Close
Back to mobile site

Form DEF 14A CADENCE DESIGN SYSTEMS For: May 02

March 21, 2024 4:38 PM EDT
Table of Contents
DEF 14Afalse0000813672 0000813672 2023-01-01 2023-12-31 0000813672 2019-12-29 2021-01-02 0000813672 2021-01-03 2022-01-01 0000813672 2022-01-02 2022-12-31 0000813672 cdns:Mr.TanMember 2021-01-03 2022-01-01 0000813672 cdns:Dr.DevganMember 2021-01-03 2022-01-01 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:PeoMember cdns:Dr.DevganMember 2021-01-03 2022-01-01 0000813672 cdns:TotalAdjustmentsMember ecd:PeoMember cdns:Dr.DevganMember 2021-01-03 2022-01-01 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:NonPeoNeoMember 2021-01-03 2022-01-01 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:PeoMember cdns:Dr.DevganMember 2021-01-03 2022-01-01 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:PeoMember cdns:Dr.DevganMember 2021-01-03 2022-01-01 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:PeoMember cdns:Dr.DevganMember 2021-01-03 2022-01-01 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:PeoMember cdns:Dr.DevganMember 2021-01-03 2022-01-01 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:PeoMember cdns:Mr.TanMember 2021-01-03 2022-01-01 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:PeoMember cdns:Mr.TanMember 2021-01-03 2022-01-01 0000813672 cdns:TotalAdjustmentsMember ecd:PeoMember cdns:Mr.TanMember 2021-01-03 2022-01-01 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:PeoMember cdns:Mr.TanMember 2021-01-03 2022-01-01 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:PeoMember cdns:Mr.TanMember 2021-01-03 2022-01-01 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:PeoMember cdns:Mr.TanMember 2021-01-03 2022-01-01 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:NonPeoNeoMember 2021-01-03 2022-01-01 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:PeoMember cdns:Mr.TanMember 2021-01-03 2022-01-01 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:NonPeoNeoMember 2021-01-03 2022-01-01 0000813672 cdns:TotalAdjustmentsMember ecd:NonPeoNeoMember 2021-01-03 2022-01-01 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:NonPeoNeoMember 2021-01-03 2022-01-01 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:NonPeoNeoMember 2021-01-03 2022-01-01 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:NonPeoNeoMember 2021-01-03 2022-01-01 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:PeoMember cdns:Dr.DevganMember 2021-01-03 2022-01-01 0000813672 cdns:Dr.DevganMember 2022-01-02 2022-12-31 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:PeoMember cdns:Dr.DevganMember 2022-01-02 2022-12-31 0000813672 cdns:TotalAdjustmentsMember ecd:PeoMember cdns:Dr.DevganMember 2022-01-02 2022-12-31 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:NonPeoNeoMember 2022-01-02 2022-12-31 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:NonPeoNeoMember 2022-01-02 2022-12-31 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:PeoMember cdns:Dr.DevganMember 2022-01-02 2022-12-31 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:PeoMember cdns:Dr.DevganMember 2022-01-02 2022-12-31 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:PeoMember cdns:Dr.DevganMember 2022-01-02 2022-12-31 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:PeoMember cdns:Dr.DevganMember 2022-01-02 2022-12-31 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:NonPeoNeoMember 2022-01-02 2022-12-31 0000813672 cdns:TotalAdjustmentsMember ecd:NonPeoNeoMember 2022-01-02 2022-12-31 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:NonPeoNeoMember 2022-01-02 2022-12-31 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:NonPeoNeoMember 2022-01-02 2022-12-31 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:NonPeoNeoMember 2022-01-02 2022-12-31 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:PeoMember cdns:Dr.DevganMember 2022-01-02 2022-12-31 0000813672 cdns:Dr.DevganMember 2023-01-01 2023-12-31 0000813672 cdns:TotalAdjustmentsMember ecd:PeoMember cdns:Dr.DevganMember 2023-01-01 2023-12-31 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:PeoMember cdns:Dr.DevganMember 2023-01-01 2023-12-31 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:PeoMember cdns:Dr.DevganMember 2023-01-01 2023-12-31 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:PeoMember cdns:Dr.DevganMember 2023-01-01 2023-12-31 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:PeoMember cdns:Dr.DevganMember 2023-01-01 2023-12-31 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000813672 cdns:TotalAdjustmentsMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:PeoMember cdns:Dr.DevganMember 2023-01-01 2023-12-31 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:PeoMember cdns:Dr.DevganMember 2023-01-01 2023-12-31 0000813672 1 2023-01-01 2023-12-31 0000813672 5 2023-01-01 2023-12-31 0000813672 4 2023-01-01 2023-12-31 0000813672 3 2023-01-01 2023-12-31 0000813672 2 2023-01-01 2023-12-31 0000813672 cdns:Mr.TanMember 2019-12-29 2021-01-02 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:NonPeoNeoMember 2019-12-29 2021-01-02 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:PeoMember cdns:Mr.TanMember 2019-12-29 2021-01-02 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:PeoMember cdns:Mr.TanMember 2019-12-29 2021-01-02 0000813672 cdns:TotalAdjustmentsMember ecd:PeoMember cdns:Mr.TanMember 2019-12-29 2021-01-02 0000813672 cdns:YearendValueOfAwardsGrantedInFiscalYearThatAreUnvestedAndOutstandingMember ecd:PeoMember cdns:Mr.TanMember 2019-12-29 2021-01-02 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:PeoMember cdns:Mr.TanMember 2019-12-29 2021-01-02 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:PeoMember cdns:Mr.TanMember 2019-12-29 2021-01-02 0000813672 cdns:TotalAdjustmentsMember ecd:NonPeoNeoMember 2019-12-29 2021-01-02 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:PeoMember cdns:Mr.TanMember 2019-12-29 2021-01-02 0000813672 cdns:PriorYearFairValueOfPriorYearAwardsThatFailedToVestThisYearMember ecd:NonPeoNeoMember 2019-12-29 2021-01-02 0000813672 cdns:ValueOfStockAwardsReportedInSctMember ecd:NonPeoNeoMember 2019-12-29 2021-01-02 0000813672 cdns:ChangeInFairValueFromPriorYearendOfPriorYearAwardsThatVestedThisYearMember ecd:NonPeoNeoMember 2019-12-29 2021-01-02 0000813672 cdns:ChangeInFairValueOfPriorYearsAwardsThatAreOutstandingAndUnvestedMember ecd:NonPeoNeoMember 2019-12-29 2021-01-02 0000813672 cdns:FmvOfAwardsGrantedAndVestedInTheIndicatedYearMember ecd:NonPeoNeoMember 2019-12-29 2021-01-02 iso4217:USD xbrli:pure
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
SCHEDULE 14A
(RULE
14a-101)
SCHEDULE 14A
INFORMATION
Proxy Statement Pursuant To Section 14(a) of the
Securities Exchange Act of 1934
 
 
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
 
Preliminary Proxy Statement
 
Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material under §
240.14a-12
CADENCE DESIGN SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if
Other
Than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
 
No fee required
 
Fee paid previously with preliminary materials
 
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11
 
 
 


Table of Contents
LOGO   NOTICE OF 2024 ANNUAL MEETING OF STOCKHOLDERS

The 2024 Annual Meeting of Stockholders of CADENCE DESIGN SYSTEMS, INC., a Delaware corporation, will be held as follows:

 

When:    Where:

May 2, 2024

1:00 p.m. Pacific Time

  

Virtual Meeting

www.meetnow.global/M5WZT79

Items of Business:

The purpose of the 2024 Annual Meeting of Stockholders (the “Annual Meeting”) is to consider and take action on the following:

 

  1.

To elect the nine directors named in the proxy statement to serve until the 2025 Annual Meeting of Stockholders and until their successors are elected and qualified, or until the directors’ earlier death, resignation or removal.

 

  2.

To approve the amendment of the Employee Stock Purchase Plan.

 

  3.

To approve the amendment of the Restated Certificate of Incorporation to limit monetary liability of certain officers as permitted by law.

 

  4.

To approve the amendment of the Restated Certificate of Incorporation regarding stockholder action by written consent.

 

  5.

To vote on an advisory resolution to approve named executive officer compensation.

 

  6.

To ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Cadence for its fiscal year ending December 31, 2024.

 

  7.

To vote on a stockholder proposal regarding vote on golden parachutes, if properly presented at the meeting.

 

  8.

To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

These items of business are more fully described in the proxy statement accompanying this notice.

Record Date:

Holders of Cadence Design Systems, Inc. common stock at the close of business on March 4, 2024 are entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.

How to Vote:

Your vote is important to us. Please cast your vote promptly via the internet, telephone or mail. Specific instructions on how to vote are included in the Notice of Internet Availability of Proxy Materials that Cadence will mail to its stockholders as of the Record Date on or about March 20, 2024. You will also be able to vote your shares electronically during the virtual Annual Meeting.

How to Attend:

The Annual Meeting will be held online at www.meetnow.global/ M5WZT79 via live audio webcast. Stockholders will be able to attend and participate in the Annual Meeting online, vote their shares electronically, and submit questions through the virtual meeting platform during the meeting. Please refer to the “Information About the Annual Meeting” section of the proxy statement for detailed instructions on how to register for and attend the Annual Meeting.

By Order of the Board of Directors,

 

San Jose, California

March 21, 2024

 

  

LOGO

Karna Nisewaner

Senior Vice President, General Counsel and Corporate Secretary

 

 

 

    LOGO  


Table of Contents

TABLE OF CONTENTS

 

 

 

Letter to Our Stockholders

     1  

Corporate Governance

     3  

Board of Directors

     7  

Stockholder Engagement

     19  

Matters to Be Considered at the Annual Meeting

     20  

Proposal 1: Election of Directors

     20  

Proposal 2: Approval of the Amended and Restated Employee Stock Purchase Plan

     30  

Proposal 3: Approval and Adoption of the Amendment of the Restated Certificate of Incorporation to Limit Monetary Liability of Certain Officers as Permitted By Law

     36  

Proposal 4: Approval and Adoption of the Amendment of the Restated Certificate of Incorporation Regarding Stockholder Action By Written Consent

     38  

Proposal 5: Advisory Resolution to Approve Named Executive Officer Compensation

     40  

Proposal 6: Ratification of the Selection of the Independent Registered Public Accounting Firm

     41  

Audit Committee Report

     42  

Fees Billed to Cadence by the Independent Registered Public Accounting Firm During Fiscal 2023 and 2022

     43  

Proposal 7: Stockholder Proposal Regarding Vote on Golden Parachutes

     44  

Security Ownership of Certain Beneficial Owners and Management

     47  

Delinquent Section 16(a) Reports

     50  

Compensation Discussion and Analysis

     51  

Compensation Committee Report

     67  

Compensation Committee Interlocks and Insider Participation

     68  

Compensation of Executive Officers

     69  

Potential Payments Upon Termination or Change in Control

     77  

Equity Compensation Plan Information

     83  

Pay Ratio Disclosure

     84  

Pay Versus Performance

     85  

Certain Transactions

     92  

Information About the Annual Meeting

     95  

Other Matters

     102  

Appendix A: Cadence Design Systems, Inc. Amended and Restated Employee Stock Purchase Plan

     A-1  

Appendix B: Proposed Amendment to Cadence Design Systems, Inc. Restated Certificate of Incorporation to Limit Monetary Liability of Certain Officers as Permitted By Law

     B-1  

Appendix C: Proposed Amendment to Cadence Design Systems, Inc. Restated Certificate of Incorporation Regarding Stockholder Action by Written Consent

     C-1  

 

 

 


Table of Contents

PROXY STATEMENT

 

LETTER TO OUR STOCKHOLDERS

 

 

Dear Cadence Stockholders:

 

On behalf of the Board of Directors, I would like to thank you for your continued trust and confidence in Cadence. The Board represents your interests as we work towards creating sustainable long-term value for stockholders. We are continuing our

  LOGO

focus on overseeing the execution of Cadence’s business strategy and prudent risk management, and I am pleased to communicate with you about several of our priorities and actions since the 2023 Annual Meeting of Stockholders.

Business Strategy and Risk Management

The Board discusses Cadence’s business strategy and risk throughout the year. In 2023 and early 2024, Cadence delivered several significant products including the revolutionary Millennium M1 platform, the industry’s first accelerated multi-physics supercomputing platform. Cadence also substantially grew its footprint at market shaping customers in 2023 and furthered its relationships with key ecosystem partners. Generational trends such as AI, hyperscale computing, autonomous driving, 5G, and IoT continue driving strong design activity and our Intelligent System Design strategy has us extremely well positioned to benefit from the resulting opportunities. Cadence is at the forefront of the AI revolution, closely partnering with several marquee semiconductor and systems companies on their trailblazing AI designs. Over the course of 2023, Cadence continued building out its generative Cadence.AI portfolio, the industry’s broadest AI offerings spanning chip to board to system, delivering exceptional optimization and productivity benefits. Accelerating momentum of the Cadence.AI portfolio has led to an almost tenfold increase in the number of customers adopting Cadence’s GenAI solutions in 2023, as customers embrace the technology to develop optimized products much more efficiently. Cadence continues to return significant value to stockholders through our continued focus on delivering innovative products, consistent execution, and driving customer success.

Human Capital Management and Corporate Social Responsibility

Cadence employees are at the center of everything we create and the business success we achieve. Our people-first One Team culture drives the employee experience and enables us to attract and retain the best talent. Our programs foster high trust, collaboration, inclusiveness and teamwork, and Cadence is dedicated to creating an environment where employees of all backgrounds can have a meaningful career and can achieve their full potential. Our One Team culture cultivates the innovation needed to develop Cadence’s suite of industry-leading products and services. Our team of passionate, dedicated, and talented employees go above and beyond for our customers, our communities, and each other, generating long-term value for Cadence and all its stakeholders. Our 49% headcount growth over the last five years and average tenure of 6.9 years reflect our efforts to create an environment that attracts and retains high-performing talent. Cadence was again recognized for its One Team culture in 2023, receiving accolades such as #9 on Fortune’s World’s Best Workplaces list, The Wall Street Journal’s Best-Managed Companies, the Human Rights Campaign Equality 100 Award for LGBTQ+ inclusion, and Global Semiconductor Alliance’s (GSA) Designing the Difference Award. Of employees surveyed, 94% say they are proud to tell others they work at Cadence and 93% say Cadence is a great place to work.

Cadence is dedicated to building ethical and sustainable business operations and supply chains, and to maintaining governance structures that are in line with the best practices of our peers. In 2023, we submitted our greenhouse gas reduction targets to the Science Based Targets Initiative (SBTi) for validation, procured 100% renewable energy for our global operations, and expect to secure CarbonNeutral® certification for the third year in a row. The Cadence Giving Foundation partnered with the Clinton Health Access Initiative to provide funding and

 

 

 

    LOGO   1


Table of Contents

technology to develop and scale access to low-emission AC units in India and Indonesia, an effort that is expected to mitigate 60Gt of CO2 emissions by 2050 – a year’s worth of current emissions for the entire planet. In addition, Cadence’s products and services enable our customers to design tomorrow’s products and help drive advancements in sustainability across industries.

We encourage you to review the Corporate Social Responsibility section of this proxy statement, as well as our 2023 ESG Report, which will be available on the Corporate Social Responsibility page at www.cadence.com, for more information on our environmental, social and governance initiatives.

Board Refreshment

Dr. John B. Shoven is not seeking re-election at the Annual Meeting of Stockholders when his current term expires. The Board thanks Dr. Shoven for his 32 years of service on the Board, including 16 years as Chair, and for his invaluable contributions to Cadence. As we continue to evaluate board refreshment, we remain committed to seeking skilled and talented leaders who can apply their unique and valuable experiences to the stewardship of Cadence. Since the beginning of 2020, we have added five directors to the Board, each of whom enhances our Board through their distinct and diverse professional and personal experiences. We regularly review board composition and will continue to proactively manage the composition of the Board to ensure it has the appropriate mix of tenures and the requisite skills to address Cadence’s current and future needs.

Corporate Governance and Stockholder Engagement

We routinely evaluate our corporate governance in light of best practices at fellow S&P 500 companies, investor guidelines and alignment with Cadence’s strategy and needs. As our stockholders play an important role in governance, Cadence maintains a robust stockholder engagement program to better understand your viewpoints on topics such as sustainable business practices, board composition and refreshment, culture, diversity, equity and inclusion, and executive compensation. For our engagement in the fall of 2023, Cadence reached out to more than 20 stockholders representing over half of our outstanding shares. Our stockholders also have the opportunity to communicate their views at the Annual Meeting, quarterly earnings process, or by writing to us at the address provided in the section of this proxy statement entitled “Communication with Directors.”

Your vote is important to us. We encourage you to read this proxy statement and vote your shares.

Sincerely,

 

LOGO

 

ML Krakauer
Board Chair

 

 

 

2   LOGO    


Table of Contents

CORPORATE GOVERNANCE

 

 

 

CORPORATE GOVERNANCE HIGHLIGHTS

 

 Board:

  Independent director serving as chair of the Board of Directors of Cadence (the “Board” or the “Board of Directors”)

 

  Substantial majority of independent directors – nine of the ten current directors are independent

 

  All Board committees comprised entirely of independent directors

 

  Regular executive sessions of the independent directors

 

  Annual Board and committee evaluations – overseen by the Corporate Governance and Nominating Committee

 

  Board refreshment and succession planning

 

  Annual Chief Executive Officer (“CEO”) and senior leadership succession review

 

  Principled Code of Business Conduct

 

  Robust insider trading and related party transactions policies

 

  Committee authority to retain independent advisors

 

  Stock Ownership Guidelines – each non-employee director required to hold Cadence shares valued at a minimum of $375,000 within five years of appointment or election

 

  Proactive, ongoing and responsive stockholder engagement program, including direct involvement by the Board

 

  Board continuing education – new director orientation and continuing education on critical topics and issues

 Stockholder Rights:   Compensation:

  No “poison pill” (stockholders’ rights plan)

 

  No dual class common stock structure

 

  Ability to act by written consent

 

  Ability to call a special meeting

 

  Proxy access

 

  No supermajority voting requirements

 

  Robust stockholder engagement program

 

  Directors elected by majority vote in an uncontested election

 

  All directors elected annually (no classified Board structure)

 

  Annual Say-on-Pay stockholder vote

 

  Compensation Recovery (“Clawback”) Policy

 

  Prohibition on hedging of Cadence securities

 

  Use of an independent compensation consultant

 

  Stock Ownership Guidelines – (i) 3X the annual base salary for the CEO and (ii) 1X the annual base salary for all other executive officers, in each case within five years of appointment

 

 

 

    LOGO   3


Table of Contents

CORPORATE GOVERNANCE PRACTICES

Cadence is governed by the Board and the committees of the Board, which meet throughout the year. Cadence and its Board are committed to sound corporate governance which helps Cadence compete more effectively, sustain its success and build long-term stockholder value. The Board and management regularly review and evaluate Cadence’s corporate governance practices. Cadence’s corporate governance documents, including the charters of the Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Finance Committee, the Code of Business Conduct, the Related Party Transactions Policies and Procedures and the Board’s Corporate Governance Guidelines, are available on the Corporate Governance page at www.cadence.com. Paper copies of these documents are also available to stockholders upon written request directed to Cadence’s Corporate Secretary at our corporate offices located at 2655 Seely Avenue, Building 5, San Jose, California 95134.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines, which cover various topics relating to the Board and its activities, including the selection and composition of the Board, Board leadership, compensation of directors, responsibilities of directors, Board access to senior management and outside advisors, meeting procedures, Board and committee responsibilities and other matters. The Corporate Governance and Nominating Committee annually reviews the Corporate Governance Guidelines, which may be amended by the Board at any time and were most recently amended in May 2023.

Code of Business Conduct

Cadence has adopted a Worldwide Code of Business Conduct (the “Code of Business Conduct”) to provide standards for ethical conduct in dealing with customers, suppliers, agents, government officials and others. The Code of Business Conduct applies to Cadence’s directors, officers and employees (and those of its subsidiaries), including Cadence’s Chief Executive Officer and Chief Financial Officer. The Code of Business Conduct also applies to certain independent contractors and consultants who work at Cadence’s facilities or at Cadence’s direction. Compliance with the Code of Business Conduct is a condition to continued service or employment with Cadence. The Code of Business Conduct covers topics including diversity and inclusion, health and safety, confidentiality of assets and information, conflicts of interest, anonymous reporting of non-compliance, compliance with federal and state securities laws, employment practices, political contributions, payment practices and compliance with competition, human rights, anti-corruption and other laws and regulations.

Any waiver of a provision of the Code of Business Conduct with respect to a director or an executive officer may only be made by the Board. Any waivers for other employees may be granted only by the Chief Executive Officer or the General Counsel or their respective designees. To the extent required under applicable U.S. Securities and Exchange Commission (the “SEC”) or Nasdaq Stock Market (“Nasdaq”) rules, Cadence will disclose material amendments to the Code of Business Conduct and any waiver of its provisions with respect to any director or executive officer in accordance with applicable law by posting such information on its website at www.cadence.com.

Stock Ownership Guidelines

The Board has adopted Stock Ownership Guidelines for Cadence’s directors and executive officers to further align the interests of the directors and executive officers with the interests of stockholders and to reinforce Cadence’s commitment to sound corporate governance. Each non-employee member of the Board is required to hold shares of Cadence common stock with a value of at least $375,000 within five years of the date of his or her initial appointment or election to the Board. Cadence’s Chief Executive Officer is required to hold shares of Cadence common stock with a value of at least three times his or her annual base salary within five years of the date of his or her appointment, and Cadence’s other executive officers are required to hold shares of Cadence common stock with a value of at least his or her annual base salary within five years of the date of his or her appointment.

 

 

 

4   LOGO    


Table of Contents

As of the Record Date, all directors and executive officers met the stock ownership guidelines applicable to them.

Anti-Hedging Policy and Trading Restrictions

Cadence’s Securities Trading Policy restricts certain transactions in Cadence securities and prohibits Cadence’s directors, executive officers and all other Cadence employees (and their respective family and household members) from hedging their ownership of Cadence securities (regardless of whether such securities were granted as compensation or are otherwise held, directly or indirectly, by such employee or director), including by purchasing financial instruments such as prepaid variable forward contracts, equity swaps, collars and exchange funds, or trading in publicly-traded options, puts, calls or other derivative instruments related to Cadence securities. Cadence’s Securities Trading Policy also prohibits short-sales and similar transactions and pledges of Cadence stock or deposits of Cadence stock in margin accounts.

