January 14, 2009

 

Dear Fellow Stockholder:

 

You are cordially invited to attend Qualcomm’s Annual Meeting on Tuesday, March 3, 2009. The meeting will begin promptly at 9:30 a.m. Pacific Time at Irwin M. Jacobs Qualcomm Hall, 5775 Morehouse Drive, San Diego, California 92121. I invite you to arrive early at 8:30 a.m. to preview our product displays. We will begin the Annual Meeting with a discussion and vote on the matters set forth in the accompanying Notice of Annual Meeting of Stockholders followed by presentations and a report on Qualcomm’s fiscal 2008 performance.

 

This year we are pleased to apply the U.S. Securities and Exchange Commission rule which allows companies to furnish proxy materials to stockholders primarily over the Internet. We believe that this new method should expedite the receipt of your proxy materials, lower the costs of our Annual Meeting and help to conserve natural resources. We encourage you to vote via the Internet and follow the links to the Proxy Statement and Annual Report, which are both available at www.qualcomm.com/investor.

 

For those stockholders who have elected to receive their proxy materials in the mail, please review the Proxy Statement and Annual Report and vote via the Internet, by telephone or using your Proxy Card.

 

Your vote is very important to us. I urge you to vote “FOR” all proposals.

 

Please review your proxy materials carefully and send in your vote today. I look forward to seeing you on March 3, 2009.

 

Sincerely,

 

Paul E. Jacobs

Chief Executive Officer

5775 Morehouse Drive
San Diego, California 92121-1714

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 3, 2009

 

To the Stockholders of QUALCOMM Incorporated:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the Annual Meeting) of QUALCOMM Incorporated (the Company), a Delaware corporation, will be held at Irwin M. Jacobs Qualcomm Hall, 5775 Morehouse Drive, San Diego, California 92121, on Tuesday, March 3, 2009 at 9:30 a.m. Pacific Time for the following purposes:

 

 

The Board of Directors has fixed the close of business on January 2, 2009 as the record date for the determination of stockholders entitled to notice of and to vote at this Annual Meeting and at any adjournment or postponement thereof.

 

By Order of the Board of Directors,

 

Donald J. Rosenberg

Executive Vice President,

General Counsel and Corporate Secretary

 

San Diego, California

January 14, 2009

 

How To Vote

 

If your shares are held by a broker, bank or other stockholder of record exercising fiduciary powers which holds securities of record in nominee name or otherwise (typically referred to as being held in “street name”), you may receive a separate voting instruction form with this Proxy Statement, or you may need to contact your broker, bank or other stockholder of record to determine whether you will be able to vote electronically via the Internet or by telephone.

 

If you are a stockholder with shares registered in your name, you may vote by one of the three following methods:

 

 

PLEASE NOTE THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER STOCKHOLDER OF RECORD AND YOU WISH TO VOTE AT THE ANNUAL MEETING, YOU WILL NOT BE PERMITTED TO VOTE IN PERSON AT THE ANNUAL MEETING UNLESS YOU FIRST OBTAIN A LEGAL PROXY ISSUED IN YOUR NAME FROM THE RECORD HOLDER.

 

 

In this document, the words “Qualcomm,” “the Company,” “we,” “our,” “ours” and “us” refer only to QUALCOMM Incorporated and not any other person or entity.

 

INTERNET AVAILABILITY OF PROXY MATERIALS

 

We are furnishing proxy materials to our stockholders primarily via the Internet under rules adopted by the U.S. Securities and Exchange Commission (SEC), instead of mailing printed copies of those materials to each stockholder. On January 14, 2009, we mailed to our stockholders (other than those who previously requested electronic or paper delivery) a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including our Proxy Statement and our Annual Report. The Notice of Internet Availability of Proxy Materials also instructs you on how to access your proxy card to vote via the Internet or by telephone.

 

This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. If you would prefer to continue to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.

PROXY STATEMENT

 

TABLE OF CONTENTS

 

QUALCOMM INCORPORATED
5775 Morehouse Drive
San Diego, California 92121-1714

PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
March 3, 2009

 

The enclosed proxy is solicited on behalf of the Board of Directors (the Board) of QUALCOMM Incorporated, a Delaware corporation, for use at the Annual Meeting of Stockholders (the Annual Meeting) to be held on Tuesday, March 3, 2009, at 9:30 a.m. Pacific Time, or at any adjournment or postponement thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting. The Annual Meeting will be held at Irwin M. Jacobs Qualcomm Hall, 5775 Morehouse Drive, San Diego, California 92121.

 

 

Only holders of record of common stock at the close of business on January  2, 2009 (the Record Date) will be entitled to notice of and to vote at the Annual Meeting. At the close of business on the Record Date, the Company had 1,648,945,537 shares of common stock outstanding and entitled to vote.

 

Each holder of record of common stock on the Record Date will be entitled to one vote for each share held on all matters to be voted upon. If no choice is indicated on the proxy, the shares will be voted in favor of all proposals.

 

All votes will be counted by an independent inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.

 

 

A broker non-vote occurs when a broker, bank or other stockholder of record that exercises fiduciary powers which holds securities of record in nominee name or otherwise (typically referred to as being held in “street name”) submits a proxy for the Annual Meeting, but does not vote on a particular proposal because that holder does not have discretionary voting power with respect to that proposal and has not received voting instructions from the beneficial owner. Abstentions and broker non-votes have no effect on the determination of whether a nominee or the proposal has received the vote of a majority of the shares of common stock present or represented by proxy and voting at the Annual Meeting. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote those shares on routine matters, but not on non-routine matters. Routine matters include the election of directors and ratification of independent public accountants. Non-routine matters include actions on stock plans and most amendments to the Company’s Certificate of Incorporation.

 

 

Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. It may be revoked by filing with the Corporate Secretary of the Company at the Company’s principal executive offices, 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714, a written notice of revocation or a duly executed proxy bearing a later date, or it may be revoked by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.

 

 

The Company will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of the Notice of Internet Availability of Proxy Materials, this Proxy Statement, the proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. The Company may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials to such beneficial owners. In addition, the Company has retained Morrow & Company to act as a proxy solicitor in conjunction with the meeting. The

Company has agreed to pay that firm $7,500, plus reasonable out-of-pocket expenses, for proxy solicitation services. Solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by directors, officers or other regular employees of the Company. No additional compensation will be paid to directors, officers or other regular employees for such services.

 

The deadline for submitting a stockholder proposal for inclusion in the Company’s proxy materials for the Company’s 2010 Annual Meeting of Stockholders is September 16, 2009. Stockholder nominations for director and other proposals that are not to be included in such materials must be received no earlier than November 3, 2009 and no later than the close of business on December 3, 2009. Any such stockholder proposals or nominations for director must be submitted to the Company’s Corporate Secretary in writing at 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714. Stockholders are also advised to review the Company’s Bylaws, which contain additional advance notice requirements, including requirements with respect to advance notice of stockholder proposals and director nominations. See page 7 for further information.

 

Attached in Appendix 1 is certain financial information from our Annual Report on Form 10-K for fiscal 2008 that we originally filed with the Securities and Exchange Commission (SEC) on November 6, 2008. We have not undertaken any updates or revisions to such information since the date it was originally filed with the SEC. Accordingly, we encourage you to review Appendix 1 together with any subsequent information we have filed with the SEC and other publicly available information.

 

ELECTION OF DIRECTORS

 

The Company’s Restated Certificate of Incorporation and Bylaws provide that directors are to be elected at the Annual Meeting to hold office until the next annual meeting of stockholders and until their respective successors are elected and qualified. Vacancies on the Board resulting from death, resignation, disqualification, removal or other causes may be filled by either the affirmative vote of the holders of a majority of the then-outstanding shares of common stock or by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the Board. Newly created directorships resulting from any increase in the number of directors may, unless the Board determines otherwise, be filled only by the affirmative vote of the directors then in office, even if less than a quorum of the Board. Any director elected in accordance with a vacancy shall hold office for a term expiring at the next Annual Meeting of Stockholders and until such director’s successor shall have been elected and qualified.

 

The Company’s Restated Certificate of Incorporation provides that the number of directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board. The Board has set the current number of directors at twelve. Therefore, twelve directors will stand for election at the Annual Meeting.

 

If a quorum is present, the directors will be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Abstentions and broker non-votes have no effect on the vote. The twelve candidates receiving the highest number of affirmative votes of the shares of common stock entitled to be voted for such directors will be elected directors of the Company. Shares of common stock represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the twelve nominees named below. In the event that any nominee should be unavailable for election as a result of an unexpected occurrence, such shares of common stock will be voted for the election of such substitute nominee as the Board may propose. Each person nominated for election has agreed to serve, if elected, and the Board has no reason to believe that any nominee will be unable to serve.

 

The following table sets forth the nominees for election at this meeting and information with respect to their ages and background.

 

 

Set forth below is biographical information for each person nominated and each person whose term of office as a director will continue after the Annual Meeting.

 

BARBARA T. ALEXANDER

 

Barbara T. Alexander has served as a director of the Company since July 2006. Ms. Alexander has been an independent consultant since February 2004. From October 1999 to January 2004, she was a senior advisor for UBS, and from January 1992 to September 1999, she was a managing director of Dillon Read & Co., Inc. Prior to joining UBS, Ms. Alexander was a managing director in the corporate finance department of Salomon Brothers. Ms. Alexander is past Chairman of the Board of the Joint Center for Housing Studies at Harvard University and is currently a member of that board’s executive committee and an executive fellow of the Joint Center for Housing Studies at Harvard University. Ms. Alexander also serves as a director of Centex Corporation and Federal Home Loan Mortgage Corporation (Freddie Mac). She holds B.S. and M.S. degrees in theoretical mathematics from the University of Arkansas, Fayetteville.

 

STEPHEN M. BENNETT

 

Stephen M. Bennett has served as a director of the Company since August 2008. He was Chief Executive Officer of Intuit, Inc. from January 2000 to January 2008. Prior to Intuit, he was at General Electric Corporation (GE) for 23 years. From December 1999 to January 2000, he was an executive vice president and a member of the board of directors of GE Capital, the financial services subsidiary of GE. From July 1999 to November 1999, he was President and Chief Executive Officer of GE Capital e-Business, and he was President and Chief Executive Officer of GE Capital Vendor Financial Services from April 1996 through June 1999. Mr. Bennett also serves as a director of Intuit and Sun Microsystems, Inc. He holds a B.A. degree in finance and real estate from the University of Wisconsin.

