Lam Research (LRCX) DEF 14ADefinitive proxy

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

LAM RESEARCH CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

September 27, 2023

Dear Lam Research Stockholders,

We cordially invite you to attend the Lam Research Corporation 2023 Annual Meeting of Stockholders. The annual meeting will be held on Tuesday, November 7, 2023, at 9:30 a.m. Pacific Standard Time. This year’s annual meeting will be a virtual meeting. You may attend the annual meeting, vote, and submit your questions during the live webcast of the annual meeting by visiting virtualshareholdermeeting.com/LRCX2023 and entering the 16-digit control number included in our Notice of Internet Availability or on your proxy card.

At this year’s annual meeting, stockholders will be asked to elect the eleven nominees named in the attached proxy statement as directors to serve until the next annual meeting of stockholders, and until their respective successors are elected and qualified; to cast an advisory vote to approve our named executive officer compensation; to cast an advisory vote to approve the frequency of holding future stockholder advisory votes on our named executive officer compensation; and to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2024. The Board of Directors recommends that you vote in favor of each director nominee; for future stockholder advisory votes on our named executive officer compensation at a frequency of every one year; and for each of these other proposals. Management will not provide a business update during this meeting; please refer to our latest quarterly earnings report for our most recently-provided outlook.

Please refer to the proxy statement for detailed information about the annual meeting, each director nominee, and each of the proposals, as well as voting instructions. Your vote is important, and we strongly urge you to cast your vote as soon as possible by the internet, telephone, or mail, even if you plan to attend the meeting.

Sincerely yours,

Abhijit Y. Talwalkar
Chairman of the Board

4650 Cushing Parkway
Fremont, California 94538
Telephone: 510-572-0200

Items of Business

	#	Proposal	Our Board’s Recommendation
	1.	Election of eleven directors to serve until the next annual meeting of stockholders, and until their respective successors are elected and qualified	þ	FOR each Director Nominee
	2.	Advisory vote to approve our named executive officer (“NEO”) compensation	þ	FOR
	3.	Advisory vote to approve the frequency of holding future advisory votes on NEO compensation	þ	ONE YEAR
	4.	Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2024	þ	FOR
	Transaction of such other business as may properly come before the annual meeting (including any adjournment or postponement thereof)

Voting

Please vote as soon as possible, even if you plan to attend the annual meeting, on all of the voting matters. You have three options for submitting your vote before the annual meeting:

By internet	By phone	By mail

The proxy statement and the accompanying proxy card
provide detailed voting instructions.

IT IS IMPORTANT THAT YOU VOTE to play a part in the future of the Company. Please carefully review the proxy materials for the 2023 Annual Meeting of Stockholders.

By Order of the Board of Directors,

Ava M. Hahn
Secretary

Lam Research Corporation

Proxy Statement for 2023 Annual Meeting of Stockholders

TABLE OF CONTENTS

To assist you in reviewing the proposals to be acted upon at the annual meeting, we call your attention to the following summarized information about the Company, the proposals and voting recommendations, the Company’s director nominees, highlights of the directors’ key qualifications, skills and experiences, board composition, corporate governance, executive compensation, and environmental, social and governance (“ESG”) matters. For more complete information about these topics, please review the complete proxy statement before voting. We also encourage you to read our latest annual report on Form 10-K, which is available at investor.lamresearch.com, and our latest ESG report, which is available at lamresearch.com/company/environmental-social-governance/. The content of any website or report referred to in this proxy statement is not a part of nor incorporated by reference in this proxy statement unless expressly noted.

We use the terms “Lam Research,” “Lam,” the “Company,” “we,” “our,” and “us” in this proxy statement to refer to Lam Research Corporation, a Delaware corporation. We also use the term “Board” to refer to the Company’s Board of Directors.

This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statements that are not statements of historical fact, including statements regarding our ESG plans and goals. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations expressed, including the risks and uncertainties described in our filings with the U.S. Securities and Exchange Commission (“SEC”), including specifically the Risk Factors described in our annual report on Form 10-K and our quarterly reports on Form 10-Q. You should not place undue reliance on forward-looking statements. We undertake no obligation to update any forward-looking statements.

About Lam Research Corporation

Lam Research is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. We have built a strong global presence with core competencies in areas such as nanoscale applications enablement, chemistry, plasma and fluidics, advanced systems engineering, and a broad range of operational disciplines. Our products and services are designed to help our customers build smaller and better performing devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive vehicles, and data storage devices.

Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as non-volatile memory, dynamic random-access memory (DRAM), and logic devices. Their continued success is part of our commitment to driving semiconductor breakthroughs that define the next generation. Our core technical competency is integrating hardware, process, materials, software, and process control enabling results on the wafer.

Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.

Demand from cloud computing, the Internet of Things, or “IoT,” and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional two-dimensional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical scaling strategies like three-dimensional architectures as well as multiple patterning to enable shrinks.

We believe we are in a strong position with our leadership and expertise in deposition, etch, and clean to facilitate some of the most significant innovations in semiconductor device manufacturing. Several factors create opportunity for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs relating to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with semi-ecosystem partners; (iv) our ability to identify and invest in the breadth of our product portfolio to meet technology inflections; and (v) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.

Figure 1. Fiscal Year 2023 Financial Highlights

Figure 2. Proposals and Voting Recommendations

Figure 3. Summary Information Regarding Director Nominees

You are being asked to vote on the election of these eleven directors. The following table provides summary information about each director nominee as of September 8, 2023. Information about nominee diversity is shown in Figure 4 on the following page, information about their key qualifications, skills and experiences is shown in Figure 5, and their biographical information is contained in the “Voting Proposals – Proposal No. 1: Election of Directors – 2023 Nominees for Director” section beginning on page 65 below.

Figure 4. Director Nominee Composition Highlights

The Board is committed to diversity and the pursuit of board refreshment and balanced tenure. The following charts show the tenure, age, and diversity of the director nominees. For more information about our Board’s approach to refreshment and diversity, including our board diversity matrix, please refer to the section “Governance Matters - Corporate Governance - Our Approach to Ensuring Board Effectiveness” beginning on page 11 below.

Figure 5. Director Nominee Key Qualifications, Skills, and Experiences

The table below summarizes the key qualifications, skills, and experiences of our nominees. Not having a mark does not mean the director nominee does not possess that qualification, skill, or experience. The director biographies contained in the “Voting Proposals – Proposal No. 1: Election of Directors – 2023 Nominees for Director” section below describe each director nominee’s background and relevant experience in more detail, and identify those qualifications, skills, and experiences considered most relevant to the decision to nominate candidates to serve on our Board.

Figure 6. Corporate Governance Highlights

Figure 7. Executive Compensation Highlights

Figure 8. ESG Highlights

Our ESG strategy supports the success of our business. It provides a framework for meaningful investments, proactive risk management, and globally focused action. Our approach emphasizes engagement, goal setting, and accountability. Our ESG strategy is composed of six key pillars, which are described in greater detail beginning on page 22 and in our annual ESG report, available at lamresearch.com/company/environmental-social-governance/. We have set goals aligned with our strategy; these goals are highlighted below, together with some of our recent progress. In 2022, we made important strides forward, including surpassing our 2025 water and volunteer hour goals years ahead of schedule. We also received approval from the Science Based Targets initiative (“SBTi”) for our near-term emissions reduction goals.¹ We aim to achieve each of the following goals by calendar year 2025, unless otherwise stated. In the table below, references to specific years are to calendar, not fiscal, years.

(table continues on next page)

Security Ownership of Certain Beneficial Owners and Management

The table below sets forth the beneficial ownership of shares of Lam common stock by: (1) each person or entity who we believe, based on our review of filings made with the SEC, beneficially owned more than 5% of Lam’s common stock on the date set forth below; (2) each current director of the Company; (3) each NEO identified below in the “Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis” section; and (4) all current directors and current executive officers as a group. With the exception of 5% owners, and unless otherwise noted, the information below reflects holdings as of September 8, 2023, which is the Record Date for the 2023 Annual Meeting of Stockholders and the most recent practicable date for determining ownership. For 5% owners, holdings are as of the dates of their most recent ownership reports filed with the SEC, which are the most practicable dates for determining their holdings. The percentage of the class owned is calculated using 132,222,362 as the number of shares of Lam common stock outstanding on September 8, 2023.

Figure 9. Beneficial Ownership Table

The terms of any outstanding stock options that are now exercisable or will become exercisable within 60 days after September 8, 2023, and RSUs that will vest within that time period, are reflected in “Figure 55. Outstanding Equity Awards at Fiscal Year 2023 Year-End,” except as described in the following sentences. Ava M. Hahn has options covering 3,456 shares, which are unexercised and exercisable within 60 days of September 8, 2023. The grants for Ms. Hahn have terms consistent with the terms reflected in “Figure 55. Outstanding Equity Awards at Fiscal Year 2023 Year-End.”

As discussed in “Governance Matters – Director Compensation” below, the non-employee directors receive an annual equity award as part of their compensation. These awards generally vest on October 31, 2023, subject to continued service on the board as of that date, with immediate delivery of the shares upon vesting. For 2023, Messrs. Ahmed, Brandt, Cannon, and Talwalkar; Mses. Mayer, Mehra and Varon; and Dr. Tsai each received awards of 563 RSUs. Dr. Kang, who was appointed as a director following the annual equity grant, received a pro-rated grant for 2023 of 452 RSUs, which is included in the tables above.

Corporate Governance

Our Board and members of management are committed to responsible corporate governance to manage the Company for the long-term benefit of its stockholders. To that end, the Board and management periodically review and update, as appropriate, the Company’s corporate governance policies and practices. As part of that process, the Board and management consider the requirements of federal and state law, including rules and regulations of the SEC; the listing standards for the Nasdaq Global Select Market (“Nasdaq”); published guidelines and recommendations of proxy advisory firms; published guidelines of some of our top stockholders; published guidelines of other selected public companies; and any feedback we receive from our stockholders. A list of key corporate governance practices is provided in the “Proxy Statement Summary” above.

Corporate Governance Policies

We have instituted a variety of policies and procedures to foster and maintain responsible corporate governance, including the following:

Figure 10. Policies and Procedures Summary

Our Approach To Ensuring Board Effectiveness

As part of the Board’s commitment to responsible corporate governance, we have developed a number of practices that together serve to ensure that, over time, the Board continues to function in an effective manner that serves the long-term interests of the Company and its stockholders. Several of the practices that we consider to be most important are summarized in Figure 11 below, and the practices themselves are described in greater detail below.