CORPORATE SOCIAL RESPONSIBILITY

Cadence’s commitment to corporate social responsibility and its environmental, social and governance (“ESG”) initiatives create value for the company and all of its stakeholders. Our employees are at the center of everything we create and the business success we achieve. Cadence is committed to maximizing innovation by fostering an environment where all employees have an equal opportunity to share their ideas and to be heard. Fostering a high-performing, inclusive culture is a foundational tenet of our business strategy. We believe that as a global leader in electronic design whose offerings enable the world’s most innovative companies to bring to market products that transform the way people live, work and play, Cadence has an opportunity and a responsibility to be an organization that positively impacts society. As we work towards this goal, Cadence is committed to building ethical and sustainable business operations and supply chains and to maintaining governance structures that are in line with the best practices of our peers.

For more information on Cadence’s ESG strategy, programs and activities, see Cadence’s Corporate Social Responsibility page at www.cadence.com for our annual ESG Report, including the 2022 ESG Report and the 2023 ESG Report, which will be available later this year. Our most recent EEO-1 data will also be made available on our website when complete. The contents of Cadence’s ESG Report and website, including our EEO-1 data, are not part of or incorporated by reference into this proxy statement.

Environmental Sustainability

As the impact of climate change intensifies, Cadence is increasingly providing creative solutions to reduce power consumption and enable more sustainable innovation across the technology industry. We are committed to our target of reaching Net-Zero greenhouse gas (“GHG”) emissions in our operations by 2040. Since 2019, we have significantly decreased the combined Scope 1, 2, and 3 emissions, and we are on track to halve GHG emissions by 2030. Cadence secured CarbonNeutral® certification across our global operations for 2021 and 2022, and we expect to secure certification for 2023 as well. While we are excited about our progress, we continue to invest in value chain engagement around decarbonization through our full value chain to achieve Net-Zero by 2040.

Diversity, Equity and Inclusion

It is important to the success of Cadence that we provide the support our employees need to thrive. Cadence strives to foster an environment where all employees can have a meaningful career and equal opportunities to make an impact. This includes building an inclusive culture based on trust, cooperation, respect and equitable treatment. We believe a diverse team can create a competitive advantage by contributing unique perspectives that advance high performance, innovation and teamwork.

Our key programs and initiatives, which are described in more detail in our annual ESG Report available on our Corporate Social Responsibility page at www.cadence.com, are focused on improving diversity in our hiring pipeline, increasing recruiting and engagement efforts in underrepresented communities, providing career support,

 

 

 

    LOGO   5


Table of Contents

maintaining pay equity among our employees and raising awareness of unconscious bias. We currently support global Inclusion Groups for Black, Latinx, LGBTQ+, Veteran and Women employees and their allies, in addition to supporting U.S. Inclusion Groups for Asian American and Pacific Islander employees, employees who are neurodivergent or have disabilities and their allies. Each of these forums encourages dialogue for sharing and connecting, as well as promoting belonging in the workplace and awareness of experiences.

Supply Chain Management

Cadence is committed to doing business honestly and ethically, and we expect the same from our suppliers. We partner with suppliers that share our values and aim to build long-lasting relationships that are mutually beneficial and create value for society beyond our respective organizations. In 2023, we continued to identify and promote diversity in our supply chain as well as to extend our rigorous governance standards across our value chain with our Supplier Code of Conduct that was introduced in 2020.

We are partnering with key suppliers to improve the accuracy of GHG emissions calculations, and more than half of our 2023 upstream Scope 3 emissions are now calculated using suppliers’ reported emissions, up from one-third in 2022. We continue to track and analyze key suppliers’ carbon reduction goals and disclosures, and 100 of our key suppliers were included in our climate-risk assessment to better understand our upstream climate-related risk and opportunities.

Oversight and Management of Corporate Social Responsibility

Our Board, through its Corporate Governance and Nominating Committee, oversees our corporate social responsibility program and the progress of our environmental (including climate-related risks and opportunities), social (including health, wellness and safety) and governance efforts, matters and initiatives. The Corporate Governance and Nominating Committee formally reviews our environmental, social and governance efforts and climate-related issues within the organization at every regular meeting and regularly reports to the Board on such programs. In 2023, the Corporate Governance and Nominating Committee held three meetings, and in the quarter that it did not meet, the Corporate Governance and Nominating Committee received and reviewed materials relating to ESG. The Board and its Compensation Committee formally review the benefits provided to our employees, including health and wellness, once a year. In 2023, the Compensation Committee charter was amended to add that the Compensation Committee is responsible for overseeing our human capital management (“HCM”) practices.

 

 

 

6   LOGO    


Table of Contents

BOARD OF DIRECTORS

 

 

 

OVERVIEW AS OF THE RECORD DATE

 

 

LOGO    LOGO

 

LOGO

BOARD MEMBERSHIP

The Board currently consists of ten members: Mark W. Adams, Ita Brennan, Lewis Chew, Anirudh Devgan, ML Krakauer, Julia Liuson, James D. Plummer, Alberto Sangiovanni-Vincentelli, John B. Shoven, and Young K. Sohn. Dr. Shoven is not on the slate of nominees for re-election and his term as a director will expire at the Annual Meeting. As a result, the size of the Board will be reduced to nine members immediately following the expiration of Dr. Shoven’s term at the Annual Meeting.

Cadence remains committed to ensuring the Board is composed of directors who bring diverse viewpoints and perspectives, exhibit a variety of skills, professional experience and backgrounds and effectively represent the long-term interests of stockholders. See “Director Qualifications and Diversity of Background” below for more information.

DIRECTOR INDEPENDENCE

The Board determines director independence in accordance with the Corporate Governance Guidelines, which require that at least a majority of the Board be “independent” within the meaning of the Nasdaq listing standards.

To be “independent” under the Nasdaq listing standards, among other bright line tests enumerated in the standards, a director must not be an executive officer or employee of the company and must not have a

 

 

 

    LOGO   7


Table of Contents

relationship that, in the opinion of the Board, would interfere with his or her exercise of independent judgment in carrying out the responsibilities of a Cadence director. In determining each director’s independence, the Board considers all relevant facts and circumstances in conjunction with the guidelines provided by the Nasdaq listing standards. This includes, without limitation, Mr. Adams’ role as President and Chief Executive Officer of SMART Global Holdings, Inc. (“SMART”), Ms. Brennan’s role as the former Senior Vice President, Chief Financial Officer of Arista Networks, Inc. (“Arista”), Mr. Chew’s role as the former Executive Vice President, Chief Financial Officer of Dolby Laboratories, Inc. (“Dolby”) and Mr. Sohn’s role as co-founder and co-manager of one of Walden International’s funds, Walden Catalyst, and Cadence’s ordinary course business transactions with SMART, Arista, Dolby and companies in which Mr. Sohn and Walden Catalyst are involved. The Board considers these transactions as part of its overall analysis of the independence of the Board. The Board also considers other board membership, employment, advisory and academic relationships of its members with other companies and institutions with which Cadence does business or to which it makes charitable gifts.

In addition, all such transactions are subject to the terms of the Code of Business Conduct and Related Party Transactions Policies and Procedures. These policies and internal procedural guidelines also require that directors recuse themselves from any discussion or approval by the Corporate Governance and Nominating Committee of Cadence’s transactions with those companies and institutions that are associated with such directors, except to provide material information concerning such transactions to the Corporate Governance and Nominating Committee.

The aggregate annual amounts involved in each of the foregoing transactions involving an entity in which an independent director is or was a partner, or a controlling shareholder or an executive officer in each of the last three fiscal years were less than the greater of 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is more, and the affiliated Board members were determined not to have a direct or indirect material interest in such transactions.

CURRENT INDEPENDENT DIRECTORS

Among the current members of the Board, the Board has determined that Directors Adams, Brennan, Chew, Krakauer, Liuson, Plummer, Sangiovanni-Vincentelli, Shoven and Sohn are independent directors within the meaning of the Nasdaq listing standards. Dr. Devgan, the President and CEO of Cadence, is not deemed independent.

BOARD LEADERSHIP

Dr. Devgan serves as CEO and Ms. Krakauer, an independent director, serves as Board Chair. The Board believes that at this time, Cadence and its stockholders are best served by this leadership structure because it facilitates effective oversight and further strengthens the Board’s independent leadership and commitment to sound governance. This also allows the CEO to focus on the day-to-day business of Cadence, while allowing the Chair to lead the Board in its oversight of management. While the Corporate Governance Guidelines permit the role of Chair to be filled by an officer or employee of Cadence, a lead independent director is required if the Chair is also a Cadence officer or employee. This provides the Board with flexibility to determine whether the two roles should be combined based on the Board’s assessment of Cadence’s needs and leadership from time to time.

PROCESS FOR SELECTING DIRECTOR NOMINEES AND CANDIDATES

The Corporate Governance and Nominating Committee evaluates and recommends director candidates for nomination by the full Board. The Corporate Governance and Nominating Committee regularly discusses and annually reviews as a committee and with the Board the appropriate skills and characteristics required of directors (such as integrity, experience, judgment, diversity of background (including, among other factors, race, ethnicity and gender), independence, ability to commit sufficient time and attention to Board activities, understanding of

 

 

 

8   LOGO    


Table of Contents

Cadence’s products, technologies and strategy, and the specific skills set forth under “Director Nominee Qualifications, Skills and Experience” below in Proposal 1 regarding the election of directors) in the context of the current composition of the Board and its committees.

STOCKHOLDER RECOMMENDATIONS OF DIRECTOR CANDIDATES

Stockholders who wish to recommend a prospective candidate for the Board must notify Cadence’s Corporate Secretary in writing with the supporting materials required by Cadence’s Bylaws as described under “Information About the Annual Meeting” below and any other material the stockholder considers necessary or appropriate in order for their recommended candidate to be considered by the Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee will evaluate any such candidate in the same manner as it evaluates candidates recommended from other sources; provided that, with respect to those candidates recommended by stockholders, such stockholders have provided Cadence with a notice that sets forth information as to such stockholders and director candidates in accordance with Cadence’s Bylaws.

DIRECTOR ATTENDANCE

During the fiscal year ended December 31, 2023, the Board held nine meetings, in addition to taking actions by unanimous written consent for certain of its committees in lieu of a meeting. Each of our current directors attended at least 75% of the meetings of the Board and the committees on which he or she served that were held during the period for which he or she was a director or committee member during fiscal 2023, with the exception of Ms. Liuson. In the fourth quarter of 2023, Ms. Liuson experienced a death in her family the same week Cadence held multiple Board and committee meetings, and her attendance subsequently fell below 75% for the year. Prior to the fourth quarter of 2023, she attended 100% of the meetings of the Board and the committees on which she served that were held during the period for which she was a director or committee member. The Corporate Governance Guidelines encourage directors to attend the Annual Meeting, and all of Cadence’s directors attended the 2023 Annual Meeting of Stockholders.

INDEPENDENT DIRECTOR SESSIONS

Pursuant to the Corporate Governance Guidelines, Cadence’s independent directors meet privately at least twice each year and Ms. Krakauer as Board Chair and an independent director, presides over portions of Board meetings attended exclusively by independent directors.

BOARD EVALUATIONS

The Board is committed to reviewing its performance through an annual evaluation process. Through the evaluations, the Board assesses its processes, meetings, planning and overall effectiveness. The directors provide feedback on the Board and its committees through questionnaires and interviews with an independent third party. Each year, the independent third party reviews the results and feedback provided by the directors and follows up with the directors regarding their evaluations and presents to the full Board. Any findings that require additional consideration are addressed at subsequent Board and committee meetings, as appropriate.

BOARD SUCCESSION PLANNING

Board succession planning is a regular topic for discussion at Board meetings. The Corporate Governance and Nominating Committee reviews with the Board at least annually the appropriate experience, skills and characteristics required of Board members in the context of the current composition of the Board. New directors undergo a robust orientation process overseen by the Corporate Governance and Nominating Committee that includes a series of briefings with senior management and other experts designed to enable new directors to quickly become active, knowledgeable and effective members of the Board. The briefings include profiles on Cadence’s business, industry, technology, financial landscape, people and culture, as well as corporate governance and regulatory matters.

 

 

 

    LOGO   9


Table of Contents

CEO AND MANAGEMENT SUCCESSION PLANNING

The Board is actively engaged and involved in the succession planning of Cadence’s management. The Compensation Committee regularly discusses and annually reports to the Board with respect to CEO succession planning, including policies for CEO selection and succession in the event of incapacitation, emergency situations, operational needs, retirement or removal of the CEO and evaluations of and development plans for potential successors to the CEO. In addition, the Compensation Committee, in consultation with the CEO, regularly discusses and annually reviews senior leadership succession planning and reports to the Board with respect to Cadence’s management development program and succession planning.

BOARD RISK OVERSIGHT

The Board exercises its risk oversight function through the Board as a whole and through certain of its committees. The Board and the relevant committees seek to understand and oversee the most critical risks facing Cadence. The Board does not view risk in isolation but considers risk as part of its regular consideration of business decisions and business strategy. The Board as a whole has the ultimate responsibility for the oversight of risk management but has delegated the oversight of certain risks to the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee as set forth in the table below.

 

 Committee   Primary Areas of Risk Oversight

Audit Committee

  Cadence’s financial condition, financial statements, financial reporting process, accounting, internal control and cybersecurity matters

Compensation Committee

  Cadence’s overall compensation and senior leadership succession planning practices, policies and programs, and human capital management practices

Corporate Governance and Nominating Committee

  Cadence’s corporate governance, the composition, structure and evaluation of, and succession planning for, the Board and its committees, ESG practices and review and approval of related party policy and transactions

The Board and the relevant committees review with Cadence’s management the risk management practices for which they have oversight responsibility. Since overseeing risk is an ongoing process and inherent in Cadence’s strategic decisions, the Board and the relevant committees also discuss risk throughout the year in relation to specific proposed actions.

Cybersecurity

Cybersecurity continues to be an important area of focus. Cadence is committed to the protection of our customers’, vendors’, partners’ and employees’ personal information and our Information Security team works to identify and prevent cybersecurity risks through enhanced privacy and data cybersecurity initiatives. Our Chief Information Security Officer administers our data privacy and cybersecurity program with oversight by the Audit Committee and regularly updates the Board and Audit Committee on our cybersecurity performance and risk profile.

 

 

 

10   LOGO    


Table of Contents

COMMITTEES OF THE BOARD

The Board currently has the following committees: Audit Committee, Compensation Committee, Corporate Governance and Nominating Committee and Finance Committee. Each of these committees meets regularly, reports on its activities to the full Board, is authorized to engage external advisors and has a written charter that is approved by the Board and available on the Corporate Governance page at www.cadence.com. The table below shows the current composition of the committees.

 

 Director Audit Compensation

Corporate

Governance

and

Nominating

Finance

Mark W. Adams

LOGO

Ita Brennan

LOGO

Lewis Chew

LOGO

Anirudh Devgan

ML Krakauer

Julia Liuson

James D. Plummer

Alberto Sangiovanni-Vincentelli

John B. Shoven

Young K. Sohn

LOGO

 

LOGO  Committee Chair  Member

Audit Committee

The Board has determined that all four members of the Audit Committee are “independent” as defined by the Nasdaq listing standards applicable to audit committee members and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board has also determined that Directors Brennan, Chew and Shoven are “audit committee financial experts” as defined in rules promulgated by the SEC.

The Audit Committee charter was last amended in February 2023 and complies with the Nasdaq listing standards. The duties and responsibilities of the Audit Committee include:

 

   

Appointing, retaining, compensating, evaluating, overseeing and discharging Cadence’s independent registered public accounting firm;

 

   

Pre-approving (or where permitted by SEC rules in the case of de minimis non-audit services, subsequently approving) all audit and permissible non-audit services to be provided by the independent registered public accounting firm and establishing policies and procedures for such pre-approval;

 

   

Engaging in dialogues with the independent registered public accounting firm with respect to any relationships or services between Cadence and the independent registered public accounting firm that may impact the objectivity and independence of the independent registered public accounting firm;

 

   

Setting clear policies regarding employment by Cadence of individuals employed or formerly employed by the independent auditors;

 

   

Reviewing audit and internal quality control procedures, the results of the annual audit and any audit problems, difficulties or significant disagreements with management;

 

 

 

    LOGO   11


Table of Contents
   

Reviewing Cadence’s annual and quarterly financial statements, annual reports on Form 10-K and quarterly reports on Form 10-Q, and recommending to the Board whether the financial statements should be included in Cadence’s annual report on Form 10-K;

 

   

At least annually, reviewing, discussing with management and assessing the adequacy and effectiveness of Cadence’s internal controls and procedures, disclosure controls and procedures, and Cadence’s guidelines, policies and practices with respect to risk assessment and risk management as they relate to Cadence’s financial condition, financial statements, financial reporting process and accounting matters, cybersecurity, and overseeing financial risk exposures;

 

   

Establishing and overseeing procedures for the receipt, retention and treatment of complaints received by Cadence regarding accounting, internal controls, auditing or violations of federal securities law matters;

 

   

At least on a quarterly basis, inquiring from the independent auditor whether Cadence’s financial statements have been selected by the Public Company Accounting Oversight Board, or PCAOB, for inspection. The Committee shall be apprised on a “real time” basis of any material developments in connection with any inspection; and

 

   

Annually reviewing and evaluating its performance, including by reviewing its compliance with the Audit Committee charter.

The Audit Committee held five meetings during fiscal 2023. See “Audit Committee Report” below for more information.

Compensation Committee

The Compensation Committee is currently comprised of four members, each of whom the Board has determined to be “independent” as defined by the Nasdaq listing standards applicable to compensation committee members and satisfies the applicable independence standards under the Exchange Act for compensation committee service. All Compensation Committee members are also “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act.

The Compensation Committee may delegate its authority over certain matters to management when it deems it to be appropriate and in the best interests of Cadence. In fiscal 2023, the Compensation Committee did not delegate any authority with respect to the consideration and determination of executive officer compensation. At or near the beginning of each fiscal year, the Compensation Committee typically establishes base salary levels and target bonuses for the CEO, Chief Financial Officer (“CFO”) and other executive officers of Cadence. In addition, the Compensation Committee administers and, if deemed necessary, may amend Cadence’s Senior Executive Bonus Plan, Cadence’s equity-based compensation plans and stock purchase plans, and Cadence’s deferred compensation plans. The Compensation Committee also reviews and recommends to the Board the compensation of Cadence’s directors, and the Compensation Committee did not delegate any authority with respect to the consideration and determination of director compensation in fiscal 2023.

The Compensation Committee charter was last amended in February 2024. The duties and responsibilities of the Compensation Committee include:

 

   

Identifying, reviewing and approving corporate goals and objectives relevant to the compensation of the CEO and any director who is also a Cadence employee, and evaluating the performance of the CEO and any employee director in light of those goals and objectives;

 

   

Overseeing the evaluation of Cadence’s management;

 

   

Reviewing at least annually Cadence’s senior leadership succession planning in consultation with the CEO;

 

   

Reviewing compensation programs and determining the compensation of Cadence’s executive officers;

 

 

 

12   LOGO    


Table of Contents
   

Overseeing Cadence’s overall compensation practices, policies and programs, assessing whether Cadence’s compensation structure establishes appropriate incentives for management and employees, assessing the risks associated with such practices, policies and programs, and assessing the results of Cadence’s most recent advisory vote on executive compensation;

 

   

Reviewing annually an assessment of any potential conflicts of interest raised by the work of compensation consultants, whether retained by the Compensation Committee or management, who are involved in determining or recommending executive or Board compensation;

 

   

Assessing the independence of any consultants or other outside advisors that the Compensation Committee selects or receives advice from, and being directly responsible for the appointment, compensation and oversight of the work of any consultants and advisors retained by the Compensation Committee;

 

   

Overseeing Cadence’s human capital management practices, including periodically reviewing the development, implementation and effectiveness of Cadence’s policies and strategies relating to talent management and development, talent acquisition, culture, employee engagement, and diversity, equity and inclusion; and

 

   

Overseeing Cadence’s compliance with the compensation recovery policy.

The Compensation Committee believes that having an outside evaluation of executive officer salary, bonus and equity compensation is a valuable tool for the Compensation Committee and Cadence stockholders. In fiscal 2023, the Compensation Committee retained the services of a compensation consultant, Semler Brossy Consulting Group, LLC (“Semler Brossy”), for advice regarding the compensation of Cadence’s executive officers and Board. The Compensation Committee retained Semler Brossy for a number of purposes, including constructing and reviewing peer groups for compensation comparison purposes, performing a competitive assessment of Cadence’s compensation programs, practices and levels for its executive officers and certain other employees and providing information on typical industry practices concerning employment, equity practices, severance and change in control agreements. Semler Brossy has not been engaged to perform any other work for Cadence. Pursuant to the factors set forth in Item 407 of Regulation S-K promulgated by the SEC and the Nasdaq listing standards, the Compensation Committee has reviewed the independence of Semler Brossy and conducted a conflicts of interest assessment, and has concluded that Semler Brossy is independent and Semler Brossy’s work for the Compensation Committee has not raised any conflicts of interest.

In determining the compensation of Cadence’s executive officers, including Cadence’s named executive officers (as defined below in “Compensation Discussion and Analysis”), the Compensation Committee considers the competitive assessments provided by and through consultation with Semler Brossy. In addition, Cadence’s CEO typically makes assessments and recommendations to the Compensation Committee on whether there should be adjustments to the annual base salary, annual cash incentive compensation and equity incentive compensation of executive officers other than himself based upon an assessment of certain factors described in “Compensation Discussion and Analysis” below. The Compensation Committee reviews such assessments and recommendations and determines whether or not to approve or modify the CEO’s recommendations. The Compensation Committee’s decisions are made, however, by the Compensation Committee in its sole discretion. See “Compensation Discussion and Analysis” below for more information.

The Compensation Committee, in consultation with Semler Brossy, reviews Cadence’s compensation practices, policies and programs for all employees, including the named executive officers, to assess the risks associated with such practices, policies and programs. The risk-mitigating factors considered by the Compensation Committee include the following:

 

   

The use of different types of compensation that provide a balance of short-term and long-term incentives with fixed and variable components;

 

   

Cadence’s Securities Trading Policy, which restricts certain transactions in Cadence’s securities, prohibits hedging by members of the Board and all employees and requires executive officers and

 

 

 

    LOGO   13


Table of Contents
   

members of the Board to obtain permission from the General Counsel or their designee before trading any shares of Cadence common stock, except those transactions expressly permitted in such policy;

 

   

Cadence’s Clawback Policy, which generally provides for the mandatory recovery of erroneously awarded incentive compensation from our current and former executive officers in the event of an accounting restatement;

 

   

Caps on bonus awards to limit windfalls; and

 

   

The consideration of ethical behavior, which is integral in assessing the performance of all executive officers, including the named executive officers.

The Compensation Committee held three meetings during fiscal 2023.

Corporate Governance and Nominating Committee

The Board has determined that all five members of the Corporate Governance and Nominating Committee are “independent” as defined by the Nasdaq listing standards.