 

DONALD G. CRUICKSHANK

 

Sir Donald G. Cruickshank has served as a director of the Company since June 2005. He was Chairman of Clinovia Group Ltd. from 2004 to 2006 and Formscape Group Ltd. from 2003 to 2006 and has been a member of the Financial Reporting Council, the body responsible in the U.K. for oversight of the Accountancy and Actuarial professions and for corporate governance standards, since 2002. Sir Donald has extensive experience in a number of areas, including European regulation and telecommunications. His career has included assignments at McKinsey &

Co. Inc., Times Newspapers, Virgin Group plc., Wandsworth Health Authority and the National Health Service in Scotland. Sir Donald served as Chairman of the London Stock Exchange plc. from 2000 to 2003 and as Director General of the U.K.’s Office of Telecommunications (Oftel) from 1993 to 1998. From 1997 to 2000, he served as Chairman of Action 2000, the U.K.’s Millennium Bug campaign. In 1998, Chancellor Gordon Brown appointed him as Chairman of the Government’s Review of the U.K. banking sector, and from 1999 to 2004, he served as Chairman of SMG plc., one of Scotland’s leading broadcasters. Sir Donald is a member of the Institute of Chartered Accountants of Scotland and holds M.A. and L.L.D. degrees from the University of Aberdeen and an M.B.A. degree from Manchester Business School.

 

RAYMOND V. DITTAMORE

 

Raymond V. Dittamore has served as a director of the Company since December 2002. Mr. Dittamore is a retired audit partner of Ernst & Young LLP, an international accounting firm. Mr. Dittamore retired in 2001 after 35 years of service with that firm, including 14 years as the Managing Partner of the firm’s San Diego office. Mr. Dittamore is also a director of Invitrogen Corporation and Gen-Probe Incorporated. Mr. Dittamore holds a B.S. degree from San Diego State University.

 

THOMAS W. HORTON

 

Thomas W. Horton has served as a director of the Company since December 2008. Mr. Horton has been Executive Vice President and Chief Financial Officer of AMR Corporation, the parent company of American Airlines since March 2006. He served as Vice Chairman and Chief Financial Officer of AT&T Corporation from January 2002 to February 2006. Prior to AT&T, Mr. Horton was Senior Vice President and Chief Financial Officer of AMR from January 2000 to 2002 and served in numerous management positions with AMR since 1985. He holds a B.A. degree in business administration from Baylor University and a M.B.A. degree from Southern Methodist University.

 

IRWIN MARK JACOBS

 

Irwin Mark Jacobs, one of the founders of the Company, has served as Chairman of the Board of Directors since it began operations in July 1985. He also served as Chief Executive Officer of the Company from July 1985 to June 2005. Dr. Jacobs received a B.S. degree in electrical engineering from Cornell University and M.S. and Sc.D. degrees from the Massachusetts Institute of Technology. Dr. Jacobs is Chairman of the National Academy of Engineering, a fellow of the American Academy of Arts and Sciences, and was awarded the National Medal of Technology in 1994. Dr. Irwin Jacobs is the father of Dr. Paul Jacobs, our Chief Executive Officer, and Jeffrey A. Jacobs, Executive Vice President and Chief Marketing Officer of Qualcomm.

 

PAUL E. JACOBS

 

Paul E. Jacobs has served as a director of the Company since June 2005 and as the Company’s Chief Executive Officer since July 2005. He served as Group President of the Qualcomm Wireless & Internet Group from July 2001 to June 2005. In addition, he served as an executive vice president from February 2000 to June 2005. Dr. Jacobs holds a B.S. degree in electrical engineering and computer science, an M.S. degree in electrical engineering and a Ph.D. degree in electrical engineering and computer science from the University of California, Berkeley. Dr. Paul Jacobs is the son of Dr. Irwin Jacobs, Chairman of Qualcomm’s Board, and the brother of Jeffrey A. Jacobs, Executive Vice President and Chief Marketing Officer of Qualcomm.

 

ROBERT E. KAHN

 

Robert E. Kahn has served as a director of the Company since February 1997. Dr. Kahn is Chairman, Chief Executive Officer and President of the Corporation for National Research Initiatives (CNRI), which he founded in 1986. From 1972 to 1985, Dr. Kahn was employed at the U.S. Defense Advanced Research Projects Agency, where his last position was Director of the Information Processing Techniques Office. From 1966 to 1972, Dr. Kahn was a senior scientist with Bolt Beranek and Newman, where he was responsible for the system design of the Arpanet, the first packet switched network. Dr. Kahn received numerous awards for his pioneering work on the Internet,

including the 1997 National Medal of Technology and the 2005 Presidential Medal of Freedom. Dr. Kahn holds a B.E.E. degree from the City College of New York and M.A. and Ph.D. degrees from Princeton University. Dr. Kahn holds numerous honorary degrees and is a member of the National Academy of Engineering and is an Inductee of the National Inventors Hall of Fame.

 

SHERRY LANSING

 

Sherry Lansing has served as a director of the Company since September 2006. Ms. Lansing is the Founder and Chair of the Sherry Lansing Foundation, a philanthropic organization focusing on cancer research, health and education. From 1992 to 2005, she was the Chair of the Motion Picture Group of Paramount Pictures where she oversaw the release of more than 200 films, including Academy Award^® winners Forrest Gump, Braveheart and Titanic. From 1984 to 1990, she operated her own production company, Lansing Productions, and co-founded Jaffe/Lansing Productions. In 1980, she became the film industry’s first female to oversee all aspects of a studio’s motion picture production when she was appointed President of Production at 20th Century Fox. She holds additional trustee, chair and advisory positions with the Friends of Cancer Research, the American Association of Cancer Research, the Carter Center and Stop Cancer, a non-profit philanthropic group she founded in partnership with Dr. Armand Hammer. Ms. Lansing also is a regent of the University of California and serves as Chair of the University Health Services Committee. She has earned the Woodrow Wilson Award for Corporate Citizenship, the Distinguished Community Service Award from Brandeis University, the Alfred P. Sloan, Jr. Memorial Award, the Horatio Alger Humanitarian Award and an honorary doctorate in fine arts from the American Film Institute. She holds a B.S. degree from Northwestern University.

 

DUANE A. NELLES

 

Duane A. Nelles, a certified public accountant, has served as a director of the Company since August 1988. Mr. Nelles has been in the personal investment business since 1987. Prior to that time, Mr. Nelles was a partner in the international public accounting firm of Coopers & Lybrand LLP, which he joined in 1968. He holds a B.A. degree from Albion College and a M.B.A. degree from the University of Michigan.

 

BRENT SCOWCROFT

 

Brent Scowcroft has served as a director of the Company since December 1994. General Scowcroft is the President of The Scowcroft Group, Inc., an international business consulting firm he founded in June 1994. General Scowcroft is also the President of The Forum for International Policy, a non-profit organization he founded in 1993 that promotes American leadership and foreign policy. General Scowcroft served as Assistant to the President for National Security Affairs for President George H.W. Bush from January 1989 until January 1993; he also held that position for President Ford during his term. A retired U.S. Air Force Lieutenant General, General Scowcroft served in numerous national security posts in the Pentagon and the White House prior to his appointments as Assistant to the President for National Security Affairs. General Scowcroft received a B.S. degree from West Point and M.A. and Ph.D. degrees from Columbia University and holds numerous honorary degrees.

 

MARC I. STERN

 

Marc I. Stern has served as a director of the Company since February 1994. Mr. Stern is a member of the Management Committee of Société Générale Group and the Chairman of Société Générale’s Global Investment Management and Services (GIMS) North America unit. Prior to his appointment as Chairman of GIMS North America in September 2005, Mr. Stern served as President and a director of The TCW Group Inc., an asset management firm based in Los Angeles, California. Société Générale acquired majority control of TCW in 2001. In addition to his role at GIMS, Mr. Stern is Vice Chairman of TCW. From 1988 to 1990, Mr. Stern served as President and a director of SunAmerica, Inc., a financial services company. Prior to joining SunAmerica, Mr. Stern was Managing Director and Chief Administrative Officer of The Henley Group, Inc., a diversified manufacturing company, and prior thereto was Senior Vice President of Allied-Signal Inc., a diversified manufacturing company. Mr. Stern is also a director of TCW Funds, Inc., a registered investment company. Mr. Stern holds a B.A. degree from Dickinson College, a M.A. degree from the Columbia University Graduate School of Public Law and Government and a J.D. degree from the Columbia University School of Law.

 

If a quorum is present and voting, the twelve nominees for director receiving the highest number of votes will be elected as directors. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum, but will not have any effect on the outcome of the vote.

 

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH NAMED NOMINEE.

 

The Company has adopted a code of ethics that applies to all Qualcomm employees, including employees of Qualcomm’s subsidiaries, as well as each member of the Board. The code of ethics is available on our website at www.qualcomm.com under the “Corporate Governance” section under “Investor Relations.” To date, there have not been any waivers by the Company of the code of ethics. Any amendments to, or waivers under, the code of ethics which are required to be disclosed by the rules of the SEC will be disclosed on our website at www.qualcomm.com under the “Corporate Governance” section under “Investor Relations.”

 

During fiscal 2008, the Board held eleven meetings. Board agendas include regularly scheduled sessions for the independent directors to meet without management present, and the Board’s presiding independent director leads those sessions. Mr. Stern has acted as the Board’s presiding independent director since the Board meeting immediately following the 2008 Annual Meeting of Stockholders. The Board delegates various responsibilities and authority to different Board committees. Committees regularly report on their activities and actions to the full Board. The Board’s current standing committees are: Audit, Compensation, Governance, Finance and Strategic. Committee assignments are re-evaluated annually and approved by the Board at its annual meeting that follows the annual meeting of stockholders in February or March of each year. Each committee acts according to a written charter approved by the Board. Copies of each charter can be found on our website at www.qualcomm.com as follows:

 

 

The Audit Committee.  The Audit Committee meets at least quarterly with our management and independent public accountants to, among other things, review the results of the annual audit and quarterly reviews, discuss the financial statements, select and engage the independent public accountants, assess the adequacy of the Company’s staff, management performance and procedures in connection with financial controls and receive and consider comments as to internal controls. At the beginning of fiscal 2008, the Audit Committee was composed of Messrs. Nelles (Committee Chair) and Dittamore and Ms. Alexander. Since March 2008, the Audit Committee has been composed of Mr. Dittamore (Committee Chair), Ms. Alexander and Dr. Kahn. The Audit Committee met thirteen times during fiscal 2008. The Board has determined that Mr. Dittamore and Ms. Alexander are audit committee financial experts as defined by SEC rules. All of the members of the Audit Committee are independent directors within the meaning of Rule 4200 of the National Association of Securities Dealers, Inc. (NASD) and SEC Rule 10A-3(b)(1)(ii). With respect to the determination of independence of Mr. Nelles under NASD Rule 4200, the Board considered the employment by the Company of Mr. Nelles’ two sons in non-executive officer positions that did not involve key strategic roles. The Board also considered Mr. Nelles’ track record of decision-making and determined that the employment of Mr. Nelles’ sons had not interfered and would not interfere with the exercise of Mr. Nelles’ independent judgment in carrying out his duties as a director.