Figure 11. Board Effectiveness Practices

Board and committee evaluations. Every year, the Board conducts a self-evaluation of the Board, its committees, and the individual directors, overseen by the nominating and governance committee. From time to time, the evaluation is facilitated by an independent third-party consultant. The evaluation solicits the opinions of the directors regarding the effectiveness of the Board, Board committees, and individual directors in fulfilling their obligations. Feedback on Board effectiveness is provided to the full Board for discussion, feedback on each committee’s effectiveness is provided to the committee for discussion, and feedback regarding individual director performance is provided to each individual director. The Board and committees identify and hold themselves accountable for action items stemming from the evaluation. The results of the evaluations are also considered by the nominating and governance committee and the Board as part of the director nomination process.

Board composition, diversity and refreshment. The Board and the nominating and governance committee regard board refreshment as important, and strive to maintain an appropriate balance of tenure, turnover, diversity, and skills to meet the needs of the Company and the Board. In consideration of the Company’s evolving strategic priorities and as part of its refreshment planning, the nominating and governance committee regularly evaluates the Board’s composition, skills and experiences and diversity, and directors’ time commitments and committee assignments, to ensure that the Board functions effectively. See “Proxy Statement Summary - Figure 5. Director Nominee Key Qualifications, Skills, and Experiences” and “Proxy Statement Summary - Figure 4. Director Nominee Composition Highlights” for additional information regarding the key qualifications, skills and experiences considered by the Board and the nominating and governance committee in nominating our nominees. Since 2020, the Board has gained three new independent directors, two of whom are diverse in terms of gender identity, ethnicity or race, as shown in Figure 12.

Figure 12. Refreshment of Independent Directors Since 2020

The Board is committed to diversity, and for many years, the composition of the Board has reflected that commitment. The Board believes that board diversity is important to serving the long-term interests of the Company’s stockholders. In identifying potential director candidates outside the Company, the nominating and governance committee is committed to actively seeking out qualified candidates who reflect diverse backgrounds, skills and experiences, including diversity of geography, gender identity, LGBTQ+

identity, age, race and ethnicity, and classification as a member of an underrepresented minority, to include in the pool from which Board nominees are chosen, and any third-party search firms retained for a related search will be instructed to include such candidates in initial lists of candidates they prepare. Every year since 2006, the Board has had at least two female directors, and since 2019 we have had either three or four female directors. We began asking directors to self-identify their ethnicity/race beginning in 2020 and their gender identity and LGBTQ+ identity beginning in 2022, and have reported those metrics for the current and prior years in Figure 13 below. As illustrated in “Proxy Statement Summary - Figure 4. Director Nominee Composition Highlights”, 64% of our nominees are diverse overall, with 27% of our nominees being diverse on the basis of gender identity and 45% on the basis of ethnicity/race. In addition, over a number of years, the Board has appointed directors who have expanded the experiences, areas of substantive expertise, and geographic and industry diversity of the Board, as illustrated by the information provided in their biographies under “Voting Proposals - Proposal No. 1: Election of Directors - 2023 Nominees for Director” below.

Figure 13. Board Diversity Matrix⁽¹⁾

The Board is also committed to the pursuit of Board refreshment and balanced tenure. The Board believes that new perspectives and ideas are important to a forward-looking and strategic board, as is the ability to benefit from the valuable experience and familiarity of longer-serving directors who can leverage their experience with the Company and with the industry and business environment in which the Company operates. Our corporate governance guidelines do not impose a term limit on Board service; however, the Board regularly assesses the directors’ tenure mix and strives to maintain a balance that will ensure both fresh perspectives and experience on the Board. In addition, our corporate governance guidelines impose an age limitation for directors to be nominated to the Board, as described under “Board Nomination Policies and Procedures - Board Membership Criteria” below.

The Board also considers refreshment and tenure with respect to the leadership and membership of its standing committees, and the nominating and governance committee evaluates short-term and long-term roadmaps for committee membership and leadership on a regular basis. When reviewing committee assignments, the nominating and governance committee considers the rotation of chairs and members with a view toward balancing the benefits derived from the diversity of experience and viewpoints of the various directors. The nominating and governance committee also considers individual directors’ skills, experiences and qualifications, prior committee experience, and other positions and commitments.

Director onboarding and education. To ensure that new directors are able to effectively participate in and contribute to the Board as quickly as possible, we provide a comprehensive orientation and onboarding program for our new directors. Upon joining the Board, new directors participate in an orientation program which includes introductions to other Board members and our senior management team, and in depth learning about our industry, business, technology, operations, culture, people, performance, strategic plans, risk management and corporate governance practices, among other topics. The onboarding process also includes tours of one or more of our manufacturing or lab facilities. These in-person tours were paused during the COVID-19 pandemic but have recently resumed. First time directors (i.e. those without prior public company board experience) are encouraged to attend an outside course shortly after joining the Board.

Our Board is also committed to ongoing education. Our corporate governance guidelines provide that directors are expected to participate in educational events sufficient to maintain their understanding of their duties as directors and to enhance their ability to fulfill their responsibilities. In addition to any external educational opportunities that the directors find useful, the Company and the board leadership are expected to facilitate such participation by arranging for appropriate educational presentations from time to time. In 2022, our Board heard from external advisors on multiple subjects, including cybersecurity, employee engagement and retention, and the economic and political climate in China.

Board Nomination Policies and Procedures

Board membership criteria. Under our corporate governance guidelines, the nominating and governance committee is responsible for recommending nominees to the independent directors, and the independent directors nominate the slate of directors for approval by our stockholders. In making its recommendations, whether for new or incumbent directors, the nominating and governance committee assesses the appropriate balance of experience, skills, and characteristics required for the Board at the time.

Our corporate governance guidelines set out a non-exclusive list of factors to be considered by the nominating and governance committee in recommending nominees, which were selected by the Board to ensure proper board composition and effectiveness. These factors are reviewed and updated by the Board on a regular basis. In May 2023, the factors were updated to include additional diversity attributes. The factors include, but are not limited to:

In addition, our corporate governance guidelines provide that a director may not be nominated for re-election or reappointment to the Board after having attained the age of 75 years. To be nominated, a new or incumbent candidate must provide an irrevocable conditional resignation that will be effective upon (1) the director’s failure to receive the required majority vote at an annual meeting at which the nominee faces re-election and (2) the Board’s acceptance of such resignation.

Upon the recommendations of the nominating and governance committee, the independent members of the Board have nominated all of our current directors for re-election to serve on the Board. Each nominee’s key qualifications, skills, and attributes considered most relevant to the nomination of the candidate to serve on the Board are reflected in their biography under “Voting Proposals-Proposal No. 1: Election of Directors - 2023 Nominees for Director” below. For a summary of the key qualifications, skills, and attributes of the nominees to the Board, see “Proxy Statement Summary - Figure 5. Director Nominee Key Qualifications, Skills, and Experiences.”

Nomination procedure. The nominating and governance committee sets specific qualifications for new directors, and identifies, screens, evaluates, and recommends qualified candidates for appointment or election to the Board. The committee considers recommendations from a variety of sources, including search firms, Board members, executive officers, and stockholders. Nominations for election by the stockholders are made by the independent members of the Board. New candidates to join the Board typically meet with our chair, our lead independent director (if applicable), members of the nominating and governance committee, additional board members, and our president and CEO, as well as representatives of the Company’s executive team, prior to being considered for recommendation by the nominating and governance committee for appointment to the Board. See “Voting Proposals - Proposal No. 1: Election of Directors - 2023 Nominees for Director” below for additional information regarding the 2023 candidates for election to the Board.

The nominating and governance committee will consider for nomination persons properly nominated by stockholders in accordance with the Company’s bylaws and nomination procedures. Our bylaws provide that under certain circumstances, a stockholder, or group of up to 20 stockholders, who have maintained continuous ownership of at least three percent (3%) of our common stock for at least three years may nominate and include a specified number of director nominees in our annual meeting proxy statement that cannot exceed the greater of two or 20% of the aggregate number of directors then serving on the Board (rounded down). Information regarding the nomination procedures is provided in the “Voting and Meeting Information - Other Meeting Information - Stockholder - Initiated Proposals and Nominations for 2024 Annual Meeting” section below. Subject to then-applicable law, stockholder nominations for director will be evaluated by the Company’s nominating and governance committee in accordance with the same criteria as are applied to candidates identified by the committee or other sources.

Director Independence Policies

Board independence requirements. Our corporate governance guidelines require that a majority of the Board members be independent. The nominating and governance committee annually reviews the independence of each director, including with respect to the Board and each individual committee, and recommends to the Board director independence determinations made with

respect to continuing and prospective directors. No director will qualify as “independent” unless the Board affirmatively determines that the director qualifies as independent under the Nasdaq rules and has no relationship that would interfere with the exercise of independent judgment as a director. In addition, no non-employee director may serve as a consultant or service provider to the Company without the approval of a majority of the independent directors (and any such director’s independence must be reassessed by the full Board following such approval).

Board member independence. The Board has determined that all current directors and persons who served as directors during any part of fiscal year 2023, other than Mr. Archer, are independent in accordance with Nasdaq criteria for director independence. In making the determination, the Board considered prior employment with the Company, disclosed related party transactions, known familial relationships of directors with employees (not involving immediate family members) and commercial transactions involving other parties with common directorships, none of which qualified as related party transactions or were considered by the Board to interfere with the exercise of independent judgment as a director.

Board committee independence. All members of the Board’s audit, compensation and human resources, and nominating and governance committees must be non-employee or outside directors and independent in accordance with applicable Nasdaq criteria as well as Rule 16b-3 under the Exchange Act. See “Board Committees” below for additional information regarding these committees.

Lead independent director. Our corporate governance guidelines authorize the Board to designate a lead independent director from among the independent members. As described below under “Leadership Structure of the Board,” an independent director, Mr. Talwalkar, currently serves as chairman of the Board, and as a result, the Board has not designated a lead independent director.

Executive sessions of independent directors. The Board and its audit, compensation and human resources, and nominating and governance committees hold meetings of the independent directors and committee members, without management present, as part of each regularly scheduled meeting and at any other time at the discretion of the Board or committee, as applicable.

Board access to independent advisors. The Board as a whole, and each standing Board committee separately, has the complete authority to retain, at the Company’s expense, and terminate, in their discretion, any independent consultants, counselors, or advisors as they deem necessary or appropriate to fulfill their responsibilities.

Leadership Structure of the Board

The Company’s governance framework provides the Board with the authority and flexibility necessary to select the appropriate leadership structure for the Board. In making determinations about the leadership structure, the Board considers many factors, including the specific needs of the business and what is in the best interests of the Company’s stockholders.

Under our corporate governance guidelines, the Board’s leadership structure includes a chair and may also include a separate lead independent director. Currently, Mr. Talwalkar, an independent director, serves as chairman of the Board, and as a result, the Board has not designated a lead independent director.