The Corporate Governance and Nominating Committee charter was last amended in February 2024. The duties and responsibilities of the Corporate Governance and Nominating Committee include:

 

   

Determining the Board’s criteria for selecting new directors and recommending to the Board director nominees for election at the next annual or special meeting of stockholders at which directors are to be elected or to fill any vacancies or newly created directorships that may occur between such meetings;

 

   

Considering potential director candidates recommended by Cadence’s management and stockholders in the same manner as nominees identified by the Corporate Governance and Nominating Committee; provided that, with respect to those candidates recommended by stockholders, such stockholders have provided Cadence with a notice that sets forth information as to such stockholders and director candidates in accordance with Cadence’s Bylaws;

 

   

Overseeing the annual evaluation of the Board and its committees, and considering the results of the annual evaluation;

 

   

Retaining, terminating and approving the fees and retention terms with respect to any search firm employed to identify director candidates;

 

   

Evaluating, at least annually, each director’s performance and effectiveness and determining whether the Board desires his or her continued service;

 

   

Overseeing the administration of the Code of Business Conduct and administering the Code of Business Conduct with respect to Cadence’s directors and executive officers;

 

   

Reviewing and approving any related party transactions and recommending to the full Board for approval policies and procedures for the review, approval and ratification of such transactions and amendments to such policies and procedures;

 

   

Reviewing whether it is appropriate for a director to continue to serve as a member of the Board if his or her business responsibilities or personal circumstances change and making a recommendation to the Board as to any action to be taken with respect to such change;

 

   

Determining whether to approve any director (a) accepting employment, directorship, consulting engagement, advisory board position or any other affiliation with another company or (b) starting a new business which may be, or give the appearance of, a conflict of interest;

 

   

Overseeing the orientation program that Cadence provides to new directors and making recommendations regarding director continuing education programs; and

 

 

 

14   LOGO    


Table of Contents
   

Overseeing Cadence’s policies and practices regarding corporate social responsibility and sustainability programs, including environmental / climate-related, social and governance matters and initiatives, and reporting to the Board at least annually on such programs (with the Compensation Committee having primary responsibility relating to human capital management).

The Corporate Governance and Nominating Committee regularly discusses and annually reviews the appropriate size of the Board, whether any vacancies on the Board are expected due to retirement or otherwise, and the need for particular expertise on the Board. If vacancies on the Board are anticipated or otherwise arise, the committee considers potential director candidates, which may come to the committee’s attention through a variety of channels, including current directors, officers, professional search firms, stockholders or other persons. The Corporate Governance and Nominating Committee makes a recommendation to the full Board as to the persons who should be nominated or elected by the Board, and the Board determines whether to reject, elect or nominate the candidate, as the case may be, after considering the recommendation of the committee.

The Corporate Governance and Nominating Committee held three meetings during fiscal 2023.

Finance Committee

The Finance Committee, on behalf of the Board, evaluates and approves financings, mergers, acquisitions, divestitures and other financial commitments of Cadence to third parties and has the authority to approve those that involve amounts up to $200 million. The Finance Committee charter was last amended in July 2020.

The Finance Committee held five meetings during fiscal 2023.

COMPONENTS OF DIRECTOR COMPENSATION

The Compensation Committee, with input from its independent compensation consultant Semler Brossy, annually reviews and recommends to the Board the compensation program for directors who are not employees of Cadence. Directors who are Cadence employees, such as Dr. Devgan, do not receive additional compensation for their service on the Board. In setting non-employee director compensation, the Compensation Committee considers the competitiveness of Cadence’s director compensation from a number of different perspectives, including average total compensation, aggregate compensation for the full Board and individual director compensation as differentiated by committee membership and leadership roles. The Compensation Committee also reviews Cadence’s director compensation relative to Cadence’s peer group, which is also used to determine market levels for executive compensation (see “Compensation Discussion and Analysis” below for more information).

The following table sets forth the components of the non-employee directors’ compensation for fiscal 2023:

 

 Compensation Component   Director Compensation

Annual Retainer(1)

  $80,000

Lead Independent Director Fees(2) (3)

  $80,000 for Lead Independent Director

Chair Fees(3)

 

$80,000 for Board Chair(4)

 

$40,000 for Chair of the Audit Committee

 

$30,000 for Chair of the Compensation Committee, Corporate Governance and Nominating Committee and Finance Committee

Meeting Attendance Fees(5)

 

$2,000 per meeting attended in person or by videoconference

 

$1,000 per meeting attended by telephone

 

 

 

    LOGO   15


Table of Contents
 Compensation Component   Director Compensation

Incentive Stock Award(6)

  Incentive stock award with a grant date fair value of $219,997 for each non-employee director that fully vests on the first anniversary of the date of grant

New Director Equity Award (one-time grant)

  Each non-employee director who joins the Board may be granted incentive stock awards, stock options and restricted stock units (“RSUs”) under the 1995 Directors Stock Incentive Plan (the “Directors Plan”), the amounts of which are determined at the sole discretion of the Board or its designated committee

Stock Ownership Guidelines(7)

  Each non-employee director is required to hold shares of Cadence common stock with a value equal to at least $375,000 within five years of initial appointment or election to the Board

 

(1) 

The annual retainer fees paid to our non-employee directors are typically paid quarterly, with proration for partial terms served. Directors may elect to defer cash compensation payable to them under Cadence’s deferred compensation plan. These deferred compensation amounts are credited to participant accounts, with values indexed to the performance of mutual funds or money market accounts selected by the participant. Cadence does not match contributions made under Cadence’s deferred compensation plan.

 

(2) 

Dr. Shoven served as Lead Independent Director of the Board until the 2023 Annual Meeting of Stockholders.

 

(3) 

Chair and Lead Independent Director fees are typically paid quarterly.

 

(4)

Ms. Krakauer has served as Board Chair since the date of the 2023 Annual Meeting of Stockholders. A non-employee director serving as Board Chair is also eligible to receive fees for service as the Chair of any of the Board committees.

 

(5) 

No additional compensation is paid when the Board or a committee acts by unanimous written consent in lieu of a meeting. Non-employee directors are also eligible for reimbursement of expenses they incur in connection with attending Board meetings in accordance with Cadence’s expense reimbursement policy.

 

(6) 

On May 4, 2023, each then-serving non-employee director was granted an incentive stock award of 1,073 shares of Cadence common stock under the Directors Plan (which award had a grant date fair value of approximately $219,997). Incentive stock awards granted to each of the non-employee directors will vest in their entirety on the earlier to occur of (i) the first anniversary of the grant date or (ii) the date of the next annual meeting of stockholders, provided that the director continues to serve Cadence on that date.

 

(7) 

As of the Record Date, all directors met the stock ownership guidelines applicable to them. Separately, Cadence’s Securities Trading Policy restricts certain transactions in Cadence securities, as discussed above under “Anti-Hedging Policy and Trading Restrictions.”

In addition, a medical and prescription benefits coverage reimbursement plan is available to active non-employee directors who were directors on December 31, 2014 (the “Eligible Directors”), eligible retired directors who retired from the Board on or prior to December 31, 2014 (the “Eligible Retired Directors”) and their respective dependents (the “Medical Reimbursement Plan”). Directors first elected or appointed to the Board after December 31, 2014 are not eligible to participate in the Medical Reimbursement Plan. Eligible Directors and their dependents may obtain coverage under the Medical Reimbursement Plan during their term of service on the Board. Eligible Retired Directors, Eligible Directors and their dependents may continue coverage under the Medical Reimbursement Plan starting immediately after the director’s termination of service for a continuous term not to exceed such director’s term of service on the Board.

A director’s eligibility for participation in the Medical Reimbursement Plan immediately ceases if the plan administrator determines that he or she has violated the Code of Business Conduct or is engaged as an

 

 

 

16   LOGO    


Table of Contents

employee, consultant, director or advisor of, or significant investor in, a competitor of Cadence. Under the Medical Reimbursement Plan, Cadence reimburses 100% of the premiums for participants and their dependents up to a maximum of $20,000 for expenses incurred per calendar year, which maximum amount may be adjusted for future changes in medical costs. Benefits under the Medical Reimbursement Plan are fully taxable to the participants and Cadence does not gross up reimbursement payments to cover any such taxes.

DIRECTOR COMPENSATION FOR FISCAL 2023

The following table sets forth the compensation earned in fiscal 2023 by Cadence’s directors (other than Dr. Devgan) who served on the Board in fiscal 2023. Dr. Devgan, Cadence’s President and CEO, and Lip-Bu Tan, former Executive Chair, did not receive any additional compensation for serving as director in fiscal 2023. Dr. Devgan’s compensation is disclosed in the Compensation Discussion and Analysis and Compensation of Executive Officers sections of this proxy statement.

 

 Name  

Fees Earned
or Paid in
Cash

($)

    Stock
Awards
($)
(1)(2)
   

Option
Awards

($)(3)

  All Other
Compensation
($)
(4)(5)
   

Total

($)

 

Mark W. Adams

    144,000         219,997         —         364,737  

Ita Brennan

    142,000         219,997         —         362,420  

Lewis Chew

    158,000         219,997         —         379,184  

ML Krakauer

    162,747         219,997         —         384,808  

Julia Liuson

    102,000         219,997         —         321,997  

James D. Plummer

    114,000         219,997         —         334,737  

Alberto Sangiovanni-Vincentelli

    114,000         219,997         17,314         357,711  

John B. Shoven

    141,473         219,997         16,036         378,245  

Young K. Sohn

    138,000         219,997         —         357,997  

Lip-Bu Tan

    —                 427,143         427,143  

 

(1) 

In accordance with SEC rules, the amount shown reflects the grant date fair value of stock awards granted during fiscal 2023 calculated pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 (Compensation — Stock Compensation) (“FASB ASC 718”). The assumptions used to calculate the valuation of the stock awards for fiscal 2023 are set forth in Note 9 to the Notes to Consolidated Financial Statements in Cadence’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The amount shown is based on the price of Cadence common stock on the date the award was granted and does not reflect any fluctuations in the price of Cadence common stock subsequent to the grant date. The amount shown therefore may not reflect the financial benefit that the holder of the award will actually realize upon the vesting of the award.

 

(2) 

As of December 31, 2023, the number of unvested shares of restricted stock held by each director other than Dr. Devgan was as follows:

 

Mark W. Adams

    1,073    

James D. Plummer

    1,073  

Ita Brennan

    1,073    

Alberto Sangiovanni-Vincentelli

    1,073  

Lewis Chew

    1,073    

John B. Shoven

    1,073  

ML Krakauer

    1,073    

Young K. Sohn

    1,073  

Julia Liuson

    1,073    

Lip-Bu Tan

    235,984  

 

 

 

    LOGO   17


Table of Contents
(3) 

No option awards were granted to the directors, other than Dr. Devgan, during fiscal 2023. As of December 31, 2023, the number of outstanding stock options held by each director other than Dr. Devgan was as follows:

 

Mark W. Adams

    0    

James D. Plummer

    0  

Ita Brennan

    0    

Alberto Sangiovanni-Vincentelli

    10,000  

Lewis Chew

    0    

John B. Shoven

    0  

ML Krakauer

    0    

Young K. Sohn

    0  

Julia Liuson

        0    

Lip-Bu Tan

    785,520

 

(4) 

The amounts listed in the “All Other Compensation” column above for Dr. Sangiovanni-Vincentelli and Dr. Shoven consist of reimbursements pursuant to the Medical Reimbursement Plan described above.

 

(5)

Mr. Tan served as Executive Chair through the date of the 2023 Annual Meeting of Stockholders and as an employee throughout 2023. The amounts listed in the “All Other Compensation” column above for Mr. Tan consist of his base salary and cash incentive compensation for 2023 for his services as an employee.

BOARD DIVERSITY MATRIX

The table below provides certain highlights of the composition of our current Board. Each of the categories listed in the below table has the meaning as it is used in the Nasdaq listing standards.

 

Board Diversity Matrix (As of March 4, 2024)  

 Board Size:

 

 Total Number of Current Directors

     10   

 Gender:

     Male        Female        Non-Binary       

Gender

Undisclosed

 

 

Number of directors based on gender identity

     7        3        0        0  

 Number of directors who identify in any of the categories below:

 

        

African American or Black

     0        0        0        0  

Alaskan Native or American Indian

     0        0        0        0  

Asian

     3        1        0        0  

Hispanic or Latinx

     0        0        0        0  

Native Hawaiian or Pacific Islander

     0        0        0        0  

White

     4        2        0        0  

Two or More Races or Ethnicities

     0        0        0        0  

LGBTQ+

     0  

Undisclosed

     0  

 

 

 

18   LOGO    


Table of Contents

STOCKHOLDER ENGAGEMENT

 

 

Cadence values and actively solicits input from its stockholders, which directly informs the Board’s decision-making on a variety of topics. In addition to management’s regular engagement with stockholders throughout the year, the Board Chair annually leads a robust outreach program to obtain stockholder feedback on numerous important issues, which in 2023 included our ESG program, sustainable business practices, board composition and refreshment, culture, diversity, equity and inclusion, executive compensation, and the results of the 2023 Annual Meeting of Stockholders. For our engagement in the fall of 2023, Cadence reached out to more than 20 stockholders representing over half of our outstanding shares.

Cadence continues to welcome stockholder feedback on these and other matters of importance and will incorporate such feedback appropriately into its decision-making and approach to stockholder engagement and corporate governance. The Board’s leadership and management plan to continue to engage with stockholders throughout 2024.

COMMUNICATION WITH DIRECTORS

Stockholders interested in communicating directly with the Board may do so by sending a letter to the following address:

Cadence Design Systems, Inc.

Board of Directors

c/o the Office of the Corporate Secretary

2655 Seely Avenue, Building 5

San Jose, California 95134

The Corporate Secretary will review the correspondence and will transmit such communications as soon as practicable to the identified director addressee(s), unless there are legal or other considerations that mitigate against further transmission of the communication, as determined by the Corporate Secretary. In that regard, certain items that are unrelated to the duties and responsibilities of the Board will not be forwarded by the Corporate Secretary, such as business solicitations or advertisements, junk mail and mass mailings, new product suggestions, product complaints, product inquiries, resumes and other forms of job inquiries, spam and surveys. In addition, material that the Corporate Secretary determines is unduly hostile, threatening, illegal or similarly unsuitable will be excluded, with the provision that the Board or individual directors so addressed will be advised of any communication withheld for legal or other considerations as soon as practicable.

 

 

 

    LOGO   19


Table of Contents

MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING

PROPOSAL 1: ELECTION OF DIRECTORS

 

 

The Corporate Governance and Nominating Committee has recommended, and the Board has nominated, the nine nominees named below for election to the Board. Each director elected at the Annual Meeting will hold office until Cadence’s 2025 Annual Meeting of Stockholders and until his or her successor is elected and qualified, or until the director’s earlier resignation, removal or death.

Each nominee listed below is currently a Cadence director, and all nominees were previously elected by Cadence stockholders at the 2023 Annual Meeting of Stockholders.

DIRECTOR QUALIFICATIONS AND DIVERSITY OF BACKGROUND

The Board believes that the Board, as a whole, should possess a combination of skills, professional experience and diversity of backgrounds necessary to oversee Cadence’s business and that there are certain attributes that every director should possess, as reflected in the Board’s membership criteria. Accordingly, the Board and the Corporate Governance and Nominating Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and Cadence’s current and future needs.

The Corporate Governance and Nominating Committee is responsible for developing the Board membership criteria and recommending them to the Board for approval. The criteria, which are set forth in the Corporate Governance Guidelines, include a prospective nominee’s integrity, experience, judgment, diversity of background (including, among other factors, race, ethnicity and gender), independence, financial literacy, ability to commit sufficient time and attention to Board activities, skills such as an understanding of electronic design, semiconductor and electronics systems technologies, international background and other relevant characteristics. The Corporate Governance and Nominating Committee considers all of these criteria in the context of the needs of the Board from time to time. In addition, the Corporate Governance and Nominating Committee regularly discusses and annually reviews as a committee and with the Board the appropriate experience, skills and characteristics required of directors in the context of the current composition of the Board and its committees. In seeking diversity of background, the Corporate Governance and Nominating Committee seeks a variety of occupational and personal backgrounds and race, ethnicity and gender diversity on the Board in order to obtain a range of viewpoints and perspectives. This annual assessment enables the Board to update the skills and experience it seeks in the Board as a whole, and in individual directors, as Cadence’s needs evolve and change over time, and also enables the Board to assess the effectiveness of its policy to seek a diversity of background on the Board. In identifying director candidates from time to time, the Corporate Governance and Nominating Committee and the Board may establish specific skills and experience that it believes Cadence should seek in order to have an effective board of directors.

 

 

 

20   LOGO    


Table of Contents

DIRECTOR NOMINEE QUALIFICATIONS, SKILLS AND EXPERIENCE

Set forth below is a summary of the qualifications, skills and experience of the director nominees determined by the Corporate Governance and Nominating Committee to be important for an effective Board.

 

 

   Summary of Qualifications, Skills and

   Experience

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

                   

Compensation / Human Capital Management (“HCM”)

Experience in compensation, organizational management, leadership, talent development and identifying, recruiting and motivating top talent

                 
 

Corporate Governance

Experience in corporate governance and compliance at the public company board level

                 
 

Cybersecurity

Understanding cybersecurity risks in enterprise operations

                       
 

Financial Expertise

Experience in evaluating financial statements and capital structures and overseeing financial reporting and internal controls

                     
 

Government / Regulatory / Public Policy

Experience in or working with governmental and regulatory organizations

                               
 

International

Experience with global businesses, operations, strategy and customer bases

                   
 

Marketing

Experience in marketing and branding of products and services and identifying and developing new markets for products and services

                     
 

Operations

Current or former executives with significant operating experience, who are able to provide insight into developing, implementing and assessing an enterprise’s operating plan, business and strategy

                     
 

Risk Management

Experience in overseeing risk management and understanding risks faced by enterprise operations

                 
 

Strategic Planning

Experience in providing insight into developing, implementing and assessing corporate growth strategy, including through acquisitions and other business transactions

                 
 

Technology / Semiconductor / Electronic Design Automation (“EDA”)

Understanding of EDA, semiconductor and electronics systems technologies and related industries; ability to understand and oversee the overall business and strategy of Cadence as an industry leader

                       

 

 

 

    LOGO   21


Table of Contents

DIRECTOR NOMINEES

The Corporate Governance and Nominating Committee believes that all nine director nominees listed below are highly qualified and have the skills and experience required for service on the Board. The biographies set forth below contain information regarding their specific experience, qualifications, attributes and skills that led to the conclusion that each person should serve as a director, in light of our business and structure.

 

 Mark W. Adams

 

LOGO

 

Cadence Committees:

Compensation (Chair)

Finance

 

Occupation:

President and Chief Executive Officer, SMART Global Holdings, Inc.

 

Age:

59

 

Director Since:

2015

 

  

 

Mr. Adams has served as President and Chief Executive Officer of SMART Global Holdings, Inc., a compute, memory and LED solutions provider, since August 2020. He served as Chief Executive Officer of Lumileds Holding B.V., a light engine technology company, from February 2017 to February 2019 and served as President of Micron Technology, Inc., a semiconductor solutions company, from February 2012 to February 2016. From 2006 to February 2012, Mr. Adams served in several positions at Micron Technology, Inc., including interim Chief Financial Officer, Vice President of Worldwide Sales and Vice President of Digital Media. Prior to joining Micron Technology, Inc., Mr. Adams served as Chief Operating Officer of Lexar Media, Inc. in 2006 and as Vice President of Sales and Marketing of Creative Labs, Inc. from 2002 to 2006.

 

Mr. Adams also serves as a director of SMART Global Holdings, Inc. and served as a director of Seagate Technology plc from January 2017 to October 2022.

 

Mr. Adams has extensive executive leadership and management experience from his roles as a chief executive officer and other management positions at a range of technology companies, including in the areas of finance, sales and operations. In addition to his experience as a technology company executive, Mr. Adams contributes to the expertise of our Board from serving and having served as a member of other public company boards.

  

 

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Financial Expertise

•  International

•  Marketing

 

  

•  Operations

•  Risk Management

•  Strategic Planning

•  Technology / Semiconductor / EDA

 

 

 

22   LOGO    


Table of Contents
 Ita Brennan

 

LOGO

 

Cadence Committees:

Audit

Corporate Governance and Nominating (Chair)

 

Occupation:

Former Senior Vice President and Chief Financial Officer, Arista Networks, Inc.

 

Age:

57

 

Director Since:

2020

 

  

 

Ms. Brennan served as Senior Vice President, Chief Financial Officer of Arista Networks, Inc., a cloud networking solutions company, from May 2015 to February 2024. Prior to joining Arista she held several key finance roles, including Chief Financial Officer of QuantumScape Corporation and Chief Financial Officer of Infinera Corporation.

 

Ms. Brennan also serves as a director of Planet Labs PBC and served as a director of LogMeln, Inc. from November 2018 to September 2020.

 

Ms. Brennan has extensive financial and accounting expertise and executive leadership experience from her roles as chief financial officer and other finance positions at companies in the technology industry. In addition to her experience as a chief financial officer, Ms. Brennan contributes to the expertise of our Board from serving and having served as a member of other public company boards.

  

 

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Cybersecurity

•  Financial Expertise

•  Government / Regulatory / Public Policy

  

•  International

•  Marketing

•  Operations

•  Risk Management

•  Strategic Planning

     
     
     
     

 

 Lewis Chew

 

LOGO

 

Cadence Committees:

Audit (Chair)

Finance

 

Occupation:

Former Executive Vice President and Chief Financial Officer, Dolby Laboratories, Inc.

 

Age:

61

 

Director Since:

2020

 

  

 

Mr. Chew served as Executive Vice President and Chief Financial Officer of Dolby Laboratories, Inc., an audio, voice and imaging technology company, from June 2012 to October 2021. He served as Senior Vice President of Finance and Chief Financial Officer of National Semiconductor Corporation, a designer and manufacturer of semiconductor components, from 2001 to 2011. Prior to joining National Semiconductor Corporation, Mr. Chew was a partner at KPMG LLP, an accounting firm.

 

Mr. Chew also serves as a director of Arista Networks, Inc. and served as a director of PG&E Corporation and Pacific Gas and Electric Company from 2009 to 2019. In addition, Mr. Chew is standing for election as a director at Intuitive Surgical, Inc., and plans to serve as a director if he is elected at the company’s annual meeting.

 

Mr. Chew has extensive financial and accounting expertise and executive leadership experience from his roles as chief financial officer at other technology companies and as a partner at a Big 4 accounting firm. In addition to his experience as a chief financial officer and an accounting firm partner, Mr. Chew contributes to the expertise of our Board from serving and having served as a member of other public company boards.

  

 

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Cybersecurity

•  Financial Expertise

•  Government / Regulatory / Public Policy

  

•  International

•  Marketing

•  Operations

•  Risk Management

•  Strategic Planning

 

 

 

    LOGO   23


Table of Contents
 Anirudh Devgan, Ph.D.     

 

LOGO

 

Cadence Committees:

N/A

 

Occupation:

President and CEO Cadence Design Systems, Inc.