 

The Compensation Committee.  The Compensation Committee makes recommendations concerning salaries and incentive compensation, administers and approves stock offerings under our Amended and Restated 2001 Employee Stock Purchase Plan, administers our 1991 Stock Option Plan, 2001 Stock Option Plan and 2006 Long-Term Incentive Plan (collectively, the Stock Option Plans) and otherwise determines compensation levels for the Chief Executive Officer, the Named Executive Officers (as listed in the “Summary Compensation Table”), the directors and other key employees and performs such other functions regarding compensation as the Board may delegate. At the beginning of fiscal 2008, the Compensation Committee was composed of Messrs. Dittamore (Committee Chair) and Stern and General Scowcroft. In March 2008, Mr. Stern became Committee Chair, and in August 2008, Mr. Bennett joined the Compensation Committee. The Compensation Committee met seven times during fiscal 2008. All of the members of the Compensation Committee are independent directors within the meaning of Rule 4200 of the NASD and outside directors within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.

 

The Governance Committee.  The Governance Committee reviews, approves and oversees various corporate governance related policies and procedures applicable to the Company. The Committee also reviews and evaluates the effectiveness of our executive development and succession planning processes and provides active leadership and oversight with respect to these processes. In addition, the Governance Committee evaluates and recommends nominees for membership on our Board and its committees. At the beginning of fiscal 2008, the Governance Committee was composed of Messrs. Stern (Committee Chair) and Sacerdote, Ms. Alexander, Sir Donald Cruickshank and Ms. Lansing. In March 2008, Mr. Sacerdote retired from the Board and Ms. Lansing became Committee Chair. The Governance Committee met six times during fiscal 2008. All of the members of the Governance Committee are independent directors within the meaning of Rule 4200 of the NASD.

 

The Finance Committee.  The Finance Committee reviews our financial position, cash management, dividend and stock repurchase programs, securities issuances, acquisitions and other major strategic investment decisions. At the beginning of fiscal 2008, the Finance Committee was composed of Messrs. Sacerdote (Committee Chair) and Nelles, and Drs. Paul Jacobs and Kahn. In March 2008, Mr. Sacerdote retired from the Board and the Finance Committee has since been composed of Mr. Nelles (Committee Chair), Sir Donald Cruickshank and Dr. Paul Jacobs. The Finance Committee met ten times during fiscal 2008.

 

The Strategic Committee.  The Strategic Committee monitors the development and implementation of our business and research and development strategies. It works with management in identifying and developing Board focus on issues and recommendations which will further our long- and short-term strategic planning. At the beginning of fiscal 2008, the Strategic Committee was composed of Drs. Irwin Jacobs (Committee Chair), Paul Jacobs and Kahn, Sir Donald Cruickshank and General Scowcroft. In March 2008, Sir Donald Cruickshank was reassigned to the Finance Committee. The Strategic Committee met two times during fiscal 2008.

 

During fiscal 2008, each Board member attended at least 75% of the aggregate of the meetings of the Board and of the committees on which he or she served or that were held during the period for which he or she was a Board or committee member, respectively.

 

Our Bylaws contain provisions which address the process by which a stockholder may nominate an individual to stand for election to the Board at our Annual Meeting of Stockholders. The Board has also adopted a formal policy concerning stockholder recommendations of Board candidates to the Governance Committee. This policy is set forth in our Corporate Governance Principles and Practices, which is available on our website at www.qualcomm.com under the “Corporate Governance” section of “Investor Relations.” Under this policy, the Governance Committee will review a reasonable number of candidates recommended by a single stockholder who has held over 1% of our stock for over one year and who satisfies the notice, information and consent requirements set forth in our Bylaws. To recommend a nominee for election to the Board, a stockholder must submit his or her recommendation to the Corporate Secretary at our corporate offices at 5775 Morehouse Drive, N-510F, San Diego, California 92121-1714. A stockholder’s recommendation must be received by us prior to the date set forth above under “Stockholder Proposals.” A stockholder’s recommendation must be accompanied by the information with respect to stockholder nominees as specified in the Bylaws, including among other things, the name, age, address and occupation of the recommended

person, the proposing stockholder’s name and address, the ownership interests of the proposing stockholder and any beneficial owner on whose behalf the nomination is being made (including the number of shares beneficially owned, any hedging, derivative, short or other economic interests and any rights to vote any shares), and any material monetary or other relationships between the recommended person and the proposing stockholder and/or the beneficial owners, if any, on whose behalf the nomination is being made. The proposing stockholder must also provide evidence of owning the requisite number of shares of Company stock for over one year. Candidates so recommended will be reviewed using the same process and standards for reviewing Governance Committee recommended candidates.

 

In evaluating director nominees, the Governance Committee considers the following factors:

 

 

The Governance Committee’s goal is to assemble a Board that brings to us a variety of perspectives and skills derived from high quality business and professional experience. In doing so, the Governance Committee also considers candidates with appropriate non-business backgrounds.

 

Other than the foregoing, there are no stated minimum criteria for director nominees, although the Governance Committee may also consider such other factors as it may deem are in the best interests of the Company and its stockholders. The Governance Committee does, however, believe it appropriate for at least one, and preferably several, members of the Board to meet the criteria for an “audit committee financial expert” as defined by SEC rules, and that a majority of the members of the Board meet the definition of “independent director” under NASD rules. The Governance Committee also believes it is in the stockholders’ best interest for certain key members of our current and former management to participate as members of the Board. The Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of the Board does not wish to continue in service or if the Governance Committee or the Board decides not to re-nominate a member for re-election, the Governance Committee identifies the desired skills and experience of a new nominee based on the criteria above. Current members of the Governance Committee and Board are polled for suggestions as to individuals meeting the criteria of the Governance Committee. Research may also be performed to identify qualified individuals. We have, in the past, engaged third parties to identify and evaluate potential nominees.

 

We adopted a “Majority Voting” policy as a part of our Corporate Governance Principles and Practices. Under this policy, if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Governance Committee will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board. In performing this evaluation, the Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service,

his or her past contributions to the Company and the availability of other qualified candidates. The Governance Committee will then make its recommendation to the Board. The Board will review the Governance Committee’s recommendation and consider such further factors and information as it deems relevant. Under this policy, the Governance Committee will make its recommendation, and the Board will act on the Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board determines that immediate resignation is in the best interests of the Company and its stockholders, the director shall promptly tender his or her resignation upon request from the Board. We will publicly disclose the Board’s decision within four business days in a Current Report on Form 8-K with the SEC, providing an explanation of the process by which the decision was reached and, if applicable, the reason for not requesting the director’s resignation. The director in question will not participate in the Governance Committee’s or the Board’s analysis.

 

We adopted stock ownership guidelines for our directors and executive officers to help ensure that they each maintain an equity stake in the Company and, by doing so, appropriately link their interests with those of the other stockholders. The guideline for executive officers is based on a multiple of the executive’s base salary, ranging from two to five times, with the size of the multiple based on the individual’s position. Only shares actually owned (as shares or as deferred units) count towards the requirement. Executives are required to achieve these stock ownership levels within five years of becoming an executive, or (in the case of persons who were executive officers at the time these guidelines were adopted) by September 2011. For directors, the guideline is three times the annual cash retainer for Board service. Directors are required to achieve this ownership level within five years of joining the Board, or (in the case of directors serving on the Board at the time the guidelines were adopted) by September 2011. In addition to the preceding ownership guidelines, all directors are expected to own shares of the Company’s common stock within one year of joining the Board. See the “Other Key Policies and Practices” section under “Compensation Discussion and Analysis” for additional information.

 

We have adopted a formal process for stockholder communications with the Board. This process is also set forth in our Corporate Governance Principles and Practices. Stockholders who wish to communicate to the Board should do so in writing to the following address:

 

[Name of Director(s) or Board of Directors]
Qualcomm Incorporated
Attn: General Counsel
5775 Morehouse Drive, N-510F
San Diego, California 92121-1714

 

Our General Counsel logs all such communications and forwards those not deemed frivolous, threatening or otherwise inappropriate to the Chair of the Governance Committee for distribution.

 

The Company’s Corporate Governance Principles and Practices set forth a policy on director attendance at annual meetings. Directors are encouraged to attend absent unavoidable conflicts. All of the then-sitting directors attended the Company’s last annual meeting.

 

The Board has determined that, except as noted below, all of the members of the Board are “independent directors” within the meaning of Rule 4200 of the NASD. Dr. Irwin Jacobs and Dr. Paul Jacobs are not considered independent because both are employed by the Company as executive officers, and Dr. Irwin Jacobs’ son and Dr. Paul Jacobs’ brother, Jeffrey Jacobs, is Executive Vice President and Chief Marketing Officer of Qualcomm.

 

RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS

 

The Audit Committee of the Board has selected PricewaterhouseCoopers LLP as our independent public accountants for the fiscal year ending September 27, 2009, and the Board has directed that management submit the selection of independent public accountants for ratification by the stockholders at the Annual Meeting. PricewaterhouseCoopers LLP has audited our consolidated financial statements since we commenced operations in 1985. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

 

Stockholder ratification of the selection of PricewaterhouseCoopers LLP as our independent public accountants is not required by our Bylaws or otherwise. However, the Board is submitting the selection of PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

 

The following table presents fees for professional services rendered by PricewaterhouseCoopers LLP for the audit of the Company’s annual financial statements for the years ended September 28, 2008 and September 30, 2007 and fees for other services rendered by PricewaterhouseCoopers LLP during those periods.