The chair’s duties include (1) preparing the agenda for the Board meetings with input from the CEO, the Board, and the committee chairs; (2) upon invitation, attending meetings of any of the Board committees of which they are not a member; (3) conveying to the CEO, together with the chair of the compensation and human resources committee, the results of the CEO’s performance evaluation; (4) reviewing proposals submitted by stockholders for action at meetings of stockholders and, depending on the subject matter, determining the appropriate body, among the Board or any of the Board committees, to evaluate each proposal, and making recommendations to the Board regarding action to be taken in response to such proposal; (5) as requested by the Board, providing reports to the Board on the chair’s activities; (6) coordinating and developing the agenda for, and moderating executive sessions of the Board’s independent directors; (7) conveying to the CEO, as appropriate, discussions from executive sessions of the Board’s independent directors; and (8) performing such other duties as the Board may reasonably request from time to time.

Other Governance Practices

In addition to the principal policies and procedures described above, we have established a variety of other practices to enhance our corporate governance, including the following:

Director resignation or notification of change in executive officer status. Under our corporate governance guidelines, any director who is also an executive officer of the Company must offer to submit their resignation as a director to the Board if the director ceases to be an executive officer of the Company. The Board may accept or decline the offer, in its discretion. The corporate governance guidelines also require a non-employee director to notify the nominating and governance committee if the director changes or retires from their executive position at another public company. The nominating and governance committee reviews the appropriateness of the director’s continuing Board membership under the circumstances, and the director is expected to act in accordance with the nominating and governance committee’s recommendations.

Limitations on director commitments, including other board and committee memberships and leadership. The Board believes that it is critical that directors dedicate sufficient time to their service on the Board. Under our corporate governance guidelines, the nominating and governance committee considers a director’s other board and committee leadership positions and

memberships that may affect a director’s ability to contribute effectively to the Board, and evaluates director commitments at least annually. In particular, our corporate governance guidelines provide that Board members may not serve on more than four public company boards (including service on the Company’s Board). Non-employee directors who are executive officers at other public companies may not serve on more than two public company boards (including the Company’s Board). In addition, non-employee directors may not serve on more than three audit committees of public company boards (including the Company’s audit committee), unless approved by the nominating and governance committee. Finally, the Company’s CEO may not serve on more than one other public company board without obtaining prior approval of such directorship by the nominating and governance committee. All of our directors are currently in compliance with the limitations on director commitments in our corporate governance guidelines.

Director and executive stock ownership. Under the corporate governance guidelines, each non-employee director is expected to own at least the lesser of five times the value of the annual cash retainer (not including any committee chair or other supplemental retainers for directors) or 5,000 shares of Lam common stock, by the fifth anniversary of their initial election to the Board. The requirements are specified in the alternative of shares or dollars to allow for stock price volatility. The dollar alternative is translated into a number of shares by dividing the applicable multiple of the annual cash retainer by the average closing price of our common stock for the 30 trading days through June 30 of the most recently-completed fiscal year as of the measurement date. Guidelines for stock ownership by designated members of the executive management team are described below under “Compensation Matters - Executive Compensation and Other Information - Compensation Discussion and Analysis.” All of our directors and designated members of our executive management team were in compliance with the Company’s applicable stock ownership guidelines at the end of fiscal year 2023 or have a period of time remaining under the guidelines to meet the requirements.

Communications with board members. Any stockholder who wishes to communicate directly with the Board, with any Board committee, or with any individual director regarding the Company may write to the Board, the committee, or the director c/o Secretary, Lam Research Corporation, 4650 Cushing Parkway, Fremont, California 94538. Subject to certain exceptions specified in our corporate governance guidelines, the Secretary will forward communications to the appropriate director(s).

Any stockholder, employee, or other person may communicate any complaint regarding any accounting, internal accounting control, or audit matter to the attention of the Board’s audit committee by sending written correspondence by mail (to Lam Research Corporation, Attention: Board Audit Committee, P.O. Box 5010, Fremont, California 94537-5010) or by telephone (855-208-8578) or internet (through the Company’s third-party provider website at www.lamhelpline.ethicspoint.com). The audit committee has established procedures to ensure that employee complaints or concerns regarding audit or accounting matters will be received and treated anonymously (if the complaint or concern is submitted anonymously and if permitted under applicable law).

Meeting Attendance

Our Board held a total of five meetings during fiscal year 2023. The number of committee meetings held is shown below under “Board Committees”. All of the directors attended at least 75% of the aggregate number of Board meetings and meetings of Board committees on which they served during their tenure in fiscal year 2023.

We expect our directors to attend the annual meeting of stockholders each year unless unusual circumstances make attendance impractical. All of the individuals who were directors as of the 2022 annual meeting of stockholders attended that meeting.

Board Committees

The Board has three standing committees: an audit committee, a compensation and human resources committee, and a nominating and governance committee. The functions, membership, and charter of each are described below. Copies of each committee’s charter are available on the Investors section of our website at investor.lamresearch.com/corporate-governance.

Audit Committee

Membership as of September 8, 2023:² Sohail U. Ahmed, Michael R. Cannon, Bethany J. Mayer, and Leslie F. Varon (Chair) Meetings held in fiscal year 2023: Ten

Key responsibilities:

The Board concluded that all members of the audit committee, and persons who served as members of the audit committee during any part of fiscal year 2023, are non-employee directors who are independent in accordance with the Nasdaq listing standards and SEC rules for audit committee member independence. Furthermore, each member is able to read and understand fundamental financial statements as required by the Nasdaq listing standards, and the Board has determined that Mr. Cannon and Mss. Mayer and Varon are each an “audit committee financial expert” as defined in the SEC rules.

Effective November 7, 2023, John M. Dineen will become a member of the audit committee.

Compensation and Human Resources Committee
Membership as of September 8, 2023:³ Eric K. Brandt (Chair), Jyoti K. Mehra, Abhijit Y. Talwalkar, and Lih Shyng (Rick L.) Tsai Meetings held in fiscal year 2023: Five

Key responsibilities:

The Board concluded that all members of the compensation and human resources committee, and persons who served as members of the committee during any part of fiscal year 2023, are non-employee directors who are independent in accordance with Rule 16b-3 under the Exchange Act and the Nasdaq criteria for director and compensation committee member independence.

Nominating and Governance Committee
Membership as of September 8, 2023:⁴ Eric K. Brandt, Michael R. Cannon (Chair), Bethany J. Mayer, and Abhijit Y. Talwalkar Meetings held in fiscal year 2023: Four

Key responsibilities:

The Board concluded that all members of the nominating and governance committee, and persons who served as members of the nominating and governance committee during any part of fiscal year 2023, are non-employee directors who are independent in accordance with the Nasdaq criteria for director independence.

Board’s Role and Engagement

General. The Board oversees the management of the business and affairs of the Company. In this oversight role, the Board serves as the ultimate decision-making body of the Company, except for those matters reserved for the stockholders. Board agendas facilitate dialogue between the Board and management regarding drivers of long-term stockholder value and key strategic and operational risks. The Board’s and its committees’ agendas include both regular, recurring topics as well as time for special agenda topics that are scheduled on an as-needed basis by the Board or committee chairs, as applicable.

The Board and its committees have the primary responsibilities for:

Risk Oversight. Effective and comprehensive risk management is critical to our Company’s success, given the dynamic economic, geopolitical, and social landscape in which we operate. Our Board is actively engaged in risk oversight both directly and through its committees. As a general matter, the Board exercises its oversight responsibility directly, including overseeing management’s implementation of the Company’s Enterprise Risk Management (“ERM”) program. In addition, the Board delegates oversight of certain risks to its various committees as further detailed below. The Board, and as applicable, each of its committees, oversees the Company’s risk profile by regularly reviewing management’s assessment of the Company’s material risks and evaluating management’s risk mitigation strategies.

The Company’s ERM program is a enterprise-wide program designed to leverage existing management processes to enable effective identification of critical enterprise risks, design and implementation of appropriate risk mitigation strategies, and regular assessment of the status of risks and mitigation plans. The ERM program (i) establishes a comprehensive, enterprise-wide system to identify, evaluate, manage, and report risks, (ii) clearly defines management’s roles and responsibilities by allocating responsibility for specific risks to specific members of our senior management team, and (iii) facilitates dialogue between senior management and the Board regarding the Company’s top risks.

As part of the ERM framework, our management team seeks to create a comprehensive index of the Company’s top enterprise risks by gathering information and input regarding specific categories of risk from designated individuals representing each of the Company’s business units on a quarterly basis. The ERM process involves both identification and ranking of the Company’s top risks. The imminence and timeframe of each relevant enterprise risk informs, in part, the relevant risk mitigation strategy and response time. Further, risks are evaluated based on their likelihood and impact, and appropriate risk mitigation strategies are designed based on such evaluation. On an as needed basis, we employ outside advisors to aid in assessing specific risks, providing benchmarking data, or providing information regarding trends or recent regulatory changes applicable to the Company’s risk profile.

Management provides the Board with annual reports regarding the critical enterprise risks, including an assessment of the likelihood and impact of each identified risk and related risk mitigation strategies. Updates on critical risks are also provided through regular reports to the Board related to the Company’s business operations, strategy, and financial results. In addition, our Chief Information Security Officer and Chief Compliance Officer provide quarterly reports to the Audit Committee on relevant information security

and compliance issues, respectively, and annually report to the Board regarding the Company’s information security and ethics and compliance programs. Further, members of our Internal Audit function provide the Audit Committee with quarterly reports regarding the effectiveness and adequacy of the Company’s controls, risk management, compliance, financial reporting, and governance processes that are designed by the Company.

In specific cases, the Board has delegated its risk oversight responsibility to committees of the Board based on each committees’ respective areas of responsibility and expertise, as described in further detail above in “Board Committees” and in the charters of the respective committees. Committees that have been charged with risk oversight regularly report to the Board on those risk matters within their areas of responsibility. Risk oversight responsibility has been allocated between the Board and its committees as summarized in Figure 14 and described in more detail below.

Figure 14. Risk Oversight

Information Security (including Cybersecurity) Oversight. Our Board recognizes the important role of information security in safeguarding our valuable intellectual property (“IP”) along with the data of our customers, employees, and suppliers. The Board, which includes members with cybersecurity expertise, oversees our strategy and approach to addressing information security risk, both directly and through the audit committee. Our global information security program is led by our chief information security officer, who reports on information security risks at least quarterly to the audit committee and at least annually to the full Board.