 

Age:

54

 

Director Since:

2021

 

  

 

Dr. Devgan has served as CEO of Cadence since December 2021 and President of Cadence since November 2017 and has been a member of the Board since August 2021. Prior to becoming President, he was Executive Vice President and General Manager of the Digital & Signoff and System & Verification groups at Cadence. Prior to joining Cadence in 2012, Dr. Devgan was General Manager and Corporate Vice President of the Custom Design Business Unit at Magma Design Automation. Previous roles include management and technical positions at IBM, where he received numerous awards including the IBM Outstanding Innovation Award. Dr. Devgan is the recipient of the IEEE/SEMI Phil Kaufman Award, has been inducted into the National Academy of Engineering, is an IEEE Fellow, has written numerous research papers, and holds several patents.

 

As our President and CEO with over a decade of service in executive leadership roles at Cadence, Dr. Devgan has thorough knowledge of our strategy, operations, culture and competitive landscape. In addition to Dr. Devgan’s Cadence experiences and insights, he has extensive industry relationships, awards and recognitions, including as an inventor, as well as operational and industry experience acquired from his roles at other technology companies, all of which contribute to his service on our Board.

  

 

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Cybersecurity

•  Financial Expertise

•  International

  

•  Marketing

•  Operations

•  Risk Management

•  Strategic Planning

•  Technology / Semiconductor / EDA

 

 

 

24   LOGO    


Table of Contents
 ML Krakauer

 

LOGO

 

Cadence Committees:

Compensation

Corporate Governance and Nominating

 

Occupation:

Former Executive Vice President and Chief Information Officer, Dell Corporation

 

Age:

67

 

Director Since:

2022

 

  

 

Ms. Krakauer has served as Board Chair since May 2023 and as a director of Cadence since January 2022. Ms. Krakauer retired as executive vice president, Chief Information Officer of Dell Corporation, a global information technology company, in January 2017. Prior to that, she served in various executive positions at EMC Corporation, a global IT infrastructure company, which she joined in 2008, including Executive Vice President, Chief Information Officer in 2016; Executive Vice President, Business Development, Global Enterprise Services during 2015; and Executive Vice President, Global Human Resources from 2012 to 2015. Ms. Krakauer also held executive general management roles at Hewlett-Packard Enterprise, Compaq Computer Corporation and Digital Equipment Corporation.

 

Ms. Krakauer also serves as a director of Proterra Inc. and served as a director of Xilinx, Inc. from October 2017 to February 2022, DXC Technology Company from May 2018 to July 2022 and Mercury Systems, Inc. from July 2017 to October 2023.

 

Ms. Krakauer has extensive information technology and cybersecurity expertise and executive leadership experience from her chief information officer, business development and human resources management roles at technology companies. In addition to her executive leadership experience, Ms. Krakauer contributes to the expertise of our Board from serving and having served as a member of other public company boards.

  

 

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Cybersecurity

•  Financial Expertise

•  International

  

•  Marketing

•  Operations

•  Risk Management

•  Strategic Planning

•  Technology / Semiconductor / EDA

 

 

 

    LOGO   25


Table of Contents
 Julia Liuson

 

LOGO

 

Cadence Committees:

Compensation

Corporate Governance and Nominating

 

Occupation:

President of the Developer Division of Microsoft Corporation

 

Age:

53

 

Director Since:

2021

 

  

 

Ms. Liuson has served as President of the Developer Division of Microsoft Corporation, a global technology provider, since November 2021 and previously served as Corporate Vice President of the Developer Division from 2012 to November 2021. Prior to 2012, Ms. Liuson served in several leadership roles in product and engineering in the Microsoft Visual Studio product line and served as General Manager of Microsoft’s Server and Tools business in Shanghai. Ms. Liuson first joined Microsoft in 1992 and began her career as a software design engineer.

 

Ms. Liuson has extensive product and engineering expertise, technology industry knowledge, cybersecurity experience and operational leadership experience, including in Asia, from her over thirty years at Microsoft Corporation. Ms. Liuson contributes her strategic and international technology industry insights as a member of our Board.

 

  

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Cybersecurity

•  International

  

•  Marketing

•  Operations

•  Risk Management

•  Strategic Planning

     
     
     
     

 

 James D. Plummer, Ph.D.

 

LOGO

 

Cadence Committees:

Audit

Corporate Governance and Nominating

 

Occupation:

John M. Fluke Professor of Electrical Engineering, Stanford University

 

Age:

79

 

Director Since:

2011

 

  

 

Dr. Plummer has been a professor of electrical engineering at Stanford University since 1978 and served as the Dean of the Stanford School of Engineering from 1999 to 2014. Dr. Plummer has received numerous awards for his research and is a member of the National Academy of Engineering. Dr. Plummer directed the Stanford Nanofabrication Facility from 1994 to 2000.

 

Dr. Plummer served as a director of Intel Corporation from 2005 to 2017 and International Rectifier Corporation from 1994 to 2014. In 2023, he was also selected to serve as the inaugural chair of the National Semiconductor Technology Center’s board of trustees.

 

Dr. Plummer has extensive electrical engineering and technical expertise in the broad field of silicon devices and technology, a deep understanding of our industry and competitive landscape, and industry recognition and relationships from his academic and research roles. In addition to his academic and industry expertise, Dr. Plummer contributes to the expertise of our Board from having served as a member of other public company boards.

  

 

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Financial Expertise

  

•  Risk Management

•  Strategic Planning

•  Technology / Semiconductor / EDA

     
     

 

 

 

26   LOGO    


Table of Contents
 Alberto Sangiovanni-Vincentelli, Ph.D.

 

LOGO

 

Cadence Committees:

Corporate Governance and Nominating

Finance

 

Occupation:

Edgar L. and Harold H. Buttner Professor of Electrical Engineering and Computer Sciences, University of California, Berkeley

 

Age:

76

 

Director Since:

1992

 

  

 

Dr. Sangiovanni-Vincentelli was a co-founder of SDA Systems, Inc., a predecessor of Cadence. Dr. Sangiovanni-Vincentelli has been a professor of electrical engineering and computer sciences at the University of California, Berkeley since 1976. He has also served as the President of Fondazione Chips-IT since December 2023. Dr. Sangiovanni-Vincentelli was elected to the National Academy of Engineering in 1998 and received the Kaufman Award from the Electronic Design Automation Consortium in 2001, the IEEE/RSE Wolfson James Clerk Maxwell Medal for his exceptional impact on the development of electronics and electrical engineering or related fields in 2008, the ACM/IEEE A. Richard Newton Technical Impact Award in EDA in 2009, the EDAA Lifetime Achievement Award in 2012 and the BBVA Foundation Frontiers Knowledge Award in Information and Communications Technologies in 2023.

 

Dr. Sangiovanni-Vincentelli also serves as a director of Cy4Gate SpA and KPIT Technologies Ltd.

 

As a pioneer in the EDA industry, co-founder of a predecessor company of Cadence and member of our Board for over 30 years, Dr. Sangiovanni-Vincentelli has a thorough understanding of our business, culture and history. As an accomplished academic and engineer, he also brings critical perspective on industry developments and engineering advancements and contributes his expertise in science, technology and innovation to our Board.

  

 

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Cybersecurity

•  International

  

•  Risk Management

•  Strategic Planning

•  Technology / Semiconductor / EDA

     

 

 

 

    LOGO   27


Table of Contents
 Young K. Sohn

 

LOGO

 

Cadence Committees:

Finance (Chair)

 

Occupation:

Managing Partner, Walden Catalyst Management LLC

 

Age:

67

 

Director Since:

2013

  

 

Mr. Sohn has served as senior advisor at Samsung Electronics, a consumer electronics company, since 2021, and as a founding managing partner at Walden Catalyst Management LLC, a venture capital firm, since November 2021. He previously served as Corporate President and Chief Strategy Officer of Samsung Electronics from 2012 to 2020. Mr. Sohn also served as a senior advisor to Silver Lake Management LLC, a private investment firm, from 2012 through January 2021. In addition, Mr. Sohn served as President and Chief Executive Officer of Inphi Corporation, a provider of high-speed mixed signal semiconductor solutions, from 2007 to 2012. Prior to joining Inphi Corporation, he served as President of Agilent Technologies, Inc.’s Semiconductor Group from 2003 until 2005, as Chief Executive Officer of Oak Technology, Inc. from 1999 until it was acquired by Zoran Corporation in 2003, and in executive positions at Quantum Corporation from 1992 to 1999, including co-President and General Manager.

 

Mr. Sohn served as a director of Arm Holdings plc from 2007 to 2012, Cymer, Inc. from 2003 to 2013 and Inphi Corporation from 2007 to 2012.

 

Mr. Sohn has extensive finance, operations and investment expertise in the semiconductor and broader technology industry from his leadership and advisory roles at technology companies and investment firms. Mr. Sohn brings broad perspective on corporate strategy and international industry trends to our Board. In addition, Mr. Sohn contributes to the expertise of our Board from having served as a member of other public company boards.

  

 

Skills & Qualifications:

 

  
  

•  Compensation / HCM

•  Corporate Governance

•  Financial Expertise

•  International

•  Marketing

 

  

•  Operations

•  Risk Management

•  Strategic Planning

•  Technology / Semiconductor / EDA

TENURE OF DIRECTOR NOMINEES

The Corporate Governance and Nominating Committee regularly reviews the tenure of Cadence’s directors and practices a long-term approach to board refreshment, which is a regular topic in the stockholder engagement sessions led by our Board Chair. A number of changes have occurred in our Board over the past several years as part of our continuing efforts to ensure that our Board has the right skills and tenures to best oversee management and the execution of our strategy and the associated risks. Our Board is of the view that a mix of tenures that takes into consideration appropriate levels of continuity, institutional memory and fresh perspectives is critical in achieving and maintaining a high-performing board. Over half of our director nominees joined the Board within the last five years. The Board will continue to proactively manage its composition to ensure it has the appropriate mix of tenures and the requisite skills to address Cadence’s current and future needs.

The following table sets forth summary of the tenure of the director nominees:

 

Years of Service
(as of the Record Date)

0 – 5 Years

  

6 – 10 Years

  

11 – 15 Years

  

16+ Years

•  Anirudh Devgan

•  Julia Liuson

•  ML Krakauer

•  Ita Brennan

•  Lewis Chew

  

•  Mark W. Adams

  

•  James D. Plummer

•  Young K. Sohn

  

•  Alberto Sangiovanni- Vincentelli

 

 

 

28   LOGO    


Table of Contents

VOTING INFORMATION AND BOARD RECOMMENDATION

The Board recommends a vote FOR the election of each director nominees named in this proxy statement.

The election of directors at the Annual Meeting requires that each director receive the affirmative vote of a majority of the votes cast with respect to that director, which means that the number of shares voted “for” a director must exceed the number of shares voted “against” that director. If, however, the election of directors is contested, the directors will be elected by the vote of a plurality of the shares present in person or represented by proxy and entitled to vote on the proposal. The election this year is not contested, so the majority voting standard outlined above applies.

Under the Corporate Governance Guidelines, in order for an incumbent Cadence director to become a nominee at the Annual Meeting, such director must submit an irrevocable resignation that becomes immediately effective if (1) the number of votes cast “for” such director does not exceed the number of votes cast “against” such director in an election that is not a contested election, and (2) the Board accepts the resignation in accordance with the policies and procedures adopted by the Board for such purpose. If a nominee who is currently serving as a Cadence director is not elected at the Annual Meeting, the Corporate Governance and Nominating Committee will make a recommendation to the Board as to whether to accept or reject such director’s resignation, or whether to take other action. The Board will act on the Corporate Governance and Nominating Committee’s recommendation and publicly disclose (as required by applicable law) its decision and the reasons behind it within 90 days from the date the election results are certified.

If any nominee should be unavailable for election as a result of unexpected circumstances, the Board may designate a substitute nominee or reduce the size of the Board. If the Board designates a substitute nominee, proxies will be voted for such substitute nominee. Each person nominated for election has agreed to be named in this proxy statement and to serve if elected, and Cadence has no reason to believe that any nominee will be unable to serve.

Abstentions will be treated as being present and entitled to vote on the election; however, abstentions will not be counted as votes “for” or “against” directors and will not have an effect on the election of directors. Broker non-votes will be treated as not being entitled to vote on the election of directors, and, therefore, will not be counted for purposes of determining whether the directors have been elected. Unless marked to the contrary, proxies received will be voted FOR the election of each of the nine director nominees.

 

 

 

    LOGO   29


Table of Contents

PROPOSAL 2: APPROVAL OF THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN

 

 

OVERVIEW

Cadence is requesting that stockholders approve the amendment and restatement of the Cadence Design Systems, Inc. Amended and Restated Employee Stock Purchase Plan (the “ESPP” and, as further amended and restated, as proposed in this proxy statement, the “Amended and Restated ESPP”). The ESPP was most recently amended by the Board on March 15, 2018 and approved by the stockholders on May 3, 2018. On February 2, 2024, subject to stockholder approval, the Board approved the Amended and Restated ESPP. If approved by stockholders, the Amended and Restated ESPP would enact the following material changes: (i) increase the number of shares of common stock authorized for issuance under the ESPP by 3,500,000 shares for a total of 81,500,000 shares authorized under the Amended and Restated ESPP, (ii) allow the Board or the Compensation Committee to delegate some or all of its administrative authority under the Amended and Restated ESPP to Cadence officers or other persons to the extent permitted under applicable law, and (iii) align the “Change in Control” definition with the definition used under Cadence’s Omnibus Equity Incentive Plan. If the stockholders do not approve the Amended and Restated ESPP, then the ESPP, as currently in effect prior to the amendment and restatement proposed in this proxy statement, will remain in effect.

REASONS FOR THE PROPOSED INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE

The primary purpose of the Amended and Restated ESPP is to ensure that Cadence will have a sufficient reserve of common stock thereunder to continue to grant purchase rights to its employees, in addition to providing for certain updates to reflect legal compliance and administrative matters. The ESPP provides eligible employees with the opportunity to become Cadence stockholders and participate in Cadence’s success, which aligns the interests of participating employees with those of stockholders. The ESPP also helps to attract and retain employees because employee stock purchase plans are a common benefit offered by Cadence’s competitors and other industry leaders. Approximately three-fourths of Cadence’s eligible employees as of the Record Date were enrolled to participate in the current offering period. As evidenced by the high level of employee participation, Cadence believes that the ESPP is a highly valued benefit that is necessary in order for Cadence to compete with other companies in attracting and retaining employees. In addition, as of the Record Date, a total of 2,954,195 shares were available for future purchases under the ESPP and employees purchased a total of 646,863 shares under the ESPP during fiscal year 2023.

SUMMARY OF THE AMENDED AND RESTATED ESPP

The following summary of the material provisions of the Amended and Restated ESPP is qualified in its entirety by the complete text of the Amended and Restated ESPP, a copy of which is attached as Appendix A to this proxy statement. Except as otherwise indicated in this proposal the terms of the Amended and Restated ESPP are materially consistent with the terms of the ESPP as currently in effect prior to the amendment and restatement proposed in this proxy statement.

Purpose

The purpose of the ESPP is to provide a means by which Cadence can offer its employees, as well as the employees of certain affiliates and related entities designated by the Board, an opportunity to purchase Cadence common stock. In doing so, the ESPP assists Cadence in retaining the services of its employees, securing and retaining the services of new employees, and providing incentives for these persons to exert maximum efforts for the success of Cadence.

 

 

 

30   LOGO    


Table of Contents

The ESPP includes two components: a “423 Component” and a “Non-423 Component.” It is the intention of Cadence to have the 423 Component qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986 (the “Code”). The provisions of the 423 Component, accordingly, will be construed to extend and limit participation on a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code. In addition, the ESPP authorizes the grant of rights under a Non-423 Component that does not qualify as an employee stock purchase plan under Section 423 of the Code. Rights under the Non-423 Component will be granted pursuant to offerings, rules, procedures or sub-plans adopted by the Board designed to achieve tax, securities laws or other objectives for eligible employees, Cadence and designated affiliates and related entities.

Administration

The Board (or its delegate, as described below) administers the ESPP and has the final power to construe and interpret both the ESPP and the rights granted under the ESPP. The Board has the power, subject to the provisions of the ESPP, to determine when and how rights to purchase Cadence common stock will be granted, the provisions of each offering of these rights (which need not be identical), and whether employees of a designated affiliate or related entity of Cadence will be eligible to participate in the ESPP.

The Board may delegate administration of the ESPP to a committee comprised of not less than two Board members. The Board has delegated administration of the ESPP to the Compensation Committee. The ESPP provides that, subject to applicable law, the Board or Compensation Committee may delegate some or all of its authority thereunder to one or more officers of Cadence or other persons or groups of persons as the Board or Compensation Committee deems necessary, appropriate or advisable.

As used in this proxy statement solely with respect to describing the terms of the ESPP, the “Board” refers to the Board itself as well as to any committee or delegate the Board appoints to administer the ESPP.

All determinations by the Board or committee (and its delegates) in carrying out and administering the ESPP and in construing and interpreting the ESPP and any enrollment form or other instrument or agreement relating to the ESPP will be made in the sole discretion of the Board and will be final, binding and conclusive for all purposes and upon all interested persons.

Offerings

The Board implements the ESPP by offering participation rights to all eligible employees during offering periods designated by the Board, which shall not exceed 27 months. Currently, each ESPP offering period is six months long, commencing on February 1 and August 1 of each year, and ending on July 31 and January 31, respectively. If February 1 or August 1 is not a trading day, the offering period will commence on the first trading day after February 1 or August 1, respectively. If July 31 or January 31 is not a trading day, the offering period will end on the last trading day before July 31 or January 31, respectively.

Eligibility

Subject to any additional requirements consistent with the requirements of Section 423 of the Code (only with respect to the 423 Component), any person employed by Cadence or employed by any affiliate or related entity of Cadence which has been designated by the Board as a “designated company” eligible to participate in the ESPP will be eligible to participate in an offering if the employee was employed by Cadence or a “designated company” on the fifteenth day of the month before the first day of the offering period. The Board may specify that employees must be employed for a minimum period in order to participate in the ESPP, provided that such minimum service period must be less than two years. As of December 31, 2023, Cadence had approximately 11,200 employees, of which approximately 98% were eligible to participate in the ESPP, including all of Cadence’s executive officers. Cadence’s non-employee directors are not eligible to participate in the ESPP.

No employee is eligible to participate in the 423 Component of the ESPP if, immediately after the grant of purchase rights, the employee would, directly or indirectly, own stock or hold options possessing 5% or more of the total combined voting power or value of all classes of stock of Cadence or of any Cadence parent or subsidiary, including any stock which the employee may purchase under outstanding rights and options.

 

 

 

    LOGO   31


Table of Contents

In addition, as required by Section 423 of the Internal Revenue Code, with respect to the 423 Component, no employee may accrue the right to purchase shares under the ESPP at a rate that exceeds $25,000 worth of common stock (determined at the fair market value of the shares at the time the right is granted, which fair market value is based upon the closing price of the shares) for any calendar year in which such right is outstanding. The Board can, and has, imposed further limitations on the rate at which employees may accrue the right to purchase shares under the ESPP, as discussed below.

Rights granted in any offering under the ESPP terminate immediately upon cessation of an employee’s employment for any reason, and Cadence will distribute to a former employee all of his or her accumulated contributions, without interest (unless otherwise specified in the offering or required by applicable law), less any accumulated contributions previously applied to the purchase of common stock on the employee’s behalf during the offering.

Participation in the ESPP

The Board has the discretion to designate the maximum percentage (of up to 15%) of gross earnings (before withholding of taxes and other amounts) and dollar amount that eligible employees may contribute toward the purchase of common stock under the ESPP, which the Board may modify from time to time. In the current offering period, eligible employees are permitted to contribute the lesser of a maximum of 15% of their eligible gross earnings (before withholding of taxes and other amounts) and $25,000, and are not permitted to purchase more than 10,000 shares of common stock during any offering period.

Upon an employee’s withdrawal from an offering, Cadence will distribute to the employee his or her accumulated contributions, without interest (unless otherwise specified in the offering or required by applicable law), less any accumulated contributions previously applied to the purchase of common stock on the employee’s behalf during the offering.

Purchase Price

The purchase price at which shares of common stock are sold in an offering under the ESPP shall not be less than the lower of:

 

  (a)

85% of the closing price of a share of common stock on the first day of the offering period; or

 

  (b)

85% of the closing price of a share of common stock on the last day of the offering period.

Purchase of Shares

A participant accumulates the purchase price of the shares by contributions over the course of the offering period. Unless otherwise specifically provided in the offering or permitted by applicable law, a participant may not (i) begin such contributions after the beginning of the offering, (ii) make payments into his or her account by means other than payroll deductions and (iii) make additional payments into his or her account, provided that such participant has not already contributed the maximum dollar amount allowable for the offering.

In connection with offerings made under the ESPP, the Board may specify a maximum number of shares of common stock an employee may be granted the right to purchase and the maximum number of shares of common stock that may be purchased in that offering by all participants. If the total number of shares to be purchased upon exercise of rights granted in the offering exceeds the maximum aggregate number of shares of common stock available for the offering, the Board will make a pro rata allocation of available shares in as nearly a uniform manner as is practicable and equitable as determined by the Board. Unless the employee’s participation is discontinued, his or her right to purchase shares is exercised automatically at the end of the purchase period at the then applicable purchase price.

 

 

 

32   LOGO    


Table of Contents

Shares Subject to the ESPP

Upon stockholder approval of this proposal, an additional 3,500,000 shares of common stock would be reserved for issuance under the Amended and Restated ESPP for an aggregate of 81,500,000 shares authorized. An aggregate of 2,954,195 shares were available for issuance under the ESPP as of the Record Date. The proposed increase in the number of shares authorized for issuance under the Amended and Restated ESPP represents approximately 1.28% of Cadence’s outstanding common stock as of the Record Date. If rights granted under the ESPP expire, lapse or otherwise terminate without being exercised, the shares of common stock not purchased under the rights again become available for issuance under the ESPP.

Effect of Certain Corporate Events

In the event of a dissolution or liquidation of Cadence, all offerings will terminate prior to the consummation of the proposed transaction or, at the Board’s discretion, the purchase date of any offering will be accelerated so that the outstanding rights may be exercised before or concurrent with the proposed transaction. In the event of a “Change in Control” (as defined in the Amended and Restated ESPP), all offerings will terminate immediately prior to the consummation of the Change in Control, unless otherwise provided by the Board. The Board, at its discretion, in lieu of assumption or substitution of the rights under the Amended and Restated ESPP, may provide that participants may exercise outstanding rights. If the Board makes a right exercisable in lieu of assumption or substitution in the event of a Change in Control, the Board must notify participants that their rights under the ESPP will be fully exercisable for a period of 20 days from the date of such notice, or such other period of time as the Board determines, and the right shall terminate upon the expiration of such period. In the case of a spin-off or similar transaction, the Board may take actions including shortening an offering.