 

 

 

 

The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the independent public accountants. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is subject to a budget. The Audit Committee has delegated pre-approval authority to certain committee members when expedition of approval is necessary. The independent public accountants and management are required to periodically report to the full Audit Committee regarding the extent of

services provided by the independent public accountants in accordance with this pre-approval delegation, and the fees for the services performed to date. All services rendered by PricewaterhouseCoopers LLP during fiscal 2008 were pre-approved by the Audit Committee. Less than 1% of total fees for services rendered by PricewaterhouseCoopers LLP during fiscal 2007 were related to non-audit services that were approved by the Audit Committee after the services were rendered, pursuant to the de minimis exception established by the SEC.

 

The affirmative vote of a majority of the votes cast at the meeting, at which a quorum is present, either in person or by proxy, is required to approve this proposal. Abstentions will be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.

 

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 27, 2009.

 

Information about our equity compensation plans at September 28, 2008 that were either approved or not approved by our stockholders was as follows (number of shares in millions):

 

 

 

 

The following table sets forth certain information regarding the ownership of our common stock as of December 12, 2008 by: (i) each director and nominee for director; (ii) each of our executive officers named in the “Summary Compensation Table” under “Executive Compensation and Related Information” (the Named Executive Officers or NEOs); and (iii) all of our executive officers and directors as a group. Based on currently available Schedules 13D and 13G filed with the SEC, we do not know of any beneficial owners of more than 5% of our common stock.

 

 

 

 

 

 

Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater-than-10-percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

 

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during fiscal 2008, all Section 16(a) filing requirements were complied with except for the following: a total of eight gifts by Dr. Irwin Jacobs in fiscal 2006 and 2007 reported on two Forms 5; two gifts by Dr. Jha in fiscal 2007 reported on a Form 5; one gift by Mr. Altman in fiscal 2006 reported on a Form 5; a sale of shares by Mr. Jeffrey Jacobs that was reported by his broker in error resulting in a late report on a Form 4 and two gifts by Mr. Jeffrey Jacobs in fiscal 2007 reported on an amended Form 5; one cash exercise and a distribution from a Grantor Retained Annuity Trust by Dr. Paul Jacobs in fiscal 2008 reported on a late Form 4; and an amended Form 5 filed on behalf of Mr. Stern in fiscal 2008 to report one gift transaction made in each of fiscal 2003, 2004, 2005 and 2006 that had not been previously reported due to an administrative oversight by the Company.

 

None of the members of our Compensation Committee are, or have been, an employee or officer of the Company. During fiscal 2008, no member of the Compensation Committee had any relationship with us requiring disclosure under Item 404 of Regulation S-K. During fiscal 2008, none of our executive officers served on the compensation committee (or equivalent) or board of another entity whose executive officer(s) served on our Compensation Committee or Board.

 

Our code of ethics states that our executive officers and directors, including their immediate family members, are charged with avoiding situations in which their personal, family or financial interests conflict with those of Qualcomm. In accordance with its charter, the Audit Committee is responsible for reviewing and approving all related-person transactions between Qualcomm and any directors or executive officers. The Compensation Committee reviews compensation-related transactions with directors or executive officers (such as base salary and annual cash incentives). Any request for us to enter into a transaction with an executive officer or director, or any of such persons’ immediate family members or affiliates, must be presented to our Audit Committee for review and approval. In considering the proposed agreement, our Audit Committee will consider the relevant facts and circumstances and the potential for conflicts of interest or improprieties.

 

During fiscal 2008, we employed the family members of certain directors and executive officers. Those employees whose compensation exceeded $120,000 are discussed below. All of the following family members under our employment were adults who did not live with the related director or executive officer. Each family member is compensated according to standard Company practices, including participation in the Company’s employee benefit plans generally made available to employees of a similar responsibility level. We do not view any of the directors or executive officers as having a beneficial interest in the described transactions that is material to them or the Company. Moreover, none of the following directors or executive officers believe that they have a direct or indirect material interest in the employment relationships of the listed family members. Options were granted under our 2006 Long-Term Incentive Plan and have a grant price that is equal to the fair market value on the date of grant. Such options vest according to the following schedule: 10% of the shares subject to the option vest on the six-month anniversary of the date of grant, with ratable monthly vesting over the remaining five-year vesting period. Generally, vesting is contingent upon continued service with the Company. Options granted under any of our stock option plans have a term of 10 years.

 

Dr. Paul E. Jacobs and Jeffrey A. Jacobs are the sons of Dr. Irwin Mark Jacobs, Chairman of the Board. Dr. Paul Jacobs serves as CEO. Drs. Paul Jacobs and Irwin Jacobs were compensated as described below under the heading “Executive Compensation and Related Information.”

 

Jeffrey A. Jacobs serves as Executive Vice President and Chief Marketing Officer. Jeffrey Jacobs earned $408,416 in base salary and $400,000 in cash incentives during fiscal 2008 and received a stock option grant for 150,000 shares of the Company’s stock at an exercise price of $37.29 per share.

 

Duane A. Nelles’ son, Duane A. Nelles III, serves as Vice President, Business Development. Duane A. Nelles III earned $198,719 in base salary and $60,000 in cash incentives during fiscal 2008 and received a stock option grant for 4,000 shares of the Company’s stock at an exercise price of $41.33 per share and two additional grants totaling 17,405 shares at an exercise price of $43.24 per share.

 

Steven R. Altman’s brother, Jeffrey S. Altman, serves as Senior Director, Business Development. Jeffrey Altman earned $177,484 in base salary and $37,000 in cash incentives during fiscal 2008 and received a stock option grant for 3,500 shares of the Company’s common stock at an exercise price of $41.33 per share and a second grant for 5,000 shares at an exercise price of $43.24 per share.

 

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis (CD&A) with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in Qualcomm’s 2009 Proxy Statement.

 

COMPENSATION COMMITTEE

 

Marc I. Stern, Chair
Stephen M. Bennett
Raymond V. Dittamore
Brent Scowcroft

 

The CD&A discusses total compensation for the Chief Executive Officer, Chief Financial Officer and the other three most highly compensated executive officers. The SEC requires that we also describe the compensation for up to two additional individuals for whom disclosure would have been required but for the fact that they are no longer serving as an executive officer. Accordingly, we are also including Dr. Sanjay K. Jha, a former executive officer who voluntarily resigned from Qualcomm during fiscal 2008. Collectively, we refer to the following individuals as the “Named Executive Officers” or the “NEOs.”

 

 

The CD&A describes Qualcomm’s overall compensation philosophy, objectives and practices to current and potential investors. Generally, we apply our philosophy and objectives to all of our employees and most of them are eligible to participate in the main components of our compensation programs.

 

The objectives, components and practices of our executive compensation program did not change materially from fiscal 2007 to fiscal 2008. We continue to provide a compensation program for NEOs that consists of four key components: (1) base salary; (2) annual cash incentives; (3) long-term incentives in the form of stock options; and (4) benefits. We also provide our NEOs with compensation programs that are not generally available to all employees, including nonqualified deferred compensation plans, financial planning services and additional life insurance and supplemental health benefits above the levels provided to non-executive employees. Our U.S.-based employees, including our NEOs, do not have guaranteed severance agreements or employment contracts. We do not have a predefined severance plan or policy for the involuntary termination of employees. The only predefined severance benefits are certain provisions for the treatment of options and shares provided under our stock option awards and nonqualified deferred compensation plans.

 

Our compensation program is subject to a thorough process that includes Compensation Committee review and approval of program design and practices, the advice of an independent, third-party compensation consultant

engaged by the Compensation Committee and in-depth discussions between the CEO and the Compensation Committee regarding his performance and the performance of the other NEOs. It also features long-standing, consistently and appropriately applied practices with respect to the timing and pricing of stock option grants.

 

The amount of compensation we provide our NEOs is intended to be competitively reasonable and appropriate, internally fair and equitable, and tax efficient for the Company. We consider external compensation data from the SEC filings of our peer companies and independent, third-party compensation surveys, as well as advice from an independent compensation consultant, in making our decisions.

 

During the first quarter of fiscal 2008, the Compensation Committee determined base salaries, annual financial performance objectives and target annual cash incentives and long-term incentives for NEOs. Based on discussions with Dr. Paul Jacobs, the Compensation Committee did not increase his base salary from the 2007 level. The Compensation Committee increased Dr. Paul Jacobs’ target annual cash incentive to better position his target cash compensation (base salary and target annual cash incentive) near the peer group competitive median and awarded him stock options that, when combined with his target cash compensation, positioned his target direct compensation (base salary, target annual cash incentive and long-term incentive) between the competitive median and the 75^th percentile. The Compensation Committee approved amounts for Messrs. Keitel and Altman that positioned their target direct compensation between the peer group competitive median and the 75^th percentile.

 

Mr. Rosenberg joined Qualcomm as our General Counsel and Corporate Secretary in October 2007. The Compensation Committee approved his employment offer package, including an $8.1 million recruiting bonus, to compensate him for unvested restricted stock units granted to him by his former employer that he forfeited.

 

Dr. Jha voluntarily resigned from Qualcomm in August 2008 to become Co-CEO of Motorola, Inc. As part of a post-termination agreement that included certain continuing obligations and restrictive covenants of Dr. Jha, the Compensation Committee modified his existing stock option awards to extend the period of time he could exercise options that were vested but unexercised at the time of his resignation. The modification resulted in additional share-based compensation expense for accounting purposes of approximately $2.7 million.

 

Excluding Dr. Irwin Jacobs, who does not participate in our annual cash incentive program, more than 90% of each NEOs’ target direct compensation may be realized only when we achieve annual financial performance objectives and when our stock price increases.

 

After the end of fiscal 2008, the Compensation Committee approved annual cash incentives for the NEOs. The Compensation Committee based its decisions on the fact that we exceeded our pro forma revenues objective by 13% and our pro forma earnings before tax (EBT) objective by 6%. Compared to fiscal 2007, pro forma revenues were up 25% and pro forma EBT was up 7%. Dr. Paul Jacobs’ fiscal 2008 cash incentive was $2.9 million, which was approximately 50% more than he would have earned if we had met, but not exceeded, our financial performance objectives. His actual cash compensation (base salary and annual cash incentive) was slightly below the median of actual cash compensation awarded to the CEOs of our peer companies. The fiscal 2008 cash incentives for the other NEOs were also approximately 50% more than their respective target annual cash incentives as a result of our having exceeded our financial performance objectives. The fiscal 2008 cash incentives for all NEOs were consistent with the formula-based methodology established by the Compensation Committee during the first quarter of fiscal 2008.

