as the Chief Executive Officer for three medical device companies and an understanding of physicians and other health care providers who are central to the use and development of our products.


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Jami Dover Nachtsheim
Former Corporate Vice President of the Sales and Market Group and Director of Worldwide Marketing, Intel Corporation

Director since 2017
 
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Mark J. Rubash
Chief Financial Officer Emeritus - Strategic Advisor, Eventbrite, Inc.


Director since 2007
 
 
 
Jami Dover Nachtsheim, 60, has been a member of our Board of Directors since April 2017. Ms. Nachtsheim served in a variety of positions with Intel Corporation from 1980 until her retirement in 2000, most recently as the Corporate Vice President of the Sales and Marketing Group and Director of Worldwide Marketing. Ms. Nachtsheim served on the Board of Directors of FEI Company from March 2010 until its acquisition by Thermo Fisher Scientific Inc. in September 2016. Ms. Nachtsheim also served on the Board of Directors of Affymetrix, Inc. from May 2009, and as Chairman starting January 2015, until its acquisition by Thermo Fisher Scientific Inc. in March 2016. Ms. Nachtsheim holds a B.S. in Business Management from Arizona State University. Ms. Nachtsheim has served as a member of the Board of Directors of several other public and private companies.
Ms. Nachtsheim’s qualifications to serve on our Board include her extensive experience in bringing high technology products to market and her long service as a board member of several public and private organizations. Her international experience provides useful insight to the Board’s deliberations on a wide range of global business matters.
 
Mark J. Rubash, 61, has been a member of our Board since October 2007. Mr. Rubash is the Chief Financial Officer Emeritus - Strategic Advisor at Eventbrite, Inc. (“Eventbrite”), a privately-held e-commerce company. He was the Chief Financial Officer at Eventbrite from June 2013 to November 2016. Prior to Eventbrite, Mr. Rubash was Chief Financial Officer at Heartflow, Inc. (“Heartflow”), a privately-held medical diagnostic services company, which he joined in March 2012. Prior to Heartflow, Mr. Rubash was the Chief Financial Officer at Shutterfly, Inc. (“Shutterfly”), an Internet-based social expression and personal publishing company. Prior to joining Shutterfly in November 2007, Mr. Rubash was the Chief Financial Officer of Deem, Inc. (formerly Rearden Commerce), an eCommerce platform company, from August 2007 to November 2007 and previous to that, Mr. Rubash was a Senior Vice President at Yahoo! Inc. (“Yahoo!”) from February 2007 to August 2007. Prior to joining Yahoo!, Mr. Rubash held various senior positions at eBay Inc. from February 2001 to July 2005. Prior to that, Mr. Rubash was also an audit partner at PwC, where he was most recently the Global Leader for their Internet Industry Practice and Practice Leader for their Silicon Valley Software Industry Practice. Mr. Rubash received his B.S. in Accounting from California State University Sacramento. Mr. Rubash has served as a member of the Board of Directors and Chairman of the Audit Committee of Line 6 Corporation from April 2007 to January 2014 and has served as a member of the Board of Directors of IronPlanet, Inc. from March 2010 to May 2017 and iRhythm Technologies, Inc. since March 2016.
Mr. Rubash’s qualifications to serve on our Board include his experience with public company financial accounting matters and risk management.


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Lonnie M. Smith
Chairman of the Board and Former Executive Officer, Intuitive Surgical, Inc.

Director since 1997
 
 
 
 
 
Lonnie M. Smith, 74, has served on our Board since he joined Intuitive Surgical as Chief Executive Officer in June 1997, from Hillenbrand Industries where he was Senior Executive Vice President. Mr. Smith served as Chief Executive Officer of Intuitive Surgical from June 1997 to January 2010 and remained as an executive officer of Intuitive Surgical from January 2010 to January 2013. Mr. Smith joined Hillenbrand in 1978 and during his tenure there he was also a member of the Executive Committee, the Office of the President, and the Board of Directors. Mr. Smith has also held positions with The Boston Consulting Group and IBM Corporation. Mr. Smith received his B.S.E.E. from Utah State University and an M.B.A. from Harvard Business School. Mr. Smith served as a member of the Board of Directors of Tandem Diabetes Care, Inc. from January 2013 to December 2015 and has served as a member of the Board of Directors of several private companies.
Having been the Chief Executive Officer of the Company until 2009, Mr. Smith brings institutional knowledge of the Company’s business, structure, history, and culture to the Board and the Chairman position.
 
 


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Board Size
The number of authorized directors constituting the full Board is currently set at ten and will be reduced to nine immediately prior to the Annual Meeting. The Board evaluates the appropriateness of the size of the Board from time to time. In evaluating the size of the Board, the Board and the Governance and Nominating Committee consider a number of factors, including (i) resignations and retirements from the current Board; (ii) the availability of appropriate and qualified candidates; (iii) balancing the desire of having a small enough Board to facilitate deliberations with, at the same time, having a large enough Board to have the diversity of knowledge, experience, skills, and expertise to ensure that the Board and its committees can effectively perform their responsibilities in overseeing the Company’s business; and (iv) the goal of having an appropriate mix of inside and independent directors.
Nomination Process
The Governance and Nominating Committee identifies director nominees by reviewing the desired experience, mix of skills, and other qualities to assure appropriate Board composition, taking into consideration the current Board members and the specific needs of the Company and the Board.
The Governance and Nominating Committee will consider nominees recommended by stockholders, and any such recommendations should be sent to the Corporate Secretary in writing at the executive offices as identified in this Proxy Statement. Such recommendations should comply with the notice and other requirements set forth in the Bylaws, including but not limited to stating the following information:
The name and address of such nominating stockholder and the class or series and number of shares of securities of the Company that are, directly or indirectly, owned of record or beneficially owned by such stockholder.
Whether the nominating stockholder intends to deliver a proxy statement and form of proxy to elect such nominee.
Interests of the nominating stockholder required to be disclosed under the Bylaws.
All information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required in a contested election (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected).
A description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among any nominating stockholder, on the one hand, and each proposed nominee, his or her respective affiliates and associates, on the other hand.
A completed and signed questionnaire, representation, and agreement as provided in the Bylaws.
The Company will also request such other information as may reasonably be required to determine the eligibility of such proposed nominee to serve as an independent director or that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such proposed nominee. Any recommendations received from stockholders will be evaluated in the same manner as potential nominees suggested by Board members, management, or other parties.
In addition, the Bylaws permit certain of the Company’s stockholders who have beneficially owned 3% or more of the outstanding common stock continuously for at least three years to submit nominations to be included in proxy materials for up to 25% of the total number of directors then serving. Notice of proxy access director nominations for the 2020 Annual Meeting of Stockholders must be delivered to the Corporate Secretary at the principal executive offices no earlier than December 27, 2019 and no later than January 26, 2020. The notice must be set forth the information required by the Bylaws with respect to each proxy access director nomination that an eligible stockholder or stockholders intend to present at the 2020 Annual Meeting of Stockholders and must otherwise be in compliance with the Bylaws.
The Governance and Nominating Committee evaluates director candidates based upon a number of criteria, including:
The desired experience, mix of skills, and other qualities to assure appropriate Board composition, taking into account the current Board members and the specific needs of the Company and the Board.
The experience, knowledge, skills, and expertise of candidates, which may include experience in management, finance, marketing and accounting, across a broad range of industries with particular emphasis on healthcare and medical device industries, along with experience operating at a policy-making level in an appropriate business, financial, governmental, educational, non-profit, technological, or global field.


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Diversity of backgrounds and perspectives, including those backgrounds and perspectives with respect to business experience, professional expertise, age, gender, and ethnic background.
Personal and professional integrity, character, and business judgment of candidates.
Whether candidates are independent, including as determined by the independence requirements of the SEC and the Nasdaq Stock Market.
The Governance and Nominating Committee assesses the effectiveness of its approach to consideration of Board candidates as part of its evaluation of the Board’s composition to ensure that the Board reflects the knowledge, experience, skills, expertise, and diversity required for the Board to fulfill its duties.
Board Responsibilities and Corporate Governance Guidelines
The Board’s primary responsibility is to exercise their business judgment in the best interests of the Company and its stockholders. The Board selects the Chief Executive Officer of the Company, monitors management’s and the Company’s performance, and provides advice and counsel to management. Among other things, the Board at least annually reviews the Company’s long-term strategy, long-term business plan, and an annual budget for the Company. The Board also reviews and approves transactions in accordance with guidelines that the Board may adopt from time to time. In fulfilling the Board’s responsibilities, directors have full access to the Company’s management, external auditors, and outside advisors. With respect to the Board’s role in risk oversight of the Company, the Board discusses the Company’s risk exposures and risk management of various parts of the business, including appropriate guidelines and policies to minimize business risks and major financial risks and the steps management has undertaken to control them.
The Board has also adopted Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities and to serve the interests of the Company and its stockholders. These guidelines serve as a framework for, among other things, the composition and selection of members of the Board, director orientation and continuing education, responsibilities of directors, conduct of Board meetings, structure and conduct of Board committees, succession planning and oversight of risk management. The Company’s Corporate Governance Guidelines are available on its website at www.intuitive.com.
Board Leadership
The Company is focused on its corporate governance practices and values independent board oversight as an essential component of strong corporate performance to enhance stockholder value. Its commitment to independent oversight is demonstrated by the fact that all of its directors, except the President and Chief Executive Officer, are independent under the listing standards of the Nasdaq Stock Market. In addition, all of the members of the Board’s committees are independent under such standards. The Board acts independently of management and regularly holds independent director sessions of the Board without members of management present.
Mr. Smith is the Chairman of the Board and Dr. Guthart is the President and Chief Executive Officer, as well as a member of the Board. The Board has determined that the separation of the roles of Chairman of the Board and Chief Executive Officer is appropriate at this time as it allows the Chief Executive Officer to focus primarily on management responsibilities and corporate strategy, while allowing the Chairman to focus on leadership of the Board, providing feedback and advice to the Chief Executive Officer and providing a channel of communication between the Board members and the Chief Executive Officer. The Chairman of the Board presides over all Board meetings and works with the Chief Executive Officer to develop agendas for Board meetings. The Chairman advises the Chief Executive Officer and other members of senior management on business strategy and leadership development. He also works with the Board to drive decisions about particular strategies and policies and, in concert with the independent Board committees, facilitates a performance evaluation process of the Board.
Since April 2018, Dr. Barratt has served as our Lead Director. The Lead Director is elected annually by a majority of the independent directors upon receiving a recommendation from the Governance and Nominating Committee. The Lead Director’s responsibilities include, among others:
Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors.
Providing feedback from executive sessions of the independent directors at which the Chairman is not present, to the Chairman, the Company’s Chief Executive Officer and other senior management.
Consulting with the Chairman as to an appropriate schedule of Board meetings.
Approving meeting agendas for the Board.


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Advising the Chairman as to the quality, quantity, and timeliness of the information submitted by the Company’s management that is necessary or appropriate for the independent directors to effectively and responsibly perform their duties.
Board Committees
The Board has established an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. The Board and its committees set schedules to meet throughout the year and also can hold special meetings and act by written consent from time to time, as appropriate. The Board has delegated various responsibilities and authority to the Audit Committee, Compensation Committee, and Governance and Nominating Committee as described below. These committees regularly report on their activities and actions to the full Board. Each of these committees of the Board has a written charter approved by the Board which is available on our website at www.intuitive.com. The Board from time to time establishes additional committees to address specific needs.
During 2018, the Board held four meetings. Each incumbent director attended at least 75% of the aggregate of the total number of meetings of the Board held during the period for which he or she has been a director and the total number of meetings held by all committees of the Board on which he or she served during the periods that he or she served.
The following table reflects the current membership of each Board committee:
 
  
Committee Membership
Name
  
Audit
Committee
  
Governance and
Nominating
Committee
  
Compensation
Committee
Craig H. Barratt, Ph.D.  
 