Adjustment Provisions

Upon an increase or decrease in the number of issued shares of Cadence common stock resulting from a stock split, the payment of a stock dividend or any other increase or decrease in the number or value of shares of Cadence common stock effected without receipt of consideration by Cadence, the number of shares authorized for issuance under the ESPP, and the number of shares and the price per share of common stock covered by each right under the ESPP that has not yet been exercised, will be proportionately adjusted for any increase or decrease.

Duration, Amendment and Termination

The Board may suspend or terminate the ESPP without stockholder approval at any time. Unless terminated earlier, the ESPP will terminate when all of the shares reserved for issuance under the ESPP, as increased or adjusted from time to time, have been issued.

The Board may also amend the ESPP at any time. However, any amendment of the ESPP must be approved by the stockholders to the extent stockholder approval is necessary for the ESPP to satisfy Section 423 (with respect to the 423 Component) of the Code, Rule 16b-3 under the Exchange Act or any Nasdaq or other applicable securities exchange listing requirements. Generally, under the Code, stockholder approval must be obtained within twelve months before or after its adoption by the Board if the amendment would, among other things:

 

  (a)

increase the number of shares of common stock reserved for issuance under the ESPP;

 

  (b)

modify the provisions regarding eligibility for participation in the ESPP, but only to the extent that Section 423 of the Internal Revenue Code requires stockholder approval of such modification; or

 

  (c)

modify the ESPP in any other way, but only to the extent that Section 423 of the Internal Revenue Code requires stockholder approval of such modification.

Rights granted before any amendment or termination of the ESPP will not be altered or impaired by any amendment or termination of the ESPP without the consent of the employee to whom such rights were granted or as expressly contemplated in the ESPP.

 

 

 

    LOGO   33


Table of Contents

FEDERAL INCOME TAX INFORMATION

The following is only a summary of the federal income tax consequences with respect to the grant and exercise of rights granted under the ESPP based upon applicable federal law as currently in effect, is not complete, does not discuss the income tax laws of any locality, state or foreign country in which a participant may reside, is subject to change and is not intended to be relied upon as tax advice. Participants in the ESPP should consult their own tax advisors regarding the specific tax consequences to them of participating in the ESPP.

423 Component

Rights granted under the 423 Component of the ESPP are intended to qualify for favorable federal income tax treatment associated with an employee stock purchase plan that qualifies under Section 423 of the Internal Revenue Code, which requires stockholder approval of the ESPP and certain amendments.

A participant will be taxed on amounts withheld for the purchase of shares of common stock under the 423 Component of the ESPP as if such amounts were actually received. No other income will be taxable to a participant as a result of participating in the 423 Component of the ESPP until the disposition of the acquired shares, and the effect of taxation will depend on the holding period of the acquired shares.

If there is a specified per participant maximum number of shares that may be purchased during an offering period and if the stock is disposed of more than two years after the first day of the offering period (the “grant date”) and more than one year after the purchase date, if later, then the participant will recognize ordinary income equal to the lesser of:

 

  (a)

the amount, if any, by which the fair market value of the shares at the time of such disposition exceeds the purchase price paid; and

 

  (b)

the amount by which the fair market value of the shares as of the beginning of the offering period exceeds the purchase price determined as of the beginning of the offering period.

Any further gain or any loss will be taxed as a long-term capital gain or loss. Generally, long-term capital gains are currently subject to lower tax rates than ordinary income. Cadence will not be allowed a deduction if the holding period requirements described in this section are satisfied. If the shares are sold or disposed of before the expiration of either of the two holding periods described above, then the amount by which the fair market value of the shares on the purchase date exceeds the purchase price will be treated as ordinary income at the time of disposition. The balance of any gain will be treated as capital gain. Even if the stock is later disposed of for less than its fair market value on the purchase date, the same amount of ordinary income is attributed to the participant, and a capital loss is recognized equal to the difference between the sales price and the fair market value of the stock on the purchase date. Any capital gain or loss will be short-term or long-term, depending on how long the stock has been held. Cadence will be entitled to a deduction equal to the ordinary income recognized by the employee, but will not be entitled to any deduction with respect to the amount recognized by such employee as capital gain.

Non-423 Component

The Non-423 Component is not intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. A participant will be taxed on amounts withheld for the purchase of shares of common stock under the Non-423 Component of the ESPP as if such amounts were actually received. A participant will also recognize taxable income as a result of purchasing shares under the Non-423 Component of the ESPP. The participant will recognize ordinary income on the purchase date in an amount equal to the difference between the fair market value of the shares purchased on the purchase date and the purchase price paid for the shares and Cadence will be entitled to a corresponding deduction. Upon subsequent resale of the shares, the difference between the sale price and the fair market value on the purchase date will be treated either as a capital gain or loss.

 

 

 

34   LOGO    


Table of Contents

STOCK PRICE

On the Record Date, the closing price of Cadence common stock as reported by Nasdaq was $317.31.

NEW PLAN BENEFITS

Because benefits under the ESPP depend on employees’ voluntary elections to participate and the fair market value of Cadence common stock at various future dates, it is not possible as of the date of this proxy statement to accurately determine future benefits that will be received by executive officers and other employees under the ESPP.

ESPP SHARES PURCHASED SINCE INCEPTION

The table below provides details on shares purchased under the ESPP from the inception of the ESPP through January 30, 2024.

 

Name and Position   No. of Shares  

Anirudh Devgan, President and Chief Executive Officer

    2,222  

John M. Wall, Senior Vice President and Chief Financial Officer

    29,749  

Neil Zaman, Senior Vice President and Chief Revenue Officer

    28,760  

Paul Cunningham, Senior Vice President GM, System Verification Group

    4,710  

Chin-Chi Teng, Senior Vice President GM, Digital & Signoff Group

    27,249  

All current Executive Officers (as a group)

    115,588  

All current Non-Executive Officer Directors (as a group)

    0  

ESPP Participant who is 5% holder

    0  

All current Non-Executive Officer Employees (as a group)

    75,483,431  

VOTING INFORMATION AND BOARD RECOMMENDATION

The Board recommends a vote FOR approval of the Amended and Restated ESPP.

The affirmative vote of a majority of the voting power of the stock present in person or represented by proxy and entitled to vote on this proposal is required for approval of this proposal. Stockholders will be treated as present whether they attend the Annual Meeting virtually or by proxy. Abstentions will be treated as being present and entitled to vote on this proposal and, therefore, will have the effect of votes against this proposal. Broker non-votes will be treated as not being entitled to vote on the proposal and, therefore, will not be counted for purposes of determining whether this proposal has been approved. Unless marked to the contrary, proxies received will be voted FOR the approval of the Amended and Restated ESPP.

 

 

 

    LOGO   35


Table of Contents

PROPOSAL 3: APPROVAL AND ADOPTION OF THE AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO LIMIT MONETARY LIABILITY OF CERTAIN OFFICERS AS PERMITTED BY LAW

 

 

OVERVIEW

Cadence requests that its stockholders approve and adopt an amendment of the Restated Certificate of Incorporation (the “Charter”) to limit the monetary liability of certain officers to the fullest extent currently permitted by Delaware law. The Charter currently provides for the exculpation of directors in specific circumstances but does not include a provision that allows for the exculpation of officers. The proposed amendment (the “Officer Exculpation Amendment”) would extend exculpation protections to certain officers.

Pursuant to and consistent with Section 102(b)(7) of the Delaware General Corporation Law (the “DGCL”), Article VII of the Charter already eliminates the monetary liability of directors for certain breaches of their fiduciary duty of care. Effective August 1, 2022, Section 102(b)(7) of the DGCL was amended to permit companies to include in their certificates of incorporation limitations of monetary liability for the following officers in certain actions: (i) a corporation’s president, chief executive officer, chief operating officer, chief financial officer, chief legal officer, controller, treasurer and chief accounting officer, (ii) an individual identified as a named executive officer in the corporation’s public SEC filings and (iii) an individual who, by written agreement with the corporation, has consented to be identified as an officer for purposes of Delaware’s long-arm jurisdiction statute. Consistent with Section 102(b)(7) of the DGCL, the Officer Exculpation Amendment would permit exculpation of these officers for breaches of their fiduciary duty of care in any direct claim. The DGCL does not permit the elimination of liability of these officers for:

 

   

Any breach of the duty of loyalty to the company or its stockholders;

 

   

Any acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; or

 

   

Any transaction from which the officer derived an improper personal benefit.

The DGCL also does not permit the limitation of monetary liability of these officers in any action by or in the right of the company, such as a derivative claim.

The Board approved, adopted and declared advisable the Officer Exculpation Amendment on February 2, 2024.

REASONS FOR THE PROPOSED OFFICER EXCULPATION AMENDMENT

The Board took into account the narrow class and type of claims for which these officers would be exculpated, and the benefits it believes the Officer Exculpation Amendment would accrue to Cadence, including, without limitation, (i) the mitigation of the risk of an officer’s financial liability without intentional misconduct, (ii) the ability to attract and retain talented officers and (iii) the potential to reduce future litigation costs associated with frivolous lawsuits. After balancing these considerations, the Board determined that it is in the best interests of Cadence and its stockholders to adopt the Officer Exculpation Amendment.

The summary of the Officer Exculpation Amendment contained in this proposal is qualified in its entirety by reference to the full text of such amendment as set forth in Appendix B to this proxy statement.

 

 

 

36   LOGO    


Table of Contents

VOTING INFORMATION AND BOARD RECOMMENDATION

The Board recommends a vote FOR approval and adoption of the amendment of the Restated Certificate of Incorporation to limit monetary liability of certain officers as permitted by law.

The affirmative vote of a majority of the voting power of the outstanding shares of stock of the Company entitled to vote at the Annual Meeting is required for approval of the proposal. Abstentions and broker non-votes will each have the effect of votes against this proposal. Unless marked to the contrary, proxies received will be voted FOR the approval and adoption of the Officer Exculpation Amendment.

The approval of this proposal is not conditioned upon approval of Proposal 4, which is the other Charter proposal described in this proxy statement. As a result, if this proposal is approved by Cadence stockholders, the Board has authorized the officers of Cadence to file with the Delaware Secretary of State a certificate of amendment that includes the Officer Exculpation Amendment set forth in Appendix B, regardless of whether Proposal 4 is also approved. The Officer Exculpation Amendment will become effective on the date it is filed with the Delaware Secretary of State (or at such later effective date set forth in the Officer Exculpation Amendment). The Board retains the discretion to abandon and not implement the Officer Exculpation Amendment at any time before it becomes effective. If this proposal is not approved by the requisite vote, the Officer Exculpation Amendment will not be implemented.

 

 

 

    LOGO   37


Table of Contents

PROPOSAL 4: APPROVAL AND ADOPTION OF THE AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION REGARDING STOCKHOLDER ACTION BY WRITTEN CONSENT

 

 

OVERVIEW

Cadence requests that its stockholders approve and adopt an amendment of the Charter regarding stockholder action by written consent in lieu of a meeting that balances the important right of allowing stockholders to act by written consent with procedural and other safeguards described below that the Board believes are in the best interests of Cadence and its stockholders. Certain of these provisions were previously included in Cadence’s Bylaws. The Board amended Cadence’s Bylaws on November 2, 2023 to, among other things, delete these provisions after questions were raised about their enforceability as Bylaw provisions. The provisions in the proposed amendment (the “Written Consent Amendment”) are similar to the deleted Bylaw provisions but do not pose the same issues regarding enforceability.

Delaware law permits Cadence stockholders to act between stockholder meetings if consents setting forth an action are signed by persons holding at least the same amount of stock that would be necessary to authorize the action if it were adopted at a meeting where all stock was present and voted. The Board may fix a record date to determine the Cadence stockholders entitled to act by consent. If the action to be taken by consent does not require prior Board approval and the Board does not fix a record date, then the record date is the first date that a Cadence stockholder delivers a consent to Cadence. Delaware law allows Cadence to place additional procedures and safeguards regarding action by written consent in the Charter. The Written Consent Amendment would enact the following provisions.

 

   

As previously included in the provisions recently deleted from Cadence’s Bylaws, to reduce the risk that a small group of short-term, special interest or self-interested stockholders initiate actions that are not in the best interest of Cadence or its stockholders and reduce the financial and administrative burdens on Cadence, stockholders of record must request that the Board fix a record date to determine the stockholders entitled to act by consent and the record date must be requested by Cadence stockholders who “own” (as ownership is determined under the Written Consent Amendment and Cadence’s Bylaws) in the aggregate not less than 25% of all outstanding shares of common stock entitled to vote on the matter.

 

   

As previously included in the provisions recently deleted from Cadence’s Bylaws, to protect against stockholder disenfranchisement, written consents must be solicited from all stockholders in accordance with Regulation 14A of the Exchange Act to ensure that a written consent solicitation statement is publicly filed and gives each stockholder the right to consider and act on a proposal. This protection would also eliminate the possibility that a small group of stockholders could act without a public and transparent discussion of the merits of any proposed action and without input from all stockholders as well as ensure that stockholders can consider the advice of senior officers and directors who owe a fiduciary duty to Cadence and its stockholders.

 

   

As previously included in the provisions recently deleted from Cadence’s Bylaws, to provide transparency, any holder of common stock seeking to act by written consent must provide approximately the same information as currently required to propose a matter to be acted upon at a stockholder meeting or to nominate a director.

 

   

To provide the Board with a reasonable timeframe to properly evaluate and respond to a record date request, the Board must act, with respect to a valid request, to set a record date by the later of (i) 20 days after the date on which the request is received and (ii) 5 days after delivery by the stockholder of any information requested by Cadence to determine the validity of the request and whether the request relates to an action that may be authorized or taken by written consent. The record date must be no more than 10 days after the Board action to set a record date. Should the Board fail to set a record date by the

 

 

 

38   LOGO    


Table of Contents
   

required date, the record date shall be the date the first signed stockholder written consent is properly delivered to Cadence; provided that if prior action by the Board is required under the DGCL, the record date shall be the date on which the Board adopts the resolution taking such prior action.

 

   

To ensure that the written consent is in compliance with applicable laws and is not duplicative, the written consent process would not be available in a limited number of circumstances, including:

 

   

If the record date request does not comply with the requirements of the Written Consent Amendment or was made in a manner that involved a violation of Regulation 14A promulgated under the Exchange Act or other applicable law;

 

   

If the record date request is received by Cadence during the period commencing 90 days prior to the first anniversary of the date of the preceding year’s annual meeting of stockholders and ending on the date of the next annual meeting of stockholders;

 

   

If the record date request relates to an item of business that is not a proper subject for stockholder action under applicable law;

 

   

An identical or substantially similar item of business (as determined in good faith by the Board, a “Similar Item”) was presented at any meeting of stockholders held within the 90 days prior to delivery of the record date request to Cadence; or

 

   

A Similar Item is included in Cadence’s notice of meeting as an item of business to be brought before a meeting of stockholders that has been called but not yet held or that is called to be held within 90 days after delivery of the record date request to Cadence.

Under the Written Consent Amendment, the election or removal of directors is deemed a “Similar Item” with respect to other items of business impacting the size or composition of the Board.

The Board approved, adopted and declared advisable the Written Consent Amendment on February 2, 2024.

REASONS FOR THE PROPOSED WRITTEN CONSENT AMENDMENT

After careful consideration, the Board has determined that adoption of this proposal would allow stockholders to retain their ability to fully exercise their voting rights without needing to convene at a meeting of stockholders while also protecting Cadence and its stockholders from abuse of the written consent process.

The summary of the Written Consent Amendment is qualified in its entirety by reference to the full text of such amendment as set forth in Appendix C to this proxy statement. In addition, this proposal, if approved, will amend Article VIII of the Charter to include the Written Consent Amendment, and re-number the existing Article VIII and Article IX to Article IX and Article X, respectively, including any cross-references to such sections in the Charter, as shown in Appendix C to this proxy statement.

VOTING INFORMATION AND BOARD RECOMMENDATION

The Board recommends a vote FOR approval and adoption of the amendment of the Charter regarding stockholder action by written consent.

The affirmative vote of a majority of the voting power of the outstanding shares of stock of the Company entitled to vote at the Annual Meeting is required for approval of this proposal. Abstentions and broker non-votes will each have the effect of votes against this proposal. Unless marked to the contrary, proxies received will be voted FOR the approval and adoption of the Written Consent Amendment.

The approval of this proposal is not conditioned upon approval of Proposal 3. As a result, if this proposal is approved by Cadence stockholders, the Board has authorized the officers of Cadence to file with the Delaware Secretary of State a certificate of amendment that includes the Written Consent Amendment set forth in Appendix C, regardless of whether Proposal 3 is also approved. The Written Consent Amendment will become effective on the date it is filed with the Delaware Secretary of State (or at such later effective date set forth in the Written Consent Amendment). The Board retains the discretion to abandon and not implement the Written Consent Amendment at any time before it becomes effective. If this proposal is not approved by the requisite vote, the Written Consent Amendment will not be implemented.

 

 

 

    LOGO   39


Table of Contents

PROPOSAL 5: ADVISORY RESOLUTION TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

 

 

Pursuant to Section 14A of the Exchange Act, Cadence stockholders are entitled to vote to approve, on an advisory (non-binding) basis, the compensation of Cadence’s named executive officers as disclosed in this proxy statement. This proposal, which is commonly known as the “say-on-pay” proposal, provides stockholders the opportunity to express their views on the named executive officers’ compensation. Cadence has held a vote on the say-on-pay proposal annually, as determined by the Board and consistent with the past advisory vote by Cadence stockholders. The next say-on-pay proposal is expected to occur at the 2025 Annual Meeting of Stockholders.

The Board and the Compensation Committee value feedback from Cadence stockholders on executive compensation and will review and consider the voting results when evaluating Cadence’s executive compensation program. At the 2023 Annual Meeting of Stockholders, approximately 89% of votes cast by Cadence stockholders approved the compensation of the named executive officers as disclosed in the 2023 proxy statement. Over the past five years, our say-on-pay proposals have had an average level of stockholder support of approximately 92% of the votes cast. In deciding how to vote on this proposal, stockholders are encouraged to read the “Compensation Discussion and Analysis” and the related tables and narrative in this proxy statement for the details of Cadence’s executive compensation program. As described in “Compensation Discussion and Analysis” below, the Board and the Compensation Committee designed Cadence’s executive compensation program to support the long-term success of Cadence and the creation of stockholder value. Cadence’s executive compensation program for fiscal 2023 tied a significant majority of the named executive officers’ compensation to performance. As a result, the pay-for-performance component in Cadence’s executive compensation program should be considered an important factor in Cadence’s strong performance in fiscal 2023, including its revenue of $4.090 billion for the year.

The Board and the Compensation Committee believe that the leadership provided by Cadence’s management team, including the named executive officers, was key to Cadence’s execution and strong performance in fiscal 2023, which contributed to a total stockholder return of 526% over the five fiscal year period through 2023. In accordance with Section 14A of the Exchange Act, Cadence is asking its stockholders to approve the following advisory resolution at the Annual Meeting:

RESOLVED, that the compensation paid to Cadence’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K of the Exchange Act, including the “Compensation Discussion and Analysis,” compensation tables and narrative discussion in this proxy statement, is hereby APPROVED.

Cadence stockholders should note that because the advisory vote on named executive officer compensation occurs well after the beginning of the compensation year, and because the different elements of Cadence’s executive compensation program are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or feasible to change such executive compensation program in consideration of any one year’s advisory vote on named executive officer compensation by the time of the following year’s annual meeting of stockholders.

VOTING INFORMATION AND BOARD RECOMMENDATION

The Board recommends a vote FOR the advisory resolution to approve named executive officer compensation.

The affirmative vote of a majority of the voting power of the stock present in person or represented by proxy and entitled to vote on this proposal is required for approval of this proposal. Stockholders will be treated as present whether they attend the Annual Meeting virtually or by proxy. Abstentions will be treated as being present and entitled to vote on this proposal and, therefore, will have the effect of votes against this proposal. Broker non-votes will be treated as not being entitled to vote on this proposal and, therefore, will not be counted for purposes of determining whether this proposal has been approved. Unless marked to the contrary, proxies received will be voted FOR the advisory resolution to approve named executive officer compensation.

 

 

 

40   LOGO    


Table of Contents

PROPOSAL 6: RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

The Audit Committee has selected PricewaterhouseCoopers LLP (“PwC”) as Cadence’s independent registered public accounting firm for the fiscal year ending December 31, 2024. PwC has served as our independent registered public accounting firm since February 26, 2020. Pursuant to the Audit Committee charter, the Audit Committee and the Board have directed management to submit the selection of the independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Representatives from PwC 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 PwC as Cadence’s independent registered public accounting firm is not required by Cadence’s Bylaws or otherwise. However, the Board is submitting the selection of PwC to the stockholders for ratification as a matter of good corporate practice. If Cadence stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PwC. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year, if it determines that such a change would be in the best interests of Cadence and its stockholders.

VOTING INFORMATION AND BOARD RECOMMENDATION

The Board recommends a vote FOR ratification of the selection of PwC as Cadence’s independent registered public accounting firm.

The affirmative vote of a majority of the voting power of the stock present in person or represented by proxy and entitled to vote on this proposal is required for approval of this proposal. Stockholders will be treated as present whether they attend the Annual Meeting virtually or by proxy. Abstentions will be treated as being present and entitled to vote on this proposal and, therefore, will have the effect of votes against this proposal. This proposal is considered a routine matter, and brokers are therefore permitted to exercise discretionary voting authority and vote shares held by them if the beneficial owners of the shares do not provide voting instructions. Unless marked to the contrary, proxies received will be voted FOR ratification of the selection of PwC.

 

 

 

    LOGO   41


Table of Contents

AUDIT COMMITTEE REPORT

 

 

The Audit Committee is currently comprised of four directors of Cadence who are “independent” as defined by Nasdaq’s listing standards and the Exchange Act. The Audit Committee met five times in fiscal 2023.

The Audit Committee operates under a charter that is available on the Corporate Governance page at www.cadence.com. As more fully described in its charter, the Audit Committee appoints and retains the independent registered public accounting firm and oversees the quality and integrity of Cadence’s financial statements, Cadence’s compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications, independence and performance, and the performance of Cadence’s internal audit function, Cadence’s accounting and financial reporting processes and the audits of Cadence’s financial statements on behalf of the Board.

In this context, the Audit Committee has reviewed and discussed the audited financial statements included in Cadence’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 with Cadence’s management and PricewaterhouseCoopers LLP (“PwC”), Cadence’s independent registered public accounting firm. The Audit Committee has also discussed with PwC the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC, as well as PwC’s independence from Cadence and its management. In addition, the Audit Committee has received from PwC the written disclosures and letter regarding PwC’s communications with the Audit Committee concerning these matters and PwC’s independence, as required by the Public Company Accounting Oversight Board. The Audit Committee has also considered whether the provision of non-audit services by PwC to Cadence is compatible with PwC’s independence.