 

1. We want to align the interests of our NEOs and long-term stockholders.

 

 

Our compensation program rewards our NEOs when they achieve our annual financial performance objectives, build stockholder value and maintain long-term careers with Qualcomm. We reward these three aspects so that the

executive team will make balanced annual and long-term decisions that result in consistent financial performance, product innovation and collaboration within Qualcomm and with our customers and suppliers.

 

We provide a base salary, annual cash incentives, long-term incentives in the form of stock options and benefits to help us attract, engage, reward and retain our NEOs and to align the interests of our NEOs and stockholders.

 

1. Base salary.  We provide a base salary to each NEO as financial consideration for each person’s level of responsibility, expertise, skills, knowledge and experience.

 

2. Annual cash incentives.  The annual cash incentive is one component of performance-based variable compensation. The Compensation Committee, at its sole discretion, determines the amount of any cash incentive. We provide this component to incentivize and reward valuable contributions to our annual financial performance objectives.

 

3. Long-term incentives.  Long-term incentives are the other component of performance-based variable compensation directly tied to stockholder return. During fiscal 2008, our NEOs received only stock option awards. The number of stock options granted is discretionary, and the potential amount of any income earned is completely dependent upon, and varies with, the Company’s stock price over the option term. We provide stock options to incentivize our NEOs to build long-term stockholder value, aligning the interests of NEOs and stockholders, and to retain NEOs through the expectation of long-term wealth creation in the value of their stock options (which have five-year vesting provisions that encourage continued employment with Qualcomm). We encourage stock ownership (see “Stock Ownership Guidelines” in the “Other Key Policies and Practices” section and “Employee Stock Purchase Plan” in the “Other Components of Our Compensation Program” section) which we regard as important for commitment, engagement and motivation.

 

4. Benefits.  We also provide retirement savings plans, health and welfare programs and other forms of compensation, perquisites and personal benefits. Each of these components helps us attract and retain NEOs.

 

Retirement Savings Plans.  Our NEOs are eligible to participate in our tax qualified 401(k) plan and in a voluntary nonqualified deferred compensation plan that we make available to U.S.-based employees who are in vice president or above roles. These voluntary plans encourage long-term careers with Qualcomm, and the nonqualified plan enables and encourages stock ownership which, we believe, aligns the interests of NEOs and stockholders. We do not have a pension plan or other defined benefit retirement plan; such plans are not typical among our peer companies in the high technology industry or, we believe, necessary for competitive purposes.

 

401(k) Plan.  Qualcomm offers the same tax-qualified 401(k) plan to all U.S.-based employees. We match employee contributions in cash using a tiered structure in order to encourage employee participation.

 

Voluntary Executive Retirement Contribution Plan (the ERC Plan) and Executive Retirement Matching Contribution Plan (the Match Plan).  Under the ERC Plan, a voluntary nonqualified deferred compensation plan, eligible employees may defer up to 100% of their base salary and annual cash incentive on a pre-tax basis. The investment choices under the ERC Plan are the same as those made available to all employees participating in our 401(k) plan. In addition, ERC Plan participants receive a Company contribution under the Match Plan in the form of Qualcomm stock. We match up to 10% of the aggregate of a participant’s base salary and annual cash incentive, less any 401(k) contributions. Stock contributions under the Match Plan are subject to a four-year vesting schedule. After the end of fiscal 2008, we consolidated the ERC Plan and the Match Plan into the Amended and Restated Executive Retirement Matching Contribution Plan but did not change the benefit levels.

 

Health and Welfare Programs.  We provide a supplemental health care plan to our NEOs because it helps to retain them and encourages senior-level employees to stay and advance to the eligibility level. The program provides coverage for most medical expenses not paid by our broad-based health plan, with a maximum annual coverage limit of $10,000 per NEO and each eligible dependent of the NEO. On January 1, 2009, we made certain modifications to the supplemental health plan, including a lower maximum annual coverage limit of $7,500 per NEO and each eligible dependent.

Employee Stock Purchase Plan (ESPP).  We have a tax-qualified, voluntary ESPP available to all U.S.-based employees, including the NEOs. The purchase price is 85% of the lower of: (1) the fair market value (FMV) on the first day of the six-month offering period; or (2) the FMV on the last day of the six-month offering period. The ESPP encourages long-term stock ownership and helps to align employee and stockholder interests on a cost- and tax-effective basis. Annual purchases are limited to $25,000 per individual, including the price discount.

 

Financial and retirement planning services.  We may reimburse our CEO, President and Chairman of the Board up to $12,500 annually (net of estimated income taxes) for expenses incurred for financial, estate and/or tax planning. We may reimburse other NEOs up to $8,000 annually. We provide this benefit to help our NEOs efficiently manage their time and financial affairs and to allow them to stay focused on business issues by minimizing distractions of this type. During fiscal 2008 and prior years, it was our policy to also pay the tax liability associated with these reimbursements. On January 1, 2009, we discontinued making these additional payments for the tax liability.

 

Charitable match.  Subject to limits based on the employee’s job level, we match employee contributions to qualified, eligible Internal Revenue Service (IRS) recognized non-profit organizations, excluding organizations that further a religious doctrine, exclusionary organizations and/or political non-profit organizations. We match up to $125,000 annually for the CEO, the President and the Chairman of the Board and up to $100,000 annually for other NEOs. We offer this program to encourage, extend and expand their support of cultural, educational and community non-profit organizations.

 

Insurance.  We provide company-paid life insurance to all employees equal to three times their base salary. We provide additional life insurance to vice presidents and above, including NEOs. The CEO, the President and the Chairman of the Board receive an additional $1,000,000 in coverage, and other NEOs receive an additional $750,000 in coverage. We offer the additional insurance for competitive positioning in the labor market.

 

Corporate aircraft.  When NEOs use our corporate aircraft for company business and there are vacant seats on a flight, they may at times invite guests to accompany them. We also permit use of our corporate aircraft for NEOs traveling to attend meetings of educational or other non-profit organizations. (See Note 1 to the “All Other Compensation” table under the “Executive Compensation and Related Information” section for more information.) NEOs are not able to reimburse Qualcomm for the cost of personal flights or the incremental cost for non-business guests because Qualcomm does not operate its aircraft on a “for hire” basis under applicable Federal Aviation Administration regulations.

 

Entertainment and charitable events.  We purchase tickets to various sporting, civic, cultural, charity and entertainment events for business purposes. If not used for business purposes, we may make these tickets available to our employees, including our NEOs, as a form of recognition and reward for their efforts.

 

Post employment compensation.

 

No employment agreements.  We employ all U.S.-based employees, including our NEOs, “at will,” without severance agreements or employment contracts. This is consistent with our objective of providing compensation related to individual contributions that improve our market leadership, competitive advantage and stockholder value. It enables our Board to terminate employment with discretion as to the terms and conditions of any separation.

 

Stock Option Plans.  The 2001 Stock Option Plan and the stock option award agreements under the 2006 Long-Term Incentive Plan (the 2006 LTIP) provide for accelerating 10% of unvested options under certain involuntary terminations that are not “for cause,” subject to execution of a general release of claims. The 2001 Stock Option Plan and the 2006 LTIP provide that if a change-in-control (as defined in the plans) occurs and an outstanding stock option award is not assumed or substituted with a substantially similar award, the Compensation Committee may accelerate the vesting of any or all outstanding stock options. Our stock option agreements include a “double trigger” in which vesting of stock options is accelerated if, within 24 months after a change-in-control, the stock option recipient is involuntarily terminated for any reason other than “for cause” or if the stock option recipient voluntarily resigns for good reason (as defined in the stock option award agreements).

 

Severance provisions.  We do not have a pre-defined severance plan or policy for the involuntary termination of employees, including the NEOs. While unvested options may be accelerated in certain

severance situations, we do not accelerate unvested options in the event of an involuntary “for cause” termination. Such terminations may involve theft, dishonesty, falsification, actions that are detrimental to the Company, conviction of a criminal act that impairs the performance of duties required by the Company or violation of a material company policy.

 

 

The amount of compensation we provide for our NEOs is intended to be (1) competitively reasonable and appropriate for our business needs and circumstances, (2) internally fair and equitable relative to roles, responsibilities and relationships among our NEOs, and (3) tax efficient to the Company. To determine reasonable and appropriate amounts, we consider competitive compensation practices and relevant business and individual factors. This approach gives us flexibility to recruit, motivate and retain our NEOs within a highly competitive labor market.

 

We consider competitive compensation practices.  To assist the Compensation Committee in determining competitively reasonable and appropriate amounts of compensation, we conduct competitive compensation analyses using SEC disclosure data from peer companies and survey data from the Radford U.S. Executive Survey for high technology companies with revenues greater than $1 billion. We use this data to estimate the median and the 75^th percentile levels of competitive practices for base salary, target cash compensation, long-term incentives and target direct compensation. The range from the competitive median to the 75^th percentile reflects what the Compensation Committee believes is competitively reasonable and appropriate. This range is consistent with our compensation objectives and is appropriate given that the NEOs’ long-term incentive compensation consists entirely of stock options (unlike many of our competitors that offer lower-risk restricted stock or performance shares). In this CD&A, references to the competitive median and the 75^th percentile refer to the statistical median and the 75^th percentile calculated from the data disclosed by peer companies in their SEC filings and the data included in the Radford survey, and reference to the competitive range refers to amounts between the competitive median and 75^th percentile.

 

Peer companies for fiscal 2008.  We identified an initial group of potential peer companies for fiscal 2008 that met one or more of the following selection criteria:

 

 

We then adjusted the initial list to include other relevant labor market competitors and exclude companies that did not provide a meaningful labor market comparison for our NEOs. The Compensation Committee’s consultant, Frederic W. Cook & Co., Inc. (FWC) confirmed that the peer group for fiscal 2008 was appropriate.