Political Activity Oversight. In 2022, we expanded the role of our nominating and governance committee to include oversight of the Company’s political activities. The committee’s responsibilities include ensuring that the Company’s political activities align with Company policy. The committee is also responsible for reviewing the Company’s policy regarding political activities and spending, and for reviewing payments to trade associations and other third parties that may be used for political purposes. Our political activities are led by our Corporate Vice President of Global Trade and Government Affairs (“GTGA”), who reports to the nominating and governance committee at least quarterly. Our GTGA group plays a central role in helping Lam navigate export control requirements and works closely with Lam’s leadership to ensure a compliant, proactive response to new requirements. Externally, the GTGA group plays a leading role in industry consortia to amplify our voice in the wafer fabrication equipment industry and larger semiconductor ecosystem. In November 2022, we joined the Semiconductor Climate Consortium as a founding member to promote semiconductor industry climate action on a global scale. We have also established a political action committee, Leading American Microelectronics Political Action Committee, as another means of engagement and advocacy. For more details regarding our political activities, please refer to our public policy engagement and political activity statement located on the Investors section of our website at investor.lamresearch.com/corporate-governance.

Stockholder Engagement

We believe that engagement with our stockholders is an important part of effective corporate governance. Our senior management, including our president and CEO, chief financial officer (“CFO”), and members of our Investor Relations team, maintain regular contact with a broad base of investors through quarterly earnings calls, meetings, investor day events, industry conferences, and other investor and industry events. Through these interactions, in calendar year 2022, senior management and Investor Relations met with stockholders holding over 35% of our shares. In addition, we regularly engage with major stockholders on governance matters, including executive compensation and ESG topics. The outreach is generally conducted outside of our proxy solicitation period and, depending on the topics, includes members of our Investor Relations, Human Resources, ESG, and Legal functions, and may also include members of the Board. During the proxy solicitation period, we may also engage with our stockholders about topics to be addressed at our annual meeting of stockholders. Our process for engaging with stockholders on governance topics and annual meeting proposals is summarized in Figure 15 below.

Figure 15. Stockholder Governance Engagement Cycle

Through these engagements, we receive valuable input from our stockholders which helps us to evaluate key initiatives from additional perspectives. We share the opinions and information received from our stockholders with the Board. Over the last few years, we have heard from stockholders about their views on subjects such as executive compensation, ESG considerations, culture, leadership transitions, returning capital to stockholders, director tenure, board refreshment, director skills and experiences, board and workforce diversity, director time commitments, political activities, and supply chain management. Understanding the feedback shared with us, we have maintained our focus on board diversification, board refreshment based on skills and experiences, workforce diversity, and pay for performance; have added additional areas of board oversight, including oversight over political activities; and have enhanced our proxy statement and annual ESG report disclosures.

We engaged in extensive stockholder outreach on governance topics and annual meeting proposals in 2022, prior to and during the proxy solicitation period, as illustrated in Figure 16 below. We have summarized our governance outreach efforts, and described the topics discussed, in Figure 16 below, as well as in “Compensation Discussion and Analysis – Overview of Executive Compensation – 2022 Say on Pay Voting Results and Stockholder Outreach”:

Figure 16. 2022 Stockholder Governance Outreach Summary

We contacted stockholders holding 59% of our shares for engagement

We engaged with stockholders holding 19% of our shares

Culture and Human Capital Management

We endeavor to be a great place to work globally by investing in a multi-faceted strategy that is rooted in building an inclusive and diverse workplace. The Board is actively engaged in overseeing our culture and the management of human capital, both directly and through its compensation and human resources committee. The compensation and human resources committee’s responsibilities include organizational and people matters, including reviewing executive officer succession plans as described below, reviewing employee engagement programs, and reviewing and assisting the Board in overseeing ESG matters relating to human capital management and our workforce, including inclusion and diversity and the workforce portion of our annual ESG report. Our chief human resources officer reports to the compensation and human resources committee on a quarterly basis on key human capital metrics, and our progress relative to our human capital goals, to assist the committee in assessing organizational health. While the metrics and areas of focus can change over time, reflecting changing areas of operational focus, in recent quarters they have included metrics and goals relating to headcount, demographics, hiring, retention (including retention by level or by group), organizational shape, inclusion, and engagement.

One of the Board’s primary responsibilities is to oversee the performance, development, and succession of our executive talent. However, the Board’s involvement in people development extends beyond the executive team. The Board and the compensation and human resources committee engage with management across a broad range of human capital related topics. To support employees’ well-being and ensure Lam is a place where everyone feels valued and can do their best work, we have focused on inclusion and diversity; recruitment and development; employee engagement; providing a comprehensive compensation and benefits package; and health and safety. Since calendar year 2020, all of our named executive officers have had compensation goals related to culture, talent, and inclusion and diversity, to help ensure the members of our executive team are aligned with our corporate goals in these areas and

are accountable for the results achieved (see “Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis” below for more details).

Employee engagement (i.e. satisfaction) and voice are critical to Lam’s culture. We regularly engage employees to find out what’s working and how we can better meet their evolving needs. We conduct a global survey on a regular basis to gather input from employees on culture, inclusion and diversity, career opportunity, and manager effectiveness. We also solicit employee feedback through in-person and online employee forums, engagement sessions, all-employee meetings, conversations with managers, and our human resource support and employee relations teams. The Board believes that visits to Company facilities and regular direct engagement with employees enable it to assess the Company’s culture first-hand. Since 2017, the Board has visited our facilities in Fremont, Livermore, Tualatin, Taiwan, and South Korea, and regularly meets directly with employees in small groups in order to engage with and hear directly from them. These in-person meetings were paused during the pandemic, but have resumed. Since August 2022, our Board has had engagement sessions with recently-hired college graduates, vice presidents, members of our employee resource groups, and director-level employees at our Tualatin location.

These surveys and engagements provide management and the Board with valuable employee feedback and help ensure the executive leadership team is focused on and held accountable for fostering and promoting a culture and workplace environment that are consistent with Lam’s core values and with achieving our human capital goals. In calendar year 2022, we matured our engagement processes to improve data collection and analysis and make survey insights more actionable across Lam’s teams. We added new data inputs to measure key engagement correlations. We also added new data outputs to enable cross-program analysis, shared the results with internal teams, and leveraged online learning to drive employee feedback conversations. We also carried out a shorter pulse survey to continue engaging with employees on key topics. We launched new culture workshops for employees who joined Lam initially as remote employees facilitated by executive leadership team members. In addition, we facilitated in person and virtual sessions in which employees shared their experiences with Lam’s chief human resource officer and CEO. These leaders also hosted roundtables with managers of highly engaged teams, which our sites modeled in various regions.

At Lam, we welcome diverse perspectives and strive to create an environment where every employee feels they belong. Lam’s leaders take an intentional and progress-oriented approach to build inclusive behaviors across our organization. The three core pillars of our strategy include fostering inclusion, increasing diversity, and sharing our progress. Based on employee feedback, we strive to continuously enhance our inclusion and diversity program, expanding resources available for professional development, facilitating the creation of additional employee resource groups, providing new job rotation and mentoring programs, and expanding our management training offerings. In 2021, we added inclusion and diversity as one of our core values, and launched and continued a variety of initiatives to cultivate a more inclusive workplace, including by further integrating inclusive features into our global benefits and wellness offerings, with a focus on increasing support for families and parents. Our leaders were also asked to add inclusion goals in their performance and development plans for 2022.

The health, safety, and well-being of our employees are important to our success, and we invest in education, awareness, monitoring, and prevention programs to help recognize and control safety hazards. Post-pandemic, we have continued to provide workplace flexibility by enabling employees to work in ways intended to meet their unique needs. We also seek to ensure our benefits support the needs of our diverse employee base and deliver resources that support all aspects of our employees’ well-being and health.

We aim to maintain and cultivate a workplace where every person has equal opportunities to thrive. We are committed to equal opportunity and non-discrimination in our employment practices, including equitable compensation for work performed. To ensure accountability, we conduct an annual pay equity assessment of our compensation practices and systems to promote fair and equitable compensation in our workforce. The charter of our compensation and human resources committee includes oversight responsibility for our compensation policies and practices related to pay equity laws. We maintain robust employment policies and procedures to reinforce our commitment to equal opportunity, non-discrimination, and pay equity. Our policies and procedures prohibit discrimination, harassment or retaliation in any aspect of employment, including recruiting, hiring, promotion, or compensation. Our Global Employment Practices Statement declares our support of workers’ rights to freedom of association and collective bargaining, to the extent permitted under local laws. In 2022, we published a new human rights policy to further demonstrate our commitment to the protection, safety, and dignity of all Lam employees. Our most recent EEO-1 report can be found in the ESG section of our website at lamresearch.com/company/environmental-social-governance/. Our EEO-1 report shall not be deemed “filed” with the SEC for purposes of federal securities law, and it shall not, under any circumstances, be incorporated by reference into any of the Company’s past or future SEC filings. The EEO-1 report shall not be deemed soliciting material.

For further details about our human capital management, please see our 2023 Annual Report on Form 10-K, as well as our most recent ESG report.

Environmental, Social and Governance Matters

An important part of advancing the industry and empowering progress is being a socially responsible company. Our core values underpin our commitments to sustainable growth and to making a positive contribution to people and the planet. We are committed to responsible and sustainable business practices and continuous improvement in our own operations, in our partnerships with our customers, across our supply chain and in our engagements with our other stakeholders. We invest in ESG across our business and integrate ESG principles into our day-to-day operations. Our ESG strategy is composed of six key pillars, as outlined below. This framework focuses our attention on our most important topics and pressing challenges, while helping us to deliver value to our stakeholders.

Governance. Our ESG governance framework is illustrated in Figure 17 below. While our Board is actively engaged in ESG oversight, the nominating and governance committee has the primary responsibility for oversight of our ESG priorities. For human capital and workforce-related issues, the compensation and human resources committee holds oversight responsibility. The audit committee is responsible for oversight of ethics and compliance and information security. Our executive leadership provides regular updates to the Board and its committees and engages them to discuss ESG strategy, gain alignment on goals, and report on progress. Our CEO and members of the CEO staff participate in our ESG executive steering committee, which is responsible for guiding our ESG strategy, approving and supporting initiatives, and holding business leaders accountable. Our cross-functional ESG leadership team is responsible for proposing goals, developing and executing strategy, and embedding ESG into our operations management system. In calendar year 2021, we formed a new net zero leadership team that is responsible for working with business units to integrate climate considerations into decision-making processes, driving progress on our net zero strategy, and tracking performance against our climate goals (described in more detail under “Sustainable Operations” below). In addition, we have topic-specific working groups to address key issues. In calendar year 2022, we tied our executive compensation program to progress on Lam’s ESG goals to ensure that Lam’s executive leaders are accountable for driving ESG progress and are rewarded for their achievements. We also joined the United Nations Global Compact, and are using the United Nations Sustainable Development Goals (SDGs) as another method of measuring our ESG progress.