In reliance on the reviews and discussions referred to above, the then-current members of the Audit Committee recommended to the Board, and the Board approved, the inclusion of the audited financial statements in Cadence’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, for filing with the SEC.

AUDIT COMMITTEE

Lewis Chew, Chair

Ita Brennan

James D. Plummer

John B. Shoven

The foregoing Audit Committee report is not soliciting material, is not deemed filed with the SEC and is not to be incorporated by reference in any filing of Cadence under the Securities Act of 1933, as amended, or under the Exchange Act, whether made before or after the date of this proxy statement and irrespective of any general incorporation language in any such filing.

 

 

 

42   LOGO    


Table of Contents

FEES BILLED TO CADENCE BY THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DURING FISCAL 2023 AND 2022

 

 

The following table presents fees incurred by Cadence for professional services rendered by PwC for the fiscal years ended December 31, 2023 and 2022:

 

    Fiscal Year Ended
December 31, 2023
    Fiscal Year Ended
December 31, 2022
 
    (In thousands)  

Audit Fees(1)

  $ 4,624     $ 4,491  

Audit-Related Fees(2)

           
 

 

 

   

 

 

 

Total Audit and Audit-Related Fees

    4,624       4,491  

Tax Fees(3)

    269       288  

All Other Fees(4)

    10       9  
 

 

 

   

 

 

 

Total Fees

  $ 4,903     $ 4,788  
 

 

 

   

 

 

 

 

(1) 

Includes fees for the audit of Cadence’s consolidated financial statements in Cadence’s annual report on Form 10-K, fees for the audit of Cadence’s internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, fees for the review of the interim condensed consolidated financial statements in Cadence’s quarterly reports on Form 10-Q and fees for services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or other engagements.

 

(2) 

Includes fees for assurance and related services that are reasonably related to the performance of the audit or review of Cadence’s consolidated financial statements that are not reported under “Audit Fees.” There were no audit-related fees for fiscal 2023 or fiscal 2022.

 

(3) 

Includes fees for tax compliance, tax planning, tax consulting and transfer pricing services.

 

(4) 

Includes fees for products and services provided by the independent registered public accounting firm, other than the services reported above. Other fees in fiscal 2023 and fiscal 2022 include subscription fees paid to access web-based research software and regulatory applications.

AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee pre-approves, or where permitted by the rules of the SEC, subsequently approves, the audit services and non-audit services provided by Cadence’s independent registered public accounting firm. In accordance with its charter, the Audit Committee has delegated its authority to pre-approve services to the Chair of the Audit Committee or, if the Chair is unavailable, another member of the Audit Committee, provided that such designees present any such approvals to the full Audit Committee at its next regularly scheduled meeting. All of the audit and non-audit fees reported in the table above were approved by the Audit Committee.

 

 

 

    LOGO   43


Table of Contents

PROPOSAL 7: STOCKHOLDER PROPOSAL REGARDING VOTE ON GOLDEN PARACHUTES

 

 

Cadence received a stockholder proposal from John R. Chevedden of 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, who beneficially owns 50 shares of Cadence common stock (the “Proponent”). The Proponent has given Cadence notice of the intent to introduce the following proposal for consideration and action by the stockholders at the Annual Meeting. The proposal may be voted on at the Annual Meeting only if properly presented by the Proponent or the Proponent’s qualified representative at the Annual Meeting.

In accordance with the Federal securities laws, the proposal and supporting statement are presented below as submitted by the Proponent and are quoted verbatim. The proposal and supporting statement may contain assertions about Cadence that Cadence believes are incorrect. The Board has not attempted to refute all assertions and Cadence has not corrected any errors in the proposal or supporting statement.

For the reasons set forth following the Proponent’s proposal, the Board opposes adoption of the proposal and recommends that stockholders vote AGAINST the proposal.

 

Proposal 7 – Shareholder Opportunity to Vote on Excessive Golden Parachutes

Shareholders request that the Board adopt a policy to seek shareholder approval of senior managers’ new or renewed pay package that provides for golden parachute payments with an estimated value exceeding 2.99 times the sum of the executive’s base salary plus target short-term bonus. This proposal only applies to Named Executive Officers.

Golden parachute payments include cash, equity or other compensation that is paid out or vests due to a senior executive’s termination for any reason. Payments include those provided under employment agreements, severance plans, and change-in-control clauses in long-term equity plans, but not life insurance, pension benefits, or deferred compensation earned and vested prior to termination.

“Estimated total value” includes: lump-sum payments; payments offsetting tax liabilities; perquisites or benefits not vested under a plan generally available to management employees; post-employment consulting fees or office expense; and equity awards if vesting is accelerated, or a performance condition waived, due to termination.

The Board shall retain the option to seek shareholder approval at an annual meeting after material terms are agreed upon.

Generous performance-based pay can sometimes be justified but shareholder ratification of golden parachutes better aligns management pay with shareholder interests.

This proposal is relevant even if there are current golden parachute limits. A limit on golden parachutes is like a speed limit. A speed limit by itself does not guarantee that the speed limit will never be exceeded. Like this proposal the rules associated with a speed limit provide consequences if the limit is exceeded. With this proposal the consequences are a non-binding shareholder vote is required for unreasonably high golden parachutes.

This proposal places no limit on long-term equity pay or any other type pay. This proposal thus has no impact on the ability to attract executive talent or discourage the use of long-term equity pay because it places no limit on golden parachutes. It simply requires that extra large golden parachutes be subject to a non-binding shareholder vote at a shareholder meeting already scheduled for other matters.

This proposal is relevant because the annual say on executive pay vote does not have a separate section for approving or rejecting golden parachutes.

 

 

 

44   LOGO    


Table of Contents

The topic of this proposal received between 51% and 65% support at:

FedEx

Spirit AeroSystems

Alaska Air

Fiserv

Please vote yes:

Shareholder Opportunity to Vote on Excessive Golden Parachutes – Proposal 7

 

 

LOGO

VOTING INFORMATION AND BOARD RECOMMENDATION

The Board recommends a vote AGAINST this proposal. The Board has carefully considered this proposal and believes that it is unnecessary and not in the best interests of Cadence and its stockholders. Consequently, the Board recommends a vote AGAINST this proposal for the following reasons.

Cadence’s existing severance and change in control arrangements are reasonable, tailored to the needs of Cadence, and already include a 2.99 times limit on cash severance payments.

To ensure our compensation arrangements remain competitive with our peers, the Compensation Committee regularly reviews industry practices and considers how those practices compare to Cadence’s severance and change in control arrangements.

Cadence’s current cash severance levels, which are only paid in connection with involuntary terminations, are carefully considered, consistent with market practices, and are less than 1.6 times the sum of each executive’s base salary and target bonus, even in a change in control scenario. Cadence’s executives are not entitled to tax gross-ups in connection with any “excess parachute payments” paid in connection with a change in control.

Additionally, while the Board believes that Cadence’s severance arrangements are reasonable and consistent with current market practice, the Compensation Committee recently adopted a new policy to further align our compensation program with stockholder expectations on executive termination pay. The policy provides that Cadence will not enter into arrangements with executive officers providing for cash severance payments in excess of 2.99 times the sum of an executive officer’s annual salary and target bonus without seeking stockholder ratification. As noted above, Cadence’s current cash severance levels are substantially lower than the limit under the policy. Given Cadence’s current severance arrangements and existing 2.99 times policy, the proposal is unnecessary.

The proposal would place Cadence at a competitive disadvantage by limiting Cadence’s ability to attract and retain executives.

Under the proposal, the value of equity that vests in a termination scenario would count against the 2.99 times limit. This limitation would significantly impact Cadence’s ability to attract and retain highly qualified executives with competitive compensation packages and creates uncertainty that would be undesirable for prospective senior executives — particularly if our competitors have not adopted similar restrictions. Our executive severance arrangements provide for partial equity award vesting acceleration upon a qualifying termination of employment that is not in connection with a change in control, and only provide for full equity award vesting acceleration if a qualifying termination of employment occurs in connection with a change in control. Given that our executives’ compensation is heavily weighted towards equity awards, providing for equity award vesting acceleration in the event of a qualifying termination is important to our executive retention strategy. The proposal could have the

 

 

 

    LOGO   45


Table of Contents

result of needing to offer larger pay packages to attract or retain executives. The Board and the Compensation Committee believe that the existing arrangements are appropriate and effective at aligning the interests of our employees with those of our stockholders.

The proposal discourages the use of at-risk, long-term equity incentive awards, which are a key element of Cadence’s executive compensation.

Target direct compensation is comprised of 90.1% long-term equity incentives for our chief executive officer and 79.6% long-term equity incentives for our other named executive officers, excluding any LTP Awards (as defined below in “Compensation Discussion and Analysis”). The LTP Awards further enhance those percentages and reinforce the Compensation Committee’s focus on aligning compensation with stock performance and value creation. Cadence’s stock options provide an opportunity to reward our executives solely to the extent the stock price increases after the date of grant, and the LTP Awards are entirely performance-based and provide value to the recipients only if there are sustained and significant increases in stockholder value during the multi-year performance period of the awards. The proposal would limit our executives’ ability to realize the full value of these awards by imposing an arbitrary limit on all severance benefits, thereby discouraging the use of such equity incentive awards. This would be detrimental to Cadence and its stockholders because these awards are tied to maximizing long-term stockholder value and delivering significant performance results.

Stockholders already have an opportunity to express their approval of Cadence’s compensation practices.

Cadence’s stockholders regularly support our executive compensation program through an annual “say-on-pay” vote. At the 2023 Annual Meeting, stockholders expressed strong support for Cadence’s executive compensation program, with approximately 89% of the votes cast for approval of the advisory “say-on-pay” vote, and an average level of stockholder support of approximately 92% of the votes cast for approval of the advisory “say-on-pay” vote over the past five years. In addition, at the 2023 Annual Meeting of Stockholders, stockholders overwhelmingly approved an amendment to Cadence’s Omnibus Equity Incentive Plan, with such amendment receiving approval from approximately 95% of the votes cast.

The proposal would create a misalignment between executives and stockholders regarding change in control transactions.

Given the high risk of job loss during a change in control transaction, executives may be motivated to seek new employment, rather than stay through the duration of the transaction. If a potential change in control transaction is in the best interests of our stockholders, our executives should focus their full energy on pursuing such transaction, even if it may result in their termination, and not worry about whether stockholders will approve their equity award vesting in connection with a termination. Our current executive compensation program reinforces this message and encourages executives to focus on long-term stockholder interests, rather than personal interests.

For the reasons above, the Board recommends a vote AGAINST Proposal 7.

The affirmative vote of a majority of the voting power of the stock present in person or represented by proxy and entitled to vote on this proposal is required for approval of this proposal. Stockholders will be treated as present whether they attend the Annual Meeting virtually or by proxy. Abstentions will be treated as being present and entitled to vote on this proposal and, therefore, will have the effect of votes against this proposal. Broker non-votes will be treated as not being entitled to vote on this proposal and, therefore, will not be counted for purposes of determining whether this proposal has been approved. Unless marked to the contrary, proxies received will be voted AGAINST this proposal.

 

 

 

46   LOGO    


Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

 

SECURITY OWNERSHIP

The following table sets forth certain information regarding the ownership of Cadence common stock as of March 4, 2024, the Record Date, unless otherwise indicated below, by:

 

   

All those known by Cadence to be beneficial owners of more than 5% of its common stock;

 

   

Each of the current or former executive officers named in the 2023 Summary Compensation Table presented below under “Compensation of Executive Officers;”

 

   

All directors and director nominees; and

 

   

All current executive officers and directors of Cadence as a group.

 

    Beneficial Ownership(1)  

 Beneficial Owner

  Number of
Shares
    Percent of
Total (%)
 
 Greater than Five Percent Stockholders:            

BlackRock, Inc.(2)

    30,577,232       11.21  

55 East 52nd Street
New York, NY 10055

   

The Vanguard Group(3)

    24,503,387       8.99  

100 Vanguard Blvd.
Malvern, PA 19355

   
 Directors and Executive Officers:            

Mark W. Adams(4)(5)(7)

    13,153       *  

Ita Brennan(4)(5)

    7,796       *  

Lewis Chew(4)(5)

    7,843       *  

Paul Cunningham(4)(6)

    111,440       *  

Anirudh Devgan(4)(6)

    595,096       *  

ML Krakauer(4)(5)

    3,705       *  

Julia Liuson(4)(5)

    5,153       *  

James D. Plummer(4)(5)(8)

    29,887       *  

Alberto Sangiovanni-Vincentelli(4)(5)

    54,256       *  

John B. Shoven(4)(5)(9)

    203,787       *  

Young K. Sohn(4)(5)

    14,146       *  

Chin-Chi Teng(4)(6)

    214,792       *  

John M. Wall(4)(6)

    89,097       *  

Neil Zaman(4)(6)

    90,311       *  

All current executive officers and directors as a group (16 persons)(10)

    1,684,745       *  

 

*

Less than 1%.

 

(1) 

This table is based upon information provided by stockholders pursuant to Schedules 13G filed with the SEC and by Cadence’s executive officers and directors. Unless otherwise indicated in the footnotes to this table

 

 

 

    LOGO   47


Table of Contents
 

and subject to community property laws where applicable, Cadence believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned by such stockholder. Beneficial ownership of greater than 5% of Cadence outstanding common stock reflects ownership as of the most recent date indicated under filings with the SEC as noted below, while beneficial ownership of the executive officers and directors is as of the Record Date. Applicable percentages are based on 272,600,859 shares of Cadence common stock outstanding on the Record Date, adjusted as required by rules promulgated by the SEC.

 

(2) 

As of December 31, 2023, based on Amendment No. 17 to its Schedule 13G filed with the SEC on January 31, 2024, BlackRock, Inc. indicated that it beneficially owns 30,577,232 shares, for which it has sole voting power with respect to 28,072,195 shares, shared voting power with respect to none of the shares, sole dispositive power with respect to 30,577,232 shares and shared dispositive power with respect to none of the shares.

 

(3) 

As of December 29, 2023, based on Amendment No. 13 to its Schedule 13G filed with the SEC on February 13, 2024, The Vanguard Group indicated that it beneficially owns 24,503,387 shares, for which it has sole voting power with respect to none of the shares, shared voting power with respect to 363,025 shares, sole dispositive power with respect to 23,333,191 shares and shared dispositive power with respect to 1,170,196 shares.

 

(4) 

Includes shares that executive officers named in the 2023 Summary Compensation Table presented under “Compensation of Executive Officers” and directors of Cadence have the right to acquire within 60 days after the Record Date upon exercise of outstanding stock options as follows:

 

Mark W. Adams

    0    

James D. Plummer

    0  

Ita Brennan

    0    

Alberto Sangiovanni-Vincentelli

    0  

Lewis Chew

    0    

John B. Shoven

    0  

Paul Cunningham

    27,494    

Young K. Sohn

    0  

Anirudh Devgan

    458,641    

Chin-Chi Teng

    106,187  

ML Krakauer

    0    

John M. Wall

    12,545  

Julia Liuson

    0    

Neil Zaman

    29,161  

 

(5) 

Includes shares underlying restricted stock awards that are subject to vesting within 60 days after the Record Date provided that the recipient continuously serves as a member of the Board until the Annual Meeting, which consists of the following amounts for each of the non-employee directors of Cadence:

 

Mark W. Adams

    1,073     James D. Plummer     1,073  

Ita Brennan

    1,073     Alberto Sangiovanni-Vincentelli     1,073  

Lewis Chew

    1,073     John B. Shoven     1,073  

ML Krakauer

    1,073     Young K. Sohn     1,073  

Julia Liuson

    1,073      

 

(6) 

Excludes LTP Awards (defined below in “Compensation Discussion and Analysis”) that are subject to vesting on March 15, 2024 to the extent that performance objectives are achieved, which consists of the following amounts for each of the executive officers named in the 2023 Summary Compensation Table presented under “Compensation of Executive Officers”:

 

Paul Cunningham

    43,101    

John M. Wall

    39,750  

Anirudh Devgan

    79,500    

Neil Zaman

    39,750  

Chin-Chi Teng

    39,750      

 

 

 

48   LOGO    


Table of Contents

  

(7) 

Includes 11,007 shares held by the Adams Family Trust dated 10/27/2000, of which Mr. Adams and his spouse are trustees, and for which Mr. Adams shares voting and investment power with his spouse.

 

(8) 

Includes 25,335 shares held by the Plummer Family Trust, of which Dr. Plummer and his spouse are trustees, and for which Dr. Plummer shares voting and investment power with his spouse.

 

(9) 

Includes 197,254 shares held by the Shoven Family Trust dated 03/01/2012, of which Dr. Shoven and his spouse are trustees, and for which Dr. Shoven shares voting and investment power with his spouse.

 

(10) 

Includes 1,675,088 shares which all current executive officers and directors in the aggregate have the right to acquire within 60 days after the Record Date upon exercise of outstanding stock options.

 

  

 

 

    LOGO   49


Table of Contents

DELINQUENT SECTION 16(a) REPORTS

 

 

 

Section 16(a) of the Exchange Act (“Section 16(a)”) requires the directors and executive officers of Cadence and persons who beneficially own more than 10% of a registered class of Cadence’s equity securities file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities.

To Cadence’s knowledge, based solely on a review of the Section 16(a) reports filed electronically with the SEC and written representations from executive officers and directors that no other reports were required during fiscal 2023, all reports required by Section 16(a) applicable to its executive officers and directors and greater than 10% beneficial owners were filed on a timely basis during fiscal 2023 other than the following: On May 8, 2023, a late Form 4 was filed on behalf of Mr. Sohn to report a transfer of shares to his ex-wife. On July 31, 2023, a late Form 4 was filed on behalf of Dr. Plummer to report a gifting transfer of shares to Plummer Family Trust. On November 3, 2023, a late Form 4 was filed on behalf of Mr. Adams to report a gifting of shares to Adams Family Trust.

 

 

 

50   LOGO    


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

 

 

 

This section discusses the compensation program for Cadence’s named executive officers (the “NEOs”). Cadence’s NEOs for fiscal 2023 were the CEO, the CFO and the three most highly compensated executive officers other than the CEO and the CFO:

 

   

Anirudh Devgan, President and CEO

 

   

John M. Wall, Senior Vice President and CFO

 

   

Neil Zaman, Senior Vice President and Chief Revenue Officer

 

   

Paul Cunningham, Senior Vice President, System Verification Group

 

   

Chin-Chi Teng, Senior Vice President, Digital & Signoff Group

EXECUTIVE SUMMARY

Cadence’s Fiscal 2023 Performance Highlights

Cadence delivered strong financial results in fiscal 2023, driven by growth across all our businesses. Robust design activity and customer demand, coupled with our strong execution, helped us to achieve 15% year-over-year revenue growth. Secular trends of digital transformation, hyperscale computing and autonomous driving, all bolstered by an artificial intelligence (“AI”) super-cycle, fueled strong design activity across the semi and systems space. We achieved record year-end backlog of $6.0 billion and current remaining performance obligations (“cPRO”) of $3.2 billion.

In particular, in fiscal 2023, Cadence:

 

   

Further broadened Cadence.AI generative AI portfolio with introduction of Voltus InsightAI for intelligent power analysis and Celsius Studio for AI-driven full system thermal analysis,

 

   

Grew System Design and Analysis 22% year-over-year, with strong momentum from our Multiphysics platform delivering superior results to customers across multiple segments including Aerospace & Defense, and Automotive,

 

   

Announced Millennium Enterprise Multiphysics Platform, the industry’s first hardware/software platform combining AI, high performance computing and digital twin technology delivering 20x energy efficiency and up to 100x design impact,

 

   

Expanded long-standing collaboration with strategic partners Nvidia and Arm, and

 

   

Achieved another record year for Palladium and Protium hardware systems with momentum across AI, hyperscale, automotive and mobile segments.

The Board and the Compensation Committee believe that the leadership provided by Cadence’s management team was key to Cadence’s continued execution and strong performance in fiscal 2023, which contributed to a total stockholder return (“TSR”) of 71% in fiscal 2023 and 526% over the five fiscal year period through 2023. In addition, during such five fiscal year period, Cadence’s cumulative total return has significantly outperformed that of the S&P 500 Index, the S&P 500 Information Technology Index and the Nasdaq Composite Index, as shown in the graph below. Over the five fiscal year period through 2023, Cadence’s market capitalization increased from $12.1 billion to $74.0 billion.

 

 

 

    LOGO   51


Table of Contents

LOGO

 

(*)

The graph assumes that the value of the investment in Cadence common stock and in each index on December 29, 2018 (including reinvestment of dividends) was $100 and tracks it each year thereafter on the last day of Cadence’s fiscal year through December 31, 2023, and, for each index, on the last day of the calendar year.

Cadence’s Fiscal 2023 Compensation Structure and Mix

Cadence’s fiscal 2023 executive compensation program was designed to be consistent with its executive compensation principles, pay-for-performance philosophy and commitment to sound corporate governance, as summarized below.

 

 

 

52   LOGO    


Table of Contents

As with prior years, a significant majority of the NEOs’ target direct compensation was delivered in the form of at-risk compensation. The graphics below show that the fiscal 2023 target direct compensation, which excludes special awards (if any), for the CEO and the other NEOs was heavily weighted towards at-risk, variable incentive awards (in the form of both short-term cash incentives and equity incentives) rather than base salaries.

 

CEO TARGET COMPENSATION MIX

 

LOGO

  

OTHER NEO AVERAGE TARGET COMPENSATION MIX

 

LOGO

See “Elements of Fiscal 2023 Executive Compensation” below for a more detailed discussion of Cadence’s fiscal 2023 executive compensation program.

Cadence’s Executive Compensation Practices

Cadence continued its commitment to sound corporate governance in its executive compensation program, as demonstrated by the following highlights:

 

   

Compensation Recovery (“Clawback”) Policy. Cadence has a compensation recovery policy that generally provides for the mandatory recovery of erroneously awarded incentive compensation from our current and former executive officers in the event of an accounting restatement.

 

   

Anti-Hedging Policy. Cadence’s Securities Trading Policy prohibits hedging, short-sales and similar transactions by Cadence employees, including its executive officers.

 

   

No Material Perquisites Provided to Executive Officers. Cadence did not provide material perquisites to its executive officers.

 

   

No Tax Gross-Ups. Cadence did not provide tax gross-ups to any of its executive officers and executive officers are not entitled to receive tax gross-ups in connection with a change in control.

 

   

Regular Compensation Risk Review. The Compensation Committee conducts a formal review of the risks associated with Cadence’s executive compensation practices, policies and programs on an annual basis and assesses such risks as part of its regular decision-making process.

 

   

Stock Ownership Guidelines. All of Cadence’s executive officers are in compliance with Cadence’s Stock Ownership Guidelines, which require ownership of shares of Cadence common stock with a minimum value of three times the annual base salary for Cadence’s CEO and the annual base salary for Cadence’s other executive officers, in each case within five years of appointment.