 

Peer Companies for Fiscal 2008

 

 

Peer Company Data for Fiscal 2008(1)
(Dollars in Billions)

 

 

 

 

Changes to peer companies for fiscal 2009.  The Compensation Committee determined that an expanded peer group was appropriate given Qualcomm’s evolution, expanded executive recruiting into adjacent labor markets (i.e. media and entertainment) and certain data limitations with a small group of peers. FWC identified potential peer companies that had all of the following characteristics with regard to Qualcomm:

 

 

Peer Companies for Fiscal 2009

 

 

 

 

Peer Company Data for Fiscal 2009(1)
(Dollars in Billions)

 

 

 

 

Fourteen of the 29 peer companies in fiscal 2009 were also peer companies in fiscal 2008. FWC suggested removing five companies from the fiscal 2008 list because they had become too small for direct comparison and suggested adding 15 companies for fiscal 2009 that included high technology and media/telecommunications companies deemed relevant because they are recruiting sources and comparable in size to Qualcomm. Qualcomm’s percentile rank among the peer companies did not change significantly from the 2008 peer companies to the 2009 peer companies relative to market capitalization, net income and three-year TSR. Our percentile rank decreased for revenues and increased for one-year TSR from the fiscal 2008 peer companies to the fiscal 2009 peer companies.

 

We did not use Global Industry Classification Standard (GICS) codes to identify potential peer companies. The GICS represents an industry classification system developed by Standard & Poor’s and Morgan Stanley Capital International. Some companies may use GICS codes to identify peer companies for compensation benchmarking. We believe this approach is not appropriate for Qualcomm because it is overly formulaic and does not capture the various complexities of our global operations, unique industry, strategy, compensation philosophy and talent requirements. Among the companies sharing Qualcomm’s six-digit GICS group, only two companies, Cisco and Motorola, had greater revenues in their last fiscal year, and only Cisco had a greater net income and fiscal year end market cap relative to Qualcomm. Excluding Cisco and Motorola, Qualcomm is significantly larger than the other companies assigned the same GICS code. For fiscal 2007 (the most recent year for which data was available), among the ten companies in our GICS group ranked immediately below Qualcomm in terms of revenues, our revenues were nearly six times greater than the median, our net income was more than forty times greater than the median, and our market cap was more than twenty times greater than the median.

 

We consider business and individual factors.  We also consider many other factors to determine reasonable and appropriate compensation levels for each NEO, including:

 

 

We do not have a predefined framework that determines which of these factors may be more or less important and the emphasis placed on specific factors may vary among the NEOs. Ultimately, it is the Compensation Committee’s judgment of these factors along with competitive data that form the basis for determining the CEO’s compensation. The Compensation Committee and the CEO follow a similar practice to determine the basis of the other NEOs’ compensation.

 

We consider tax regulations.  A goal of the Compensation Committee is to comply with the requirements of Internal Revenue Code Sections 162(m) and 409A. Section 162(m) places a $1 million annual limit on the amount that a public company may deduct for compensation paid to the CEO and the other three most highly compensated NEOs, excluding the CFO. We refer to these four executive officers as 162(m) covered officers. The $1 million limit does not apply if the compensation meets Section 162(m) requirements for performance-based compensation (i.e. the compensation is based on pre-established objective performance goals based on criteria approved by stockholders and is determined and administered according to related regulations). Compliance with Section 162(m) did not influence the allocation of compensation among base salary, target annual cash incentives and long-term incentives for fiscal 2008. We designed and administered our fiscal 2008 cash incentive program to be eligible for tax deductions to the extent permitted by the relevant tax regulations, including Section 162(m). Stock options granted under the 2006 LTIP also qualify as performance-based compensation. From time-to-time, we may pay compensation to our 162(m) covered officers that may not be tax deductible if there are compelling reasons to do so.

 

Under Section 409A, amounts deferred by a NEO under a nonqualified deferred compensation plan (such as the ERC Plan and Match Plan) may be included in gross income when earned and subject to a 20% additional federal tax, unless the plan complies with certain requirements related to the timing of deferral election and distribution decisions. Nonqualified stock options are generally exempt from Section 409A if the option satisfies certain requirements (i.e. the exercise price is not less than the fair market value on the grant date, the number of shares subject to the options is fixed on the grant date, and there is no deferral feature beyond exercise). We administer the ERC Plan, the Match Plan and stock option awards consistent with Section 409A requirements.

 

Other factors that influence the amount of compensation for our NEOs.

 

Consultants and advisors.  The Compensation Committee has the authority to retain and terminate any independent, third-party compensation consultant and to obtain independent advice and assistance from internal and external legal, accounting and other advisors. During fiscal 2008, the Compensation Committee engaged an independent executive compensation consulting firm, FWC, to advise them on compensation matters. FWC reported directly to the Compensation Committee. During fiscal 2008, we did not engage FWC for any additional services beyond their support of the Compensation Committee. The Compensation Committee instructed FWC to provide information, insights and advice regarding compensation philosophy, objectives and strategy, selection of peer companies for competitive analyses, methodology for valuing long-term incentives and target direct compensation, and specific issues the Compensation Committee addressed during the year. The Compensation Committee asked FWC to comment on our recommendations regarding NEO compensation and aggregate equity compensation. Finally, the Committee instructed FWC to provide an analysis of competitive practices for director compensation. Representatives from FWC attended all but two Compensation Committee meetings during fiscal 2008 and interacted with the Committee Chair, members of our human resources staff and outside legal counsel prior to and following Compensation Committee meetings. During fiscal 2008, the Compensation Committee also sought and received advice from our outside legal counsel, DLA Piper. The total rewards management department within our human resources organization supported the Compensation Committee in its work, collaborated with FWC and DLA Piper, conducted analyses and managed our compensation and benefit programs.

 

Compensation or amounts realizable from prior compensation.  FWC prepared and reviewed with the Compensation Committee “carried interest” and “wealth accumulation” analyses that reported the current and potential values of shares owned and vested and unvested stock options, and the gain on option sales from the preceding three years, as part of its annual review of NEO compensation. The Compensation Committee and the CEO reviewed these analyses as part of their broader consideration of retention and incentives for each NEO. The amount of past compensation, including annual cash incentives and amounts realized or realizable from prior stock option awards, has generally not been a significant factor in the Compensation Committee’s considerations because annual

cash incentives are awarded for fiscal year performance, and stock options are forward-looking long-term incentives awarded as part of the target direct compensation that the Compensation Committee establishes each year.

 

CEO involvement in compensation decisions.  After the end of the fiscal year, the Compensation Committee and the CEO discussed our business performance, his performance and his evaluation of and compensation recommendations for the other NEOs. The Compensation Committee, without the CEO present, determined the CEO’s base salary, annual cash incentive and stock option award. The Compensation Committee also approved the base salaries, annual cash incentives and stock option awards for the other NEOs.

 

Timing, grant date and exercise price for stock option awards.  We have a long-standing and consistent practice of awarding annual stock option grants to the NEOs during the first quarter of our fiscal year. The Compensation Committee approves base salaries, annual cash incentives and stock options at the same time to facilitate consideration of target direct compensation to NEOs. We may award stock options and/or restricted stock units upon hiring a new NEO, and we may award stock options and/or restricted stock units upon a promotion or change in roles and responsibilities of a NEO.

 

Stock ownership guidelines.  Our stock ownership guidelines for all of our executive officers, including our NEOs, help ensure that they maintain an equity stake in Qualcomm, and by doing so, appropriately link their interests with those of other stockholders. Only shares actually owned (including deferred units under the Match Plan) count towards the equity ownership requirement. Outstanding unexercised stock options do not count towards the requirement. Executive officers are required to achieve these stock ownership levels by the later of September 2011 or five years after becoming an executive officer. If a NEO has not met the guidelines by the deadline, we will require that the NEO, upon a stock option exercise, hold at least 50% of the net shares remaining after required tax withholdings, until they meet the minimum guideline. The guidelines are as follows:

 

 

Although the guidelines are not effective until 2011, four of the NEOs, Drs. Paul Jacobs and Irwin Jacobs and Messrs. Altman and Keitel, have met their ownership guidelines as of September 28, 2008.

 

In this section, we provide an overview of our fiscal 2008 target direct compensation and annual cash incentive program so readers may better understand the amounts of annual cash incentives disclosed in the “Summary Compensation Table.” (See the narrative accompanying the “Grants of Plan-Based Awards” table for technical information about the annual cash incentive program.)

 

Target direct compensation for fiscal 2008.  In the first quarter of fiscal 2008, the Compensation Committee determined base salaries, target annual cash incentives and financial performance objectives for the annual cash incentive program and long-term incentives for the NEOs. The Compensation Committee considered information from its competitive compensation analysis and the business and individual factors described earlier. The “Fiscal 2008 Target Direct Compensation” table below reports the base salaries, target annual cash incentives and long-term incentives that the Compensation Committee approved during the first quarter of fiscal 2008.

 

The Compensation Committee did not use or attempt to establish specific internal compensation relationships among the NEOs, but it did review the other NEOs’ compensation relative to the CEO and among all the NEOs. Dr. Paul Jacobs’ target direct compensation ranged from 1.7 to 2.2 times the target direct compensation of the other NEOs, excluding Dr. Irwin Jacobs, who did not participate in the annual cash incentive program.

Fiscal 2008 Target Direct Compensation

 

 

 

 

Fiscal 2008 annual cash incentive program.  During the first quarter of fiscal 2008, the Compensation Committee, after consultation with the CEO, established pro forma revenues and pro forma EBT objectives for the fiscal 2008 annual cash incentive program. We have used pro forma revenues and pro forma EBT for several years because the two operational objectives: (1) focus the executive officer team on overall business growth and profitability; (2) provide more direct linkage between decisions and outcomes; and (3) are two key factors that influence stockholder value. Pro forma objectives exclude the Qualcomm Strategic Initiatives (QSI) segment, certain estimated share-based compensation and acquired in-process research and development expense. We believe that pro forma objectives, rather than objectives based on generally accepted accounting principles (GAAP), enable evaluation of operating results on a consistent and comparable basis. The QSI segment and estimated share-based compensation are excluded because we view such items as unrelated to the Company’s operational performance. Certain tax items related to prior years are excluded in order to provide a clearer understanding of the Company’s ongoing tax rate and after tax earnings. Acquired in-process research and development is excluded because we view such expense as unrelated to the operating activities of the Company’s ongoing business. To encourage profitable growth, we placed a 60% relative weighting on pro forma EBT and a 40% relative weighting on pro forma revenues.