Figure 17. Lam’s ESG Governance Structure

Product Innovation. We develop products and solutions with the belief that business success includes making a positive impact on society and the planet. For us, that means that environmental impact and social responsibility should inform our product design and research and development. As part of our net zero strategy, we intend to accelerate the integration of environmental considerations into the design, manufacturing, delivery, and performance of our products to help us meet our goals.

In calendar year 2022, we focused on developing smarter, more efficient products and processes to measure and reduce the greenhouse gas (“GHG”) emissions footprint of our products. To reduce the emissions associated with the use of our products, we are seeking to design solutions that are smarter and more efficient. We are also incorporating design for environment principles into the product design process, to guide us in developing products with their full lifecycle in mind. In doing so, we are proving that it is possible to increase productivity while reducing the use of raw materials, energy, and space, and identifying ways to reduce the environmental impact of our products without sacrificing quality and value. We also recognize that we can’t solve these challenges alone, and thus are collaborating closely with stakeholders including customers and universities via a variety of avenues, including our 2022 Tech Symposium themed “Engineering a Greener Fab.”

In addition, our Equipment Intelligence® solutions combine automation, machine learning, interconnectivity, and real-time data with Lam’s equipment and process expertise. By enabling faster learning cycles, these solutions help customers enhance productivity,

efficiency, and performance while minimizing waste. We are also applying these capabilities to measure key environmental impacts of our products.

Our Customer Support Business Group (“CSBG”) supports Lam’s customers across the equipment lifecycle. From solutions that increase system uptime to offerings that extend the product lifecycle, our goal is to help customers optimize quality and cost, with the added benefit of reducing their environmental impact. In addition to new systems, CSBG provides refurbished tools, previous generation tools, and equipment upgrades. These options deliver great customer value while avoiding the environmental impacts of manufacturing new tools and sending existing equipment to landfills. Our spares offerings include the reuse of high-value spare parts through a variety of re-cleaning, repair, refurbishment, and re-coating services.

Sustainable Operations. Incorporating environmental sustainability into business leads to better products, more efficient operations, and added value for our customers. As the world tackles climate change and other critical environmental issues, we seek to do our part by responsibly managing our impact and have set global goals for energy efficiency, greenhouse gas emissions, water conservation, and hazardous waste diversion. We carefully monitor and manage our environmental impact across our business and work to implement cost-effective best practices, focusing our efforts where we believe we can have the biggest long-term impact. By 2050, we aim to achieve net zero GHG emissions and in 2022 we achieved Science-Based Targets initiative (“SBTi”) validation for our near-term GHG-reduction targets.⁵ These goals are in line with limiting global warming to 1.5°C, representing the most ambitious SBTi designation available. We report progress annually to the CDP and through our annual ESG report. Our ESG report for calendar year 2022 contains disclosures aligned with the Sustainability Accounting Standards Board (“SASB”), the Global Reporting Index (“GRI”), and the Task Force on Climate-Related Disclosures (“TCFD”) framework.

In 2022, we joined the Semiconductor Climate Consortium as a founding member. This industry-level collaboration brings together key players across the semiconductor industry to collectively tackle climate change. By collaborating with fellow members, we aim to accelerate solutions with greater speed and scale than can be achieved alone.

Our Workplace. As described above in the “Culture and Human Capital Management” section, guided by our core values, we strive to provide a work environment that fosters inclusion and diversity, ensures every voice is heard, and enables employees to achieve their full potential. We aim to maintain a collaborative, supportive, and opportunity-rich culture that enhances innovation and employee engagement. We strive to protect the health and safety of our personnel throughout our entire operation, including our offices, manufacturing sites, research and development (“R&D”) centers, and our field team working at customer sites.

Responsible Supply Chain. We understand the importance of an ethical, responsible, resilient, and diverse supply chain, and we engage with our suppliers to address issues including climate action, human rights, supplier diversity, and responsible mineral sourcing. Lam’s supply chain is extensive, so we employ strong oversight and governance to facilitate comprehensive supply chain management across the globe. Our Supply Chain ESG team leads our direct supplier risk assessment efforts, with a focus on driving continuous improvements. Lam also has cross-functional supply chain teams that collaborate to share best practices around supplier engagement. In 2022, we matured our supply chain management processes, grew our Supply Chain ESG team, and leveraged additional tools published by the Responsible Business Alliance (the “RBA”) to better quantify risks in the regions where our suppliers operate.

We are a strong proponent of supply chain-related industry standards and uphold the guidelines published by the RBA. Since 2019, Lam has been an affiliate member of the RBA, the world’s largest industry coalition dedicated to corporate responsibility in global supply chains. All of our direct suppliers are expected to adhere to our Global Supplier Code of Conduct, which incorporates the RBA code of conduct and covers topics such as ethics, integrity, transparency, anti-corruption, conflict minerals, human trafficking, environmental sustainability, and social responsibility. Throughout the supplier lifecycle, we continue to conduct due diligence using a risk-based approach, which may include RBA self-assessment questionnaires, inspections, and corrective actions as needed.

Advancing climate action requires close collaboration between us and our customers and suppliers. Upstream activities contribute to our Scope 3 emissions, so if we want to reduce them, we need top suppliers on board. In 2021, we began our engagement with suppliers to make progress toward our 2050 net zero GHG emissions goal. We hosted our annual Supplier Excellence Awards and inaugural ESG Supplier Forum to connect with suppliers. In 2022, we engaged with 100% of our top-tier suppliers by spend on environmental sustainability opportunities. We also made progress toward our 2025 goal of engaging 46.5% of top suppliers as measured by emissions in setting SBTs. During the year, we surveyed our top suppliers to better understand their climate progress and encouraged them to acknowledge a Climate Pledge committing to climate action. We also began asking suppliers to take a carbon footprinting class through RBA. By engaging suppliers on these issues, we are encouraging them to measure and manage important areas of their environmental impact. This supports mutual progress toward our respective ESG priorities and goals.

We are committed to protecting and supporting human rights—both in our supply chain and in our operations around the world. We expect our suppliers and sites to comply with laws including, but not limited to, the U.K. Modern Slavery Act of 2015 and the California Transparency in Supply Chains Act of 2010. In 2022, we published our first Human Rights Policy, which applies to all our employees and outlines our expectations to uphold internationally recognized human rights. Our policy is intended to align with several internationally recognized standards, including the Universal Declaration of Human Rights, the UN’s Guiding Principles on Human Rights, and the RBA Code of Conduct. Lam expects our suppliers to adopt similar practices.

Inclusion and diversity are part of our Core Values at Lam, and we recognize the value that our relationships with diverse suppliers bring. During our supplier onboarding process, we implement measures to identify diverse suppliers, including minority-, women-, LGBTQ+, and veteran-owned businesses, as well as businesses owned by people with disabilities. We also include diverse qualifications in our Supplier Scorecard and track and report spending with diverse direct material suppliers on a periodic basis.

Our Communities. One of our guiding principles is to “act with purpose for a better world.” We seek to fund community programs that uplift the places where we operate and live, in line with this guiding principle. We recently established an overarching social impact platform – “Powering Breakthroughs Together” – with an objective of making meaningful progress in three focus areas: enabling transformative learning; helping to build more resilient communities; and fostering more inclusive societies. We endeavor to work together with philanthropic organizations and our employees to increase the impact of our activities. In 2022, we kicked off our first signature initiative through the program, a three-year collaboration with FIRST® Global. In 2022, we provided a $1.33 million donation to support FIRST Global and served as the premier sponsor for the 2022 FIRST Global Challenge. We encourage our employees to volunteer as FIRST mentors for students. We also plan to donate $10 million to FIRST Global over the next three years, beginning in 2023. Beyond our engagement with FIRST Global, we intend to support programs to strengthen relationships, technology, preparedness, and recovery plans that enable communities to succeed in the face of adversity. This includes making investments in programs implementing disaster preparedness and recovery plans, engaging and connecting with community members, helping rebuild communities or curbing climate change. We plan to invest in initiatives to facilitate equitable access and opportunities to help communities reach their full potential by eliminating barriers, leveling the playing field and driving systematic change.

For more information about our ESG efforts, including climate-related efforts, please refer to our annual ESG report available in the ESG section of our website at lamresearch.com/company/environmental-social-governance/. Our ESG report shall not be deemed “filed” with the SEC for purposes of federal securities law, and it shall not, under any circumstances, be incorporated by reference into any of the Company’s past or future SEC filings. The ESG report shall not be deemed soliciting material.

Director Compensation

Our director compensation is designed to attract and retain high-caliber directors and to align director interests with those of stockholders. The compensation and human resources committee’s independent compensation consultant advises the committee with respect to non-employee director compensation and assists with the review of competitiveness of such compensation. In November 2021, our Board adopted our current non-employee director compensation program. The objective of the non-employee director compensation program is to target and pay the non-employee directors at the median of our Peer Group (as defined and described below under “Compensation Matters - Executive Compensation and Other Information - Compensation Discussion and Analysis – Executive Compensation Governance and Procedures – Peer Group Practices and Survey Data”), as measured every other year.

Under the non-employee director compensation program, non-employee director compensation is compared to our Peer Group annually and the results of this comparison are provided to the compensation and human resources committee in connection with its regular August meeting. Every other year, beginning in 2023, if this comparison shows any element of non-employee director compensation to be below the 50th percentile when compared to our Peer Group, this element will be automatically increased to a value equal, as nearly as practicable, to the 50th percentile, effective on the date of our next annual meeting of stockholders for service in the following calendar year (e.g. if an adjustment were made in connection with the August 2023 compensation and human resources committee meeting, then such adjustment will be effective on the date of our annual stockholder meeting in November 2023 for service in calendar year 2024). Under the program, the compensation and human resources committee has the option at any time to recommend that the Board exercise, and the Board has the right at any time to exercise, negative discretion to reduce (or to not increase) any element of non-employee director compensation. The non-executive director compensation program may be modified, replaced, superseded or cancelled by the Board at any time. The elements of our non-employee director compensation are described below.

In the case of Mr. Archer, our president and CEO, his executive compensation (which is described below under “Compensation Matters - Executive Compensation and Other Information - Compensation Discussion and Analysis”) is reviewed annually by the independent members of the Board. Mr. Archer does not receive additional compensation for his service on the Board.