 
  
ü
  
 
Michael A. Friedman, M.D. (1)
 
 
 
 
 
 
Amal M. Johnson
 
 
  
 
  
Chair
Don R. Kania, Ph.D. (2)
 
ü
 
 
 
 
Keith R. Leonard, Jr.
 
ü
 
 
 
 
Alan J. Levy, Ph.D.  
 
 
  
Chair
  
ü
Jami Dover Nachtsheim (1)
 
 
  
ü
  
ü
Mark J. Rubash
 
Chair
  
 
  
 
 
(1)
Effective February 1, 2019, Jami Dover Nachtsheim replaced Michael A. Friedman, M.D. as a member of the Governance and Nominating Committee. Effective February 1, 2019, Dr. Friedman was no longer a member of the Audit Committee.
(2)
In July 2018, Don R. Kania, Ph.D. was appointed to the Board. In October 2018, he was appointed as a member of the Audit Committee.
Audit Committee
The Audit Committee assists the full Board in its general oversight of our financial reporting, internal controls, and audit functions, and is directly responsible for the appointment, compensation, and oversight of the work of the Company’s independent registered public accounting firm. The Audit Committee reviews and discusses with management and the independent registered public accounting firm the annual audited and quarterly financial statements (including the related disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the annual report on Form 10-K and the quarterly reports on Form 10-Q), reviews the integrity of the financial reporting processes, both internal and external, reviews the qualifications, performance and independence of the registered public accounting firm, and prepares the Audit Committee Report included in the Proxy Statement in accordance with rules and regulations of the SEC. In addition, the Audit Committee discusses policies with respect to financial and cyber security risk assessment and risk management, including appropriate guidelines and policies to govern the processes, as well as the Company’s major financial and cyber security risk exposures and the steps management has undertaken to address them. The responsibilities and activities of the Audit Committee are described in further detail in the “Audit Committee Report” in this proxy statement and the Audit Committee’s charter, a copy of which can be found on the Company’s website at www.intuitive.com.
During 2018, the Audit Committee consisted of Michael A. Friedman, M.D., Don R. Kania, Ph.D., Keith R. Leonard, Jr., and Mark J. Rubash. The Board has determined that all of the Audit Committee members meet the independence and experience requirements of the Nasdaq Stock Market and the SEC and that Mr. Rubash is an “audit committee financial expert” as defined under applicable rules of the SEC. In 2018, the Audit Committee met nine times.


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Governance and Nominating Committee
The Governance and Nominating Committee is responsible for matters relating to the corporate governance of the Company and the nomination of members of the Board, the Lead Director, and committees thereof. The Board has determined that all of the Governance and Nominating Committee members meet the independence requirements of the Nasdaq Stock Market. The responsibilities and activities of the Governance and Nominating Committee are described in the Governance and Nominating Committee charter, a copy of which can be found on the Company’s website at www.intuitive.com.
In 2018, the Governance and Nominating Committee met twice.
Compensation Committee
The Compensation Committee reviews and approves all compensation programs applicable to executive officers of the Company, including salaries, bonuses, and equity compensation. The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of the Company’s Chief Executive Officer, evaluates the performance of the Chief Executive Officer in light of those goals and objectives, and sets the Chief Executive Officer’s compensation level based on this evaluation. The Compensation Committee approves any new compensation plan or any material change to an existing compensation plan whether or not subject to stockholder approval and makes recommendations to the Board with respect to the Company’s incentive compensation plans and equity-based plans subject to stockholder approval. The Compensation Committee reviews and discusses with management the disclosures regarding executive compensation and inclusion of the Compensation Discussion and Analysis (“CD&A”) included in the annual proxy statements. The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee.
In 2018, the Compensation Committee directly engaged an independent compensation consultant, Compensia, Inc. (“Compensia”), to provide analysis, advice, and guidance on compensation matters.
The Board has determined that all of the Compensation Committee members meet the independence requirements of the Nasdaq Stock Market and the SEC. In 2018, the Compensation Committee met three times. The Compensation Committee operates under a charter that can be found on the Company’s website at www.intuitive.com.
Compensation Committee Interlocks and Insider Participation
During 2018, the Compensation Committee consisted of Amal M. Johnson, Jami Dover Nachtsheim, and Alan J. Levy, Ph.D., none of whom is a present or former officer or employee of the Company. In addition, during 2018, none of the Company’s officers had an “interlock” relationship, as that term is defined by the SEC.
Attendance at the Annual Meeting
The Company encourages, but does not require, its Board members to attend each annual meeting of stockholders. All then-members of the Board attended the 2018 Annual Meeting of Stockholders. Dr. Kania joined the Board in July 2018 and, therefore, did not attend the 2018 Annual Meeting of Stockholders.



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COMPENSATION FOR DIRECTORS
We compensate our non-employee directors for their service on our Board with a combination of cash and equity awards. The compensation provided is commensurate with their role and involvement, and consistent with competitive market practices. We provide a majority of the compensation in the form of equity to align the interests of our non-employee directors with the interests of our stockholders. We do not compensate our Chief Executive Officer for serving on our Board in addition to his regular employee compensation.
The Compensation Committee, consisting solely of independent directors, has the primary responsibility for reviewing and considering any changes to our director compensation program. Our Board determines the form and amount of director compensation after reviewing the committee’s recommendation.
The Compensation Committee reviews total compensation of our non-employee directors every other year and evaluates the appropriate level and form of their compensation. In making its recommendations, the committee considers the amount of time our non-employee directors expend, as well as the skill level required of members of our Board in fulfilling their duties. It also considers the Company’s financial performance, general market conditions, and advice from its independent compensation consultant, including the independent analysis of our director compensation program that is updated on a biannual basis. As part of this analysis, the compensation consultant reviews and analyzes competitive market practices in director compensation as represented by the companies in our compensation peer group. The analysis also examines how director compensation levels, practices, and design features compare to the constituent members of the compensation peer group, which is the same peer group used as a reference when setting executive compensation. The committee also considers the extent to which our Board’s compensation practices align with the interests of our stockholders.
Our Board reviews the Compensation Committee’s recommendations and then determines the form and amount of compensation for our non-employee directors. Our Board sets cash compensation levels with reference to the median of the competitive market and equity compensation levels to approximate the 75th percentile of the competitive market.
Following a review with its compensation consultant, the Compensation Committee determined that the compensation of our non-employee directors was consistent generally with the compensation for non-employee directors at the companies in the compensation peer group and recommended that no changes be made to the amounts of non-employee director compensation for 2018.
During 2018, our director compensation program consisted of cash and equity compensation elements, as further described below.
Annual Cash Compensation
We provide cash compensation through retainers for Board and committee service, as well as separate retainers to the chairpersons and members of our Board committees. Compensation in this manner simplifies the administration of our program and creates greater equality in rewarding service on committees of our Board. The committee and committee chair retainers compensate directors for the additional responsibilities and time commitments involved with those positions.
During 2018, the non-employee directors received the following cash compensation:
Board or Committee Position
 
Cash Retainer ($)
General Annual Board Retainer
 
60,000

Additional Annual Retainer - Audit Committee Chair
 
23,000

Additional Annual Retainer - Compensation Committee Chair
 
20,000

Additional Annual Retainer - Governance and Nominating Committee Chair
 
13,000

Additional Annual Retainer - Audit Committee Member
 
10,000

Additional Annual Retainer - Compensation Committee Member
 
6,000

Additional Annual Retainer - Governance and Nominating Committee Member
 
4,000

Cash compensation is pro-rated for the time served by a director on the Board and any Board committees.


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Equity Compensation
Non-employee directors receive grants of stock options and restricted stock unit awards which vest 100% on the earlier of (i) the first anniversary of the grant date or (ii) the next annual meeting of stockholders following the grant date, subject to continued service through such vesting date.
During 2018, the non-employee directors received the following equity compensation granted at the 2018 Annual Meeting of Stockholders:
Directors
 
2018
RSU
Value ($) (1)
 
2018
Stock Option
Value ($) (2)
Chairman of the Board
 
190,000

 
190,000

Lead Director
 
165,000

 
165,000

Members of the Board
 
140,000

 
140,000

 
(1)
The number of RSUs granted is determined by taking the RSU Value and dividing by the 90 calendar-day average closing trading price of the Company’s common stock reported by Nasdaq through the date of grant.
(2)
The number of shares underlying the stock options granted is determined by taking the Stock Option Value and dividing by one-third of the 90 calendar-day average closing trading price of the Company’s common stock reported by Nasdaq through the date of grant; provided that in no event shall the number of shares underlying the option exceed the number of shares underlying the 2015 annual option grant.
New non-employee directors receive a pro-rated equity grant based on the number of months remaining between appointment date and the expected date of the next annual grant.
The equity compensation program for our non-employee directors for 2019 is similar to the program described above for 2018.
Our stock ownership policy requires non-employee directors to own shares of our common stock having a total value equal to four times their aggregate annual cash retainer for serving as a member of our Board, not including any meeting fees, incentive awards, or committee, chair, or other similar retainers. These mandatory ownership guidelines are intended to create a clear standard that encourages our directors to remain invested in the performance of the Company’s stock price. Each non-employee director has five years from the date he or she becomes subject to the stock ownership guidelines to come into compliance with the guidelines. All of our non-employee directors met the guidelines or were on track to comply with the guidelines in the relevant time frame as of the date of this proxy statement. For the purposes of determining stock ownership levels, the following forms of equity interests in the Company are included: shares owned outright by, or held in trust for the benefit of, the director or his or her spouse or children sharing the same household; shares held through a fund or other entity as to which the director has control; shares of the Company’s common stock, stock units or other stock equivalents obtained through the exercise of stock options or vesting of Company equity awards; shares of common stock underlying vested stock options net of shares that would need to be withheld for the exercise price; and other stock or stock equivalent awards determined by the Compensation Committee.
The aggregate grant date fair value of total equity compensation (consisting of stock options, restricted stock unit awards, and any other equity compensation) to any non-employee director in any calendar year in respect of such director’s service as a member of our Board or any Board committee during such year shall not exceed $750,000. Our Board has determined that imposing such a limit is in the best interests of the Company and its stockholders.
We reimburse non-employee directors for reasonable out-of-pocket expenses incurred in the performance of their duties as directors of the Company.


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Director Compensation Table
The following Director Compensation Table sets forth summary information concerning the compensation paid to the Company's non-employee directors for the year ended December 31, 2018, for services to the Company.
Name
 
Fees earned or
paid in cash ($)
 
Stock
Awards ($) (1)
 
Option
Awards ($) (1)
 
Total ($)
Craig H. Barratt, Ph.D.
 
64,000

 
180,920

 
154,347

 
399,267

Michael A. Friedman, M.D.
 
74,000

 
153,620

 
130,945

 
358,565

Amal M. Johnson
 
80,000

 
153,620

 
130,945

 
364,565

Don R. Kania, Ph.D. (2)
 
32,500

 
109,261

 
94,599

 
236,360

Keith R. Leonard, Jr.
 