 

The “Fiscal 2008 Annual Cash Incentive Calculation” table below reports our pro forma revenues and pro forma EBT objectives and actual results for fiscal 2008. The table also reports the results of the formula-based calculations considered by the Compensation Committee in its determination of the annual cash incentives approved after the end of fiscal 2008. (See the narrative under “Grants of Plan-Based Awards” for a detailed description of the cash incentive program design.)

 

Briefly, the table shows that we achieved 113% and 106% of our pro forma revenues and pro forma EBT objectives for fiscal 2008, respectively. These levels of performance resulted in 59% more than the target level because we exceeded our objectives. We multiplied each NEO’s target annual cash incentive by approximately 159%, the result being the formula-based annual cash incentive level. For our 162(m) covered officers, we multiplied approximately 159% times 1.25 to set a higher amount, from which the Compensation Committee could then exercise “negative discretion.” By setting this higher amount, which could then be reduced, we enabled the Compensation Committee to make adjustments to the formula-based incentive level that would be in compliance with the Section 162(m) requirements that allow negative discretion.

 

Compared to fiscal 2007, our fiscal 2008 pro forma revenues and pro forma EBT were 25% and 7% higher, respectively. In fiscal 2007, we achieved 106% of our pro forma revenues objective and 105% of our pro forma EBT

objective, resulting in an annual cash incentive level that was 17% more than the target level. We used a different formula to calculate the cash incentive multiple in fiscal 2008 than in fiscal 2007. Compared to the fiscal 2007 formula, the fiscal 2008 formula produced a relatively lower annual cash incentive level if we did not achieve the financial performance objectives and a relatively higher cash level if we exceeded the financial performance objectives. We made this change to provide greater reward opportunity for achieving marginal gains above the financial performance objectives.

 

Fiscal 2008 Annual Cash Incentive Calculation

 

 

 

 

The “Fiscal 2008 Actual Direct Compensation” table below reports the results of the annual cash incentive calculations (i.e. the approximate 159% incentive multiple times the target annual cash incentive amount with the 1.25 multiple for Section 162(m) covered officers) and the actual cash incentives approved by the Compensation Committee and reported in the “Summary Compensation Table” under the “Non-equity Incentive Plan Compensation” column. The Compensation Committee’s use of negative discretion generally resulted in annual cash incentives that reflected a “rounding off” from the formula-based annual cash incentive levels prior to applying the Section 162(m) multiple. Reductions from the 162(m) amount and from the formula-based level are nominal adjustments and are not negative reflections on the NEOs’ performance. In the following section, we discuss the fiscal 2008 compensation levels for the NEOs and the Compensation Committee’s and CEO’s considerations in determining the actual cash incentives.

 

Fiscal 2008 Actual Direct Compensation

 

 

 

 

Discussion of compensation for Dr. Paul Jacobs, CEO.

 

Target direct compensation.  Dr. Paul Jacobs asked that the Compensation Committee not increase his base salary from the fiscal 2007 level. The Compensation Committee set his target annual cash incentive at 175% of base salary (up from 125% for fiscal 2007) to better position his target cash compensation near the competitive median. Historically, his target annual cash incentive and resulting target cash compensation had been below the competitive median. The Compensation Committee awarded a stock option grant in November 2007 (see the “Grants of Plan-Based Awards” table) that, when added to his target cash compensation, positioned his fiscal 2008 target direct compensation within the competitive range (i.e. between the competitive median and the 75th percentile).

 

Mix of compensation components compared to competitive practice.  The two pie charts below show that Dr. Paul Jacobs’ mix of target direct compensation was similar to the peer group average mix. A total of 94% of his target direct compensation was linked to financial performance and stock price appreciation, compared to the average of 93%. His long-term incentive consisted entirely of stock options, while our peer companies, on average, used combinations of stock options, restricted stock and performance awards.

 

Comparison of the Components of Target Direct Compensation for the CEO

 

 

Fiscal 2008 cash incentive.  In addition to the calculation of the annual cash incentive for fiscal 2008, the Compensation Committee engaged in its annual review of the CEO’s performance. In its evaluation, the Compensation Committee noted Dr. Paul Jacobs’ leadership in the following accomplishments:

 

 

Accordingly, the Compensation Committee awarded Dr. Paul Jacobs a fiscal 2008 annual cash incentive of $2.9 million. This was slightly more than 2.5 times his fiscal 2007 annual cash incentive and resulted in $4.0 million of actual cash compensation for fiscal 2008, a level that was slightly below the competitive median for total cash compensation.

 

Discussion of compensation for Mr. Keitel, CFO, and Mr. Altman, President.

 

General.  Mr. Keitel’s mix of target direct compensation was more heavily weighted towards long-term incentives compared to the peer group average. Mr. Altman’s mix was similar to the peer group. Messrs. Keitel’s and Altman’s long-term incentives consisted entirely of stock options, while our peer companies, on average, used combinations of stock options, restricted stock and performance-based awards. A total of 91% of Mr. Keitel’s target direct compensation, and 92% of Mr. Altman’s, was linked to financial performance and stock price appreciation.

 

Target direct compensation.  The Compensation Committee increased Mr. Keitel’s base salary by 4% in fiscal 2008 from the fiscal 2007 level, consistent with expected competitive increases for fiscal 2008. Mr. Altman asked that the Compensation Committee not increase his base salary from the 2007 level. The Compensation Committee kept their fiscal 2008 target annual cash incentives the same as those used in fiscal 2007: 110% of base salary for Mr. Keitel and 125% of base salary for Mr. Altman. These levels positioned Mr. Keitel’s target cash compensation within the competitive range, and Mr. Altman’s target cash compensation slightly above the competitive 75^th percentile. The Compensation Committee awarded stock option grants (see the “Grants of Plan-Based Awards” table) to Messrs. Keitel and Altman that, when added to their target cash compensation, positioned their target direct compensation within the competitive range.

 

Comparison of the Components of Fiscal 2008 Target Direct Compensation for the CFO and the President

 

 

Fiscal 2008 cash incentives.  Dr. Paul Jacobs discussed his review and evaluation of our other NEOs with the Compensation Committee. In addition to the calculations of the annual cash incentives, the Compensation Committee considered Dr. Paul Jacobs’ recommendations.

 

Regarding Mr. Keitel, the Compensation Committee and Dr. Paul Jacobs noted his leadership in the following accomplishments:

 

 

 

Accordingly, the Compensation Committee awarded Mr. Keitel a fiscal 2008 annual cash incentive of $1.2 million. This is slightly more than 1.5 times his fiscal 2007 annual cash incentive and resulted in $1.8 million of actual total cash compensation for fiscal 2008, a level that was within the competitive range.

 

Regarding Mr. Altman, the Compensation Committee and Dr. Paul Jacobs noted his leadership in the following accomplishments:

 

 

Accordingly, the Compensation Committee awarded Mr. Altman a fiscal 2008 annual cash incentive of $1.5 million. This is nearly twice the amount of his fiscal 2007 annual cash incentive and resulted in $2.3 million of actual total cash compensation for fiscal 2008, a level that was within the competitive range.

 

Discussion of compensation for Mr. Rosenberg, EVP and General Counsel.

 

General.  Mr. Rosenberg joined Qualcomm in October 2007. The Compensation Committee approved his new hire offer package that included a base salary of $600,000, a target annual cash incentive of 110% of base salary, a new hire stock option award for 500,000 shares that vests over five years and a recruiting bonus of $8.1 million. The recruiting bonus was to compensate him for unvested restricted stock units granted to him by his former employer that he forfeited. We did not provide a comparison of his target direct compensation mix because his fiscal 2008 stock option grant was a new hire grant, not an annual, on-going award.

 

Fiscal 2008 cash incentive.  In addition to the calculation of the annual cash incentive, the Compensation Committee considered Dr. Paul Jacobs’ recommendations.

 

Regarding Mr. Rosenberg, the Compensation Committee and Dr. Paul Jacobs noted his leadership in the following accomplishments:

 

 

Accordingly, the Compensation Committee awarded Mr. Rosenberg a fiscal 2008 annual cash incentive of $1.0 million. This resulted in $1.6 million of actual total cash compensation for fiscal 2008, a level that was within the competitive range.

 

Discussion of compensation for Dr. Irwin Jacobs, Chairman of the Board.  Dr. Irwin Jacobs has asked that the Compensation Committee not increase his base salary from the level established in July 2005, when he relinquished the day-to-day responsibilities as Chief Executive Officer. At that time, he and the Compensation Committee agreed to compensate his role with a base salary and long-term incentives, but no annual cash incentive, because he is not directly responsible for annual operating performance. The Compensation Committee awarded

him a stock option grant in November 2007 (see the “Grants of Plan-Based Awards” table) that was consistent with the grant he received in the prior year.

 

Discussion of compensation for Dr. Jha, former COO and Group President.  Dr. Jha voluntarily resigned from Qualcomm in August 2008 and joined Motorola Inc. as Co-CEO.

 

Target direct compensation.  At the beginning of fiscal 2008, the Compensation Committee increased Dr. Jha’s base salary by 3% from the fiscal 2007 level and kept his target annual cash incentive at 125% of his base salary, the same target percentage used in fiscal 2007. His target cash compensation was below the competitive 75^th percentile. The Compensation Committee awarded him a stock option grant in November 2007 (see the “Grants of Plan-Based Awards” table) that positioned his target direct compensation slightly above the competitive 75^th percentile. This was to recognize his role within Qualcomm that included significant strategic responsibilities, interactions with investors and stockholders and his prominent role in the semiconductor industry.

 

Mix of compensation components compared to competitive practice.  The two pie charts below show that Dr. Jha’s mix of target direct compensation was slightly more weighed toward long-term incentives compared to the peer group average. We linked 93% of his target direct compensation to financial performance and stock price appreciation. His long-term incentive consisted entirely of stock options, while our peer companies, on average, used combinations of stock options, restricted stock and performance awards.

 

Comparison of the Components of Fiscal 2008 Target Direct Compensation for the former COO and Group President

 

 

Post-termination arrangements.  As part of a post-termination agreement between Qualcomm and Dr. Jha that included certain continuing obligations and restrictive covenants of Dr. Jha, the Compensation Committee agreed to modify certain stock option award agreements. The original award agreements had provided the standard 30-day post-termination period to exercise options that were vested on the termination date. The Compensation Committee modified the award agreements so that Dr. Jha could exercise stock options that were vested but unexercised on his termination date at any time prior to 12 months after his service terminated. For accounting purposes, the share-based compensation expense for modifying the post-termination exercise period of these option grants from 30 days to 12 months was approximately $2.7 million. This additional expense is included in the amount reported in the “Option Awards” column of the “Summary Compensation Table.”

