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Overview

Alignment with Stockholders and Compensation Best Practices

Pay-for-Performance
  • The majority of target total direct compensation for executives is performance-based as well as equity-based to align executives’ rewards with stockholder value.
  • Total direct compensation is targeted at or near the median of peers to ensure that it is appropriate and competitive.
  • Actual realized total direct compensation and pay positioning are designed to fluctuate with, and be commensurate with, actual annual and long-term performance, recognizing company-wide, business, and individual results.
  • Incentive awards are heavily dependent upon our stock performance and are measured against objective financial metrics that we believe link either directly or indirectly to the creation of value for our stockholders. In addition, 25% of our target annual incentives are contingent upon the achievement of qualitative objectives that we believe will contribute to our long-term success.
  • We balance growth, cash flow, revenue and profit objectives, as well as short- and long-term objectives to reward for overall performance that does not over-emphasize a singular focus on a particular metric or time period.
  • A significant portion of our long-term incentives are primarily delivered in the form of performance-adjusted restricted stock units, referred to as “PARSUs,” which vest only upon the achievement of relative total shareholder return (“TSR”) and EPS objectives.
  • We validate the pay-for-performance relationship on an annual basis and our Human Resources and Compensation (“HRC”) Committee reviews and approves performance goals under our incentive plans.
  • The compensation of objectively identified peer companies based on industry and size criteria is considered to confirm that pay levels for the NEOs are appropriate and competitive.
  • The maximum payouts under annual incentive awards and under PARSUs are capped at 200% of bonus target and 2x shares.
Corporate Governance
  • We do not utilize executive employment contracts for senior officers.
  • We devote significant time to management succession planning and leadership development efforts.
  • We maintain a consistent market-aligned severance policy for executives and a conservative change in control policy which requires a double trigger for execution.
  • The HRC Committee engages an independent compensation consultant.
  • We have clawback and equity-forfeiture provisions that provide the Board with discretion to recoup compensation in the event of a material financial restatement or misconduct that results in material reputational harm to the Company, which mitigates compensation-related risk.
  • We maintain strong stock ownership guidelines for executive officers and non-employee Directors.
  • We prohibit all employees, including our executive officers, and also non-employee Directors, from engaging in any form of hedging transaction involving HP securities, holding HP securities in margin accounts and pledging stock as collateral for loans in a manner that could create compensation-related risk for the Company.
  • We conduct a robust stockholder outreach program throughout the year and use that input to inform our program decisions and pay practices.
  • We disclose our corporate performance goals and achievements relative to these goals.
  • We do not provide excessive perquisites to our employees, including our executive officers.
  • We do not allow our executives to participate in the determination of their own compensation.

Components of Compensation

Our executive compensation program primarily comprises performance-based components. The table below shows each pay component, the role and factors for determining the amount. Percentages are the averages of pay components at target for the NEOs, including the CEO.

Pay Component Role Determination Factors

Base Salary

  • Provides a fixed portion of annual cash income
  • Value of role in competitive marketplace
  • Value of role to the Company
  • Skills, experience and performance of individual compared to the market as well as others in the Company

Annual Incentive

(i.e., Pay-for-Results (“PfR”))
Payments to executives for annual PfR incentive purposes are made under the Stock Incentive Plan (the “Plan”)

  • Provides a variable and performance-based portion of annual cash income
  • Focuses executives on annual objectives that support the long-term strategy and creation of value
  • Target awards based on competitive marketplace, level of position, skills and performance of executive
  • Actual awards based on achievement against annual corporate, business unit, and individual goals as set and approved by the HRC Committee

Long-term Incentives

  • Restricted Stock Units (“RSUs”)
  • Performance-Adjusted Restricted Stock Units (“PARSUs”)
  • Supports need for long-term sustained performance
  • Aligns interests of executives and stockholders, reflecting the time-horizon and risk to investors
  • Focuses executives on critical long-term performance goals
  • Encourages equity ownership and stockholder alignment
  • Retains key employees
  • Target awards based on competitive marketplace, level of position, skills and performance of the executive
  • Actual earned values based on performance against corporate goals and TSR performance

All others:

  • Benefits
  • Limited perquisites
  • Severance protection
  • Supports the health and security of our executives and their ability to save on a tax-deferred basis
  • Enhances executive productivity
  • Competitive market practices for similar roles
  • Level of executive
  • Standards of best-in-class governance

Financial Highlights

As illustrated below for the three key financial measures used to fund our annual pay-for-performance incentive awards, we exceeded two of our three goals reflected in our business plan in fiscal 2019, even as the global-macroeconomic and foreign-currency environment was challenging.

GAAP Net Revenue

$58.8

         BILLION

(as defined on page 46) compared to a target goal of $60.0 billion under our annual incentive plan.

Adjusted Non-GAAP Net Earnings

$3.8

         BILLION

(as defined on page 46) compared to a target goal of $3.7 billion under our annual incentive plan.

Non-GAAP Free Cash Flow

6.78%

(as a percentage of revenue; as defined on page 46) compared to a target goal of 6.33% under our annual incentive plan.

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