 

   

Independent Compensation Consultant. The Compensation Committee engages its own compensation consultant, Semler Brossy, which does not provide any services to management or otherwise to Cadence and has no prior relationship with any of Cadence’s executive officers.

SAY-ON-PAY

At the 2023 Annual Meeting, stockholders again expressed strong support for Cadence’s executive compensation program, with approximately 89% of the votes cast for approval of the advisory “say-on-pay” vote, and an average

 

 

 

    LOGO   53


Table of Contents

level of stockholder support of approximately 92% of the votes cast for approval of the advisory “say-on-pay” vote over the past five years. The Compensation Committee determined that the company’s executive compensation objectives and compensation elements continued to be appropriate and did not make any changes to the company’s executive compensation program in response to the 2023 say-on-pay vote. In addition, our stockholders regularly affirm that they support our executive compensation program during our routine engagement with them.

DETERMINING EXECUTIVE COMPENSATION

Executive Compensation Objectives

Cadence is engaged in a very competitive industry, and its success depends on its ability to attract, motivate and retain highly qualified, talented and creative executives with the leadership and innovation skills necessary to achieve Cadence’s annual and long-term business objectives. Cadence seeks to accomplish these objectives by means that are designed to be aligned with the long-term interests of its stockholders.

Cadence’s executive compensation program is based on the following principles:

 

   

Total direct compensation and other compensation elements are targeted to be competitive with peer companies and market practices, taking into account each executive officer’s scope of responsibility, impact, criticality and individual performance; and

 

   

A substantial portion of compensation of the executive officers is at-risk and is highly dependent on Cadence’s short-term and long-term financial, operational and stock performance.

The Compensation Committee oversees the executive compensation program and assesses executive compensation on a continuous basis to monitor Cadence’s adherence to these principles. The executive compensation program is designed to be results-oriented and dependent on the achievement of key financial goals, strategic objectives and the long-term performance of Cadence’s stock.

Competitive Compensation Levels

For fiscal 2023, the Compensation Committee assessed the competitiveness of each element of the executive officers’ total direct compensation, including the annualized impact of any outstanding Long Term Plan (“LTP”) Awards, against Cadence’s peer group, as discussed below. The Compensation Committee also periodically reviews the competitiveness of the executive officers’ severance and change in control arrangements and the broad-based employee benefit plans in which the executive officers participate.

In particular, the Compensation Committee considered the competitiveness of the executive officers’ compensation as compared to executives with similar titles and responsibilities at companies with which Cadence competes for executive talent (the “Peer Group”). In order to accurately reflect the pool from which executive talent is drawn and to which it is lost, the Peer Group includes publicly listed companies located throughout the United States that the Compensation Committee deems comparable to Cadence in revenue, market capitalization and scope, are in similar technical fields, and compete in the same talent market as Cadence, each as further described in the Peer Group selection criteria chart below. The Peer Group excludes companies that are foreign or are in businesses or industries that are not considered by the Compensation Committee to be reasonably comparable.

 

 

 

54   LOGO    


Table of Contents
 Selection Criteria   Fiscal 2023 Peer Group

Geographic Location

  Located in the United States

Industry

  Application Software, Communications Equipment, Electronic Components, Electronic Equipment and Instruments, Semiconductor, Internet Services and Infrastructure, IT Consulting and Other Services, Semiconductor Equipment, and Systems Software

Financial Scope

  Revenue and market capitalization of approximately one-third to three times that of Cadence’s trailing twelve-month revenue and market capitalization at the time the Peer Group is determined

In August 2022, the Compensation Committee reviewed the Peer Group that would be used to evaluate fiscal 2023 compensation decisions and removed six companies and replaced with five companies. Three of our Fiscal 2022 Peer Group companies (Citrix Systems, Maxim Integrated Products, and Xilinx) were acquired or in the process of being acquired and were no longer relevant peers. Additionally, given Cadence’s continued revenue and market value growth, three existing Fiscal 2022 Peer Group companies (Dolby Laboratories, National Instruments, and Nutanix) were removed since they were undersized relative to our financial screening criteria (between 0.33x – 3x of Cadence on revenues and less than 0.33x of Cadence on market value). The Compensation Committee reviewed companies that fit the criteria listed above and added five companies that were determined to have closer business and overall scope with Cadence. These new companies included CrowdStrike Holdings, Datadog, Microchip Technology, Palo Alto Networks, and Veeva Systems. The resulting Peer Group had a median revenue of approximately $4.6 billion (calculated based on the most recently available trailing four fiscal quarters as of June 30, 2022) and a median market value of approximately $35 billion (calculated based on the 90-day average as of July 28, 2022). Cadence’s revenue for the same period was approximately $3.3 billion and had a market value of $42 billion. The Compensation Committee considered the balanced positioning on both revenue and market value when making these adjustments.

The Peer Group approved by the Compensation Committee for evaluating fiscal 2023 competitive compensation levels is comprised of the following companies:

 

Fiscal 2023 Peer Group

ANSYS, Inc.

  Keysight Technologies, Inc.   Skyworks Solutions, Inc. 

Autodesk, Inc.

  Marvell Technology, Inc.   Splunk Inc.

Arista Networks

  Microchip Technology   Synopsys, Inc.

CrowdStrike Holdings

  Palo Alto Networks   Veeva Systems

Datadog

  PTC Inc.   Workday, Inc.

Fortinet, Inc.

  ServiceNow, Inc.  

In August 2023, the Compensation Committee reviewed the Peer Group that would be used to evaluate fiscal 2024 compensation decisions and added Advanced Micro Devices (AMD) to the existing peer group.

Compensation Determinations

Consistent with the principles of Cadence’s executive compensation program outlined above, the Compensation Committee determines the market levels of each executive officer’s compensation by reference to the compensation paid by the companies in the Peer Group, with consideration to similar titles and responsibilities. For the purposes of this assessment, the Compensation Committee considers the annual base salary, short-term cash incentive compensation, grants of equity incentive compensation (based on the grant date fair value of such equity awards), and the annualized value of outstanding LTP Awards. For example, the following graph illustrates how

 

 

 

    LOGO   55


Table of Contents

the Compensation Committee views the LTP Awards granted to Dr. Devgan in 2019 and 2022 over their respective five-year performance periods compared to the grant date fair value disclosure rules provided by the SEC.

 

LOGO

Cadence does not target executive compensation at a specific level or percentile relative to compensation provided by the companies in the Peer Group, whether for total direct compensation or any element of executive compensation. Instead, when determining compensation for the executive officers, the Compensation Committee takes into account each of the following compensation factors, without prescribing particular weightings:

 

   

Cadence Compensation Factors:

 

   

Cadence’s financial and operational performance as compared to the performance of the companies in the Peer Group

 

   

Cadence’s relative size and scope of business as compared to the companies in the Peer Group

 

   

Cadence’s budget considerations

 

   

Individual Compensation Factors:

 

   

Compensation paid to executives with similar titles and responsibilities as the individual at the companies in the Peer Group

 

   

Individual performance over the preceding year

 

   

Strategic importance of the individual’s position

 

   

Criticality, experience and ability of the individual to impact corporate and/or business group results

 

   

Marketability and scarcity in the market of the individual’s skills and talents

 

   

Expected future contributions of the individual

 

   

Historical compensation of the individual

 

   

Retention risks related to the individual

 

   

Relative positioning/performance of the individual versus other Cadence executives

The Compensation Committee retains and does not delegate any of its responsibility to determine executive compensation. However, for executive officers other than the CEO, the CEO makes assessments and recommendations to the Compensation Committee on their respective base salaries, short-term cash incentive compensation and equity incentive compensation based upon an assessment of the “Cadence Compensation Factors” and the “Individual Compensation Factors” outlined above. The Compensation Committee then reviews these assessments and recommendations and determines whether to approve or modify the CEO’s recommendations. The Compensation Committee also evaluates the CEO based on the compensation factors described above, and the assessment from such evaluation is used to determine the CEO’s compensation. The Compensation Committee, in its sole discretion, makes all decisions related to the CEO’s and the other NEOs’ compensation.

 

 

 

56   LOGO    


Table of Contents

ELEMENTS OF FISCAL 2023 EXECUTIVE COMPENSATION

The fiscal 2023 compensation of Cadence’s executive officers, including the NEOs, was comprised of the following main elements:

 

   

Total direct compensation, consisting of:

 

   

Base salary

 

   

Short-term cash incentive compensation

 

   

Equity incentive compensation (including stock options and incentive stock awards)

 

   

Other compensation and benefits, consisting of:

 

   

Broad-based employee benefit plans

 

   

Non-qualified deferred compensation plan

 

   

Severance benefits

Consistent with Cadence’s executive compensation principles outlined above, an executive officer’s total direct compensation is based on Cadence’s performance and on the performance of the individual executive officer, as well as on the Compensation Committee’s view of the level of total direct compensation sufficient to attract, motivate and retain qualified executives. Cadence does not have a pre-established policy or target for allocating compensation between fixed and variable pay elements or for allocating among the different types of variable compensation, although the allocation is influenced by the Compensation Committee’s assessment of the compensation practices of the companies in the Peer Group and Cadence’s short-term and long-term strategic objectives. The Compensation Committee believes that the executive compensation program should motivate the executive officers to drive strong and sustained performance for Cadence. Accordingly, the executive officers’ compensation is heavily weighted towards at-risk, variable incentive awards — short-term cash incentives and equity grants — rather than base salaries.

Base Salaries

Cadence offers its executive officers an annual base salary to compensate them for services rendered during the year. Base salaries are considered essential for the attraction and retention of talented executive officers and are determined using the compensation factors described above. The executive officers’ base salaries are reviewed annually by the Compensation Committee, but do not automatically or necessarily increase each year. Changes to the executive officers’ base salaries, if any, are typically made in the first quarter of a fiscal year or in connection with an executive officer’s promotion or change in responsibilities.

In February 2023, consistent with the process discussed under “Compensation Determinations” above, the Compensation Committee reviewed the base salaries of the NEOs. The base salaries for each NEO were increased by $25,000 considering several factors, including the competitive market context, internal calibration, and each NEO’s performance in their respective roles.

The fiscal 2022 and 2023 base salaries of the NEOs are shown in the chart below.

 

 Name   Fiscal 2022
Base Salary
    Fiscal 2023
Base Salary
 

Anirudh Devgan

    $725,000       $750,000  

John M. Wall

    550,000       575,000  

Neil Zaman

    550,000       575,000  

Paul Cunningham

    450,000       475,000  

Chin-Chi Teng

    450,000       475,000  

 

 

 

    LOGO   57


Table of Contents

Short-Term Cash Incentive Compensation under the Senior Executive Bonus Plan (“SEBP”)

Overview. Cadence provides its executive officers with the opportunity to earn short-term cash incentive compensation under its SEBP. The purpose of SEBP is to reward executive officers for performance during a single fiscal year (or portions thereof) and to provide incentives for them to achieve Cadence’s short-term financial and operational goals, as measured against specific performance criteria relative to Cadence’s overall business results and individual performance. Cash bonus payouts under SEBP for fiscal 2023 were determined semi-annually based on base salary earned in each half of the fiscal year.

For each executive officer other than the CEO, the CEO makes an assessment and recommendation for each individual’s target bonus. The Compensation Committee reviews the CEO’s recommendation, as described above under “Compensation Determinations,” and approves (with or without modification, in its sole discretion) the CEO’s recommendation. For the CEO, the Compensation Committee is solely responsible for assigning a target bonus based on its review of the performance of Cadence and the CEO, as described above under “Compensation Determinations.”

In February 2023, consistent with the process discussed in “Compensation Determinations” above, the Compensation Committee reviewed the target bonus levels of the NEOs and determined that the fiscal 2022 target bonus levels as a percentage of base salary for the NEOs were appropriate and would remain unchanged for fiscal 2023.

The base salaries, target bonus levels under SEBP, and actual bonuses earned by the NEOs for fiscal 2023 (as determined using the criteria described below) are set forth in the table below.

 

        Senior Executive Bonus Plan
 Name   Base
Salary
 

Target Bonus

(as % of
Base Salary)

  Target
Bonus
  Actual
Bonus

Anirudh Devgan

      $750,000       125 %     $ 937,500     $ 1,187,386

John M. Wall

      575,000       100       575,000       705,606

Neil Zaman

      575,000       100       575,000       712,722

Paul Cunningham

      475,000       100       475,000       594,990

Chin-Chi Teng

      475,000       100       475,000       580,438

Performance Factors. Each NEO’s actual bonus under SEBP for fiscal 2023 was determined by multiplying his or her base salary earned during the bonus period by his or her target bonus percentage, the product of which is then multiplied by two factors: (i) a “Company Performance Factor” and (ii) an “Individual Performance Factor.” In fiscal 2023, the Company Performance Factor was comprised of (a) a “Revenue Component” (weighted 45%) and (b) an “Operating Margin Component” (weighted 55%), and the Individual Performance Factor was comprised of (y) a “Cadence Culture Modifier” (weighted 20%) and (z) an “Executive Leadership Component” (weighted 80%). The combination of these performance factors is intended to ensure that all critical aspects of performance are considered in determining short-term cash incentive awards.

 

 

 

58   LOGO    


Table of Contents

The bonus determination under SEBP is illustrated below:

 

LOGO

Determination of Company Performance Factor. The Company Performance Factor is designed to reflect Cadence’s overall financial performance. The weightings and performance components used to determine the Company Performance Factor are reviewed by the Compensation Committee, in consultation with the CEO, for each performance period to evaluate whether the weightings and performance components align with what the Compensation Committee and the CEO believe are the most important factors that influence Cadence’s business and financial performance and directly impact long-term stockholder value.

The Revenue Component is a percentage ranging from 0% to 150% that is a function of Cadence’s total revenue for the performance period as compared to the pre-established revenue target (the “Revenue Target”) for the same performance period.

The Operating Margin Component is a percentage ranging from 0% to 150% that is a function of Cadence’s non-GAAP operating margin for the performance period divided by a pre-established non-GAAP operating margin target (the “Operating Margin Target”) for the same performance period. For purposes of SEBP, non-GAAP operating margin is defined as the ratio of non-GAAP income from operations (that is, GAAP operating income adjusted for amortization of acquired intangibles, stock-based compensation expense, non-qualified deferred compensation expenses or credits, restructuring and other charges or credits, acquisition- and integration-related costs, and special charges) divided by total revenue.

For both components of the Company Performance Factor, the Compensation Committee excludes the impact of acquisitions made by Cadence during the applicable performance period if such acquisitions were not taken into account in the setting of the targets.

For each half of fiscal 2023, the revenue and non-GAAP operating margin performance targets and actual performance against such targets used to determine the Company Performance Factor were as follows:

 

    1st Half 2023   2nd Half 2023
    Revenue
(in millions)
  Non-GAAP
Operating
Margin
  Revenue
(in millions)
  Non-GAAP
Operating
Margin

2023 SEBP Target

      $1,990       41.5 %       $2,072       41.5 %

Actual Achievement

      $1,998       41.9 %       $2,092       42.2 %(1)

Company Performance Factor

      102.41%       104.59%

 

(1) 

Non-GAAP operating margin for the second half of fiscal 2023 excludes a special bonus paid to employees below the NEO level for exceptional performance, which had an insignificant impact on payments to the NEOs.

Determination of Individual Performance Factor. As described under “Performance Factors” above, for fiscal 2023, the Individual Performance Factor consisted of two components (both expressed as a percentage ranging from 0% to 150%): (i) a Cadence Culture Modifier based on criteria such as diversity, equity and inclusion, sustainability and climate and talent development and (ii) an Executive Leadership Component based on criteria such as the achievement of strategic objectives, leadership within the organization, talent acquisition and retention, and fiscal management.

 

 

 

    LOGO   59


Table of Contents

At the beginning of the fiscal year, the Compensation Committee meets to review performance criteria for the Cadence Culture Modifier and Executive Leadership components. These criteria generally reflect a combination of quantitative and qualitative metrics for each executive with specific attention to their individual focus area to deliver on the business unit results or other corporate priorities in driving long term value creation. The Compensation Committee believes that the criteria are rigorous yet achievable and provide good balance with the company-wide performance metrics in the Company Performance Factor detailed above. Performance against these goals is measured at the end of each performance period during the year (1st Half and 2nd Half) and is evaluated on a holistic basis with input from the CEO (for the non-CEO performance assessments).

The Individual Performance Factor criteria specific to each NEO that were considered by the Compensation Committee for fiscal 2023 are set forth below:

 

   

Dr. Devgan: Led the company to achieve leading levels of shareholder returns with record revenue and profitability. Drove market expansion with significant new products, including transformative artificial intelligence (AI) solutions and acquisitions that broadened our Total Available Market in furtherance of Cadence’s Intelligent System Design strategy. To ensure that Cadence is a leader in innovation, Dr. Devgan sponsored talent initiatives that moved the needle on diversity of experience and thought, and he and his team continued to elevate Cadence as a leading technology company and employer.

 

   

Mr. Wall: Exceeded all financial targets for the year: revenue, operating margin, cash from operations and earnings per share and reached the milestone of $4B+ in revenue and 40%+ non-GAAP operating margin (30%+ GAAP operating margin). Executed to long-term operating model, and sponsored advancement of Cadence’s sustainable business practices. Contributed to the development Cadence’s next generation of leaders.

 

   

Mr. Zaman: Exceeded revenue and bookings targets and drove expansion into new markets. Partnered effectively with market-shaping customers and drove operational excellence across the Worldwide Field Operations organization. Sponsored unique university programs that are focused on diversity of experience and comprehensive development of Cadence’s junior talent.

 

   

Dr. Cunningham: Took the System Verification business to a new level of success, crossing an important $1B revenue milestone. Drove a record year for the hardware business through significant expansions with several key customers. Continued to grow a strong leadership team.

 

   

Dr. Teng: Proliferation of digital full flow solutions at market-leading customers and key wins with large hyper-scalers. Led the company’s artificial intelligence initiatives. Strong contributor to the company’s top talent hiring from universities, ensuring Cadence builds a strong bench of next generation, innovative, diverse talent.

Actual Bonus Payments. Based on its assessment of Cadence’s performance and individual performance as described above, the Compensation Committee approved the following bonus payouts under SEBP for each half of fiscal 2023:

 

    1st Half 2023     2nd Half 2023  
 Name   (% of Target)(1)   ($)     (% of Target)(1)   ($)  

Anirudh Devgan

  123.2       577,496     130.1       609,890  

John M. Wall

  115.1       330,938     130.3       374,667  

Neil Zaman

  116.7       335,649     131.2       377,073  

Paul Cunningham

  121.5       288,463     129.1       306,527  

Chin-Chi Teng

  114.5       271,924     129.9       308,514  

 

(1)

The percentage of target is equal to (a) the actual bonus amount divided by (b) the actual base salary earned during each bonus period multiplied by the target bonus percentage.

 

 

 

60   LOGO    


Table of Contents

Equity Incentive Compensation

Overview. Consistent with the principles of Cadence’s compensation for its executive officers outlined above, equity incentives are designed to provide executive officers with an ownership stake in Cadence, promote stock ownership to align the executive officers’ interests with those of other Cadence stockholders, and create significant incentives for executive retention. Specifically, equity incentives in the form of stock options provide an opportunity for Cadence to reward its executive officers solely to the extent Cadence’s stock price increases from the date of grant, which aligns the interests of executive officers with those of Cadence stockholders. Further, the executive officers generally must remain employed at Cadence during the period required for the stock options to vest, except as otherwise provided for in the award agreement or the Company’s severance arrangements. Equity incentive awards in the form of incentive stock awards also align the interests of executive officers with the interests of stockholders through stock ownership, require continued employment of the executive throughout the vesting period, and increase in value when Cadence’s stock price increases. The vesting of incentive stock awards granted to Cadence’s executive officers is also subject to performance goals originally intended to qualify the awards as “performance-based compensation” under section 162(m) of the Internal Revenue Code before passage of the Tax Cuts and Jobs Act. Although the performance-based compensation exemption under section 162(m) of the Internal Revenue Code has been repealed, the Compensation Committee continued to maintain the performance goal requirement for incentive stock awards granted in fiscal 2023.

Additionally, as an important component of executive officers’ equity incentive compensation, since 2016 the Compensation Committee has made grants of LTP Awards every three years. The Compensation Committee granted LTP Awards to all then-serving executive officers in fiscal 2016, fiscal 2019 and fiscal 2022. The Compensation Committee, with input and collaboration from its independent compensation consultant, designed the LTP Awards to further focus the executive officers on building strong, sustained levels of growth, to provide a pay opportunity for exceptional market performance by Cadence, and to inspire innovation and resourcefulness to achieve Cadence’s strategic priorities over a multi-year performance period. By design, the LTP Awards provide value to the recipients only if there is a significant increase in stockholder value during the multi-year performance period of the awards. The Compensation Committee continues to assess Cadence’s equity incentive compensation program and may make future grants of LTP Awards with similar or different design parameters as prior LTP Awards, as it deems appropriate.

When the Compensation Committee determines and approves individual equity grants to executive officers, it considers each of the compensation factors set forth under “Compensation Determinations,” without prescribing particular weight to any of the compensation factors. In addition, the Compensation Committee reviews the CEO’s assessments and recommendations as to the equity compensation for all of the executive officers except himself.

Fiscal 2023 Equity Grants. The Compensation Committee believes equity incentive grants provide the appropriate level of executive alignment with Cadence stockholder interests and reward Cadence’s executives for building long-term stockholder value. The fiscal 2023 equity grants were designed to create balance among stock options (which provide value only if the stock price increases) and incentive stock awards (which provide more certain retention value subject to the fulfillment of certain vesting conditions, while still providing an incentive to improve Cadence’s stock performance).

In March 2023, the Compensation Committee approved stock option and incentive stock award grants for the NEOs as part of the annual equity program. Approximately 50% of the fiscal 2023 equity grants for the CEO consisted of stock options, and approximately 34% of the other NEOs’ annual fiscal 2023 equity grants in the aggregate consisted of stock options, with the remainder of the equity grants being incentive stock awards. The Compensation Committee continued to place significant weight on stock options to focus on stock price appreciation over the seven-year term of the stock option. The stock options granted to the NEOs in March 2023 vest monthly over four years from the date of grant and expire seven years from the date of grant. The incentive stock awards granted to the NEOs in March 2023 vest over three years, with one-third of the award shares vesting approximately twelve months after the date of grant and the remaining shares vesting in four equal semi-annual installments, subject to achievement of the performance goal requirement described above.

 

 

 

    LOGO   61


Table of Contents

Please see the Grants of Plan-Based Awards table for a description of the grants awarded to our named executive officers during 2023. The values included in the Summary Compensation Table and the Grants of Plan-Based Awards Table reflect the accounting grant date fair value of the grants. These values do not reflect amounts actually realizable by our executive officers.