 

This section provides an update to compensation decisions and actions we made after the end of fiscal 2008. The Compensation Committee reviewed a competitive compensation analysis prepared by its compensation consultant, FWC, during the fourth quarter of fiscal 2008. The Compensation Committee met on November 7, 2008 and approved base salary, target annual cash incentives and long-term incentives that are summarized in the “Fiscal 2009 Target Direct Compensation” table below.

 

Dr. Paul Jacobs’ target direct compensation is 1.8 to 3.2 times the target direct compensation of the other NEOs, excluding Dr. Irwin Jacobs, who did not receive a stock option award and will not participate in the fiscal 2009 annual cash incentive program.

Fiscal 2009 Target Direct Compensation

 

 

 

 

Fiscal 2009 Long-Term Incentives

 

 

The Compensation Committee met on December 15, 2008, and based on discussions with the CEO, CFO and consultants from FWC, approved pro forma revenues and pro forma operating income objectives for the fiscal 2009 annual cash incentive program. This represented a change from our historical practice of using a pro forma EBT objective for the earnings metric. We made this change because, unlike pro forma EBT, pro forma operating income does not include investment income from our cash, cash equivalents and marketable securities. We believe the major disruptions in U.S. and foreign credit and financial markets may continue to impact the value of our marketable securities portfolio. Given unprecedented market volatility and the significant judgments involved, establishing objectives for the performance of this portfolio is extremely difficult. Pro forma operating income is a profitability measure that we will also use for the incentive programs for our other executive officers and our broad-based incentive plan in which all other employees are eligible. The Compensation Committee, at its sole discretion, may consider the performance of our cash and marketable securities portfolio when it determines the NEOs’ annual incentive awards for fiscal 2009. For fiscal 2009:

 

 

While our financial performance objectives for fiscal 2009 do not represent year-over-year growth, we believe the relative difficulty of achieving the fiscal 2009 objectives is consistent with the difficulty of achieving the fiscal 2008 objectives given the depressed global economic conditions, which may lower consumer demand for our products and services.

 

The following tables, narratives and footnotes describe the total compensation and benefits for our NEOs for fiscal 2008. The values presented in the tables do not always reflect the actual compensation received by our NEOs during the fiscal year. In the narratives and footnotes, we disclose values actually realized by the NEOs.

 

Base Salary.  We have a long-standing practice of establishing NEOs’ base salaries concurrent with the calendar year. Salary increases during fiscal 2008 were effective on December 15, 2007. Thus, the base salaries reported in the SCT reflect approximately three months of earnings at the calendar 2007 rates and approximately nine months of earnings at the calendar 2008 rates. We reported the calendar year 2008 base salaries in the CD&A table entitled “Fiscal 2008 Target Direct Compensation.” Base salary for certain NEOs includes vacation match payments payable under the Company’s vacation policy.

 

Bonus.  The amounts in this column represent discretionary bonuses to the NEOs including amounts received under the patent award program and new hire bonuses. We disclose the annual cash incentives in the “Non-Equity Incentive Plan Compensation” column.

 

Stock Awards.  The amounts in this column represent the fair value of fully vested, unrestricted stock awarded as part of the fiscal 2007 annual cash incentive program.

 

Option Awards.  Option awards granted to NEOs include annual grants, promotion grants and new hire grants. The amounts disclosed in this column represent the estimated fair value of stock option grants recognized by the Company for accounting purposes as share-based compensation expense in fiscal 2008 because they became vested during fiscal 2008. The stock options that vested in fiscal 2008 were awarded in fiscal 2008 and in prior years under our 2001 Stock Option Plan and our 2006 LTIP. The estimated fair value amounts were determined using option-pricing models and are not indicative of whether the NEO has or will realize the estimated fair value or any financial benefit from the award. See the “Grants of Plan-Based Awards” table for details on the stock option awards granted during fiscal 2008 to the NEOs.

 

Non-Equity Incentive Plan Compensation.  The amounts disclosed in this column represent cash awards under our annual cash incentive program. The relevant performance period was fiscal 2008. The Compensation Committee approved the annual cash incentives after the end of fiscal 2008; the NEOs received payment of their fiscal 2008 annual cash incentives in November 2008. See the CD&A section and the “Grants of Plan-Based Awards” table and narrative for a description of the incentive program mechanics.

 

Change in Pension Value and Nonqualified Deferred Compensation Earnings.  We do not offer a pension plan or other defined benefit retirement plan. The amounts disclosed in this column represent the combined earnings from the ERC Plan and the Match Plan (see the “Voluntary Retirement Savings Plans” section in the CD&A for a description of these plans). Earnings include the change in fair value of investments held in the ERC Plan and the fair value of shares of Qualcomm stock that vest under the Match Plan, as well as dividend earnings on the vested shares. We do not provide above-market or preferential earnings on deferred compensation nor do we provide dividends on stock in the Match Plan at a rate higher than dividends on our common stock. These values do not represent actual compensation realized by the NEOs in fiscal 2008 because deferred compensation is not realized until it is paid to the NEO.

 

All Other Compensation.  See the “All Other Compensation” table for an itemized account of all other compensation.

Summary Compensation Table

 

 

 

 

The “All Other Compensation” table provides an itemized account of all other compensation reported in the SCT. The SEC requires disclosures to separately identify and quantify any individual item of compensation exceeding $10,000, except as discussed below under “Perquisites and Other Personal Benefits.”

 

Perquisites and Other Personal Benefits.  The SEC requires disclosure of all perquisites unless the aggregate annual value is less than $10,000; if the $10,000 threshold is exceeded, each perquisite and personal benefit must be identified by type. The SEC also requires individual identification and quantification of each perquisite if the amount exceeds the greater of $25,000 or 10% of the aggregate amount of all perquisites for any NEO.

 

Executive Retirement Contribution Match Plan.  The amounts disclosed represent the dollar value of common stock used to match up to 10% of the aggregate of the participant’s base salary plus annual cash incentives, less any 401(k) contributions, deferred on a pre-tax basis under the ERC Plan. (See the “Voluntary Retirement Savings Plans” section in the CD&A for a description of the ERC Plan.)

 

Charitable Match.  The amounts disclosed represent Qualcomm’s matches for NEO contributions to qualified, eligible IRS recognized non-profit organizations.

 

Company Match on 401(k) Contributions.  The amounts disclosed represent the cash value of Company matches to employee contributions to the 401(k) plan.

 

Life Insurance Premiums.  The amounts disclosed represent the premiums paid for group term life insurance greater than $50,000.

 

Payment of HSR Act Fees.  During fiscal 2008, certain of our NEOs and a director submitted filings under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, known as the HSR Act, based on their

past acquisitions of Qualcomm common stock. At its September 2008 meeting, the Compensation Committee reviewed the legal requirements under the HSR Act, the stock acquisitions triggering the filing requirement and the practices of other public companies with respect to HSR Act filings. Based on this review, the Compensation Committee approved the payment by Qualcomm of the HSR Act filing fees otherwise payable by the NEOs and the directors and additional amounts sufficient to cover any associated tax liabilities of the affected individuals. The Compensation Committee determined that these payments were appropriate because of the unavailability of an HSR Act exemption for stock acquisitions made by officers and directors for investment purposes and because the filing obligations arose as a direct result of each individual’s position as an officer or director of Qualcomm. The Company has now put in place procedures designed to ensure compliance with the HSR Act for stock acquisitions made by officers and directors.

 

Tax Gross-Ups.  In addition to the payment of HSR filing fees, the Compensation Committee also approved payment of an additional amount sufficient to cover the estimated tax liability resulting from our payment of the filing fees to help ensure that there was no significant out-of-pocket cost to our NEOs and director in connection with this filing obligation. In addition to the payment of the tax liabilities associated with HSR fees, we paid tax liabilities associated with certain perquisites and benefits, such as reimbursements for financial planning services. Effective January 1, 2009, we stopped making the additional payments for the tax liability associated with reimbursements for financial planning services.

 

All Other Compensation

 

 

 

 

 

Annual Cash Incentive Program.  The Compensation Committee approved a target annual cash incentive, expressed as a percentage of base salary, for each NEO (see the “Fiscal 2008 Target Direct Compensation” table). The target annual cash incentive was the potential earnings opportunity for the NEO if we achieved 100% of our financial objectives for pro forma revenues and pro forma EBT. We structured the cash incentive program to provide different potential incentive earnings opportunities at various levels of performance for each financial performance objective (i.e. pro forma revenues and pro forma EBT). Below are a table and a graphic depiction of the relationship between the percentage of the financial performance objective that is achieved (the Achievement Ratio) and the potential cash incentive opportunity as a percentage of the target annual cash incentive (the Incentive Multiple).

 

Potential Non-Equity Incentive Plan Payout and Associated Financial Performance Levels

 

 

Relationship between Financial Performance and Potential Cash Incentive Earnings (1)

 

 

 

 

 

 

Stock Option Awards.  At its previously scheduled meeting in November 2007, the Compensation Committee approved annual, on-going stock option awards for Drs. Paul Jacobs, Irwin Jacobs and Jha and Messrs. Keitel and Altman. The grant date was the same date that the Compensation Committee met and approved the awards. The exercise price was the closing price on the grant date.

 

At a special meeting, the Compensation Committee approved a new hire stock option award as part of an employment offer to Mr. Rosenberg. Consistent with our practice for all new hires, the grant date was the second Friday following the hire date.

 

The stock options reported are nonqualified stock options granted under the 2006 LTIP. Except for Mr. Rosenberg’s new hire grant, ten percent of the shares vest six months after the grant date and then in equal monthly installments over the next 54 months, becoming fully vested five years after the grant date. Mr. Rosenberg’s new hire stock options have the same vesting schedule we use for all new hire grants; specifically, 20% of the shares vest 12 months after the grant date and then vest in equal monthly installments over the next 48 months, becoming fully vested five years after the grant date. The options have a 10-year term. Generally, vesting is contingent upon continued service with Qualcomm.

 

The fair value amounts reported in the table reflect the fair value of stock option grants as estimated for accounting purposes using a binomial option-pricing model and are not indicative of whether the NEO will realize the estimated fair value or any financial benefit from the award.

 

Grants of Plan-Based Awards(1)