Non-employee director compensation. Non-employee directors receive annual cash retainers and equity awards. The chair of the Board, the lead independent director (if applicable), and committee chairs and members receive additional cash retainers. Non-employee directors who join the Board or a committee mid-year receive pro-rated cash retainers and equity awards, as applicable. Our non-employee director compensation program is based on service during the calendar year; however, SEC rules require us to report compensation in this proxy statement on a fiscal year basis. Cash compensation paid to non-employee directors for the fiscal year ended June 25, 2023, together with the annual cash compensation program components in effect for calendar years 2023 and 2022, is shown below.

Figure 18. Director Annual Retainers

Each non-employee director also receives an annual equity award on the first Friday following the annual meeting. For the equity awards granted in November 2022, these had a targeted grant date value equal to $215,000 (the number of RSUs subject to the award is determined by dividing $215,000 by the 30 trading day average of the closing price of our common stock prior to the date of grant, rounded down to the nearest whole share). These awards generally vest on October 31 in the year following the grant and are subject to the terms and conditions of the Company’s 2015 Stock Incentive Plan, as amended (the “2015 Plan”), and the applicable award agreements. These awards immediately vest in full: (1) if a non-employee director dies or becomes subject to a “disability” (as determined pursuant to the 2015 Plan), (2) upon the occurrence of a “Corporate Transaction” (as defined in the 2015 Plan), or (3) on the date of the annual meeting, if the annual meeting during the year in which the award was expected to vest occurs prior to the vest date and the non-employee director is not re-elected or retires or resigns effective immediately prior to the annual meeting. Non-employee directors who commence service after the annual equity award has been granted receive on the first Friday following the first regularly scheduled, quarterly Board meeting attended a pro-rated award based on the number of regularly scheduled, quarterly Board meetings remaining in the year as of the effective date and time of the director’s appointment. The pro-rated awards are subject to the same vesting schedule, terms and conditions as the annual equity awards, except that if the award is granted on the first Friday following the regularly scheduled quarterly November Board meeting, the award vests immediately.

On November 11, 2022, each director at such time (other than our president and CEO) received a grant of 563 RSUs for service during calendar year 2023. Unless there is an acceleration event, the RSUs granted to each current director for service during calendar year 2023 will vest in full on October 31, 2023, subject to the director’s continued service on the Board. On February 10, 2023, Dr. Kang, who was appointed to the Board effective February 7, 2023, also received a prorated grant of 452 RSUs for service during calendar year 2023. The following table shows compensation for fiscal year 2023 for persons serving as directors during fiscal year 2023 other than Mr. Archer:

Figure 19. Director Compensation for Fiscal Year 2023

Other benefits. Any members of the Board enrolled in the Company’s health plans on or prior to December 31, 2012, can continue to participate after retirement from the Board in the Company’s Retiree Health Plans. The Board eliminated this benefit for any person who became a director after December 31, 2012. The most recent valuation of the Company’s accumulated post-retirement benefit obligation under ASC 715, Compensation-Retirement Benefits as of June 25, 2023, for eligible directors and the current directors who may become eligible, is shown below. Factors affecting the amount of post-retirement benefit obligation include current age, age at retirement, coverage tier (e.g., single, plus spouse, plus family), interest rate, and length of service.

Figure 20. Accumulated Post-Retirement Benefit Obligations

Executive Compensation and Other Information

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program. Our CD&A discusses compensation earned by our fiscal year 2023 “Named Executive Officers” (“NEOs”), who are as follows:

Figure 21. Named Executive Officers for Fiscal Year 2023

Our CD&A is organized according to the following structure:

I. OVERVIEW OF EXECUTIVE COMPENSATION

To align with stockholders’ interests, our executive compensation program is designed to foster a pay-for-performance culture and achieve the executive compensation objectives described in “Executive Compensation Philosophy and Program Design - Executive Compensation Philosophy” below. We have structured our compensation program and payouts to reflect these goals. Highlights of our executive compensation program are listed in “Proxy Statement Summary–Figure 7. Executive Compensation Highlights” above. Our president and CEO’s compensation in relation to our revenue and net income, as well as the Company’s cumulative five-year total shareholder return on common stock compared against the cumulative returns of other indices, are shown below.

Figure 22. CEO Pay for Performance for Fiscal Years 2018-2023

CEO Pay for Performance

The CEO Total Compensation for fiscal year 2019 represents Mr. Archer’s compensation for service as president and COO until December 5, 2018 and thereafter until the end of the 2019 fiscal year as president and CEO. For years prior to and after fiscal year 2019, the CEO Total Compensation relates to the compensation of the applicable CEO.

The graph below compares Lam’s cumulative five-year total shareholder return on common stock with the cumulative total returns of the Nasdaq Composite Total Return Index, the Standard & Poor’s (“S&P”) 500 (TR) Index, and the Philadelphia Semiconductor Sector Total Return Index. The graph tracks the performance of a $100 investment in our common stock and in each of the indices (with the reinvestment of all dividends) for the five years ended June 25, 2023.

Figure 23. Comparison of Cumulative Five-Year Total Return

COMPARISON OF CUMULATIVE FIVE-YEAR TOTAL RETURN*

Among the Company, the Philadelphia Semiconductor Sector Total Return
Index, the Nasdaq Composite Total Return Index, and
the S&P 500 (TR) Index**

To understand our executive compensation program fully, we believe it is important to understand:

Our Business, Our Industry Environment, and Our Financial Performance

An overview of our business and industry environment is set forth in “Proxy Statement Summary” on page 1.

Although we have a June fiscal year end, our executive compensation program is generally designed and oriented on a calendar year basis to correspond with our calendar year-based business planning. This CD&A generally reflects a calendar year (“CY”) orientation rather than a fiscal year (“FY”) orientation, as shown below. The Executive Compensation Tables at the end of this CD&A are based on our fiscal year, as required by SEC regulations.

Figure 24. Executive Compensation Calendar-Year Orientation

In calendar year 2022, there were higher investments in wafer fabrication equipment spending relative to calendar year 2021, driven by increasing manufacturing complexity in NAND, DRAM, and foundry/logic devices, as well as robust secular demand for semiconductors in a number of areas including cloud computing, artificial intelligence, 5G networks, and the Internet of Things.

Highlights for calendar year 2022:

In the first half of calendar year 2023, wafer fabrication equipment spending declined primarily from demand weakness in the memory segment. Additionally, the United States government imposed new controls in October 2022, which significantly impacted trade with China for the shipment of wafer fabrication equipment and related parts and services.

For the March and June 2023 quarters combined, Lam delivered revenues of approximately $7.1 billion, and operating cash flows of approximately $2.8 billion.

Executive Compensation Philosophy and Program Design

Executive Compensation Philosophy

The philosophy of our compensation and human resources committee that guided this year’s awards and payout decisions is that our executive compensation program should:

Our compensation and human resources committee’s executive compensation objectives are to motivate:

Program Design

Our program design incorporates an annual review of each of the compensation elements. However, additional reviews may be undertaken whenever there is a change in roles or responsibilities or a new hire joins the Company.

Our program design uses a mix of annual and long-term components, and a mix of cash and equity components. Our executive compensation program includes base salary; an annual incentive program (“AIP”); a long-term incentive program (“LTIP”); promotion, retention and/or new hire awards whenever necessary; as well as stock ownership guidelines and a compensation recovery policy. The primary elements of our executive compensation program are listed in Figure 25 below and are described in more detail in “III. Primary Components of NEO Compensation; CY2022 Compensation Payouts; CY2023 Compensation Targets and Metrics” below.

Figure 25. Compensation Components

As illustrated below, our program design is weighted toward performance and stockholder value. The performance-based program components include annual incentive program cash payout opportunities and market-based equity and stock option awards under the LTIP.

Figure 26. NEO Compensation Target Pay Mix Averages

2022 Say on Pay Voting Results and Stockholder Outreach

We evaluate our executive compensation program and practices at least annually. Among other things, we consider the outcome of our most recent advisory vote on named executive officer compensation, or “Say on Pay,” and input we receive from our stockholders. As is described above in more detail in “Governance Matters - Corporate Governance - Stockholder Engagement,” we engage regularly with our stockholders, typically outside of our proxy solicitation period, on matters including executive compensation.

The primary components of our executive compensation program have remained consistent over the last several years and, in general, have received continuing support from our stockholders, as reflected in the voting results for our annual Say on Pay proposals shown in Figure 27 below.⁶

Figure 27. Historical Say on Pay Votes ⁽¹⁾

In 2022, we engaged in extensive stockholder outreach regarding our executive compensation program prior to the proxy solicitation period, covering planned enhancements to our executive compensation disclosures in our 2022 proxy statement, and design considerations relating to our LTIP, among other topics. Figure 28 below summarizes what we heard from our stockholders, our perspective on those views, and how we have responded. Other than the changes described below and in this CD&A, our compensation and human resources committee determined to maintain our executive compensation program and practices in their current form for calendar year 2023, in light of our stockholders’ continuing support.

Figure 28. 2022 Executive Compensation Stockholder Outreach

II. EXECUTIVE COMPENSATION GOVERNANCE AND PROCEDURES

Role of the Compensation and Human Resources Committee

Our Board has delegated certain responsibilities to the compensation and human resources committee, or for purposes of this CD&A, the “committee,” through a formal charter. The committee⁷ oversees the compensation programs in which our CEO and his direct reports who are executive or senior vice presidents participate. The independent members of our Board approve the compensation packages and payouts for our CEO. Our CEO is not present for any decisions regarding his compensation packages and payouts.

Committee responsibilities include, but are not limited to:

The committee is authorized to delegate its authority and responsibilities as it deems proper and consistent with legal requirements to its members, any other committee of the Board and/or one or more officers of the Company, in accordance with the provisions of the Delaware General Corporation Law. For additional information on the committee’s responsibilities and authorities, see “Governance Matters - Corporate Governance - Board Committees - Compensation and Human Resources Committee” above.

In order to carry out these responsibilities, the committee receives and reviews information, analyses, and proposals prepared by our management and by the committee’s compensation consultant (see “Role of Committee Advisors” below).

Role of Committee Advisors

The committee is authorized to engage its own independent advisors to assist in carrying out its responsibilities. The committee has engaged the services of Compensia, Inc. (“Compensia”), a national compensation consulting firm, as the committee’s compensation consultant. Compensia provides the committee with independent and objective guidance regarding the amount and types of compensation for our chair, non-employee directors, and executive officers, and how these amounts and types of compensation compare to other companies’ compensation practices, as well as guidance on market trends, evolving regulatory requirements, compensation of our non-employee directors, peer group composition, and other matters as requested by the committee.

Representatives of Compensia regularly attend committee meetings (including executive sessions without management present), communicate with the committee chair outside of meetings, and assist the committee with its consideration of performance metrics and goals. Compensia reports to the committee, not to management. At the committee’s request, Compensia meets with members of management to gather and discuss information that is relevant to advising the committee. The committee may replace Compensia or hire additional advisors at any time. Compensia has not provided any other services to the committee or to our management, and has received no compensation from us other than with respect to the services described above. The committee assessed the independence of Compensia pursuant to SEC rules and Nasdaq listing standards, including the following factors: (1) the absence of other services provided by it to the Company; (2) the fees paid to it by the Company as a percentage of its total revenue; (3) its policies and procedures

to prevent conflicts of interest; (4) the absence of any business or personal relationships with committee members; (5) the fact that it does not own any Lam common stock; and (6) the absence of any business or personal relationships with our executive officers. The committee assessed this information and concluded that the work of Compensia had not raised any conflict of interest.

Role of Management

Our CEO, with support from our human resources and finance organizations, develops recommendations for the compensation of our other executive officers. Typically, these recommendations cover base salaries, annual incentive program target award opportunities, long-term incentive program target award opportunities, and the criteria upon which these award opportunities may be earned, as well as actual payout amounts under the annual and long-term incentive programs.

The committee considers our CEO’s recommendations within the context of competitive compensation data, the Company’s compensation philosophy and objectives, current business conditions, the advice of Compensia, and any other factors it considers relevant.

Our CEO attends committee meetings at the request of the committee but leaves the meeting for any deliberations related to and decisions regarding his own compensation, when the committee meets in executive session, and at any other time requested by the committee.

Peer Group Practices and Survey Data

In establishing the total compensation levels of our executive officers, as well as the mix and weighting of individual compensation elements, the committee monitors compensation data from a group of comparably sized companies in the technology industry (the “Peer Group”), which may differ from peer groups used by stockholder advisory firms. The committee selects the companies constituting our Peer Group based on their comparability to our lines of business and industry, annual revenue, and market capitalization, and our belief that we are likely to compete with them for executive talent. Our Peer Group is focused on public semiconductor, semiconductor equipment and materials companies that file standard reports with the SEC as domestic issuers, and similarly-sized high-technology equipment and hardware companies with a global presence and a significant investment in research and development. The table below summarizes how the calendar year 2023 Peer Group companies compare to the Company:

Figure 29. Peer Group Revenue and Market Capitalization

Based on these criteria, the Peer Group and targets may be modified from time to time. Our Peer Group was reviewed in August 2022 to ensure that our Peer Group continues to fit within our Peer Group criteria outlined above, and no changes were made for calendar year 2023 compensation decisions. Our Peer Group consists of the companies listed as follows:

Figure 30. Peer Group Companies for Calendar Year 2023

We derive revenue, market capitalization, and NEO compensation data from public filings made by our Peer Group companies with the SEC and from other publicly available sources. Radford Technology Survey data may be used to supplement compensation data from public filings as needed. The committee reviews compensation practices and selected data on base salary, bonus targets, total cash compensation, equity awards, and total compensation drawn from the Peer Group companies and/or the Radford Technology Survey as a reference to help ensure compensation packages are consistent with market norms.

Base pay levels for each executive officer are generally set with reference to market-competitive levels and in reflection of each officer’s skills, experiences, and performance. Variable pay target award opportunities and total direct compensation for each executive officer are generally designed to deliver market-competitive compensation for the achievement of stretch goals, with downside risk for underperforming and upside reward for overperforming. For those executive officers who are new to their roles, compensation arrangements may be designed to deliver below-market compensation for a period of time. However, the committee

does not “target” pay at any specific percentile. Rather, individual pay positioning depends on a variety of factors, such as prior job performance, job scope and responsibilities, skill set, prior experience, time in position, internal comparisons of pay levels for similar skill levels or positions, our goals to attract and retain executive talent, Company performance, and general market conditions.

Assessment of Compensation Risk

Management, with the assistance of Compensia, the committee’s independent compensation consultant, conducted a compensation risk assessment in 2023 and concluded that risks arising from the Company’s current employee compensation programs are not reasonably likely to have a material adverse effect on the Company.

Tax and Accounting Considerations

Taxation of “Parachute” Payments

Sections 280G and 4999 of the Code provide that “disqualified individuals” within the meaning of the Code (which generally includes certain officers, directors and employees of the Company) may be subject to additional tax if they receive payments or benefits in connection with a change in control of the Company that exceed certain prescribed limits. The Company or its successor may also forfeit a deduction on the amounts subject to this additional tax.

We did not provide any of our executive officers, any director, or any other service provider with a “gross-up” or other reimbursement payment for any tax liability that the individual might owe as a result of the application of sections 280G or 4999 during fiscal year 2023, and we have not agreed and are not otherwise obligated to provide any individual with such a “gross-up” or other reimbursement as a result of the application of sections 280G and 4999.

Internal Revenue Code Section 409A

Section 409A of the Code imposes significant additional taxes on an executive officer, director, or service provider that receives
non-compliant “deferred compensation” that is within the scope of section 409A. Among other things, section 409A potentially applies to cash awards under the LTIP, if any, the Elective Deferred Compensation Plan, certain equity awards, and severance arrangements.

To assist our employees in avoiding additional taxes under section 409A, we have structured the LTIP, the Elective Deferred Compensation Plan, and our equity awards in a manner intended to qualify them for exemption from, or compliance with, section 409A.

Accounting for Stock-Based Compensation

We follow ASC 718 for accounting for our stock options and other stock-based awards. ASC 718 requires companies to calculate the grant date “fair value” of their stock option grants and other equity awards using a variety of assumptions. This calculation is performed for accounting purposes. ASC 718 also requires companies to recognize the compensation cost of stock option grants and other stock-based awards in their income statements over the period that an employee is required to render service in exchange for the option or other equity award.

III. PRIMARY COMPONENTS OF NEO COMPENSATION; CY2022 COMPENSATION PAYOUTS; CY2023 COMPENSATION TARGETS AND METRICS

This section describes the components of our executive compensation program. It also describes, for each component, the payouts to our NEOs for calendar year 2022 and the forward-looking actions taken with respect to our NEOs in calendar year 2023.

Base Salary

Adjustments to base salary are generally considered by the committee each year in February.

For calendar years 2023 and 2022, base salaries for NEOs were determined by the committee in February of each year, based on the factors described in Figure 25 above. The base salaries for calendar year 2022 became effective on March 1 or the first day of the pay period that included March 1 (if earlier). No base salary adjustments for the NEOs were made for calendar year 2023 due to the weakness in the business environment at the beginning of the calendar year. The base salaries of the NEOs for calendar years 2023 and 2022 are shown below.

Figure 31. NEO Annual Base Salaries

Annual Incentive Program

Annual Incentive Program Components

The components of our annual incentive program, each of which plays a role in determining actual payments made, are described in Figure 32 below. For calendar year 2023, the committee approved the addition of a new component to our annual incentive program, the Profitability Performance Factor.

Figure 32. Annual Incentive Program Components

The Funding Factor is set by the committee to create a maximum payout amount from which annual incentive program payouts may be made. The committee may exercise negative (but not positive) discretion against the Funding Factor result, and generally the entire funded amount is not paid out. Achievement of a minimum level of performance against the Funding Factor goal is required to fund any program payments. As a guide for using negative discretion against the Funding Factor result and for making payout decisions, the committee primarily tracks the results of the Performance Factors, which are generally weighted equally, and against which discretion may be applied in a positive or negative direction, provided the Funding Factor result is not exceeded.

The metrics and goals for the annual incentive program are set annually in connection with our annual business planning cycle, and are directly connected to our annual business plans and goals. Goals are set depending on the business environment and the Company’s annual objectives and strategies, encompassed in the Annual Operating Plans for the Company and the organizations managed by each of the NEOs, to ensure that they remain stretch goals regardless of changes in the business environment, which

can vary significantly from year-to-year in our industry. Accordingly, as business conditions improve, goals are calibrated to require better performance, and if business conditions deteriorate, goals are calibrated to incentivize stretch performance under more difficult conditions. The interplay between our corporate planning cycle and our compensation planning and evaluation cycle is summarized in Figure 33 below.

Figure 33. Annual Planning and Compensation Decision Cycle

We believe that, over time, outstanding business results create stockholder value. Consistent with this belief, multiple performance-based metrics (non-GAAP operating income, non-GAAP gross margin, product market share, and strategic, operational, and organizational metrics embodied in organizational Annual Operating Plans) are established for our NEOs as part of the annual incentive program.

The specific metrics and goals and the relative weightings for the Performance Factors are determined by the committee considering the recommendation of our CEO, other than the metrics and goals for the Individual Performance Factor, which are determined by our CEO, or in the case of the CEO, by the committee. Generally, the Performance Factors are weighted equally.

In recent years, including calendar year 2022, the committee used a Corporate Performance Factor, with the metric of non-GAAP operating income⁸  as a percentage of revenue (“non-GAAP operating margin”), and an Individual Performance Factor, based primarily on our performance to corporate-level Annual Operating Plan goals, with each of the Corporate Performance Factor and Individual Performance Factor weighted equally. The committee selected non-GAAP operating margin as the Corporate Performance Factor metric because the committee believes that it is the performance metric that best reflects core operating results. Non-GAAP operating margin is considered useful to investors for analyzing business trends and comparing performance to prior periods. By excluding certain costs and expenses that are not indicative of core results, non-GAAP results are more useful for analyzing business trends over multiple periods. See “Figure 37. Individual Performance Factor Components for Calendar Year 2022” below for additional detail regarding the determination of the Individual Performance Factor for calendar year 2022.

For calendar year 2023, in light of the focus by the Board, committee and management team on the profitability of the Company, the committee determined to add a third factor, the Profitability Performance Factor, to the 2023 annual incentive program, with the metric of non-GAAP gross margin as a percentage of revenue. The committee selected non-GAAP gross margin as a percentage of revenue as the Profitability Performance Factor metric because the committee believes that it is the performance metric that has the largest impact on the overall profitability of the Company. Non-GAAP gross margin as a percentage of revenue is considered useful to investors for analyzing the core profitability of the Company’s business and comparing performance to prior periods. Under the calendar year 2023 annual incentive program, the Corporate Performance Factor, Profitability Performance Factor and Individual Performance Factor will be weighted equally; however, the program was designed to cause Profitability Performance Factor results to scale up and down more rapidly (as compared to the Corporate Performance Factor) in the event that the Company’s non-GAAP gross margin as a percentage of revenue were to outperform or underperform relative to the goal for calendar year 2023, thereby increasing both the risk and potential reward associated with the program as compared to prior year programs that only incorporated the Corporate Performance Factor and Individual Performance Factor.

The committee establishes individual target award opportunities for each NEO as a percentage of base salary. Specific target award opportunities are determined based on job scope and responsibilities, as well as an assessment of Peer Group data. Awards have a maximum payment amount defined as a multiple of the target award opportunity.

We believe the metrics and goals set under this program have been effective to motivate our NEOs and the organizations they lead, and to achieve pay-for-performance results.

Figure 34. Annual Incentive Program Payouts for Calendar Years 2020-2022

Calendar Year 2022 Annual Incentive Program Parameters and Payout Decisions

In February 2022, the committee established the metrics and goals for the Funding Factor and the Corporate Performance Factor, set the calendar year 2022 target award opportunities, determined that the Corporate Performance Factor and the Individual Performance Factor should be weighted equally, and established the metrics and goals for the Individual Performance Factors for each then-employed NEO. In February 2023, the committee considered the actual results under these factors and made payout decisions for the calendar year 2022 program.

2022 Annual Incentive Program Funding Factor and Corporate Performance Factor. In February 2022, the committee set non-GAAP operating margin as the metric for the Funding Factor and Corporate Performance Factor for calendar year 2022.

For the Funding Factor, the committee set the following parameters for calendar year 2022:

For the Corporate Performance Factor, the committee set the following parameters:

The Corporate Performance Factor goal was designed to be a stretch goal. As is discussed above in “Annual Incentive Program Components”, goals are set annually depending on the business environment and the Company’s annual objectives and strategies, to ensure that they remain stretch goals regardless of changes in the business environment, which can vary significantly from year-to-year in our industry. As shown in Figure 35, over the five years through calendar year 2022, the committee raised the Corporate Performance Factor goal year-over-year each year as our outlook and the industry outlook improved, with the exception of calendar year 2019, when a weakened industry outlook for wafer fabrication equipment spending was reflected in a Corporate Performance Factor goal that was slightly below that of the prior year.

Figure 35. Corporate Performance Factor Goals for Calendar Years 2018-2022

Actual non-GAAP operating margin was 31.7% for calendar year 2022. This performance resulted in a Funding Factor of 225% of target and a Corporate Performance Factor of 0.97 for calendar year 2022.

2022 Annual Incentive Program Target Award Opportunities. The annual incentive program target award opportunities for calendar year 2022 for each NEO were as set forth below in Figure 36 in accordance with the principles described above under “Executive Compensation Governance and Procedures - Peer Group Practices and Survey Data.” The target award opportunities (as a percentage of base salary) for each of our NEOs remained the same for calendar year 2022 relative to the prior year, with the exception of Mr. Archer, Dr. Vahedi and Mr. Varadarajan, whose target award opportunities were increased in order to increase the competitiveness of cash compensation while continuing to align compensation with performance. The committee also set a maximum award opportunity, which for calendar year 2022 was equal to 2.25 times the target award opportunity, consistent with prior years.

Figure 36. Annual Incentive Program Target Award Opportunities for Calendar Year 2022 

2022 Annual Incentive Program Individual Performance Factors. For calendar year 2022, as shown in Figure 37 below, the committee determined the Individual Performance Factor for each NEO (other than Mr. Archer) using a formula that took into consideration two elements: a weighted score for each NEO based on the Company’s performance relative to corporate-level annual operating plan goals, with weightings for each NEO based on the extent to which they (and the organizations managed by them) were expected to contribute to and be accountable for that corporate-level performance; and an individual score reflecting the extent to which individual NEOs provided exceptional contributions during the year.

Figure 37. Individual Performance Factor Components for Calendar Year 2022

The committee evaluated the Company’s performance relative to corporate-level annual operating plan goals, and determined to assign the scores shown in Figure 38 below.

Figure 38. Corporate Scorecard for Calendar Year 2022

The committee assigned weightings for each corporate goal area for each of the NEOs (other than Mr. Archer), which were combined with the corporate-level scores to determine a weighted achievement score, as shown in Figure 39 below.

Figure 39. Corporate Scorecard Weightings and Achievements for Calendar Year 2022

The committee also determined the individual achievement scores for each NEO (other than Mr. Archer), as shown in Figure 40 below. The corporate scorecard weighted achievements for each such NEO were then combined with the individual achievements at a weighting of 80% and 20%, respectively, as described in Figure 37 above, to yield the Individual Performance Factors shown in Figure 40 below.

In determining Mr. Archer’s Individual Performance Factor, the independent members of the Board evaluated the Company’s performance against its corporate-level goals, Mr. Archer’s individual performance, and the performance of the other members of the management team reporting to him, and determined to assign him an Individual Performance Factor equal to the average of the Individual Performance Factors of the executive and senior vice presidents reporting directly to him, rounded to three decimal places, as shown in Figure 40 below. The committee declined to exercise its discretion to recommend an adjustment to Mr. Archer’s Individual Performance Factor.

Figure 40. Individual Performance Factors for Calendar Year 2022

Calendar Year 2022 Annual Incentive Program Payout Decisions. Based on the above results and decisions, for the calendar year 2022 annual incentive program, the committee approved the payouts for each NEO as shown below in Figure 41, which were less than the maximum payout available under the Funding Factor and below each NEO’s target award opportunity:

Figure 41. Annual Incentive Program Payouts for Calendar Year 2022

Calendar Year 2023 Annual Incentive Program Parameters

In February 2023, the committee set the target award opportunity for each NEO as a percentage of base salary, and set a maximum award opportunity equal to 2.50 times the target award opportunity. For calendar year 2023, target award opportunities for the NEOs remained unchanged compared to the prior year. The target award opportunity for each NEO is shown below. The maximum award of 2.50 times target for calendar year 2023 was increased from prior years, when it was set at 2.25 times target. The committee’s decision to increase the maximum award for calendar year 2023 was based on the committee’s view that the addition of the Profitability Performance Factor to the calendar year 2023 annual incentive program as a second corporate-level goal would make the achievement of target award opportunities more difficult for each NEO to achieve, including by requiring enhanced coordination of execution across the Company. The committee also considered that the design of the Profitability Performance Factor element of the program would result in payouts increasing or decreasing more rapidly in the event of outperformance or underperformance relative to the goal for calendar year 2023, thereby increasing both the risk and potential reward associated with the program as compared to prior year programs that only incorporated the Corporate Performance Factor and Individual Performance Factor. The committee’s view was that balancing that increased difficulty and risk with the potential for larger maximum awards would serve the committee’s and the program’s objective of incentivizing and rewarding outperformance.

Figure 42. Annual Incentive Program Target Award Opportunities for Calendar Year 2023

As noted above, the committee also determined to add an additional Performance Factor, the Profitability Performance Factor, to the annual incentive program for calendar year 2023. The committee approved non-GAAP operating margin as the annual metric for the Funding Factor and the Corporate Performance Factor, approved non-GAAP gross margin as a percentage of revenue as the annual metric for the Profitability Performance Factor, and set the annual goals for the Funding Factor, the Corporate Performance Factor, and the Profitability Performance Factor. Consistent with the program design, the Corporate Performance Factor and Profitability Performance Factor goals are more difficult to achieve than the Funding Factor goal. Individual Performance Factor metrics and goals were also established for each NEO, based upon corporate-level annual operating plan goals and individual performance. All Corporate, Profitability and Individual Performance Factor goals were designed to be stretch goals.

Long-Term Incentive Program

Design

Our LTIP is designed to attract and retain top talent, provide competitive levels of compensation, align pay with achievement of business objectives and with stock performance over a multi-year period, reward our NEOs for outstanding Company performance, and create stockholder value over the long-term.

Under the current long-term incentive program, at the beginning of each multi-year performance period, target award opportunities (expressed as a U.S. dollar value), performance metrics and the mix of vehicles used are established for the program.

Prior to our 2022/2024 long-term incentive program, 50% of the total target award opportunity was generally awarded in Market-based PRSUs, and the remaining 50% was awarded in a combination of stock options and service-based RSUs with at least 10% of the award in each of these two vehicles. The specific percentage of service-based RSUs and stock options was reviewed annually to determine whether service-based RSUs or stock options would be the more efficient form of equity for the majority of the award based on criteria such as the business environment and the potential value to motivate and retain the executives. We consider Market-based PRSUs and stock options to be performance-based, but do not classify service-based RSUs as performance-based.

Beginning with our 2022/2024 long-term incentive program, the committee determined to substantially increase the weighting of Market-based PRSUs relative to prior years, with the aim of furthering the committee’s objective of aligning pay with performance. The committee also determined that it would be appropriate to provide for a different mix for the CEO and NEOs who are executive presidents than for NEOs who are senior vice presidents. Beginning with the 2022/2024 long-term incentive program, of the total target award opportunity for the CEO and NEOs who are executive vice presidents, 60% was awarded in Market-based PRSUs, 20% was awarded in stock options, and 20% was awarded in service-based RSUs; while for NEOs who are senior vice presidents, 55% was awarded in Market-based PRSUs, 15% was awarded in stock options, and 30% was awarded in service-based RSUs. Primarily as a result of this change, the percentage of the average NEO’s target pay mix which is performance-based increased from 59% in calendar year 2021 to 73% in calendar year 2022.

While service-based RSUs and stock options vest on an annual basis over three years, Market-based PRSUs cliff vest after three years. Cliff, rather than annual, vesting provides for both retention and for aligning NEOs with longer-term stockholder interests.

Equity Vehicles

The equity vehicles used in our 2023/2025 long-term incentive program are as follows:

Figure 43. 2023/2025 LTIP Program Equity Vehicles

Figure 44. 2023/2025 Market-based PRSU Performance Parameters

Figure 45. Market-based PRSU Potential Payouts

Target Award Opportunity

Under the long-term incentive program, the committee sets a target award opportunity for each participant based on the NEO’s position and responsibilities and an assessment of competitive compensation data. The target award opportunities for each participant are expressed in a U.S. dollar value. The target amounts for each NEO under the program cycles affecting fiscal year 2023 are shown below. The year-over-year increases in the target award opportunities as shown below for the NEOs, other than the CEO, were made to remain competitive relative to our peer group.

Figure 46. LTIP Target Award Opportunities

Calendar Year 2020/2022 LTIP Award Parameters and Payouts

On March 2, 2020, the committee granted to each NEO, as part of the calendar year 2020/2022 CEO staff long-term incentive program (the “2020/2022 LTIP Awards”), Market-based PRSUs, and service-based RSUs and stock options, with a total target award opportunity shown below. The service-based RSUs and stock options vested over three years, one-third on each anniversary of the grant date. The Market-based PRSUs cliff vested three years from the grant date. The terms of the Market-based PRSUs and service-based RSUs granted to all the NEOs as part of the 2020/2022 LTIP Awards were the same.

Figure 47. 2020/2022 LTIP Award Grants