Outstanding LTP Awards. LTP Award grants on March 15, 2019 (the “2019 LTP Awards”) to the then-serving executive officers were eligible to begin vesting when Cadence’s 20-day average stock price exceeded a threshold of $77.80 per share and full vesting is scheduled to occur when the average stock price reaches a goal of $138 per share, with the first vesting date on March 15, 2022 and subject to a vesting cap of 33% of the award shares. The 2019 LTP Awards also require relative TSR to exceed the 35th percentile of the companies in both the S&P MidCap 400 Information Technology Index and the S&P 500 Information Technology Index as of March 15, 2019 in order for the awards to vest. Cadence’s 20-day average stock price on March 15, 2022 was $146.72 and its TSR relative to the comparator groups was in the 89th percentile. Accordingly, 33% of the shares under each 2019 LTP Award vested on March 15, 2022. Cadence’s 20-day average stock price on March 15, 2023 was $196.09 and its TSR relative to the comparator groups was in the 91st percentile. Accordingly, an additional 34% of the shares under each 2019 LTP Award vested on March 15, 2023; together with the 33% vesting from the March 15, 2022 first measurement date, the total vesting from the 2019 LTP Award is within the cumulative 67% vesting cap through the second measurement date.

LTP Award grants on January 13, 2022 (the “2022 LTP Awards”) to the then-serving executive officers are eligible to begin vesting when Cadence’s 20-day average stock price exceeded a threshold of $245 per share and full vesting is scheduled to occur when the average stock price reaches a goal of $359 per share, with the first vesting date on March 15, 2025 and subject to a vesting cap of 33% of the award shares. The 2022 LTP Awards also require relative TSR to exceed the 35th percentile of the companies in both the S&P MidCap 400 Information Technology Index and the S&P 500 Information Technology Index as of January 13, 2022 in order for the awards to vest. Any shares that vest on a measurement date are subject to a one-year holding period and will not be delivered to the executive until the first anniversary of such measurement date. No shares have been earned or vested given the first measurement date is March 15, 2025.

 

 

 

62   LOGO    


Table of Contents

LOGO

 

(1)

While Cadence’s recent and strong share price performance early in 2024 is well positioned against the 2022 LTP performance threshold of $245.00 and the share price target of $282.62 required for the first 33% vesting opportunity, nothing has been earned or vested and actual performance will be measured in early 2025. In order for anything to be earned at the first vesting event in 2025, Cadence’s stock price will need to remain above the $245 stock price threshold while also being above the relative TSR performance threshold. Additionally, no more than 33% of the shares on a cumulative basis can vest on the 2025 first measurement date even if the performance conditions necessary for vesting are achieved as of such date.

Grant Timing Policy

The Compensation Committee and senior management monitor Cadence’s equity grant policies to evaluate whether such policies comply with governing regulations and are consistent with good corporate practices. Historically, grants to the executive officers have generally been made at the Compensation Committee meeting held in February of each year, after results for the preceding fiscal year become available and after review and evaluation of each executive officer’s performance, enabling the Compensation Committee to consider both the prior year’s performance and expectations for the succeeding year in making grant decisions. The Compensation Committee reviewed this policy in February 2022 and revised its grant timing policy, effective with the 2022 grants, to provide that annual grants to the executive officers will be made March 15th of each year rather than at the February Compensation Committee meeting. In addition, the Compensation Committee may make grants at any time during the year it deems appropriate, including with respect to new hires or transitions.

Deferred Compensation

In fiscal 2023, all of the NEOs were eligible to defer compensation otherwise payable to them under a nonqualified deferred compensation plan maintained by Cadence (the “Deferred Compensation Plan”). The Deferred

 

 

 

    LOGO   63


Table of Contents

Compensation Plan is designed to allow for salary deferral above the limits imposed by the Internal Revenue Code for 401(k) plans on an income tax-deferred basis. Under the Deferred Compensation Plan, non-employee directors and selected employees who are classified as officers, vice presidents, directors, or an equivalent title are eligible to participate. Amounts deferred under the Deferred Compensation Plan are held in accounts with values indexed to the performance of mutual funds or money market accounts selected by the participant. The investment options made available under the Deferred Compensation Plan are substantially similar to those available under Cadence’s tax-qualified 401(k) plan. Cadence does not match contributions made under the Deferred Compensation Plan. Unlike 401(k) plans with contributions housed in a trust and protected from creditors under the Employee Retirement Income Security Act of 1974 (ERISA), the Deferred Compensation Plan is unfunded and is subject to the claims of creditors. As a result, participants in the Deferred Compensation Plan have rights in the plan only as unsecured creditors. Cadence maintains the Deferred Compensation Plan for the purposes of providing a competitive benefit and allowing all participants, including the NEOs, an opportunity to defer income tax payments on their cash compensation.

Other Employee Benefit Plans

The executive officers, including the NEOs, are eligible for the same benefits generally available to Cadence employees. These include participation in a tax-qualified 401(k) plan, employee stock purchase plan, and group life, health, dental, vision, and disability insurance plans. Cadence does not currently offer guaranteed pension benefits in the United States. Cadence periodically assesses the competitiveness of its broad-based employee benefit plans. Cadence aims to provide benefits to its employees that are competitive with market practices.

Perquisites

Cadence did not provide material perquisites to any NEO in fiscal 2023. Cadence does not provide its executive officers with club memberships, financial planning assistance, personal use of private aircraft or tax gross-up payments.

Severance Benefits

The Compensation Committee periodically reviews typical industry practices concerning severance and change in control arrangements and considers how those practices compare to Cadence’s severance and change in control arrangements. Cadence has entered into an employment agreement with Dr. Devgan that provides for benefits upon termination of employment under certain circumstances, such as in connection with a change in control of Cadence.

Cadence’s Executive Severance Plan provides certain severance benefits to individuals promoted to or hired as executive officers of Cadence, to the extent designated as a participant in the Executive Severance Plan by the Compensation Committee. Each of the NEOs other than Dr. Devgan have been designated as a participant in the Executive Severance Plan. In designing the Executive Severance Plan, the Compensation Committee structured the severance benefit levels based on Cadence’s historical practices, as reflected in the executive employment agreement in place with Dr. Devgan.

Cadence provides these severance benefits as a means of retaining executive officers, focusing executive officers on stockholder interests when considering strategic alternatives and providing income protection in the event of involuntary loss of employment. In general, the employment agreements and the Executive Severance Plan provide for severance benefits upon Cadence’s termination of the executive’s employment without “cause.” The employment agreements, but not the Executive Severance Plan, provide severance benefits upon resignation by the executive in connection with a “constructive termination” without a change in control. In the event of a change in control of Cadence, and if the executive’s employment is terminated without “cause” or by the executive in connection with a “constructive termination,” the executive will receive enhanced severance benefits. Accordingly, Cadence provides for enhanced severance benefits only in the event of a “double trigger” because it believes that the executive officers would be materially harmed only if a change in control results in reduced responsibilities or compensation, or loss of employment.

 

 

 

64   LOGO    


Table of Contents

The highest cash severance entitlement Cadence provides is less than 1.6 times base salary plus target bonus for a termination without “cause” or by the executive in connection with a “constructive termination” in the event of a change in control of Cadence.

See “Potential Payments upon Termination or Change in Control” below for a more detailed discussion of the severance and change in control arrangements with the NEOs.

STOCK OWNERSHIP GUIDELINES

Cadence’s Stock Ownership Guidelines require that Cadence’s executive officers hold shares of Cadence common stock with a value equal to or greater than a specific value, as set forth below. These guidelines are designed to further align the interests of Cadence’s executive officers with the interests of stockholders and to reinforce Cadence’s commitment to sound corporate governance.

 

 Position   Minimum Value of Shares   Years to Meet Guidelines

Executive Chair (if applicable)

  3X annual base salary   5 years

Chief Executive Officer

  3X annual base salary   5 years

Other Executive Officers

  1X annual base salary   5 years

Compliance with the Stock Ownership Guidelines is measured on the last trading day of each fiscal year in which the guidelines are applicable (the “Ownership Measurement Date”), based on the average closing price of Cadence common stock during the 20 trading day period ending on the Ownership Measurement Date (the “Measurement Price”). As of December 29, 2023 (the last trading day of Cadence’s fiscal 2023), all NEOs satisfied Cadence’s Stock Ownership Guidelines.

Should any executive officer not meet the Stock Ownership Guidelines on the Ownership Measurement Date based on the Measurement Price or on any other date based on the closing price of Cadence common stock on such date, such executive officer is required to retain an amount equal to 100% of the “net shares” received as a result of the exercise, vesting or settlement of any Cadence equity award granted to such executive officer until the guideline is met. “Net shares” are those shares that remain after the shares are sold or withheld to pay any applicable exercise price or taxes for the award. The Compensation Committee retains the discretion to grant a hardship exception to an executive officer if he or she fails to meet the guidelines as of the Ownership Measurement Date.

The following forms of equity interests in Cadence count towards satisfaction of the Stock Ownership Guidelines: restricted or incentive shares (whether vested or unvested), shares subject to RSUs, shares obtained through Cadence’s Employee Stock Purchase Plan (the “ESPP”), shares obtained through the exercise of stock options or upon settlement of restricted stock, shares purchased on the open market, shares owned outright by the executive officer or his or her immediate family members residing in the same household, shares held in trust for the benefit of the executive officer or his or her family and restricted shares granted under Cadence’s equity plans.

COMPENSATION RECOVERY (“CLAWBACK”) POLICY

Cadence has adopted a compensation recovery policy as required by Rule 10D-1 under the Exchange Act and the corresponding listing standard adopted by Nasdaq, which generally provides that if Cadence is required to prepare an accounting restatement (including a restatement to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period), Cadence must recover from its current and former executive officers any incentive-based compensation that was erroneously received on or after October 2, 2023 and during the three years preceding the date that Cadence is required to prepare such accounting restatement. The amount required to be recovered is the excess of the amount of incentive-based

 

 

 

    LOGO   65


Table of Contents

  

compensation received over the amount that otherwise would have been received based on the restated financial measure. Additionally, for any incentive-based compensation received before October 2, 2023, Cadence’s historical clawback policy will continue to apply, which provides that if Cadence restates its reported financial results, the Board will review all bonuses and other awards made to executive officers on the basis of having met or exceeded performance goals during the period covered by the restatement and will, to the extent practicable and considered in the best interests of stockholders, instruct Cadence to seek to recover or cancel such bonuses or awards to the extent that performance goals would not have been met under such restated financial results.

 

  

 

 

66   LOGO    


Table of Contents

COMPENSATION COMMITTEE REPORT

 

 

The current members of the Compensation Committee have reviewed and discussed the “Compensation Discussion and Analysis” above with management. Based on this review and discussion, the current members of the Compensation Committee recommended to the Board the inclusion of the “Compensation Discussion and Analysis” in this proxy statement and incorporation by reference into Cadence’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

COMPENSATION COMMITTEE

Mark W. Adams, Chair

ML Krakauer

Julia Liuson

John B. Shoven, Ph.D.

 

 

 

    LOGO   67


Table of Contents

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

 

No member of the Compensation Committee is, or was during or prior to fiscal 2023, an officer or employee of Cadence or any of its subsidiaries. None of Cadence’s executive officers serves or served as a director or member of the compensation committee of another entity where an executive officer of such other entity serves or served as a director of Cadence or member of the Compensation Committee.

 

 

 

68   LOGO    


Table of Contents

COMPENSATION OF EXECUTIVE OFFICERS

 

 

The following table shows the compensation awarded to, paid to, or earned by Cadence’s NEOs in fiscal 2023 and, to the extent required by SEC disclosure rules, in fiscal 2022 and fiscal 2021.

2023 SUMMARY COMPENSATION TABLE

 

 Name and

 Principal Position

  Year  

Salary

($)(1)

 

Stock
Awards

($)(2)(3)

 

Option
Awards

($)(2)

 

Non-Equity
Incentive Plan
Compensation

($)(1)

 

All Other
Compensation

($)(4)

 

Total

($)

Anirudh Devgan

President and

Chief Executive Officer

      2023       750,000       7,702,791       7,689,913       1,187,386       11,772       17,341,862
      2022       725,000       25,318,495       4,779,658       1,381,859       11,022       32,216,034
      2021       604,808       2,499,956       17,496,404       1,109,054       25,572       21,735,794

John M. Wall

Senior Vice President and

Chief Financial Officer

      2023       575,000       3,050,188       1,568,773       705,606       11,772       5,911,339
      2022       550,000       8,528,597       1,218,800       845,326       11,022       11,153,745
      2021       500,000       7,310,069       1,189,938       788,207       10,572       9,798,786

Neil Zaman

Senior Vice President and

Chief Revenue Officer

      2023       575,000       2,711,278       1,394,457       712,722       11,772       5,405,229
      2022       550,000       8,370,707       1,137,557       845,326       11,022       10,914,612
      2021       500,000       1,980,035       1,019,901       784,476       10,572       4,294,984

Paul Cunningham

Senior Vice President

GM, System Verification Group

      2023       475,000       2,541,824       1,307,264       594,990       11,222       4,930,300
      2022       450,000       7,461,699       975,070       661,438       10,036       9,558,243
                           

Chin-Chi Teng

Senior Vice President,

GM, Digital & Signoff Group

      2023       475,000       2,541,824       1,307,264       580,438       13,183       4,917,709
      2022       450,000       7,461,699       975,070       650,089       12,260       9,549,118
      2021       425,000       1,484,957       764,946       657,251       11,638       3,343,792

 

(1) 

Includes amounts deferred pursuant to Section 401(k) of the Internal Revenue Code and the Deferred Compensation Plan.

 

(2) 

In accordance with SEC rules, the amount shown reflects the grant date fair value of stock awards and option awards granted during fiscal 2023 calculated pursuant to FASB ASC 718. The assumptions used to calculate the valuation of the awards for fiscal 2023 are set forth in Note 9 to the Notes to Consolidated Financial Statements in Cadence’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and the assumptions used to calculate the valuation of the awards for prior years are set forth in the Notes to Consolidated Financial Statements in Cadence’s annual reports on Form 10-K for the corresponding years. While the grant date fair value of awards reflects the full value of the awards in the year of grant, the awards will be earned by the holder over a number of years, and the stock awards are subject to performance conditions. The terms of the applicable awards are discussed in more detail in the tables entitled “Grants of Plan-Based Awards in Fiscal Year 2023” and “Outstanding Equity Awards at 2023 Fiscal Year End.” The amount shown is based on the price of Cadence common stock on the date the award was granted and does not reflect any fluctuations in the price of Cadence common stock subsequent to the grant date. The amount shown therefore does not reflect the financial benefit that the holder of the award will actually realize upon the vesting of the award, and with respect to option awards, such amount does not reflect whether the option award will be exercised or exercisable prior to its expiration.

 

(3) 

The amount shown includes both the grants of incentive stock awards (“ISAs”) and long-term equity awards subject to stockholder return targets (“LTP Awards”). LTP Awards were granted to all of the NEOs in fiscal 2022. As a result of the foregoing, stock award values and total compensation for years in which an executive officer received an LTP Award are significantly higher than Cadence’s historical compensation levels.

 

 

 

    LOGO   69


Table of Contents

The per share and aggregate grant date fair values of the ISAs granted in fiscal 2023, calculated pursuant to FASB ASC 718, are set forth below.

 

    ISAs  

Name

  Shares     Per Share
($)
    Aggregate
($)
 

Anirudh Devgan

    37,956         202.94         7,702,791  

John M. Wall

    15,030       202.94       3,050,188  

Neil Zaman

    13,360       202.94       2,711,278  

Paul Cunningham

    12,525       202.94       2,541,824  

Chin-Chi Teng

    12,525       202.94       2,541,824  

 

(4) 

The amounts listed in the “All Other Compensation” column above reflect the following and, unless noted below, are based upon the actual cost expended by Cadence in connection with the following amounts for fiscal 2023:

 

   

For Dr. Devgan, the amount shown includes $9,900 for 401(k) matching contributions and $1,872 for term life insurance premium payments.

 

   

For Mr. Wall, the amount shown includes $9,900 for 401(k) matching contributions and $1,872 for term life insurance premium payments.

 

   

For Mr. Zaman, the amount shown includes $9,900 for 401(k) matching contributions and $1,872 for term life insurance premium payments.

 

   

For Dr. Cunningham, the amount shown includes $9,900 for 401(k) matching contributions and $1,322 for term life insurance premium payments.

 

   

For Dr. Teng, the amount shown includes $9,900 for 401(k) matching contributions and $3,283 for term life insurance premium payments.

 

 

 

70   LOGO    


Table of Contents

GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023

 

 Name   Grant
Date
  Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)
  Estimated Future Payouts
Under Equity Incentive
Plan Awards
 

All

Other

Stock

Awards:

Number

of
Shares
of Stock

or Units
(#)(2)

  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(3)
  Exercise
or Base
Price of
Option
Awards
($/Sh)(4)
  Grant
Date Fair
Value of
Stock and
Option
Awards
($)(5)
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
                                           

Anirudh

Devgan

      3/15/23                                           37,956                   7,702,791
      3/15/23                                                 108,390       202.94       7,689,913
      SEBP             937,500       2,109,375                                          

John M. Wall

      3/15/23                                           15,030                   3,050,188
      3/15/23                                                 22,112       202.94       1,568,773
      SEBP             575,000       1,293,750                                          

Neil Zaman

      3/15/23                                           13,360                   2,711,278
      3/15/23                                                 19,655       202.94       1,394,457
      SEBP             575,000       1,293,750                                          

Paul Cunningham

      3/15/23                                           12,525                   2,541,824
      3/15/23                                                 18,426       202.94       1,307,264
      SEBP             475,000       1,068,750                                          

Chin-Chi Teng

      3/15/23                                           12,525                   2,541,824
      3/15/23                                                 18,426       202.94       1,307,264
      SEBP             475,000       1,068,750                                          

 

(1) 

The Non-Equity Incentive Plan Awards consist of cash bonuses under the SEBP. Pursuant to the terms of the SEBP, bonus amounts are based on base salary earned during the year by each NEO. The minimum dollar amount for each such bonus award is $0.

 

(2)

The incentive stock awards granted to Messrs. Devgan, Wall, Zaman, Cunningham and Teng on March 15, 2023 were granted under the Omnibus Plan and vest over three years, with 1/3rd of the shares subject to each such stock award vesting twelve months after the date of grant and the remaining shares vesting in four equal semi-annual installments, subject to the achievement of certain specified performance goals.

 

(3)

The stock options granted to Messrs. Devgan, Wall, Zaman, Cunningham and Teng on March 15, 2023 were granted under the Omnibus Plan and vest over four years, with 1/48th of the shares vesting each month after the date of grant.

 

(4) 

The exercise price of the stock options is the closing price of Cadence common stock on the date of grant.

 

(5) 

In accordance with SEC rules, the amount shown reflects the grant date fair value of stock awards and option awards granted during fiscal 2023 calculated pursuant to FASB ASC 718. The assumptions used to calculate the valuation of the awards for fiscal 2023 are set forth in Note 9 to the Notes to Consolidated Financial Statements in Cadence’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The grant date fair value of the stock awards and stock options granted during fiscal 2023 is based on the price of Cadence common stock on the date the award was granted and does not reflect any fluctuations in the price of Cadence common stock subsequent to the grant date. The amount shown therefore does not reflect the financial benefit that the holder of the award will actually realize upon the vesting of the award, and with respect to option awards, such amount does not reflect whether the option award will be exercised or exercisable prior to its expiration.

 

 

 

    LOGO   71


Table of Contents

NARRATIVE DISCLOSURE TO 2023 SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2023 TABLE

Employment Terms

Certain elements of compensation set forth in the 2023 Summary Compensation Table and the table entitled “Grants of Plan-Based Awards in Fiscal Year 2023” reflect the terms of agreements between Cadence and each of the NEOs that was in effect as of December 31, 2023.

 

   

Anirudh Devgan. On December 15, 2021, the Company entered into an amended and restated employment agreement with Dr. Devgan describing the terms of his employment as President and CEO. The payments and benefits to which Dr. Devgan is entitled under his employment agreement include an annual base salary of $725,000 and participation in the SEBP, with an annual target bonus opportunity of 125% of annual base salary. In 2023, Dr. Devgan’s base salary was increased to $750,000 and his annual target bonus was 125% of his base salary.

 

   

John M. Wall. Cadence is a party to a letter agreement with Mr. Wall entered into on September 12, 2017 confirming his promotion to Senior Vice President and CFO that then provided for a base salary of $360,000 per year and Mr. Wall’s participation in the SEBP with an annual target bonus of 75% of his base salary. Over the years, Mr. Wall has received increases in his base salary and annual SEBP target bonus depending upon compensation peer analysis for his position and his performance. In 2023, his base salary was increased to $575,000 and his annual target bonus was 100% of his base salary.

 

   

Neil Zaman. Cadence is a party to a letter agreement confirming Mr. Zaman’s promotion to Senior Vice President, Worldwide Field Operations that then provided for a base salary of $350,000 per year and Mr. Zaman’s participation in the SEBP with an annual target bonus of 100% of his base salary. Over the years, Mr. Zaman has received increases in his base salary and annual SEBP target bonus depending upon compensation peer analysis for his position and his performance. In 2023, his base salary was increased to $575,000 and his annual target bonus was 100% of his base salary.

 

   

Paul Cunningham. Prior to 2021, Dr. Cunningham was Corporate Vice President and General Manager, Research & Development. In 2021, Dr. Cunningham was promoted to Senior Vice President and General Manager, Research & Development that provided for a base salary of $400,000 per year and for Dr. Cunningham’s participation in the SEBP with an annual target bonus of 75% of his base salary. Dr. Cunningham has received increases in his base salary and annual SEBP target bonus depending upon compensation peer analysis for his position and his performance. In 2023, his base salary was increased to $475,000 and his annual target bonus was 100% of his base salary.

 

   

Chin-Chi Teng. Cadence is a party to a letter agreement with Dr. Teng entered into on August 28, 2020 confirming his promotion to Senior Vice President, Research and Development that then provided for a base salary of $375,000 per year and Dr. Teng’s participation in the SEBP with an annual target bonus of 75% of his base salary. In 2023, his base salary was increased to $475,000 and his annual target bonus was 100% of his base salary.

 

 

 

72   LOGO    


Table of Contents

OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR END

 

    Option Awards   Stock Awards  
 Name  

Grant

Date

 

Number of

Securities

Underlying

Unexercised

Options

(#)
Exercisable
(1)

 

Number of

Securities

Underlying

Unexercised

Options

(#)
Unexercisable
(1)

 

Option

Exercise

Price

($)

   

Option

Expiration

Date

   

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)

   

Market

Value of

Shares or

Units of

Stock That

Have Not
Vested

($)(2)

   

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares, Units

or Other

Rights That

Have Not

Vested

(#)

   

Equity

Incentive Plan

Awards: