Alignment with Stockholders and Compensation Best Practices
- 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.
- 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|
(i.e., Pay-for-Results (“PfR”))
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
(as defined on page 52) compared to a target goal of $60.0 billion under our annual incentive plan.
Adjusted Non-GAAP Net Earnings
(as defined on page 52) compared to a target goal of $3.7 billion under our annual incentive plan.
Non-GAAP Free Cash Flow
(as a percentage of revenue; as defined on page 52) compared to a target goal of 6.33% under our annual incentive plan.