70,000

 
153,620

 
130,945

 
354,565

Alan J. Levy, Ph.D.
 
79,000

 
153,620

 
130,945

 
363,565

Jami Dover Nachtsheim
 
66,000

 
153,620

 
130,945

 
350,565

Mark J. Rubash
 
83,000

 
153,620

 
130,945

 
367,565

Lonnie M. Smith
 
60,000

 
208,220

 
177,749

 
445,969

 
(1)
The amounts in these columns represent the grant date fair value of stock options and restricted stock units (“RSUs”) granted to non-employee directors in 2018, determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”). Except for the initial grants to Don R. Kania, Ph.D. discussed below, the RSUs had a grant date fair value of $462.71 per RSU and the grant date fair value for stock options was $131.47 per share, in each case, based on the closing trading price of the Company’s common stock reported by Nasdaq on the date of grant. See Note 9 of the Notes to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K filed on February 4, 2019, for a discussion of all assumptions made by the Company in the valuation of the equity awards.
(2)
Dr. Kania was appointed to the Board in July 2018. On July 31, 2018, Dr. Kania was granted: (i) 215 RSUs; and (ii) an option to purchase 647 shares of the Company’s common stock, respectively, both vesting in full on the first anniversary of the date of grant, subject to continued service through such date. The RSUs had a grant date fair value of $508.19 per RSU and the grant date fair value for stock options was $146.21 per share based on the closing trading price of the Company’s common stock reported by Nasdaq on the date of grant.
The table below sets forth the aggregate number of shares of the Company’s common stock subject to options outstanding as well as the number of outstanding RSUs held by non-employee directors as of December 31, 2018.
Name
 
Number of Shares of Common Stock
Underlying Options
Outstanding
 
Number of Shares of Common Stock
Underlying Options
Exercisable
 
Number of Shares of Common Stock Subject to Outstanding RSUs
Craig H. Barratt, Ph.D.
 
15,496

 
14,322

 
391

Michael A. Friedman, M.D.
 
996

 

 
332

Amal M. Johnson
 
30,068

 
29,072

 
332

Don R. Kania, Ph.D.
 
647

 

 
215

Keith R. Leonard, Jr.
 
2,541

 
1,545

 
332

Alan J. Levy, Ph.D.
 
20,472

 
19,476

 
332

Jami Dover Nachtsheim
 
2,541

 
1,545

 
332

Mark J. Rubash
 
6,318

 
5,322

 
332

Lonnie M. Smith
 
3,173

 
1,821

 
450



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EXECUTIVE OFFICERS OF THE COMPANY
The Company’s executive officers and their ages as of February 15, 2019, are as follows:
Name
 
Age
 
Position
Gary S. Guthart, Ph.D.
 
53
 
President and Chief Executive Officer
Salvatore J. Brogna
 
64
 
Executive Vice President and Chief Operating Officer
Myriam J. Curet, M.D.
 
62
 
Executive Vice President and Chief Medical Officer
Marshall L. Mohr
 
63
 
Executive Vice President and Chief Financial Officer
David J. Rosa
 
51
 
Executive Vice President and Chief Business Officer
Kara Andersen Reiter
 
54
 
Senior Vice President, General Counsel, and Chief Compliance Officer
The principal occupations and positions for at least the past five years of the executive officers named above, other than Dr. Guthart, are as follows:
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Salvatore J. Brogna joined Intuitive Surgical as Director, Mechanical Engineering, in October 1999 and was promoted to Vice President, Engineering in July 2005. In August 2010, Mr. Brogna was appointed as Senior Vice President, Product Development. In June 2015, Mr. Brogna was promoted to the position of Executive Vice President, Product Operations. In November 2017, Mr. Brogna was promoted to the position of Executive Vice President and Chief Operating Officer. Prior to joining Intuitive Surgical, Mr. Brogna led design and development of complex robotic systems at Adept Technology and at Unimation. Mr. Brogna is a graduate of Clarkson University where he earned a B.S. and an M.S. in Mechanical Engineering.
 
 
 
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Myriam J. Curet, M.D. joined Intuitive Surgical in December 2005 as Chief Medical Advisor. In February 2014, Dr. Curet was promoted to the position of Senior Vice President and Chief Medical Officer. In November 2017, Dr. Curet was promoted to the position of Executive Vice President and Chief Medical Officer. Dr. Curet also held a faculty position as Professor of Surgery at Stanford University. Since October 2010, she has served as a Consulting Professor of Surgery at Stanford University with a part time clinical appointment at the Palo Alto Veteran’s Administration Medical Center. Dr. Curet received her M.D. from Harvard Medical School and completed her general surgery residency program at the University of Chicago. She then worked for the Indian Health Service for four years before finishing her Surgical Endoscopy fellowship at the University of New Mexico. She was on the faculty at the University of New Mexico for six years prior to joining the Stanford University Department of Surgery in 2000.
 
 
 
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Marshall L. Mohr joined Intuitive Surgical in March 2006 as Senior Vice President and Chief Financial Officer and was promoted to Executive Vice President and Chief Financial Officer in July 2018. Prior to that, Mr. Mohr was Vice President and Chief Financial Officer of Adaptec, Inc. (“Adaptec”). Prior to joining Adaptec in July 2003, Mr. Mohr was an Audit Partner with PwC where he was most recently the Managing Partner of the firm’s west region technology industry group and led its Silicon Valley accounting and audit advisory practice. Mr. Mohr also currently serves on the boards of directors of Plantronics, Inc. and Pacific Biosciences of California, Inc. Mr. Mohr received his B.B.A. in Accounting and Finance from Western Michigan University.
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David J. Rosa joined Intuitive Surgical in March 1996 and has held leadership positions in engineering, clinical development, marketing and product development. In April 2011, Mr. Rosa was promoted to the position of Senior Vice President, Emerging Procedures & Technology and transitioned to the position of Senior Vice President, Scientific Affairs. In August 2014, Mr. Rosa was promoted to the position of Executive Vice President and Chief Scientific Officer. In June 2015, Mr. Rosa was appointed as Executive Vice President and Chief Commercial Officer. In January 2019, Mr. Rosa took on additional responsibility as Executive Vice President and Chief Business Officer. Prior to joining Intuitive Surgical, Mr. Rosa contributed to the development of trans-esophageal transducers for Acuson Corporation. Mr. Rosa also currently serves on the boards of directors of Kardium Inc. and Arterys Inc. Mr. Rosa graduated magna cum laude with a B.S. in Mechanical Engineering from California Polytechnic University at San Luis Obispo. He also holds a Master of Science in Mechanical Engineering from Stanford University.
 
 
 
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Kara Andersen Reiter joined Intuitive Surgical in January 2015 as Vice President, Assistant General Counsel, and was promoted to Senior Vice President, General Counsel and Chief Compliance Officer in July 2018. Prior to joining Intuitive Surgical, Ms. Andersen Reiter was Vice President, Regulatory Affairs and Chief In House Counsel of PneumRx, Inc., a medical device company, from August 2004 to January 2015, where she had oversight of all legal and regulatory matters. Prior to that, Ms. Andersen Reiter was a litigation partner at the law firm of Keker & Van Nest. Ms. Andersen Reiter earned her J.D. from UCLA School of Law and her A.B. from Brown University. She also holds a D.E.A. (a master’s-level degree) in family law from the Université de Lyon III, obtained while studying as a Fulbright Scholar following law school.


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EXECUTIVE COMPENSATION
This Proxy Statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements relate to expectations concerning matters that are not historical facts. Words such as “projects,” “believes,” “anticipates,” “plans,” “expects,” “intends,” “may,” “will,” “could,” “should,” “would,” and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements related to risks associated with our compensation programs. Readers are cautioned that these forward-looking statements are based on current expectation and are subject to risks, uncertainties, and assumptions that are difficult to predict. We undertake no obligation to revise or update any forward-looking statements for any reason.
Compensation Committee Report
The following report of the Compensation Committee shall not be deemed to be “soliciting material” or to otherwise be considered “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the Company specifically incorporates it by reference into such filing.

The Compensation Committee has reviewed and discussed with management the disclosures contained in the section entitled “Compensation Discussion and Analysis” of this Proxy Statement. Based upon this review and discussion, the Compensation Committee recommended to the Board that the section entitled “Compensation Discussion and Analysis” be included in this Proxy Statement for the 2019 Annual Meeting of Stockholders and incorporated by reference into the Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Members of the Compensation Committee
Amal M. Johnson (Chair)
  
Alan J. Levy, Ph.D.
  
Jami Dover Nachtsheim


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Compensation Discussion and Analysis
This Compensation Discussion and Analysis explains our executive compensation program including the philosophy, objectives and the policies and practices that contributed to our executive compensation actions and decisions for our 2018 named executive officers, who are listed below.
Name
 
Position
Gary S. Guthart, Ph.D.
 
President and Chief Executive Officer
Salvatore J. Brogna
 
Executive Vice President and Chief Operation Officer
Myriam J. Curet, M.D. (1)
 
Executive Vice President and Chief Medical Officer
Marshall L. Mohr (2)
 
Executive Vice President and Chief Financial Officer
David J. Rosa (3)
 
Executive Vice President and Chief Business Officer
 
(1)
During 2018, Dr. Curet’s employment with the Company was at 80% part-time and her compensation reflected this.
(2)
In July 2018, Mr. Mohr was promoted to our Executive Vice President and Chief Financial Officer from his prior position as our Senior Vice President and Chief Financial Officer.
(3)
In January 2019, Mr. Rosa took on additional responsibility as Executive Vice President and Chief Business Officer from his prior position as our Executive Vice President and Chief Commercial Officer.
Executive Summary
The primary objective of our executive compensation program is to attract and retain a passionate team of executives who drive innovation that enables physicians and healthcare providers to improve the quality of and access to minimally invasive care. We seek to accomplish this goal in a way that is aligned with the long-term interests of our stockholders. Our strategy has been to provide a level of fairness within our programs to drive alignment of all employees including our NEOs. This approach recognizes that as a company we are all one team with one mission. We believe our executive compensation program effectively aligns the interests of our NEOs with our objective of creating sustainable long-term value.
Results of Stockholder Advisory Vote on Named Executive Officer Compensation
At our 2018 Annual Meeting of Stockholders, we conducted a stockholder advisory vote on the 2017 compensation of our then NEOs (commonly known as a “Say-on-Pay” vote). Our stockholders approved the 2017 compensation of our then NEOs, with approximately 95% of the votes cast voted in favor of the proposal. The Compensation Committee took the results of this Say-on-Pay vote into consideration when making compensation decisions following the 2018 Annual Meeting of Stockholders.
We believe that the outcome of the Say-on-Pay vote reflects our stockholders’ support of our compensation philosophy, specifically our efforts to attract, retain, and motivate our executive officers, including our NEOs. Accordingly, no significant design changes were made to the executive compensation program as a result of the Say-on-Pay vote on 2017 NEO compensation. Further, any design changes resulting from the Say-on-Pay vote would not typically affect compensation until the following fiscal year due to the timing of our annual meeting of stockholders relative to the Compensation Committee meeting at which compensation decisions are made.
We value the opinions of our stockholders and will continue to consider the outcome of future Say-on-Pay votes, as well as feedback received throughout the year, when making compensation decisions for our executive officers, including our NEOs.
Based on the results of a separate stockholder advisory vote on the frequency of future stockholder advisory votes regarding the compensation of our NEOs conducted at our 2017 Annual Meeting of Stockholders, our Board determined that we will hold Say-on-Pay votes on an annual basis.


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2018 Financial Highlights
In 2018, we continued to grow the number of procedures performed worldwide using our products. In the U.S., the procedure growth was largely attributable to growth in general surgery procedures as well as moderate growth in more mature gynecologic and urologic procedures. International procedure growth was primarily driven by continued growth in prostatectomy and earlier stage growth in kidney cancer procedures, general surgery, and gynecology.
Measure (Amounts in millions of USD, except procedures and system placements)
 
Fiscal 2018
 
Fiscal 2017
 
Percentage
Change
Revenue
 
$
3,724.2

 
$
3,138.2

 
19
 %
Worldwide procedures
 
1,037,000

 
877,000

 
18
 %
System placements
 
926

 
684

 
35
 %
Income from operations
 
$
1,199.4

 
$
1,062.9

 
13
 %
Non-GAAP income from operations (*)
 
$
1,537.4

 
$
1,315.9

 
17
 %
Net income (**)
 
$
1,127.9

 
$
670.9

 
68
 %
Non-GAAP net income (*)
 
$
1,305.1

 
$
1,056.8

 
23
 %
Cash, cash equivalents, and investments
 
$
4,834.4

 
$
3,846.5

 
26
 %
Repurchases and retirement of common stock (***)
 
$

 
$
2,274.0

 
(100
)%
 
(*)
Non-GAAP Financial Measures. Non-GAAP adjusted financial measures should be viewed in addition to, and not as an alternative for, financial results prepared in accordance with U.S. GAAP. See Exhibit A to this proxy statement for more information about these non-GAAP financial measures and for a reconciliation of these non-GAAP measures to the most comparable GAAP measures.
(**)
In fiscal 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted on December 22, 2017, which resulted in an income tax expense of $317.8 million primarily related to a one-time deemed repatriation tax on undistributed foreign earnings and the revaluation of deferred taxes due to a reduction of the U.S corporate income tax rate.
(***)
In January 2019, our Board increased the authorized amount available under the Company’s common stock repurchase program to an aggregate of $2.0 billion, including amounts remaining under previous authorization.
Recent Operational Highlights
In February 2019, we received U.S. FDA clearance of the Ion endoluminal system, our new flexible robotic-assisted catheter-based platform, designed to navigate through very small lung airways to reach peripheral nodules for biopsies.
In 2018, the annual number of procedures exceeded 1 million for the first time, with more than 6 million procedures performed to-date.
In the third quarter of 2018, we commercially launched our da Vinci SP Surgical System, the latest in our integrated product family that enables surgeons to access narrow workspaces while maintaining high quality vision, precision, and control.
The Intuitive-Fosun joint venture in China began direct operations for da Vinci products and services in January 2019.
The Company began direct operations for da Vinci products and services in India and Taiwan in May and December 2018, respectively.
In October 2018, the China National Health Commission announced a new quota to allow the sale of 154 new surgical robots into China through 2020, which includes da Vinci Surgical Systems. In December 2018, the Company also obtained clearance for the da Vinci Xi Surgical System in China.
The Company received U.S. Food and Drug Administration clearance for the Vessel Sealer Extend, the da Vinci SP Surgical System for use in certain urology procedures, the SureForm 60, a single-patient use 60mm stapler, and the SureForm 45, a single-patient use 45mm stapler, in April 2018, May 2018, July 2018, and January 2019, respectively.
In Japan, 12 da Vinci procedures within the specialties of general surgery, gynecology, and cardiothoracic surgery were granted national reimbursement status effective April 1, 2018 and our da Vinci X system was approved in April 2018.





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2018 Executive Compensation Highlights
Consistent with our business results, the Compensation Committee took the following actions with respect to the 2018 compensation of our NEOs:
Annual Cash Incentive Bonuses. The 2018 Corporate Incentive Program (the “CIP”), our annual performance-based cash incentive program, for our NEOs was funded at 108.2% and paid out in February 2019. The CIP was funded based on our actual level of achievement as measured against a pre-established adjusted operating income goal and pre-established strategic Company performance goals. See the section entitled “Annual Performance-Based Cash Bonuses” below for a detailed discussion of the CIP.
Base Salary. Base salaries were increased on average 3% - 4% for our NEOs and slightly higher for those who also received a promotional increase. These base salary increases took into consideration the changes in responsibility for each NEO, the competitive market for executive talent, Company performance, and the other factors described in the section entitled “Executive Compensation Elements” below.
Equity Awards. The Compensation Committee granted equity awards in the form of stock options and RSUs. The size of each award was based on several factors including managing the Company’s burn rate, reducing our equity overhang in the long run, maintaining our ability to compete for outstanding talent, maintaining our corporate compensation philosophies, and the executive officer’s experience and performance.
Pay for Performance
We believe our executive compensation program is closely aligned with stockholders’ interests. While base salary and an annual performance-based cash bonus opportunity incentivize the achievement of shorter-term goals, our long-term equity awards in the form of stock options, which are typically subject to either a 4-year or 3.5-year vesting requirement and a 10-year term, and RSUs which are typically subject to a 4-year vesting requirement, represent a longer-term compensation structure that promotes retention and continuous commitment to the operating results of the Company. We further believe this compensation mix rewards each executive officer for their individual contributions to the Company, both present and future. At this phase in our growth cycle, a majority of the annual total direct compensation of our executive officers is directly tied, through the use of stock options and RSUs, to the growth in the value of our common stock. To illustrate this point, the following chart displays the historical relationship between the annual total direct compensation of our Chief Executive Officer, and the changes in stockholder value as reflected by the percentage change in value of the market price of our common stock.


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For illustration purposes, our Chief Executive Officer’s annual total direct compensation consists of base salary paid, annual cash bonus earned, and the grant date fair value of his long-term equity awards (including stock options and RSUs) granted in the following year. The chart assumes a like number of stock options to the February 15, 2019, grant will be granted on August 15, 2019, using the same Black-Scholes fair value as of February 15, 2019. Our stock return is calculated based on the closing market price of our common stock on the date of the fiscal year end. The stock return is indexed to 2014 such that it represents the stock price percentage change over the 2014 fiscal year end price of $176.31, and our Chief Executive Officer’s annual total direct compensation is similarly indexed to his 2014 annual total direct compensation.
Executive Compensation Policies and Practices
The Compensation Committee has adopted and is committed to maintaining a comprehensive governance framework for executive compensation which aligns with long-term stockholder interests. This framework includes the following:
Independence. The Compensation Committee is comprised solely of independent directors.
Independent Adviser. The Compensation Committee engaged an independent compensation consultant, Compensia, to provide analysis, advice and guidance on compensation matters.
Biennial Executive Compensation Review. The Compensation Committee reviews a biennial compensation assessment prepared by Compensia which includes approval of the executive compensation strategy and philosophy and peer group of companies.
Succession Planning. We review the risks associated with key executive officer positions and endeavor to ensure adequate succession plans are in place.
Stock Ownership Guidelines. We maintain stock ownership guidelines for our executive officers and members of our Board.
Compensation At-Risk. Our executive compensation program is designed so a significant portion of compensation is “at risk” based on corporate performance, including equity-based compensation, to align the interests of our executive officers and stockholders.
No Employment Agreements. We do not have employment agreements with any of our executive officers. All executive officers are employed “at will.”
No Executive Retirement Plans. We do not provide pensions or other supplemental executive retirement health, or insurance benefits.
No Executive Perquisites. We do not provide any perquisites or other personal benefits to our executive officers that are not otherwise available on the same basis to our other full-time employees.
No Special Health or Welfare Benefits. Our executive officers participate in broad-based company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees.
No Tax Reimbursements. We do not provide any tax reimbursement payments (including “gross-ups”) on any element of executive compensation.


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“Double-Trigger” Change-in-Control Arrangements. All change-in-control payments and benefits pursuant to the Company-wide change in control plan are based on a “double-trigger” arrangement (that is, they require both a change-in-control of the Company plus a qualifying termination of employment before payments and benefits are paid).
No Repricing. All of the Company’s equity plans expressly prohibit stock option repricing without stockholder approval.
No Buyout of Underwater Options. All of the Company’s active equity plans also expressly prohibit the Company from buying out stock options whose exercise price exceeds the fair market value of our common stock, often referred to as underwater options, for cash.
No Liberal Recycling of Shares. All of the Company’s active equity plans prohibit the liberal recycling of shares or underlying awards granted under these plans.
No Automatic Single Trigger Vesting of Awards. None of the Company’s active equity plans provide for automatic acceleration of equity awards upon a change in control of the Company.
Executive Compensation Philosophy
Goal of Executive Compensation Program
The primary objective of our executive compensation program is to attract and retain a passionate team of executives who will provide leadership to make surgery more effective, less invasive, and easier on surgeons, patients, and their families. We seek to accomplish this goal in a way that is aligned with the long-term interests of our stockholders.
We employ a “team-based” approach to compensating our executive officers, which is predicated on two principles.
Each executive officer must demonstrate exceptional individual performance to remain a part of our executive team. We believe that executive officers who underperform should be removed from our executive team and have their compensation adjusted accordingly, or be dismissed from the Company.
Each executive officer must contribute as a member of the team to our overall success rather than merely achieve specific objectives within his or her area of responsibility.
As a result of this team-based approach, the Compensation Committee carefully considers the relative compensation levels among all members of the executive team. Accordingly, our executive compensation program is designed to be internally consistent and equitable to further the Company’s success. As reflected in the discussion below, the differences in the amounts awarded to each of our executive officers, including our NEOs, relate primarily to the experience, responsibilities, and performance of each individual executive officer, and differing market practices for compensation in each executive officer’s function.
Compensation Mix
Historically, our equity program provides awards in both stock options and RSUs. We relied on these long-term equity awards to attract, motivate, and retain an outstanding executive team and to ensure a strong connection between our executive compensation program and the long-term interests of our stockholders. We believe stock options are an effective compensation element for attracting innovative and passionate executive officers that rewards stockholder value creation. By ensuring that our executive officers have a significant portion of their potential compensation tied to long-term stock price performance, we are able to closely align the interest of our executive officers with the interests of our stockholders.
In 2018, the majority of Dr. Guthart’s and the other NEOs’ total compensation is long-term equity based compensation. By linking more of our NEOs total compensation to long-term equity emphasizes variable pay, which is consistent with the Company’s pay-for-performance philosophy.
Named Executive Officer
  
Base Salary as a % of Total Compensation
  
Annual Performance-based Cash Bonus as a % of Total Compensation
  
Fair Value of 2018 Equity Grants as a % of Total Compensation
Gary S. Guthart, Ph.D.  
 
12%
  
13%
  
75%
Other NEOs
 
12%
 
10%
 
78%


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Executive Compensation Process
Role of Compensation Committee
The Compensation Committee oversees our executive compensation program (including our executive compensation policies and practices), approves the compensation of our executive officers including our NEOs (other than Dr. Guthart), and administers our various equity plans.
The Compensation Committee reviews the performance of Dr. Guthart to determine whether to make any changes to his compensation. Following its approval, the Compensation Committee presents such changes to the independent members of our Board for review and ratification.
Role of Executive Officers
Dr. Guthart makes recommendations to the Compensation Committee regarding the salary, annual cash bonus award, and equity awards for the executive officers other than himself. At the Compensation Committee’s request, Dr. Guthart reviews with the Compensation Committee the individual performance of each of the other executive officers, including each of our NEOs. The Compensation Committee gives considerable weight to Dr. Guthart’s evaluations and determines whether the recommended changes in each executive officer’s compensation, if any, are appropriate.
The Compensation Committee receives support from our Human Resources Department in designing our executive compensation program and analyzing competitive market practices. In addition, Dr. Guthart participates in Compensation Committee meetings, providing input from our executive team on organizational structure, executive development, and financial analysis.
Role of Compensation Consultant
In 2018, the Compensation Committee directly retained the services of Compensia, an independent national executive compensation consulting firm, to assist it in fulfilling its duties and responsibilities. Compensia does not provide services to Intuitive management outside of the services provided to the Compensation Committee unless directed by the Compensation Committee.
The Committee annually reviews the performance of Compensia. As part of the annual review, the Compensation Committee considers the independence of the consultant in accordance with SEC and Nasdaq rules and has concluded that no conflict of interest exists with respect to the work that Compensia performs for the Compensation Committee.
Competitive Positioning
While the Compensation Committee does not establish compensation levels based solely on a review of competitive market data, it believes that such data is a useful tool in its deliberations as it recognizes that our compensation policies and practices must be competitive in the marketplace for us to be able to attract, motivate, and retain qualified executive officers. Generally, the Compensation Committee reviews our executive compensation relative to our established competitive market (based on an analysis of the compensation policies and practices of a select group of peer companies) every two years. The Compensation Committee uses the competitive market data when evaluating all aspects of executive compensation. As a reference point for our NEOs, we use the market median for cash and incentive values, the 75th percentile for long term incentive values, and the market median and 75th percentile for the total direct compensation values.
The Compensation Committee engages Compensia to assist with updating our compensation peer group and assessing the competitiveness of our executive compensation program. In evaluating and making changes to the compensation peer group, the Compensation Committee considered the following selection criteria: (1) location of the company (U.S.-based); (2) ownership structure of the company (publicly-traded); (3) company’s industry (medical device, medical supplies, life sciences tools and services and technology); (4) revenues (approximately 1/3 to 3x the Company’s last four quarters’ revenue); and (5) market capitalization (approximately 1/3 to 3x the Company’s market capitalization).


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After considering the analysis performed by Compensia, the Compensation Committee selected the following direct compensation peer group for use in 2018:
Agilent Technologies, Inc.
Dentsply Sirona, Inc.
Illumina, Inc.
Teleflex Incorporated
Becton, Dickinson and Company
Edwards Lifesciences Corporation
Mettler-Toledo International, Inc.
Varian Medical Systems, Inc.
Boston Scientific Corporation
Hologic, Inc.
ResMed, Inc.
Waters Corporation
The Cooper Companies, Inc.
IDEXX Laboratories, Inc.
Stryker Corporation
Zimmer Biomet Holdings, Inc.
Executive Compensation Elements
The following table lists the elements of our 2018 executive compensation program. By using a mix of fixed and variable compensation elements it is designed to drive corporate performance using specific measures that correlate to stockholder value and align with our financial and strategic Company goals.
 
 
Fixed
 
Variable Short-Term
 
Variable Long-Term
 
Other
 
 
Base Salary
 
Annual Performance-based Cash Bonus
 
Stock Options
 
RSUs
 
Benefits
 
 
 
 
 
 
 
 
 
 
 
 
 
Attract, Reward, and Retain
Primary Purpose
 
Provide competitive, fixed cash compensation
 
Provide focus on annual financial and non-financial goals, motivate team performance
 
Create ownership and align with stockholder interests
 
Encourage wellness and financial savings
Performance Measures
 
 
 
Adjusted operating income and strategic corporate objectives
 
 
 
 
 

Performance Period/Vesting Period
 
Ongoing; Annual review
 
1-year performance period
 
4- and 3.5-year vesting ratably
 
4-year vesting ratably
 
Ongoing
Base Salary
In July 2018, the Compensation Committee reviewed the base salaries of our executive officers, including our NEOs, for possible adjustments. After taking into consideration our “team-based” approach to compensation, the Compensation Committee set the base salaries of our NEOs as follows:
Named Executive Officer
 
Base Salary
as of
August 1, 2018 ($)
 
Base Salary
as of
August 1, 2017 ($)
 
Percentage
Change
Gary S. Guthart, Ph.D.
 
780,000

 
757,050

 
3.0
%
Salvatore J. Brogna (1)
 
569,250

 
520,000

 
9.5
%
Myriam J. Curet, M.D. (2)
 
518,750

 
472,219

 
9.9
%
Marshall L. Mohr (3)
 
525,000

 
489,250

 
7.3
%
David J. Rosa
 
556,973

 
540,750

 
3.0
%
 
(1)
In November 2017, in connection with his appointment as the Executive Vice President and Chief Operating Officer, Mr. Brogna’s base salary was first increased to $550,000 per year. During 2018, his base salary increased by 3.5% to $569,250 compared with his base salary in November 2017.
(2)
Dr. Curet was employed part-time at 80% in 2018 and 2017, and her base salary is reported in the table as converted to a full-time basis. In November 2017, in connection with her appointment as the Executive Vice President and Chief Medical Officer, Dr. Curet’s base salary was first increased to $400,000 per year (or $500,000 per year on a full-time basis). During 2018, her base salary increased by 3.75% to $415,000 (or $518,750 per year on a full-time basis) compared with her base salary in November 2017.
(3)
In connection with his appointment as the Executive Vice President and Chief Financial Officer, Mr. Mohr’s base salary was increased to $525,000 per year effective July 2018.
The base salaries earned by our NEOs during 2018 are set forth in the “2018 Summary Compensation Table” below.


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Annual Performance-Based Cash Bonuses
We use annual cash bonuses to motivate and reward our executive officers, including our NEOs, to achieve or exceed our short-term financial and operational objectives while making progress towards our longer-term growth and other goals. Consistent with our executive compensation philosophy, these annual cash bonuses constitute a smaller portion of the target total direct compensation opportunity of our executive officers than their long-term equity awards.
At the end of each year, the Compensation Committee determines the amount of the award to be paid to each executive officer by comparing actual results to the performance goals for the year. The Compensation Committee may, in its discretion, reduce or increase the amount of any individual award based on an executive officer’s overall performance and his or her contribution to the achievement of our performance goals.
Target Annual Cash Bonus Opportunities
Given our emphasis on long-term stockholder value creation over annual operating results, the CIP targets are set relatively low to the competitive market, as reflected by the target annual cash bonus opportunities of our executive officers. For 2018, the target and maximum annual cash bonuses opportunities as a percentage of base salary under the CIP for our NEOs were set as follows:
Named Executive Officer
 
Target Annual Cash Bonus
Opportunity (as a percentage
of base salary)
 
Maximum Annual Cash Bonus
Opportunity (as a percentage
of base salary) (1)
Gary S. Guthart, Ph.D.
 
100.0%
 
125.0%
Salvatore J. Brogna
 
70.0%
 
87.5%
Myriam J. Curet, M.D.
 
70.0%
 
87.5%
Marshall L. Mohr
 
70.0%
 
87.5%
David J. Rosa
 
70.0%
 
87.5%
 
(1)
The maximum annual cash bonus opportunity (as a percentage of base salary) is calculated at 125% of the target; however, the Compensation Committee may award higher amounts based on individual performance.
Annual Cash Bonus Plan Formula and Funding
For 2018, the CIP was funded through an incentive pool based on our achievement of an adjusted operating income (“AOI”) goal as set forth in our annual operating plan, and paid to our executive officers based on our actual level of achievement of AOI and several pre-established corporate performance objectives (the “Company Performance Goals”). For purposes of the CIP, “AOI” is defined as operating income excluding non-cash share-based compensation expense, non-cash amortization of intangible assets, and litigation charges.
For 2018, the CIP incentive pool was funded based on an AOI target set at the previous year’s AOI level plus a pre-established increase in AOI for the year and could be funded up to a maximum of 125% of target. The amount of the incentive pool that is paid out as annual cash bonuses for each executive officer, including each NEO, is determined by an equal weighting of achievement of the AOI goal and Company Performance Goals. In the event that the AOI target was not achieved, the incentive pool would not be funded, and our NEOs would not be eligible to receive any bonus under the CIP. Typically, the overall CIP payout will not exceed the amount by which the incentive pool is funded.
The Company Performance Goals are established at the corporate level by the executive team and Dr. Guthart, then reviewed and approved by the Board of Directors annually at the beginning of the fiscal year. For 2018, the Performance Goals fell into four categories: Business Metrics, Regional Strategic Goals, Strategic Operations/Quality Goals and Corporate Strategy. Given their relationship to our annual operating plan and business strategy and because the Company Performance Goals and their specific target levels are highly confidential, we do not publicly disclose them. We believe their disclosure would provide our competitors, customers and other third parties with significant insights regarding our confidential business strategies that could cause us substantial competitive harm.
The Company Performance Goals are designed to focus on the short-term objectives that we believe ultimately drive the long-term success of the Company. There is a risk that payments with respect to any specific goal will not be made at all or will be made at less than 100% of the target level. The achievement of the goals may be affected by several factors including, but not limited to, the impact of changes in healthcare legislation and policy, global and regional conditions, credit markets and the related impact on healthcare spending, timing and success of product development and market acceptance of developed products, changes in trade agreements and/or tariffs imposed on cross-border commerce, and regulatory approvals, clearances, and restrictions. Because several of these factors are not entirely within the control of our NEOs and given the “stretch” nature of the goal-setting process, we believe that


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it would be relatively difficult to fully achieve the Company Performance Goals in any year. The challenge of the goals and uncertainty in the environment ensures that any payments under the CIP are truly performance-based, which is consistent with the plan’s objectives.
2018 Bonus Decisions
For 2018, target funding was set at AOI of $1,449 million and maximum funding of 125% of the pool was set at AOI of $1,811 million, with funding at intermediate levels determined based on linear interpolation. Based on our actual achievement of AOI of $1,598 million or 116.3% achievement, weighted at 50% and actual achievement of Company Performance Goals of 100.0%, weighted at 50%, the CIP was funded at 108.2% of the target level for our NEOs.
The annual cash bonus payments made to our NEOs for 2018 are set forth in the “2018 Summary Compensation Table” below.
Long-Term Equity Awards
Our long-term incentive compensation consists of equity awards in the form of stock options and RSUs. We grant these equity awards to ensure that our executive officers, including our NEOs, have a continuing stake in our long-term success. The Compensation Committee believes that these types of equity awards best meet our overall goals of alignment with long-term performance and stockholder value creation, and retention of our executive officers. The Compensation Committee also believes granting awards with multi-year vesting requirements and, with respect to options, a 10-year term creates a substantial retention incentive and encourages our executive officers to focus on our long-term business objectives and long-term stock price performance.
Individual grant awards are determined using various factors including competitive market data, current value of our common stock, overall available stock pool and the individual performance of each NEO. The Compensation Committee considers Dr. Guthart’s recommendations for other NEOs when approving equity awards. The Compensation Committee determines and presents its recommendation for Dr. Guthart to the Board of Directors for their approval.
The equity awards granted to our NEOs in 2018 are set forth in the “2018 Summary Compensation Table” and the “2018 Grants of Plan-Based Awards Table” below.
The Compensation Committee authorized the following equity awards in 2019, 2018, and 2017 for the NEOs:
 
 
Shares of Company Common Stock Underlying RSUs Granted
 
 Shares of Company Common Stock Subject to Options Granted
Named Executive Officer
 
2019 (1)
 
2018
 
2017
 
2019 (1)
 
2018
 
2017
Gary S. Guthart, Ph.D.
 
5,000

 
5,667

 
8,001

 
15,000

 
17,000

 
24,000

Salvatore J. Brogna
 
3,000

 
4,167

 
6,000

 
9,000

 
12,500

 
18,000

Myriam J. Curet, M.D.
 
2,333

 
4,000

 
3,999

 
7,000

 
12,000

 
12,000

Marshall L. Mohr
 
2,333

 
2,833

 
5,001

 
7,000

 
8,500

 
15,000

David J. Rosa
 
3,000

 
4,167

 
6,000

 
9,000

 
12,500

 
18,000

 
(1)
As described above, stock options are granted bi-annually in February and August. Although the number of options to be granted in August 2019 will be determined at a future date, we anticipate that a like number to the February 2019 award will be granted. We have included both the February 2019 grant and the estimated August 2019 grant in this table. Please refer to the section “Equity Award Grant Policies” for more information on the vesting terms of these awards. For 2019, 2018, and 2017, we targeted the stock option to RSU grant ratio at approximately 3:1 for our NEOs.
The equity awards granted to our NEOs in 2018 are set forth in the “2018 Summary Compensation Table” and the “2018 Grants of Plan-Based Awards Table” below.
Equity Award Grant Policies
The Compensation Committee reviews and approves annual equity award grants to our executive officers, including our NEOs. Stock options are granted to our executive officers, bi-annually on February 15 and August 15 of each year. RSUs are granted on February 15 of each year. The February stock option grants vest over a four-year period, while the August stock option grants vest over a 3.5-year period. The RSUs vest 25% annually over a four-year period.
We do not time the granting of stock options with any favorable or unfavorable news released by the Company. Initial stock option grants are consistently granted on the fifth business day of the month after employment begins. Proximity of any awards to an earnings announcement or other market events is coincidental.


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Welfare and Other Employee Benefits
We have established a tax-qualified Section 401(k) retirement plan for all employees, including our NEOs, who satisfy certain eligibility requirements, including requirements relating to age and length of service. Beginning in 2015, we began matching contributions made to the plan by our eligible employees, including executive officers. We match 200% of employee contributions up to $1,500 per calendar year per person. All matching employer contributions are fully vested when made.
In addition, we provide all of our employees who work 30 hours or more per week, including our NEOs, a variety of health and welfare benefits. These benefits include medical, dental, and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance coverage.
Our employee benefits programs are intended to be affordable and competitive in relation to the market. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
Perquisites and Other Personal Benefits
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide perquisites to our executive officers, including our NEOs, except in limited situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment and retention purposes.
In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual executive officer in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation, or retention purposes. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee.
Post-Employment Compensation
In December 2008, our Board approved and adopted a change in control plan (the “Change in Control Plan”). Under the Change in Control Plan, all eligible employees of the Company who have been employed at least six months prior to the date of their separation from service, including our executive officers, are eligible to receive certain payments and benefits in the event of a termination of employment without cause or an involuntary separation from service within 12 months after a change in control of the Company.
We believe the Change in Control Plan is beneficial to our stockholders because it minimizes the uncertainty presented to our valuable workforce in the case of a change in control of the Company. In addition, we provide the Change in Control Plan to encourage our employees to work at a dynamic and rapidly growing business where their long-term compensation largely depends on future stock price appreciation. In the case of our executive officers, the Change in Control Plan is intended to mitigate a potential disincentive for them when they are evaluating a potential acquisition of the Company, particularly when the services of the executive officers may not be required by the acquiring entity. In such a situation, we believe that these protections are necessary to encourage retention of the executive officers through the conclusion of the transaction, and to ensure a smooth management transition. The payments and benefits provided under the Change in Control Plan have been designed to provide our eligible employees, including our executive officers, with consistent treatment that is competitive with current market practices.
A description of the terms and conditions of the Change in Control Plan, as well as information about the estimated payments and benefits that our NEOs would have been eligible to receive as of December 31, 2018, are set forth in Potential Payments Upon Termination or Change in Control” below.


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Other Compensation Policies
Stock Ownership Guidelines
We believe that stock ownership by our executive officers, including our NEOs, and the members of our Board is important to link the risks and rewards inherent in stock ownership of these individuals and our stockholders. In January 2015, our Board adopted executive officer stock ownership guidelines requiring each individual serving as an executive officer to maintain beneficial ownership of a minimum dollar amount of shares of our common stock. For the purposes of determining stock ownership levels, the following forms of equity interests are included: shares owned outright by, or held in trust for the benefit of, the executive officer or his or her spouse or children sharing the same household; shares held through a fund or other entity as to which the executive officer has control; shares of our common stock, stock units or other stock equivalents obtained through the exercise of stock options or vesting of equity awards; shares of common stock underlying vested stock options net of shares that would need to be withheld for the exercise price; and other stock or stock equivalent awards determined by the Compensation Committee.
These stock ownership guidelines are intended to create a clear standard that encourages these executive officers to remain invested in the performance of our stock price. Each executive officer has five years from the date he or she becomes subject to the stock ownership guidelines to achieve compliance with the guidelines. The current ownership levels specified by these guidelines require each NEO to maintain a minimum level of stock ownership equal to four times his or her annual base salary. All of our NEOs met the guidelines or were on track to comply with the guidelines in the relevant time frame as of the date of this proxy statement.
Compensation Recovery Policy
Currently, we have not implemented a policy regarding retroactive adjustments to any cash or equity-based incentive compensation paid to our executive officers and other employees where the payments were predicated upon the achievement of financial results that were subsequently the subject of a financial restatement.
Derivatives Trading, Hedging, and Pledging Policies
Our Insider Trading Policy provides that no employee, officer, or director may acquire, sell, or trade in any interest or position relating to the future price of Company securities, such as a put option, a call option or a short sale (including a short sale “against the box”), or engage in hedging transactions (including “cashless collars”). In addition, our Insider Trading Policy provides that no employee, officer, or director may pledge Company securities as collateral to secure loans. This prohibition means, among other things, that these individuals may not hold Company securities in a “margin” account, which would allow the individual to borrow against their holdings to buy securities.
Tax and Accounting Considerations
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code (the “Code”) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for “covered employees.” As a result of the 2017 Tax Act, covered employees generally consist of our Chief Executive Officer, Chief Financial Officer, and each of the next three highest compensated officers for the taxable year without regard to whether such executive officers are serving at the end of the taxable year, and anyone who previously has been a covered employee for any taxable year beginning after December 31, 2016. In addition, as a result of the 2017 Tax Act, the “qualified performance-based compensation” exemption from this $1 million deduction limit was, with certain limited exceptions, eliminated.
The Compensation Committee believes that, in establishing the cash and equity incentive compensation plans and arrangements for our executive officers, the potential deductibility of the compensation payable under those plans and arrangements should be only one of a number of relevant factors taken into consideration, and not the sole governing factor. For that reason, the Compensation Committee may deem it appropriate to provide one or more executive officer with the opportunity to earn incentive compensation, whether through cash incentive awards tied to our financial performance or equity incentive awards tied to the executive officer’s continued service, which may be in excess of the amount deductible by reason of Section 162(m) or other provisions of the Code.
The Compensation Committee believes it is important to maintain cash and equity incentive compensation at the requisite level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation.


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Nonqualified Deferred Compensation
The Compensation Committee takes into account whether components of the compensation for our executive officers will be adversely impacted by the penalty tax imposed by Section 409A of the Code, and aims to structure these components to be compliant with or exempt from Section 409A to avoid such potential adverse tax consequences.
“Golden Parachute” Payments
Sections 280G and 4999 of the Code provide that certain executive officers and other service providers who are highly compensated or hold significant equity interests may be subject to an excise tax if they receive payments or benefits in connection with a change in control of the company that exceeds certain prescribed limits, and that we, or a successor, may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer, including any NEO, with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G or 4999 during 2018 and we have not agreed and are not otherwise obligated to provide any executive officer, including any NEO with such a “gross-up” or other reimbursement.
Accounting for Share-Based Compensation
We follow ASC 718 for our share-based compensation awards. ASC 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options and RSUs, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their share-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.
COMPENSATION RISK CONSIDERATIONS
The Compensation Committee considers, in establishing and reviewing our employee compensation programs, whether each of these programs encourages unnecessary or excessive risk taking. The Company, after reviewing and discussing the compensation programs with the Compensation and Audit Committees of our Board, believes that the programs are balanced and do not motivate or encourage unnecessary or excessive risk taking because of, in part, the following:
Base salaries are fixed in amount and thus do not encourage risk taking.
While annual performance-based awards focus on achievement of short-term goals, and short-term goals may encourage the taking of short-term risks at the expense of long-term results, the Company’s performance-based award programs represent a reasonable portion of employees’ target total direct compensation opportunities. Performance-based awards are based on various departmental and Company-wide metrics; funding for the awards is capped at the Company level and the distribution of the funds to executive officers and other employees is at the discretion of the Compensation Committee.
Long-term equity awards are important to help further align employees’ interests with those of our stockholders. The ultimate value of the awards is tied to the Company’s stock price and since awards are staggered and subject to long-term vesting schedules, they help ensure that our executive officers have significant value tied to our long-term stock price performance. As described above in the Compensation Discussion and Analysis, we have established procedures related to the timing and approval of equity awards.
Because of the above, we believe that our employee compensation programs appropriately balance risk and the desire to focus employees on specific short-term goals important to the Company’s success.


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COMPENSATION OF NAMED EXECUTIVE OFFICERS
2018 Summary Compensation Table
The following Summary Compensation Table sets forth summary information concerning the compensation provided to our NEOs in the years ended December 31, 2018, 2017, and 2016, for services to our Company in all capacities, with the exception of Dr. Curet, whose total compensation is shown only for 2018 and 2017, the years in which she was a NEO.
Name and Principal Position
 
Year
 
Salary ($) (1)
 
Stock
Awards ($) (2)
 
Option
Awards ($) (2)
 
Non-Equity
Incentive Plan
Compensation 
($) (3)
 
Total ($)
Gary S. Guthart, Ph.D.
President and Chief Executive Officer
 
2018
 
766,613

 
2,371,980

 
2,474,658

 
809,827

 
6,423,078

 
2017
 
744,188

 
1,911,546

 
1,570,974

 
833,512

 
5,060,220

 
2016
 
707,788

 
2,408,220

 
626,635

 
834,593

 
4,577,236

Salvatore J. Brogna
Executive Vice President and Chief Operating Officer

 
2018
 
558,021

 
1,744,140

 
1,819,601

 
454,230

 
4,575,992

 
2017
 
513,334

 
1,433,480

 
1,178,230

 
450,000

 
3,575,044

 
2016
 
482,500

 
1,739,270

 
452,569

 
425,801

 
3,100,140

Myriam J. Curet, M.D.
Executive Vice President and Chief Medical Officer
 
2018
 
406,250

 
1,674,240

 
1,746,817

 
324,450

 
4,151,757

 
2017
 
374,027

 
955,414

 
785,487

 
300,000

 
2,414,928

Marshall L. Mohr
Executive Vice President and Chief Financial Officer

 
2018
 
505,635

 
1,185,780

 
1,237,329

 
400,155

 
3,328,899

 
2017
 
480,938

 
1,194,806

 
981,859

 
385,360

 
3,042,963

 
2016
 
466,250

 
1,337,900

 
348,130

 
380,385

 
2,532,665

David J. Rosa
Executive Vice President and Chief Business Officer
 
2018
 
547,510

 
1,744,140

 
1,819,601

 
432,600

 
4,543,851

 
2017
 
531,563

 
1,433,480

 
1,178,230

 
450,000

 
3,593,273

 
2016
 
510,417

 
1,739,270

 
452,569

 
417,297

 
3,119,553

 
(1)
The amounts reported in this column include payments in respect of accrued paid-time off made in addition to salary earned. The amount reported for Dr. Curet reflects her 80% part-time basis.
(2)
The amounts reported in these columns represent the grant date fair values of the stock options granted to the NEOs and the RSUs granted to the NEOs in the fiscal year, determined in accordance with ASC 718. The grant date fair value for RSUs is measured based on the closing fair market value of the Company’s common stock on the date of grant. See Note 9 of the Notes to the Consolidated Financial Statements contained in our Annual Report on Form 10-K filed on February 4, 2019, for a discussion of all assumptions made by us in determining the grant date fair value of these equity awards.
(3)
Represents the annual bonus earned in the designated fiscal year under the CIP paid in February of the following year. See the “Compensation Discussion and Analysis” section above for a more detailed discussion.




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2018 Grants of Plan-Based Awards
The following table summarizes information about the non-equity incentive awards and equity-based awards granted to our NEOs in 2018:
Name
 
Grant Date
 
Estimated Future
Payouts Under Non-Equity
Incentive Plan Awards (1)
 
All Other
Stock  Awards:
# of Shares
of Stock or Units (2)
 
All Other
Option  Awards:
# of Securities Underlying Options (2)
 
Exercise or Base
Price of
Options or Awards
($/Share)
 
Grant Date
Fair
Value of
Options and Awards ($) (3)
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Gary S. Guthart, Ph.D.
 
2/15/2018
 
 
 
 
 
 
 
5,667

 
 
 
 
 
2,371,980

 
2/15/2018
 
 
 
 
 
 
 
 
 
8,500

 
418.56

 
1,113,749

 
8/15/2018
 
 
 
 
 
 
 
 
 
8,500

 
522.77

 
1,360,909

 
 
Cash Incentive
 
 
 
780,000

 
975,000

 
 
 
 
 
 
 
 
Salvatore J. Brogna
 
2/15/2018
 
 
 
 
 
 
 
4,167

 
 
 
 
 
1,744,140

 
2/15/2018
 
 
 
 
 
 
 
 
 
6,250

 
418.56

 
818,933

 
8/15/2018
 
 
 
 
 
 
 
 
 
6,250

 
522.77

 
1,000,668

 
Cash Incentive
 
 
 
398,475

 
498,094

 
 
 
 
 
 
 
 
Myriam J.
Curet, M.D.
 
2/15/2018
 
 
 
 
 
 
 
4,000

 
 
 
 
 
1,674,240

 
2/15/2018
 
 
 
 
 
 
 
 
 
6,000

 
418.56

 
786,176

 
8/15/2018
 
 
 
 
 
 
 
 
 
6,000

 
522.77

 
960,641

 
Cash Incentive
 
 
 
290,500

 
363,125

 
 
 
 
 
 
 
 
Marshall
L. Mohr
 
2/15/2018
 
 
 
 
 
 
 
2,833

 
 
 
 
 
1,185,780

 
2/15/2018
 
 
 
 
 
 
 
 
 
4,250

 
418.56

 
556,875

 
8/15/2018
 
 
 
 
 
 
 
 
 
4,250

 
522.77

 
680,454

 
Cash Incentive
 
 
 
367,500

 
459,375

 
 
 
 
 
 
 
 
David J. Rosa
 
2/15/2018
 
 
 
 
 
 
 
4,147

 
 
 
 
 
1,744,140

 
2/15/2018
 
 
 
 
 
 
 
 
 
6,250

 
418.56

 
818,933

 
8/15/2018
 
 
 
 
 
 
 
 
 
6,250

 
522.77

 
1,000,668

 
Cash Incentive
 
 
 
389,881

 
487,351

 
 
 
 
 
 
 
 
 
(1)
For 2018, Dr. Guthart had a bonus target of 100% of base salary and Messrs. Brogna, Rosa, and Mohr as well as Dr. Curet had a bonus target of 70% of base salary. At its discretion, the Compensation Committee has the authority to pay any NEO in excess of or below his or her targeted bonus amount. The goals for 2018 were approved by the Compensation Committee in January 2018. The payout amounts for each NEO were reviewed and approved by the Compensation Committee and the Board in January 2019 upon reviewing results for 2018. The maximum bonus or performance payout is calculated at 125% of the target. See “Compensation Discussion and Analysis” section above for detailed discussion of the CIP.
(2)
The options were granted under our Amended and Restated 2010 Incentive Award Plan. The February 15 option grants vest 6/48 at the end of six months and 1/48 per month thereafter through a four-year period, subject to continued employment through the applicable vesting date. The August 15 option grants vest 7/48 at the end of one month and 1/48 per month thereafter through a 3.5-year period, subject to continued employment through the applicable vesting date. The February 15 RSU grants vest 1/4 increments annually over a four-year period, subject to continued employment through the applicable vesting date.
(3)
The amounts shown represent the fair value per share as of the grant date of such award determined pursuant to stock compensation accounting, multiplied by the number of shares. See Note 9 of the Notes to the Consolidated Financial Statements contained in our Annual Report on Form 10-K filed on February 4, 2019, for a discussion of all assumptions made by us in determining the value of the equity awards.


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Outstanding Equity Awards as of December 31, 2018
The following table summarizes the outstanding stock options and RSUs that were held by our NEOs as of December 31, 2018:
 
 
Option Awards
 
Stock Awards
Name
 
Grant Date
 
# of Securities
Underlying
Unexercised
Options
(# Exercisable)
 
# of Securities
Underlying
Unexercised  Options
(# Unexercisable)
(*)
 
Option 
Exercise
Price
($/share)
 
Option
Expiration
Date
 
Shares or units of stock that have not vested (#) (1)
 
Market value of shares or units of stock that have not vested ($) (2)
Gary S. Guthart, Ph.D.
 
2/16/2010
 
71,666

 

 
111.43

 
2/16/2020
 
 
 
 
 
2/15/2011
 
95,625

 

 
113.73

 
2/15/2021
 
 
 
 
 
2/15/2012
 
42,000

 

 
168.41

 
2/15/2022
 
 
 
 
 
8/15/2012
 
42,000

 

 
172.44

 
8/15/2022
 
 
 
 
 
 
2/15/2013
 
22,500

 

 
189.74

 
2/15/2023
 
 
 
 
 
 
8/15/2013
 
22,500

 

 
127.91

 
8/15/2023
 
 
 
 
 
 
2/18/2014
 
11,250

 

 
148.03

 
2/18/2024
 
 
 
 
 
 
8/15/2014
 
11,250

 

 
153.05

 
8/15/2024
 
 
 
 
 
 
2/17/2015
 
8,049

 
351

 
171.33

 
2/17/2025
 
2,599

 
1,244,713

 
 
8/17/2015
 
8,051

 
349

 
177.68

 
8/17/2025
 
 
 
 
 
 
2/16/2016
 
1,863

 
768

 
178.39

 
2/16/2026
 
6,750

 
3,232,710

 
 
2/15/2017
 
5,499

 
6,501

 
238.91

 
2/15/2027
 
6,000

 
2,873,520

 
 
8/15/2017
 
5,501

 
6,499

 
328.46

 
8/15/2027
 
 
 
 
 
 
2/15/2018
 
1,770

 
6,730

 
418.56

 
2/15/2028
 
5,667

 
2,714,040

 
 
8/15/2018
 
1,771

 
6,729

 
522.77

 
8/15/2028
 
 
 
 
Salvatore J. Brogna
 
2/17/2015
 
153

 
306

 
171.33

 
2/17/2025
 
2,274

 
1,089,064

 
8/17/2015
 
153

 
305

 
177.68

 
8/17/2025
 
 
 
 
 
 
2/16/2016
 
102

 
1,422

 
178.39

 
2/16/2026
 
4,874

 
2,334,256

 
 
8/15/2016
 
102

 
1,422

 
231.00

 
8/15/2026
 
 
 
 
 
 
2/15/2017
 
188

 
4,873

 
238.91

 
2/15/2027
 
4,500

 
2,155,140

 
 
8/15/2017
 
750

 
4,874

 
328.46

 
8/15/2027
 
 
 
 
 
 
2/15/2018
 
1,302

 
4,948

 
418.56

 
2/15/2028
 
4,167

 
1,995,660

 
 
8/15/2018
 
1,303

 
4,947

 
522.77

 
8/15/2028
 
 
 
 
Myriam J. Curet, M.D.
 
2/15/2013
 
8,650

 

 
189.74

 
2/15/2023
 
 
 
 
 
2/17/2015
 
438

 
175

 
171.33

 
2/17/2025
 
1,299

 
622,117

 
8/17/2015
 
437

 
174

 
177.68

 
8/17/2025
 
 
 
 
 
2/16/2016
 
312

 
875

 
178.39

 
2/16/2026
 
3,000

 
1,436,760

 
 
8/15/2016
 
2,125

 
875

 
231.00

 
8/15/2026
 
 
 
 
 
 
2/15/2017
 
2,751

 
3,249

 
238.91

 
2/15/2027
 
2,999

 
1,436,281

 
 
8/15/2017
 
2,751

 
3,249

 
328.46

 
8/15/2027
 
 
 
 
 
 
2/15/2018
 
1,250

 
4,750

 
418.56

 
2/15/2028
 
4,000

 
1,915,680

 
 
8/15/2018
 
1,251

 
4,749

 
522.77

 
8/15/2028
 
 
 
 
Marshall L. Mohr
 
2/15/2011
 
40,500

 

 
113.73

 
2/15/2021
 
 
 
 
 
2/15/2012
 
21,000

 

 
168.41

 
2/15/2022
 
 
 
 
 
 
8/15/2012
 
21,000

 

 
172.44

 
8/15/2022
 
 
 
 
 
 
2/15/2013
 
18,000

 

 
189.74

 
2/15/2023
 
 
 
 
 
 
8/15/2013
 
18,000

 

 
127.91

 
8/15/2023
 
 
 
 
 
 
2/18/2014
 
9,375

 

 
148.03

 
2/18/2024
 
 
 
 
 
 
8/15/2014
 
9,375

 

 
153.05

 
8/15/2024
 
 
 
 
 
 
2/17/2015
 
6,541

 
284

 
171.33

 
2/17/2025
 
2,112

 
1,011,479



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8/17/2015
 
6,540

 
285

 
177.68

 
8/17/2025
 
 
 
 
 
 
2/16/2016
 
2,656

 
1,094

 
178.39

 
2/16/2026
 
3,750

 
1,795,950

 
 
8/15/2016
 
2,657

 
1,093

 
231.00

 
8/15/2026
 
 
 
 
 
 
2/15/2017
 
3,437

 
4,063

 
238.91

 
2/15/2027
 
3,750

 
1,795,950

 
 
8/15/2017
 
3,438

 
4,062

 
328.46

 
8/15/2027
 
 
 
 
 
 
2/15/2018
 
885

 
3,365

 
418.56

 
2/15/2028
 
2,833

 
1,356,780

 
 
8/15/2018
 
886

 
3,364

 
522.77

 
8/15/2028
 
 
 
 
David J. Rosa
 
2/15/2011
 
48,000

 

 
113.73

 
2/15/2021
 
 
 
 
 
2/15/2012
 
21,000

 

 
168.41

 
2/15/2022
 
 
 
 
 
8/15/2012
 
21,000

 

 
172.44

 
8/15/2022
 
 
 
 
 
2/15/2013
 
18,000

 

 
189.74

 
2/15/2023
 
 
 
 
 
 
8/15/2013
 
36,000

 

 
127.91

 
8/15/2023
 
 
 
 
 
 
2/18/2014
 
9,375

 

 
148.03

 
2/18/2024
 
 
 
 
 
 
8/7/2014
 
13,500

 

 
147.27

 
8/7/2024
 
 
 
 
 
 
8/15/2014
 
9,375

 

 
153.05

 
8/15/2024
 
 
 
 
 
 
2/17/2015
 
7,044

 
306

 
171.33

 
2/17/2025
 
2,274

 
1,089,064

 
 
8/17/2015
 
7,045

 
305

 
177.68

 
8/17/2025
 
 
 
 
 
 
2/16/2016
 
3,453

 
1,422

 
178.39

 
2/16/2026
 
4,874

 
2,334,256

 
 
8/15/2016
 
3,453

 
1,422

 
231.00

 
8/15/2026
 
 
 
 
 
 
2/15/2017
 
4,127

 
4,873

 
238.91

 
2/15/2027
 
4,500

 
2,155,140

 
 
8/15/2017
 
4,126

 
4,874

 
328.46

 
8/15/2027
 
 
 
 
 
 
2/15/2018
 
1,302

 
4,948

 
418.56

 
2/15/2028
 
4,167

 
1,995,660

 
 
8/15/2018
 
1,303

 
4,947

 
522.77

 
8/15/2028
 
 
 
 
 
(*)
All of the listed options, except the August 2015, 2016, 2017, 2018 and August 15, 2014, grants, vest 6/48 of the underlying option shares upon completion of six months of service following the date of grant and 1/48 per month thereafter, contingent upon continued employment. The August 2015, 2016, 2017, 2018, and August 15, 2014, options vest 7/48 of the underlying option shares upon completion of one month of service following the date of the grant and 1/48 per month thereafter, contingent upon continued employment. All of these options have a ten-year term.
(1)
All of the listed RSUs vest in 1/4 increments annually over a four-year period from the date of grant, subject to continued employment through the applicable vesting date.
(2)
The dollar amounts shown are determined by multiplying the number of unvested units by $478.92 (the closing price of the Company’s common stock on December 31, 2018, the last trading day of the Company’s fiscal year).
Option Exercises and Stock Vested During Fiscal 2018
The following table summarizes the stock options exercised and vesting of RSUs during the year ended December 31, 2018, and the value realized upon exercise of stock options and vesting of stock awards by our NEOs:
 
 
Option Awards
 
Stock Awards
Name
 
Number of Shares
Acquired on 
Exercise (#)
 
Value Realized 
Upon
Exercise ($) (1)
 
Number of Shares
Acquired on Vesting  (#)
 
Value Realized 
Upon
Vesting ($) (2)
Gary S. Guthart, Ph.D.
 
220,834

 
93,539,546

 
9,851

 
4,128,847

Salvatore J. Brogna
 
11,221

 
3,042,302

 
7,771

 
3,258,611

Myriam J. Curet, M.D.
 
10,415

 
3,186,221

 
5,047

 
2,116,753

Marshall L. Mohr
 
30,750

 
11,161,763

 
6,798

 
2,852,284

David J. Rosa
 
106,500

 
43,663,962

 
8,896

 
3,841,249

 
(1)
The value realized equals the excess of the fair market value of our common stock at exercise over the option exercise price, multiplied by the number of shares for which the option was exercised.
(2)
The dollar amounts shown above for stock awards are determined by multiplying the number of shares that vested by the per-share closing price of the Company’s common stock on the vesting date.


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Potential Payments Upon Termination or Change in Control
The following table shows potential payments to the NEOs upon a change in control of the Company and subsequent involuntary separation from service within 12 months after the change in control, in accordance with the Change in Control Plan. Under this plan, all eligible employees of the Company who have been employed at least six months prior to the separation from service date, including executive officers, are entitled to the following severance payments and benefits in the event of a termination of employment without cause or an involuntary separation from service within 12 months after a change in control of the Company:
a lump sum cash payment in the amount equal to the sum of six months of such eligible employee’s base compensation (defined in the Change in Control Plan as base salary and target bonus) plus an additional one month of base compensation for every year of such eligible employee’s service with the Company, such severance not to exceed 12 months;
six months of COBRA premiums, provided that such eligible employee elects continued coverage under COBRA; and
100% vesting of all outstanding unvested equity awards that the eligible employee then holds.
The amounts shown assume that a qualifying termination of employment was effective December 31, 2018, the last business day of the year, under the Change in Control Plan and are estimates of the amounts that would be paid to the NEOs upon such a termination of employment. The terms and conditions of the Change in Control Plan (including the definitions of the key plan terms) are set forth in the plan document.
Name
 
Base Compensation
and Target Bonus ($) (1)
 
COBRA Premiums 
($)
 
Total Value of Equity
Acceleration ($) (2)
 
Total Potential
Payment ($)
Gary S. Guthart, Ph.D.
 
1,755,000

 
13,929

 
13,453,254

 
15,222,183

Salvatore J. Brogna
 
1,067,344

 
9,657

 
10,741,596

 
11,818,597

Myriam J. Curet, M.D.
 
778,125

 
4,512

 
7,552,328

 
8,334,965

Marshall L. Mohr
 
984,735

 
9,657

 
8,522,571

 
9,516,963

David J. Rosa
 
1,044,324

 
13,929

 
10,741,596

 
11,799,849

 
(1)
Amounts shown are the maximum potential payment the executive officer would have received as of December 31, 2018. Amounts of parachute payment cut-back as described below, if any, would be calculated upon actual termination of employment. The amount shown for Dr. Curet reflects her 80% part-time employment as of December 31, 2018.
(2)
Amounts shown assume that all stock options would be exercised immediately upon termination of employment. Stock option values represent the excess of the market value of the option shares for which vesting is accelerated over the exercise price for those option shares, using $478.92 per share for the market value, which is the closing market price of a share of our common stock on December 31, 2018, the last trading day of our 2018 fiscal year. The dollar amounts of RSUs are determined by multiplying the number of shares subject to the RSUs for which vesting is accelerated by $478.92.
For purposes of the Change in Control Plan, an involuntary separation from service of a NEO generally means, (i) without the executive’s express written consent, the assignment to the executive of any duties or the significant reduction of the executive’s duties, authority or responsibilities, which is inconsistent with the executive’s duties, authority or responsibilities in effect immediately prior to such assignment, or the removal of the executive from such duties, authority or responsibilities; (ii) a reduction by the Company in the base compensation of the executive as in effect immediately prior to such reduction; (iii) a material reduction by the Company in the kind or level of employee benefits to which the executive is entitled immediately prior to such reduction with the result that the executive’s overall benefits package is significantly reduced; (iv) the relocation of the executive to a facility or a location more than 25 miles from the executive’s then present location, without the executive’s express written consent; (v) any purported termination of the executive by the Company which is not effected for disability or for cause, or any purported termination for which the grounds relied upon are not valid; (vi) the failure of the Company to obtain the assumption of the agreement by any successors contemplated in the Change in Control Plan; or (vii) any act or set of facts or circumstances which would, under California case law or statute constitute a constructive termination of the executive. In order for an executive to terminate employment in an involuntary separation from service, he or she must provide notice to the Company of the existence of a condition listed above, within 30 days of the initial existence of the condition, and the Company shall have 30 days following receipt of such notice to remedy such condition and not make any payments hereunder in connection with such termination of employment.
The payments and benefits pursuant to the Change in Control Plan are subject to a NEO’s timely execution and non-revocation of a release of claims. Further, the Change in Control Plan specifically include a so-called parachute payment “best pay” provision, where payments and benefits will either be made to the executive in full or as to such


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lesser amount as which would result in no portion of the payments and benefits being subject to an excise tax under Section 280G of the Internal Revenue Code, whichever of the foregoing amounts is greater on an after-tax basis.
Pay Ratio
Annual total compensation of the CEO for 2018
 
$
6,423,078

Annual total compensation of the median employee for 2018
 
$
163,552

Ratio of annual total compensation of the CEO to the annual total compensation of the median employee for 2018
 
39.3:1

The Company believes that there have been no significant changes to its employee population or employee compensation arrangements during 2018. The median employee for 2018 is the same as 2017. In determining the median employee, the Company chose December 31, 2017 as the date for establishing the employee population used in identifying the median employee and used fiscal 2017 as the measurement period. The Company identified the median employee using a consistently applied compensation measure that consists of annual base salary or wages, target annual performance-based cash bonuses, target commissions, and long-term equity awards based on their grant date fair values. Permanent employees who joined in 2017 and permanent employees who were on leave during 2017 were assumed to have worked for the entire year. All U.S. and non-U.S. employees employed as of December 31, 2017, were captured. No cost-of-living adjustments were made.
The annual total compensation of the CEO and the annual total compensation of the median employee were calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.


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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board has determined that the following directors are “independent” under current Nasdaq rules: Craig H. Barratt, Ph.D., Michael A. Friedman, M.D., Amal M. Johnson, Don R. Kania, Ph.D., Keith R. Leonard, Jr., Alan J. Levy, Ph.D., Jami Dover Nachtsheim, Mark J. Rubash, and Lonnie M. Smith.
The Company has adopted a written policy for approval of transactions between the Company and its related parties, such as directors, director nominees, executive officers, greater than five percent beneficial owners, and each of their respective immediate family members, as well as any firm, corporation or other entity in which such persons are employed, serve as general partner, principal or similar position or in which such persons own a five percent or greater beneficial ownership interest, where the amount involved in the transaction exceeds or is expected to exceed $120,000 in a single calendar year. The policy provides that the Audit Committee review transactions subject to the policy and determine whether or not to approve or ratify those transactions. In doing so, they take into account:
Whether the terms of the transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related party.
Whether there are business reasons for the Company to enter into the related party transaction.
Whether the transaction would impair the independence of an outside director.
Whether the transaction would present an improper conflict of interest for any director or executive officer of the Company.
Any other factors deemed appropriate.
No member of the Audit Committee may participate in the approval of a related party transaction for which he or she is a related party.
In addition, each of the following types of related party transactions are deemed to be approved under the policy:
Compensation to an executive officer or director of the Company required to be disclosed in the Proxy Statement pursuant to Item 402 of Regulation S-K; or compensation to an executive officer who is not an immediate family member of a related party, provided that such compensation would have been reported pursuant to Item 402 of Regulation S-K as compensation earned for services to the Company if the executive was a “named executive officer”, and such compensation has been approved, or recommended to the Board for approval, by the Compensation Committee of the Board.
The following transactions that are in the Company’s ordinary course of business and where the financial interest of the related party arises only in the following indirect manners:
a)
from the related party’s position as a director of another corporation or organization that is a party to the transaction;
b)
from the direct or indirect ownership by the related party (or parties, in the aggregate) of less than a 10% equity interest in another person (other than a partnership) which is a party to the transaction; or