Document
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No.          )
Filed by the Registrant  x
Filed by a Party other than the Registrant  ¨
Check the appropriate box:
¨
Preliminary Proxy Statement
¨
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x
Definitive Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Pursuant to §240.14a-12

 synopsysnoticeof2018a_image1.jpg
Synopsys, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
 
x
No fee required.
 
¨
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
 
 
 
(2)
Aggregate number of securities to which transaction applies:
 
 
 
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
 
(4)
Proposed maximum aggregate value of transaction:
 
 
 
 
(5)
Total fee paid:
 
 
 
¨
Fee paid previously with preliminary materials.
¨
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
 
 
 
(2)
Form, Schedule or Registration Statement No.:
 
 
 
 
(3)
Filing Party:
 
 
 
 
(4)
Date Filed:
 
 
 


Table of Contents




    synopsyslogostsrbg.jpg


cs304252180synopsysproxystat.jpg


























Table of Contents

synopsysnoticeof2018a_image1.jpg
Notice of 2019 Annual Meeting of Stockholders
April 8, 2019
Dear Stockholder,
You are cordially invited to attend the 2019 Annual Meeting of Stockholders of Synopsys, Inc., a Delaware corporation, which will be held on April 8, 2019, at 8:00 a.m. Pacific Time at our office located at 1030 West Maude Avenue, Sunnyvale, California 94085. We are holding the meeting for the following purposes, which are more fully described in the attached Proxy Statement:
1.
To elect nine directors nominated by our Board of Directors to hold office until the next annual meeting of stockholders or until their successors have been elected
2.
To approve our 2006 Employee Equity Incentive Plan, as amended, in order to, among other items, increase the number of shares available for issuance under the plan by 3,200,000 shares
3.
To approve, on an advisory basis, the compensation of our named executive officers, as disclosed in this Proxy Statement
4.
To ratify the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending November 2, 2019
 
We will also consider any other business that properly comes before the annual meeting or any adjournment or postponement thereof. As of the close of business on February 8, 2019, we are not aware of any other matters to be submitted for consideration at the annual meeting.
All of our stockholders of record at the close of business on February 8, 2019 are entitled to attend and vote at the annual meeting. A list of registered stockholders entitled to vote at the meeting will be available at our office located at 690 East Middlefield Road, Mountain View, California 94043, for ten days prior to the meeting and at the meeting location during the meeting.
Whether or not you plan to attend the annual meeting, we urge you to cast your vote. For most items being put to a vote, if you do not provide voting instructions in person, via the Internet, by telephone, or by returning the proxy card or voting instruction card, your shares will not be voted. Please vote as promptly as possible. Every stockholder vote is important.
 
Sincerely yours,
 
synopsysnoticeof2018a_image2.jpg
 
John F. Runkel, Jr. 
 
General Counsel and
 
Corporate Secretary
Mountain View, California
February 15, 2019
Important Notice Regarding the Internet Availability of Proxy Materials
for the Annual Meeting to Be Held on April 8, 2019
 
The Proxy Statement and our 2018 Annual Report on Form 10-K will be released to stockholders at 
http://materials.proxyvote.com/871607 on or about February 22, 2019



Table of Contents

Proxy Statement Table of Contents
 
 
Other Matters
 
 



Table of Contents

synopsysnoticeof2018a_image1.jpg
Proxy Statement for the 2019 Annual Meeting of Stockholders to Be Held on April 8, 2019
We are providing these proxy materials to you in connection with Synopsys’ 2019 Annual Meeting of Stockholders to be held on Monday, April 8, 2019 at 8:00 a.m. Pacific Time at our office located at 1030 West Maude Avenue, Sunnyvale, California 94085 (referred to in this Proxy Statement as the Annual Meeting). The solicitation by this Proxy Statement is made by Synopsys, Inc.
This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully. You do not need to attend the Annual Meeting in order to vote.
If your shares are held through a broker, bank, or other agent and not in your name, your broker is not permitted to vote on your behalf on proposals where broker discretionary votes are not allowed, as indicated below. Therefore, for most items being put to a vote, if you do not provide voting instructions in person, via the Internet, by telephone, or by returning the proxy card or voting instruction card, your shares will not be voted.
We strongly encourage all stockholders to vote, and to do so as promptly as possible. The deadline for voting by Internet or phone is 11:59 p.m. Eastern Time on Sunday, April 7, 2019.
Annual Meeting Agenda
 
Proposal
Proxy
Statement
Page
Numbers
Board’s
Recommendation
Vote Required for Approval
Broker
Discretionary
Votes
Allowed
Proposal 1: Election of Directors
2–18
FOR all nominees
The nine nominees receiving the highest number of FOR votes will be elected. Nominees receiving more WITHHOLD votes than FOR votes must offer their resignation to the Board.
No
Proposal 2: Approval of Our 2006 Employee Equity Incentive Plan, as Amended
19–30
FOR
FOR votes must exceed votes AGAINST.
No
Proposal 3: Advisory Vote to Approve Executive Compensation
31–65
FOR
FOR votes must exceed votes AGAINST.
No
Proposal 4: Ratification of Selection of Independent Registered Public Accounting Firm
66–67
FOR
FOR votes must exceed votes AGAINST.
Yes
Questions and Answers about the Annual Meeting and Voting
Please see the “About the Annual Meeting” section beginning on page 73 for answers to common questions about the Annual Meeting, voting, attendance, submitting a proposal for next year’s annual meeting of stockholders, and other procedures.
 
A Note about Our Fiscal Year
Our fiscal year ends on the Saturday nearest to October 31. Fiscal 2018 ended on November 3, 2018. Fiscal 2019 will end on November 2, 2019.


Synopsys Inc. | 1 | 2019 Proxy Statement

Table of Contents

Proposal 1 – Election of Directors
We are asking our stockholders to vote “For” the election of our directors at the Annual Meeting. We do not have a classified or staggered Board of Directors. Each of our directors stands for election on an annual basis, and of the nine current directors whose term expires in 2019, all are standing for re-election.
The Corporate Governance and Nominating Committee of our Board of Directors (referred to in this Proxy Statement as the Governance Committee), consisting solely of independent directors as determined by the Board under applicable Nasdaq listing standards, recommended each of our nine current directors for nomination by our full Board. Based on that recommendation, our Board has nominated our nine current directors for election at the Annual Meeting.
Provided that there is a quorum at the Annual Meeting, the nine nominees receiving the highest number of “For” votes of the shares present in person or represented and entitled to vote at the Annual Meeting will be elected as directors. In the event a nominee is unable or declines to serve as a director, the proxies will be voted at the Annual Meeting for any nominee who may be designated by our Board to fill the vacancy. As of the date of this Proxy Statement, our Board is not aware of any nominee who is unable or will decline to serve as a director. Each director to be elected at the Annual Meeting will serve until our next annual meeting of stockholders and until his or her successor is elected and qualified or, if earlier, the director’s death, resignation or removal.
You may either vote “For” all the nominees or you may “Withhold” your vote for any nominee you specify. Unless marked otherwise, proxies returned to us will be voted for each of the nominees named below. If you hold your shares through a bank, a broker or other holder of record, you must instruct your bank, broker or other holder of record to vote such that your vote can be counted for this Proposal 1. Broker non-votes will have no effect on the vote for this Proposal 1.
Proposal 1 is an uncontested election. In addition to the voting requirements under Delaware law described above, our Corporate Governance Guidelines provide that in an uncontested election, any nominee for director who receives a greater number of votes “Withheld” from his or her election than votes “For” such election will, promptly following certification of the stockholder vote, submit to our Board a letter of resignation for consideration by the Governance Committee. Our Board, after taking into consideration the recommendation of the Governance Committee, will determine whether to accept the director’s resignation. Synopsys will publicly disclose the decision reached by our Board and the reasons for such decision.
Our Board of Directors Recommends that You Vote FOR All Nominees
Our Director Nominees
Information regarding our nominees, including information they have furnished as to their principal occupations, certain other directorships they hold, or have held, and their ages as of the Record Date, February 8, 2019, is set forth below. The section titled “Director Nominations” on page 15 of this Proxy Statement provides additional information on the director nomination process. The nominee descriptions below and the section titled “Director Qualifications” on page 14 of this Proxy Statement contain information about the experience, qualifications and skills that led the Governance Committee to determine that these nominees should serve as our directors.
Other than Dr. de Geus and Dr. Chan, all nominees are independent as determined by the Board under applicable federal securities law and the listing standards of the Nasdaq Global Select Market. There are no family relationships among any of the director nominees, directors and/or any of Synopsys’ executive officers. In addition, no nominee has an arrangement or understanding with another person under which he or she was or is to be selected as a director or nominee.
 

Synopsys Inc. | 2 | 2019 Proxy Statement

Table of Contents

 
 
Aart J. de Geus
 
Co-Chief Executive Officer and Chairman of the Board 
 
Age: 64
Director since 1986
 
Public Company Directorships:
     Applied Materials, Inc.
 
Dr. de Geus co-founded Synopsys and has served as Chairman of our Board of Directors since February 1998 and Chief Executive Officer since January 1994. He has served as co-Chief Executive Officer with Dr. Chi-Foon Chan since May 2012. Since the inception of Synopsys in December 1986, Dr. de Geus has held a variety of positions, including President, Senior Vice President of Engineering and Senior Vice President of Marketing. He has served as a director since 1986, and has served as Chairman of our Board from 1986 to 1992 and again from 1998 until present. Dr. de Geus has also served on the board of directors of Applied Materials, Inc. since July 2007.
 
As a co-founder of Synopsys, Dr. de Geus has led Synopsys for over 32 years, and is considered a pioneer in the electronic design automation (referred to as EDA in this Proxy Statement) industry. Dr. de Geus brings to our Board a unique and thorough understanding of our business, industry and culture. He provides strong executive leadership and vision and maintains a global network of customer and industry relationships. Dr. de Geus also provides our Board with public company board experience.
 
Chi-Foon Chan
 
Co-Chief Executive Officer and President 
 
Age: 69
Director since 1998
Dr. Chan has served as our co-Chief Executive Officer since May 2012 and as our President and a member of our Board of Directors since February 1998. Prior to his appointment as our co-Chief Executive Officer, he served as our Chief Operating Officer since April 1997. Dr. Chan joined Synopsys in May 1990 and has held various senior management positions, including Executive Vice President, Office of the President from September 1996 to February 1998 and Senior Vice President, Design Tools Group from February 1994 to April 1997. Dr. Chan previously held senior management and engineering positions at NEC Electronics and Intel Corporation.
 
Dr. Chan brings to our Board senior executive-level leadership, strategic, and operational experience with Synopsys as well as within the overall EDA industry. Dr. Chan has been with Synopsys for over 28 years and served as our Chief Operating Officer and President for over 15 years before being appointed co-Chief Executive Officer, thus providing our Board with a thorough understanding of our business, operations and technology strategies. He has broad knowledge of the overall EDA industry landscape, and he provides particular expertise in the Asia-Pacific region. Dr. Chan also provides our Board with extensive research and development and engineering experience in the semiconductor industry gained from his leadership positions at NEC and Intel.
 

Synopsys Inc. | 3 | 2019 Proxy Statement

Table of Contents

 
 
Janice D. Chaffin
 
Age: 64
Director since 2014
Independent
 
Synopsys Board Committees during fiscal 2018:
     Audit

Synopsys Board Committees during fiscal 2019:
     Compensation
     Governance
 
Public Company Directorships:
     Electronics for Imaging, Inc.
     PTC, Inc.
 
Former Public Company Directorships Held in Last Five Years:
    International Game Technology
 
 
 
Ms. Chaffin was appointed to our Board of Directors in December 2014. She held several senior executive positions with Symantec Corporation, most recently as Group President, Consumer Business Unit, from April 2007 to March 2013, and previously as Executive Vice President and Chief Marketing Officer from 2006 to 2007 and Senior Vice President and Chief Marketing Officer from 2003 to 2006. Before joining Symantec, Ms. Chaffin spent more than twenty years with Hewlett-Packard Company in a variety of management and marketing leadership positions. Ms. Chaffin has served on the board of directors of PTC, Inc. since August 2013 and the board of directors of Electronics for Imaging, Inc. since November 2018. She previously served on the board of directors of Informatica Corporation from 2001 to 2008, and the board of directors of International Game Technology from September 2010 to April 2015.
 
Ms. Chaffin has extensive senior management experience with large technology companies. As the former Group President, Consumer Business Unit, of Symantec Corporation, a provider of security, storage and systems management solutions, Ms. Chaffin provides our Board with demonstrated expertise in strategic marketing and global operations in the software industry, as well as significant experience with cybersecurity matters. Ms. Chaffin also provides our Board with significant public company board experience, serving as a director of PTC, Inc. and Electronics for Imaging, Inc.
 
Bruce R. Chizen
 
Age: 63
Director since 2001
Independent
 
Synopsys Board Committees:
     Compensation
     Governance
 
Public Company Directorships:
     Oracle Corporation
 
Mr. Chizen has been a member of our Board of Directors since April 2001. He is currently an independent consultant and has served as Senior Adviser since July 2008 and PGO Partner since June 2018 with Permira Advisers LLP, and Venture Partner with Voyager Capital since July 2009. From November 2007 to November 2008, Mr. Chizen served as a strategic adviser to Adobe Systems Incorporated, a provider of design, publishing and imaging software for print, Internet and dynamic media production. From December 2000 to November 2007, he served as Adobe’s Chief Executive Officer and served as its President from April 2000 to January 2005. He held various other positions at Adobe dating back to 1994. Mr. Chizen has served on the board of directors of Oracle Corporation since July 2008, and he previously served on the board of directors of Adobe from December 2000 to April 2008.
 
Mr. Chizen has significant expertise in the management of complex global organizations. As the former Chief Executive Officer of Adobe, Mr. Chizen provides our Board with executive-level insight into the challenges associated with operating a multi-billion dollar company in a high technology industry. Additionally, Mr. Chizen brings significant financial, product management and marketing expertise, which he gained through various leadership positions at Adobe. Mr. Chizen also provides extensive public company board experience to our Board.
 

Synopsys Inc. | 4 | 2019 Proxy Statement

Table of Contents

 
 
Mercedes Johnson
 
Age: 64
Director since 2017
Independent
 
Synopsys Board Committees:
     Audit (Chair)
 
Public Company Directorships:
     Juniper Networks, Inc.
     Teradyne, Inc.
 
Former Public Company Directorships Held in Last Five Years:
     Intersil Corporation
     Micron Technology, Inc.

 
 
 
 
Ms. Johnson has been a member of our Board of Directors since February 2017. Ms. Johnson previously served as Interim Chief Financial Officer of Intersil Corporation from April 2013 to September 2013, Chief Financial Officer of Avago Technologies, Inc. from 2005 to 2008, and Senior Vice President, Finance and Chief Financial Officer of Lam Research Corporation from 1997 to 2004. For the past 13 years, Ms. Johnson has served as a board member for a number of public companies including Storage Technology Corporation, Intersil Corporation, Micron Technology, Inc., Juniper Networks, Inc. and Teradyne, Inc.
 
Ms. Johnson brings a wealth of experience from her current and previous board and chief financial officer roles at public and private companies. She provides both a domestic and international perspective having served on the boards and audit committees of multi-billion dollar technology companies with a worldwide presence. Besides financial expertise, Ms. Johnson bring significant information technology and semiconductor experience, which she gained through various leadership positions at Avago Technologies, Inc., Lam Research Corporation and Applied Materials, Inc.
Chrysostomos L. “Max” Nikias
 
Age: 66
Director since 2011
Independent
 
Synopsys Board Committees:
     Compensation (Chair)
 
 
 
 
Dr. Nikias has been a member of our Board of Directors since July 2011. Dr. Nikias served as President of the University of Southern California (USC) from August 2010 to August 2018. He currently serves as Professor of Electrical Engineering, and he is the holder of the Malcolm R. Currie Chair in Technology and the Humanities, and Life Trustee of USC. Dr. Nikias served as USC's provost from 2005 through 2010 and as dean of USC's Viterbi School of Engineering from 2001 through 2005. From 1996 through 2001, he was the founding director of the National Science Foundation-funded Integrated Media Systems Center. Dr. Nikias has worked as a consultant for numerous corporations and the U.S. government, including the U.S. Department of Defense. Dr. Nikias is a member of the National Academy of Engineering, a fellow of the American Academy of Arts & Sciences, a life fellow of the Institute of Electrical and Electronics Engineers (IEEE), a fellow of the American Association for the Advancement of Science (AAAS), and a charter fellow of the National Academy of Inventors. He has received the IEEE Simon Ramo medal for exceptional achievement in systems engineering.
 
Dr. Nikias has extensive experience in directing engineering research and development programs, as well as a deep understanding of global technology trends. A recognized scholar in the fields of digital signal processing and communications systems, among others, Dr. Nikias provides our Board with broad engineering knowledge.
 

Synopsys Inc. | 5 | 2019 Proxy Statement

Table of Contents

 
 
John Schwarz
 
Age: 68
Director since 2007
Independent
 
Synopsys Board Committees:
     Governance (Chair)
 
Public Company Directorships:
     Avast PLC
     Teradata Corporation

 
 
 
 
Mr. Schwarz has been a member of our Board of Directors since May 2007. Since May 2010, Mr. Schwarz has served as co-founder and Chief Executive Officer of Visier Inc., a business analytics software firm. Mr. Schwarz previously served on the executive board of SAP AG from March 2008 to February 2010. Mr. Schwarz was the Chief Executive Officer of Business Objects S.A., a provider of business intelligence software and services, from September 2005 through its acquisition by SAP in January 2008, and he served as the Chief Executive Officer of SAP’s Business Objects unit through February 2010. Mr. Schwarz served on Business Objects’ board of directors from January 2006 until its acquisition in January 2008. Mr. Schwarz has also served as the President and Chief Operating Officer of Symantec Corporation and as President and Chief Executive Officer of Reciprocal Inc. Mr. Schwarz previously spent 25 years at IBM Corporation, where he was most recently General Manager of IBM’s Industry Solutions Unit. Mr. Schwarz has served as a director at Teradata Corporation since September 2010, a director at Avast PLC since December 2011, and the Chairman of Avast's board of directors since 2014.
 
As the former Chief Executive Officer of Business Objects S.A., Mr. Schwarz led a large international software company and brings to our Board extensive management expertise and knowledge of the software industry. Furthermore, Mr. Schwarz provides significant cybersecurity experience to our Board through his previous role at Symantec Corporation and his current roles at Avast PLC and Visier Inc. Mr. Schwarz understands the complexities of leading a global organization and operating in international markets. Mr. Schwarz also provides our Board with public company board experience.
 
Roy Vallee
Lead Independent Director 
Age: 66
Director since 2003
Independent
 
Synopsys Board Committees:
     Audit
 
Public Company Directorships:
     Teradyne, Inc.

Mr. Vallee has been a member of our Board of Directors since February 2003. From July 2011 to November 2012, Mr. Vallee served as Executive Chairman of the board of directors of Avnet, Inc., a global semiconductor/electronics products and IT distributor. From July 1998 to June 2011, Mr. Vallee served as Avnet’s Chief Executive Officer and Chairman of the board of directors. Mr. Vallee also previously served as Avnet’s Vice Chairman, President, and Chief Operating Officer. Since February 2000, Mr. Vallee has served on the board of directors of Teradyne, Inc., and he has been its Chairman of the board of directors since May 2014. Mr. Vallee served on the board of directors of the Federal Reserve Bank of San Francisco from January 2013 to December 2016, and as Chairman of the board of directors from January 2015 to December 2016.
 
Mr. Vallee provides our Board with significant executive-level leadership expertise, as well as thorough knowledge of the semiconductor industry. Mr. Vallee led Avnet for over 14 years, as CEO and Executive Chairman, and understands the challenges of managing a public technology company in a highly competitive industry. Mr. Vallee also brings public company board experience to our Board and insight into macroeconomic conditions through his previous board role with the Federal Reserve.
 

Synopsys Inc. | 6 | 2019 Proxy Statement

Table of Contents

 
 
Steven C. Walske
 
Age: 66
Director since 1991
Independent
 
Synopsys Board Committees during fiscal 2018:
     Compensation
     Governance

Synopsys Board Committees during fiscal 2019:
     Audit

 
 
 
Mr. Walske has been a member of our Board of Directors since December 1991. Mr. Walske has been the Managing Director of Myriad Investments, LLC, a private equity firm specializing in investments in software companies, since June 2000. From 1986 through June 2000, Mr. Walske held several executive-level positions at Parametric Technology Corporation, including Chief Executive Officer, President and Chairman of the board of directors. Mr. Walske served on the board of directors of BladeLogic, Inc. from November 2002 to April 2008, holding the Chairman position from September 2005 to April 2008.
 
As a private equity investor, Mr. Walske provides our Board with financial and strategic planning expertise, as well as extensive knowledge of the software industry and other high-tech industries. Having served as the former Chief Executive Officer of Parametric Technology Corporation, Mr. Walske brings product development and executive-level management expertise as well as an understanding of complex global organizations. Mr. Walske also provides our Board with extensive public company board experience.
 

Synopsys Inc. | 7 | 2019 Proxy Statement

Table of Contents

Corporate Governance
Corporate Governance Guidelines
Our Board of Directors is committed to sound and effective corporate governance practices. Accordingly, our Board has adopted Corporate Governance Guidelines, which are intended to describe the governance principles and procedures by which the Board functions. Our Board regularly reviews and evaluates these guidelines. Among other matters, the Corporate Governance Guidelines cover board composition, board membership criteria, director responsibilities, board committees, evaluation of our co-Chief Executive Officers, board self-assessment and succession planning. The Corporate Governance Guidelines are available on our website at: https://www.synopsys.com/company/corporate-governance-values/governance-guidelines.html
Copies of the Corporate Governance Guidelines are also available in print upon written request to Investor Relations, Synopsys, Inc., 690 East Middlefield Road, Mountain View, California 94043.
Code of Ethics and Business Conduct
Our Board of Directors is committed to ethical business practices and, therefore, we have adopted a Code of Ethics and Business Conduct applicable to all of our Board members, employees and executive officers, including our co-Chief Executive Officers (Co-Principal Executive Officers), Chief Financial Officer (Principal Financial Officer) and Vice President, Corporate Controller (Principal Accounting Officer). The Code of Ethics and Business Conduct is available on our website at: https://www.synopsys.com/content/dam/synopsys/company/corporate-governance/code-ethics-business-conduct-worldwide-english.pdf
Synopsys intends to satisfy the public disclosure requirements regarding (1) any amendments to the Code of Ethics and Business Conduct, or (2) any waivers under the Code of Ethics and Business Conduct given to Synopsys’ Principal Executive Officers, Principal Financial Officer and Principal Accounting Officer by posting such information on its website.
Board Leadership Structure
Our Board of Directors believes it is important to have flexibility in selecting our Chairman and board leadership structure. Accordingly, our Corporate Governance Guidelines allow for the positions of Chairman and Chief Executive Officer to be held by the same person. The Board of Directors believes that it is currently in the best interest of Synopsys and its stockholders for Dr. de Geus to serve in both roles. Dr. de Geus co-founded Synopsys and has extensive knowledge of Synopsys, its industry and its culture. He has successfully guided Synopsys through both strong and challenging periods, and his ability to speak as both Chairman and co-CEO provides strong, consistent leadership for Synopsys.
Lead Independent Director
Our guidelines also provide for the appointment of a Lead Independent Director in the event that the positions of Chairman and CEO are held by the same person. Mr. Vallee has served as our Lead Independent Director since February 2017. The responsibilities of our Lead Independent Director include:
Establishing the agenda for regular Board meetings with the Chairman;
Reviewing and advising on the schedule of regular Board meetings with the Chairman;
Serving as chairperson of regular Board meetings when the Chairman is unavailable;
Calling executive sessions of the independent directors, and establishing the agenda for, and presiding at, such sessions;
Providing feedback from executive sessions to management;
Serving as liaison between the co-CEOs and the independent directors;
 
Participating in the annual performance evaluation of the co-CEOs;
Encouraging dialogue between the independent directors and management; and
Consulting with stockholders at management’s request.

Synopsys Inc. | 8 | 2019 Proxy Statement

Table of Contents

Our Board believes the role of Lead Independent Director provides an appropriate balance in Synopsys’ leadership to the combined role of Chairman and CEO, and that the responsibilities assigned to the Lead Independent Director help ensure a strong, independent and active Board.
Director Independence
Our Corporate Governance Guidelines require that a majority of our Board qualifies as independent directors in accordance with applicable federal securities laws and the listing standards of the Nasdaq Global Select Market. Currently, each member of our Board, other than our co-Chief Executive Officer and Chairman of the Board, Aart de Geus, and co-Chief Executive Officer and President, Chi-Foon Chan, is an independent director. All standing committees of the Board are composed entirely of independent directors, in each case under Nasdaq's independence definition. The Nasdaq definition includes a series of objective tests to determine independence, including that the director not be an employee of the company and not have engaged in various types of business dealings with the company. In addition, the Board has made a subjective determination as to each independent director that no relationship exists which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
In making these determinations, the Board reviewed and discussed information provided by the directors and Synopsys with regard to each director’s business and other outside activities as they may relate to Synopsys and our management. This information included commercial transactions that we entered into, or proposed entering into, in fiscal 2018 with Juniper Networks, Inc; Micron Technology, Inc.; Oracle Corporation; PTC, Inc.; Teradata Corporation; Teradyne, Inc.; and Visier, Inc. Our non-employee directors or their immediate family members have relationships with these companies. We consider each of these transactions to be at arms’ length and in the ordinary course of business. We do not consider any of these transactions to be related person transactions requiring disclosure under the applicable rules of the Securities and Exchange Commission.
Based on this review and consistent with our independence criteria, the Board has affirmatively determined that all of the directors who are standing for election to our Board except for Dr. de Geus and Dr. Chan are independent.
Board Meetings and Committees
Our Board of Directors held six meetings during fiscal 2018. During the year, our Board maintained an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee. All such committees have written charters which are available on our website at: https://www.synopsys.com/company/corporate-governance-values/board-committees.html
The following table summarizes the current composition of our Board committees:
 
Director
Audit
Committee
Compensation
Committee
Governance
Committee
Aart J. de Geus, Chairman of the Board
 
 
 
Chi-Foon Chan
 
 
 
Janice D. Chaffin(1)
 
Bruce R. Chizen
 
Mercedes Johnson
Chair
 
 
Chrysostomos L. “Max” Nikias
 
Chair
 
John Schwarz
 
 
Chair
Roy Vallee, Lead Independent Director
 
 
Steven C. Walske(2)
 
 
Total committee meetings held in fiscal 2018
9
6
4
 (1)
Ms. Chaffin transitioned from the Audit Committee to the Compensation Committee and Governance Committee in December 2018.
 (2)
Mr. Walske transitioned from both the Compensation Committee and Governance Committee to the Audit Committee in December 2018.

Synopsys Inc. | 9 | 2019 Proxy Statement

Table of Contents

The principal responsibilities of each Board committee are summarized below. For a more extensive description of committee functions, please refer to the committee charters.
Audit Committee
 
Members
 
Mercedes Johnson (Chair), Roy Valle and Steven C. Walske(3).
 
 
Number of fiscal 2018 meetings
 
 
Nine
 
Responsibilities
 
The Audit Committee acts on behalf of our Board, performing financial oversight responsibilities relating to:
 
     The integrity of our financial statements, financial reporting processes and systems of internal accounting and financial controls
 
     Our internal audit function
 
     The annual independent audit of our financial statements
 
     The engagement of our independent registered public accounting firm and evaluation of their performance and independence
 
     Compliance with legal and regulatory requirements that pertain to our financial statements, internal controls over financial reporting, and disclosure controls
 
 
 
Independence
 
 
All members of our Audit Committee are considered independent under the applicable requirements of the Securities and Exchange Commission and the listing standards of the Nasdaq Global Select Market.
 
 
Audit Committee financial experts
 
Our Board has determined that Ms. Johnson, Mr. Vallee and Mr. Walske each qualify as an “audit committee financial expert” within the meaning of the regulations of the Securities and Exchange Commission.
 
 
(3)
Mr. Walske succeeded Ms. Chaffin as a member of the Audit Committee in December 2018.

Synopsys Inc. | 10 | 2019 Proxy Statement

Table of Contents

Compensation Committee
 
Members
 
Chrysostomos L. “Max” Nikias (Chair), Janice D. Chaffin(4) and Bruce Chizen
 
 
Number of fiscal 2018 meetings
 
 
 
Six
 
Responsibilities
 
The Compensation Committee primarily reviews and approves our general compensation policies, sets compensation levels for our executive officers (including our co-CEOs), and administers our equity incentive plan, employee stock purchase plan, deferred compensation plans and 401(k) plan. The Compensation Committee also reviews our non-employee director compensation and recommends any changes to the Board for approval.
 
The Compensation Committee’s processes for determining executive compensation are described in the section “Compensation Discussion and Analysis” beginning on page 32.
 
 
 
Independence
 
All members of our Compensation Committee are considered independent under the applicable requirements of the Securities and Exchange Commission and the listing standards of the Nasdaq Global Select Market. Each member of the Compensation Committee is also a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act.
 
 
 
 
 
Governance Committee
 
Members
 
John Schwarz (Chair), Janice D. Chaffin(4) and Bruce Chizen
 
 
Number of fiscal
2018 meetings
 
 
 
Four
 
Responsibilities
 
The Governance Committee identifies and recommends to our Board candidates for membership on our Board and Board committees, reviews Board performance, oversees corporate governance matters, and reviews such other matters relating to our management as it deems appropriate. Our Governance Committee also reviews and discusses with management our strategy regarding mergers and acquisitions and strategic investments.
 
Our Governance Committee’s policy regarding consideration of director candidates submitted by stockholders is set forth below under “Director Nominations.” The Governance Committee recommended the nine nominees for election to our Board at the Annual Meeting.
 
 
 
Independence
 
 
All members of our Governance Committee are considered independent under the applicable listing standards of the Nasdaq Global Select Market.
 
 
(4)
Ms. Chaffin succeeded Mr. Walske as a member of both the Compensation Committee and the Governance Committee in December 2018.
Each director attended at least 75% of all Board and applicable committee meetings that were held during his or her period of service as a director in fiscal 2018.
Executive Sessions
The independent directors meet in executive sessions without management directors or management present. These sessions take place prior to or following regularly scheduled Board meetings. The directors met three times in such sessions during fiscal 2018.
 
Risk Oversight
Our Board is responsible for the oversight of our company-wide risk management efforts and delegates the assessment and implementation of our day-to-day risk management policies to our management. Our Board is directly involved in overseeing risk management issues related to significant matters such as our overall business strategy, major strategic transactions, and executive officer succession through its regular communications with management.

Synopsys Inc. | 11 | 2019 Proxy Statement

Table of Contents

Information technology and data security, particularly cybersecurity, is a top area of focus for our Board. Our Board is actively involved in overseeing cybersecurity risk management, both through presentations given by members of management during Board meetings as well as regular reports from the Audit Committee on its cybersecurity risk oversight activities. In December 2018, the Board transitioned the specific responsibility of cybersecurity risk oversight from our Audit Committee to our Governance Committee, simultaneous with the change in composition of our Governance Committee members.
The Governance Committee, which is now comprised of multiple individuals with significant experience in cybersecurity and related matters, will meet more frequently with members of management to review our information technology and data security policies and practices, and to assess current and projected threats, cybersecurity incidents, and related risks.
Additionally, each of our standing Board committees has individual oversight responsibilities:
Committee
Primary Areas of Risk Oversight
 
Audit
    Risks related to financial reporting and controls.
 
   Supervision of the work performed by our independent registered public accounting firm and our internal audit function.
 
   Supervision of our anonymous and confidential ethics reporting system, which encourages and allows any employee to submit concerns directly to senior management and the Audit Committee.
 
   Risks relating to our investments, financing activities, taxes, and world-wide insurance programs.
 
   Review and approval of related person transactions.
   Evaluation of enterprise risk issues.
 
 
Compensation
 
   Risks related to our cash and equity compensation programs and practices.
 
   For additional information regarding the Compensation Committee’s assessment of our compensation-related risk, please see the subsection titled “Compensation Risk Assessment” in the “Compensation Discussion and Analysis” section on page 32 below.
 
 
Governance
 
   Risks related to our overall corporate governance, including our governance policies and principles.
 
   Risks related to the composition and structure of our Board of Directors and its committees, which includes annual evaluation of our Board and Board committees and periodic review of Board member and executive officer succession plans.
   Risks related to information technology security and data security.
 
   The committee chairperson may investigate concerns applicable to our Board and its committees raised through our confidential ethics reporting system.
 
 
Share Ownership Guidelines
In order to better align the interests of our Board members and management with the interests of our stockholders, our Board of Directors first adopted share ownership guidelines in fiscal 2003. Under the current guidelines, non-employee directors are expected to achieve a share ownership level with a value equal to three times the amount of each non-employee director’s annual cash retainer (excluding compensation for committee service) or 15,000 shares, within three years of initial election as a director, and maintain such ownership level, as measured each year on the date of the annual meeting of stockholders, so long as they serve in the position of director.
These guidelines also recommend that covered members of management achieve share ownership levels within four years of appointment and maintain such ownership level so long as they serve in such positions as follows: co-Chief Executive Officer—50,000 shares; Chief Financial Officer—10,000 shares; General Counsel—10,000 shares; all other members of our “Corporate Staff”—10,000 shares; and Chief Accounting Officer—2,500 shares.
 

Synopsys Inc. | 12 | 2019 Proxy Statement

Table of Contents

Each covered member of management is expected to meet the applicable guidelines within four years of becoming a covered person. The guidelines do not require any covered person to exercise stock options or to purchase shares of our common stock on the open market solely to meet these guidelines. However, when stock options are exercised, when restricted stock or restricted stock units vest, or when shares are purchased under our Employee Stock Purchase Plan, the guidelines recommend that the covered person retain a number of shares of common stock equal to the lesser of 25% of the net value of shares of common stock acquired or vested (after deducting the exercise price, if any, and taxes at an assumed tax rate), or a number of shares necessary to reach such person’s applicable share ownership guideline amount.
As of February 8, 2019, each non-employee director and named executive officer held the requisite number of shares and was accordingly compliant with the share ownership guidelines.
Political Contributions
In accordance with our Political Activities Policy, Synopsys does not contribute to political parties or candidates, nor do we attempt to influence the outcome of elections through political action committees. We may contribute periodically to local ballot initiatives in California that are consistent with our quality of life goals. We also engage with trade and industry associations in the United States and abroad, which may undertake advocacy on behalf of members. Our Political Activities Policy is available on our website at: https://www.synopsys.com/company/corporate-governance-values/political-activities-policy.html
Stockholder Communications with our Board of Directors
Stockholders who wish to communicate with our Board of Directors or one or more individual members of our Board may do so by sending written communications addressed to: Corporate Secretary, Synopsys, Inc., 690 East Middlefield Road, Mountain View, California 94043. All stockholder communications we receive that are addressed to our Board of Directors will be compiled by our Corporate Secretary and forwarded to the specified director(s), if any. If the correspondence is not addressed to a particular director, such correspondence will be forwarded, depending on the subject matter, to the Chairperson of the Audit Committee, Compensation Committee, or Governance Committee.
Board Attendance at Stockholders’ Meetings
Synopsys encourages director attendance at our annual stockholder meetings, but does not require attendance or have a formal policy requiring attendance. Attendance by phone is permitted. All then-current directors attended the 2018 Annual Meeting of Stockholders.
Stockholder Engagement
Synopsys is committed to engagement with our stockholders, as we believe that understanding our current and potential stockholders’ perspectives is vital to how we conduct our business. We have an ongoing and proactive investor outreach program, utilizing vehicles such as investor conferences, roadshows, on-site meetings and numerous conference calls to ensure two-way discussions about the company’s strategy, operations and financial performance and objectives. During fiscal 2018, we augmented this program by holding a series of meetings with the corporate governance leaders of institutional stockholders who own a significant percentage of our outstanding common stock. We believe that ongoing relationships and conversations enable us to better understand their views on important issues such as corporate governance, executive compensation, and corporate social responsibility.  The feedback that we receive from our stockholders—through these meetings, regular stockholder outreach, and perception surveys—helps to strengthen our corporate practices over time.
Corporate Social Responsibility
Corporate social responsibility at Synopsys is an important means by which we translate our company values into action and maintain stakeholder trust in our company. Synopsys is actively reducing our environmental footprint through energy management, waste management, and green building. We are committed to providing a safe, secure, and productive environment for our employees, customers, and visitors. We value company and Board diversity and inclusion, and have taken steps to enhance these measures across many dimensions. Furthermore, we support industry-wide efforts to encourage

Synopsys Inc. | 13 | 2019 Proxy Statement

Table of Contents

responsible sourcing of minerals and transparency in supply chains, working with our direct suppliers to ensure transparency in our supply chain. Through our community engagement initiatives, we strengthen local communities, encourage employee engagement, and inspire a new generation of technology leaders. During fiscal 2018, we established a Corporate Social Responsibility Committee, consisting of leaders across the company to drive cross-functional management of our corporate social responsibility program.
Director Qualifications
A top priority for the Governance Committee is to ensure that the Board comprises directors that bring diverse viewpoints and perspectives and exhibit a variety of skills, professional experiences and backgrounds, in order to effectively represent the long-term interests of stockholders. To achieve this, the Governance Committee works with our Board to determine the appropriate experience, qualifications and skills that we seek in Board members in light of our business environment and existing Board composition. When evaluating a particular candidate for Board membership, the Governance Committee and our Board consider many factors, including an understanding of the EDA, semiconductor, electronics, software or technology industries; sufficient experience in business operations, finance, marketing, strategic planning and other relevant disciplines; and professional background such as executive leadership experience and other public company board service. They also consider diversity in their assessment of potential candidates, including diversity of personal background and professional experience, qualifications and skills. The Governance Committee focuses on this through an ongoing year-round process, which includes the annual Board evaluation, discussed below.
 
All candidates for election or re-election are expected to fully participate in Board activities, including preparation for, attendance at and active participation in meetings of our Board of Directors, not hold positions that would conflict with their responsibilities to us, have a high degree of personal integrity and interpersonal skills, and represent the best interests of all of our stockholders and not just certain constituencies.
The Governance Committee and Board believe that a significant majority of the members of our Board should qualify as independent directors in accordance with our corporate governance guidelines and the listing standards of the Nasdaq Global Select Market. They also deem it appropriate for certain of our executive officers to serve on the Board to provide a first-hand perspective on the operations, management and culture of our business. The Governance Committee and Board believe that it is beneficial for at least one member, and preferably multiple members, of our Board to meet the criteria for an “audit committee financial expert” as defined by the applicable rules of the Securities and Exchange Commission.
We place great emphasis on Board diversity, and actively consider diversity in the recruitment and nomination of directors. The Governance Committee believes that the current composition of the Board reflects the success of those efforts.
Director Tenure
While the Governance Committee and our Board prioritize maintaining a board that is comprised of directors with a diverse set of skills, experiences, and perspectives, they also recognize the importance of balancing these qualifications with the overall tenure of directors in their long-term approach to board refreshment. The fresh viewpoints and philosophies newer directors bring, coupled with the valuable experience and institutional knowledge the longer-tenured directors possess, improve the independent oversight of management and ensure a focus on Synopsys' business strategy.
The Board has appointed three highly-qualified directors since 2010 that bring insight in areas such as strategic marketing in the software industry, research and development programs at a leading academic institution, and information technology systems and financial experience in the semiconductor and software industries. To supplement our newer directors, our longer-tenured directors have extensive knowledge of our operations and have the perspective of overseeing our business activities through economic cycles and across differing competitive environments. While continuing to monitor this aspect, we believe the current mix of our Board members is the appropriate blend of experience and diverse perspectives that play a critical role in supporting us as we continue to compete in existing semiconductor and electronic design industries as well as new and emerging market segments such as mobile, automotive, digital home, Internet of Things (IoT), and cloud computing.

Synopsys Inc. | 14 | 2019 Proxy Statement

Table of Contents

Director Evaluations
In accordance with our Corporate Governance Guidelines, on an annual basis, our Board maintains a process to evaluate the overall Board, the functioning of the committees and each individual member of our Board. A director’s qualifications are also evaluated each time the director is considered for Board membership. For directors seeking re-election, the Governance Committee also evaluates the director’s overall service, including the director’s past attendance at Board and committee meetings, as well as participation in and contributions to the Board.
Director Nominations
The Governance Committee considers candidates for Board membership suggested by our Board members and management. The Governance Committee has, on occasion, retained third-party executive search firms to identify independent director candidates. The Governance Committee will consider persons recommended by our stockholders in the same manner as a nominee recommended by Board members, management, or a third-party executive search firm. After completing the evaluation and review, the Governance Committee makes a recommendation to the full Board as to the persons who should be nominated to our Board of Directors, and our Board determines and approves the nominees after considering the recommendation and report of the Governance Committee.
Stockholders seeking to recommend a prospective nominee should follow the instructions under the headings “Stockholder Communications with our Board of Directors” and “About the Annual Meeting—How can I make a proposal to be voted on at next year’s annual meeting of stockholders?” There are no recent material changes to the procedures by which stockholders may recommend nominees for our Board. Stockholder submissions must include the full name of the proposed nominee, a description of the proposed nominee’s business experience for at least the previous five years, complete biographical information, a description of the proposed nominee’s qualifications as a director and a representation that the stockholder submitting the recommendation is a beneficial or record owner of our stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected. Stockholders who wish to nominate a candidate for election must follow the procedures described in Article II of our Bylaws.
Each director candidate nominated for election at the Annual Meeting is an existing director seeking re-election to our Board of Directors and was previously elected by our stockholders.
 

Synopsys Inc. | 15 | 2019 Proxy Statement

Table of Contents

Certain Relationships and Related Transactions
Our Code of Ethics and Business Conduct requires that every employee avoid situations where loyalties may be divided between our interests and the employee’s own interests. Employees and directors must avoid conflicts of interest that interfere with the performance of their duties or are not in our best interests.
Pursuant to its written charter, the Audit Committee reviews and approves all related party transactions as such term is used in ASC Topic 850 Related Party Disclosures, or as otherwise required to be disclosed in our financial statements or periodic filings with the Securities and Exchange Commission, other than (a) grants of equity awards made by our Board of Directors or any committee thereof or pursuant to an automatic grant plan, or (b) payment of compensation authorized by our Board or any committee thereof. Related party transactions include transactions between us, our executive officers and directors, beneficial owners of five percent or greater of our securities, and all other related persons specified under Item 404 of Regulation S-K promulgated by the Securities and Exchange Commission. We have adopted written policies and procedures regarding the identification of related parties and transactions, and the approval process for such transactions. The Audit Committee will consider each proposed transaction in light of the specific facts and circumstances presented, including but not limited to the risks, costs, and benefits to us and the availability from other sources of comparable products or services.
From the beginning of fiscal 2018 until the present, there have been no (and there are no currently proposed) transactions involving an amount in excess of $120,000 in which Synopsys was (or is to be) a participant and any executive officer, director, five percent beneficial owner of our common stock or member of the immediate family of any of the foregoing persons had (or will have) a direct or indirect material interest, except the compensation arrangements described in this Proxy Statement for our named executive officers and directors.
 

Synopsys Inc. | 16 | 2019 Proxy Statement

Table of Contents

Director Compensation
Our non-employee directors are compensated for serving on our Board. We do not pay our employees who serve on our Board of Directors any additional compensation for Board membership.
Our Compensation Committee reviews our non-employee director compensation with the assistance of a compensation consultant, Radford (an Aon company), that it has determined to be objective and independent. The Compensation Committee reviews such compensation biennially, at a minimum, and recommends adjustments as appropriate.
Our Compensation Committee believes, based in part on market data (including a survey of market practices and trends among our peer group and the software and semiconductor industries generally) that was provided to and reviewed by our Compensation Committee with Radford, that a combination of cash and equity-based awards is the most effective and appropriate way to compensate our non-employee directors. As part of its review process, both the cash and equity-based award elements are benchmarked by the Compensation Committee against our peer group and the aforementioned industries to ensure that the mix and levels are appropriate and competitive with comparable companies and align our directors’ interests with those of our stockholders.
Other than the compensation disclosed below, no director received compensation or other payment in connection with his or her candidacy or service on our Board.
Fiscal 2018 Compensation
As noted above, our non-employee director compensation consists of cash and equity awards. We also reimburse directors for out-of-pocket expenses for travel to Board meetings in accordance with our Corporate Travel Policy.
Cash
For fiscal 2018, we paid non-employee directors an annual retainer of $125,000 for serving on our Board. We also paid an additional retainer of $30,000 to our Lead Independent Director, $30,000 to the chair of the Audit Committee, and $15,000 to the other members of the Audit Committee. The retainers were paid in advance in four equal payments prior to our regularly scheduled quarterly Board meetings.
Equity
For fiscal 2018, non-employee directors were eligible to receive equity awards under the 2017 Non-Employee Directors Equity Incentive Plan (referred to in this Proxy Statement as the 2017 Directors Plan). The plan provides for automatic grants of equity awards to non-employee members of our Board upon their initial appointment or election, and upon their re-election each year. The 2017 Directors Plan contains limits on the equity awards that may be awarded to non-employee directors in any fiscal year.
Initial Awards. For fiscal 2018, under the 2017 Directors Plan, new non-employee directors were eligible to receive (1) an initial stock option grant with a grant date fair value of $350,000, which vests in equal installments on the date immediately preceding each of the first three annual meetings following the date of grant, subject to continued Board service through each vesting date; and (2) if appointed to our Board less than eleven months since the most recent annual meeting of stockholders, an “interim award” in the form of restricted stock with a grant date fair market value equal to a pro-rated portion of the annual award of $175,000, which vests on the date immediately preceding the first annual meeting following the date of grant.
Annual Awards. For fiscal 2018, under the 2017 Directors Plan, each re-elected non-employee director was eligible to receive an annual award comprised of either a stock option grant, a restricted stock grant or a combination of both, as determined by our Board each year. The annual award in fiscal 2018, which was comprised solely of restricted stock, had a grant date fair market value equal to $175,000. The annual restricted stock award vests on the date immediately preceding the first annual meeting following the date of grant, subject to continued Board service through such date. In the event of a change of control or similar transaction, the vesting of unvested grants will generally accelerate unless assumed by the successor company. Our Board of Directors received restricted stock for the annual award for fiscal 2018 and, as a result, we issued 2,109 shares of restricted stock to each non-employee director.
 

Synopsys Inc. | 17 | 2019 Proxy Statement

Table of Contents

The following table sets forth a summary of the compensation paid to our non-employee directors for services in fiscal 2018.
Name
Fees Earned or
Paid in Cash ($)

Stock
Awards ($)(1)

Option
Awards ($)(2)

Total ($)

Janice D. Chaffin
$ 140,000(3)

$
174,962

$

$
314,962

Bruce R. Chizen
125,000

174,962


299,962

Mercedes Johnson
155,000(4)

174,962


329,962

Chrysostomos L. “Max” Nikias
125,000

174,962


299,962

John Schwarz
125,000

174,962


299,962

Roy Vallee
170,000(5)

174,962


344,962

Steven C. Walske
125,000

174,962


299,962

(1)
These amounts represent the aggregate grant date fair values, computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Compensation—Stock Compensation, of restricted stock awards issued pursuant to the 2017 Non-Employee Directors Equity Incentive Plan. The grant date fair value of these awards is calculated using the closing price of our common stock of $82.96 on the grant date multiplied by the 2,109 shares granted to each non-employee director. These amounts do not represent the actual value that may be realized by the director upon vesting of such awards. For information on the assumptions used to calculate the value of the awards, refer to Note 10 to the consolidated financial statements contained in our 2018 Annual Report on Form 10-K. Such stock awards vest on the date immediately preceding the first annual meeting following the date of grant. At the end of fiscal 2018, our non-employee directors held the following aggregate numbers of unvested restricted stock awards: Ms. Chaffin—2,972 shares; Mr. Chizen—2,972 shares; Ms. Johnson—2,109 shares; Dr. Nikias—2,972 shares; Mr. Schwarz—2,972 shares; Mr. Vallee—2,972 shares; and Mr. Walske—2,972 shares.
(2)
At the end of fiscal 2018, the only non-employee directors who held outstanding option awards were Ms. Chaffin (34,222 shares, which are fully vested) and Ms. Johnson (30,838 shares, which remain subject to vesting).
(3)
Includes $15,000 retainer paid to Ms. Chaffin for serving as an Audit Committee member in fiscal 2018.
(4)
Includes $30,000 retainer paid to Ms. Johnson for serving as the Audit Committee chairperson in fiscal 2018.
(5)
Includes $15,000 retainer paid to Mr. Vallee for serving as an Audit Committee member and $30,000 retainer paid to Mr. Vallee for serving as the Lead Independent Director in fiscal 2018.



Synopsys Inc. | 18 | 2019 Proxy Statement

Table of Contents

Proposal 2 – Approval of Our
2006 Employee Equity Incentive Plan, as Amended
We are asking our stockholders to approve our 2006 Employee Equity Incentive Plan, as amended (referred to in this Proxy Statement as the 2006 Employee Plan), to increase the number of shares of common stock, par value $0.01 per share, available for issuance under the 2006 Employee Plan by 3,200,000 shares, representing approximately 2.14% of our shares of common stock outstanding as of February 8, 2019. We believe equity compensation is a critical tool for employee motivation and retention. We are proposing the share increase to enable us to continue offering effective equity compensation to our employees.
Our Board of Directors approved the 2006 Employee Plan, as amended, in January 2019, subject to stockholder approval. If approved by our stockholders, the amended 2006 Employee Plan will become effective as of the Annual Meeting date.
Approval of the 2006 Employee Plan, as amended, requires the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting, and voting on this Proposal 2, to vote “For” this Proposal 2. Abstentions and broker non-votes will not be counted as either votes cast “For” or “Against” Proposal 2 and have no effect on the vote for this Proposal 2.
Our Board of Directors Recommends that You Vote FOR
the Approval of the 2006 Employee Plan, as Amended
Purpose and Background
The primary goal of the amendment of our 2006 Employee Plan is to provide us with a sufficient reserve of common stock to offer appropriate incentives to our employees. Like other technology companies, we actively compete for highly qualified employees, especially technical employees. Our equity program is a key component of our strategy to attract and retain key individuals, and the share requirements of our equity program have grown with our company.
Each year, the Compensation Committee of our Board of Directors and our management review our overall compensation strategy and determine the allocations of cash and equity compensation in light of our pay for performance philosophy. We continue to believe that equity compensation is critical in motivating key employees and that it effectively aligns employee compensation with stockholder interests. The 2006 Employee Plan is the sole available plan for granting discretionary equity compensation to our employees. If the amended 2006 Employee Plan is not approved and we are unable to grant equity compensation in the future, we may need to consider other compensation alternatives, such as increasing cash compensation.
We are committed to effectively managing our share reserves for equity compensation while minimizing stockholder dilution. For this reason, we carefully manage both our gross burn rate and net burn rate. Gross burn rate reflects equity awards granted during the fiscal year divided by the number of shares outstanding. Net burn rate reflects equity awards granted during the fiscal year less equity awards cancelled and returned to the plan (net equity grants), divided by the number of shares outstanding.
We endeavor to achieve a gross burn rate that approximates the average rate for our peer group companies as well as for the software and services industry more generally, and to achieve burn rates within the limits published by independent shareholder advisory groups, such as Institutional Shareholder Services (referred to in this Proxy Statement as ISS). While there are several methodologies to arrive at burn rates, using current ISS methodology, our gross burn rates for the last three years are well within the guidelines published by ISS. Detailed information about equity awards issued in fiscal 2018 as well as other relevant information is set forth below.
 
We note that the cornerstone of our compensation philosophy is pay for performance, as discussed in the Compensation Discussion and Analysis beginning on page 32. In that regard, approximately half of the value of the target equity grants to our named executive officers in 2018 was in performance-based RSUs. The balance was in stock option grants, the values of which are directly linked to the appreciation of our stock price.

Synopsys Inc. | 19 | 2019 Proxy Statement

Table of Contents

Important Features of the 2006 Employee Plan
We also note that our 2006 Employee Plan includes additional provisions that are designed to protect our stockholders’ interests and to reflect corporate governance best practices, including:
Stockholder approval required for additional shares. The 2006 Employee Plan does not contain an annual “evergreen” provision that provides for automatic increases of shares on an ongoing basis. The 2006 Employee Plan instead authorizes a fixed number of shares, and stockholder approval is required for any increase in the number of shares.
No discounted stock options or stock appreciation rights. The 2006 Employee Plan requires that stock options and stock appreciation rights must have an exercise price equal to or greater than the fair market value of our common stock on the date of grant.
Repricing not allowed. The 2006 Employee Plan expressly prohibits the repricing of equity awards—including the cancellation and re-grant of outstanding equity awards—without prior stockholder approval. The 2006 Employee Plan also expressly prohibits us from buying out stock options whose exercise price exceeds the fair market value of our common stock, often referred to as underwater options, for cash, without stockholder approval.
No liberal share recycling. In general, when awards terminate or are cancelled, the shares reserved for those awards are returned to the share reserve and become available for future awards. However, shares of common stock that are tendered to us in payment of the exercise price of an award or that are withheld to cover tax withholding obligations are not returned to our share reserve.
Seven-year term. All equity awards granted under the 2006 Employee Plan have a term of no more than seven years, thereby limiting the potential for unproductive overhang.
Fungible share reserve. The 2006 Employee Plan has a fungible share reserve, under which the share reserve is depleted at a higher multiple for restricted stock units, restricted stock, and other "full-value awards", in order to minimize stockholder dilution.
New Plan Benefits and Historical Grant Information
No awards have been granted or promised with respect to the additional 3,200,000 shares requested. Awards under our 2006 Employee Plan are made at the discretion of our Board of Directors or the Compensation Committee and are therefore not determinable at this time. The following tables set forth detailed information about our historical equity compensation practices.
 

Synopsys Inc. | 20 | 2019 Proxy Statement

Table of Contents

Awards Granted to Certain Individuals and Groups under the 2006 Employee Plan
The following table shows, for each of the named executive officers and the various groups indicated, the number of stock options and restricted stock units granted under the 2006 Employee Plan during fiscal 2018:
 
Number of
Restricted Stock
Units Granted(1)

Number of
Stock Options
Granted(2)

Aart J. de Geus
24,859(3)

120,839

Co-Chief Executive Officer and Chairman of the Board of Directors
 
 
Chi-Foon Chan
24,859(3)

120,839

Co-Chief Executive Officer and President
 
 
Trac Pham
11,877(3)

57,734

Chief Financial Officer
 
 
Joseph W. Logan
11,049(3)

53,706

Sales and Corporate Marketing Officer
 
 
John F. Runkel, Jr.
4,419(3)

21,483

General Counsel and Corporate Secretary
 
 
All executive officers as a group (5 persons)
77,063

374,601

All directors who are not executive officers as a group (7 persons)


All employees, excluding executive officers, as a group
(13,240 persons as of November 3, 2018)(4)
1,417,756

759,084

(1)
The aggregate numbers of restricted stock units granted under the 2006 Employee Plan, since its adoption through February 2, 2019, to Dr. de Geus, Dr. Chan, Mr. Pham, Mr. Logan, Mr. Runkel, all executive officers as a group, all directors who are not executive officers as a group, and all employees (excluding executive officers) as a group were 648,676, 481,843, 94,520, 224,592, 47,575, 1,497,206; none; and 17,547,830. Of those aggregate grant numbers for Dr. de Geus, Dr. Chan, Mr. Pham, Mr. Logan, Mr. Runkel, and all executive officers as a group, 24,788; 24,788; 13,090; 11,140; 5,013; and 78,819 restricted stock units, respectively, are eligible to vest only upon the achievement of pre-established performance goals.
(2)
The aggregate numbers of stock option awards granted under the 2006 Employee Plan, since its adoption through February 2, 2019, to Dr. de Geus, Dr. Chan, Mr. Pham, Mr. Logan, Mr. Runkel, all executive officers as a group, all directors who are not executive officers as a group, and all employees (excluding executive officers) as a group were 2,218,915; 1,738,415; 358,908; 880,269; 209,807; 5,406,314; none; and 16,981,152.
(3)
These restricted stock units required the achievement of pre-established performance goals prior to any vesting of the awards.
(4)
Equity grants in fiscal 2018 under the 2006 Employee Plan were made to an aggregate of 3,132 employees, excluding our executive officers.

 

Synopsys Inc. | 21 | 2019 Proxy Statement

Table of Contents

Additional Equity Plan Information
The following table provides certain additional information regarding the 2006 Employee Plan and 2017 Directors Plan:
 
As of 2/2/19

Total Stock Options Outstanding
6,585,908

Total Restricted Stock Unit Awards Outstanding
3,590,937

Total Common Stock Outstanding
149,276,055

Weighted-Average Exercise Price of Stock Options Outstanding

$58.96

Weighted-Average Remaining Duration of Stock Options Outstanding
4.35 years

Total Shares Available for Grant under the 2006 Employee Plan
11,681,129

Total Shares Available for Grant under the 2017 Directors Plan
415,613

Information for Burn Rate Calculations
The following table provides detailed information regarding activity under all of our equity plans (except our Employee Stock Purchase Plan) in fiscal 2018.
 
Fiscal 2018

Stock Options Granted by Synopsys(1)
1,133,685

Restricted Stock Units Granted by Synopsys(2)
1,494,819

Restricted Stock Awards Granted by Synopsys(3)
14,763

Stock Options Cancelled
178,179

Restricted Stock Units Cancelled(4)
257,646

Restricted Stock Awards Cancelled
863

Weighted-Average Common Stock Outstanding
149,036,497

Common Stock Outstanding at Fiscal Year End
149,264,835

(1)
Granted under the 2006 Employee Plan.
(2)
Granted under the 2006 Employee Plan, and represents the actual number of restricted stock units granted, prior to the application of the fungible share reserve ratio.
(3)
Granted under the 2017 Directors Plan, which does not contain a fungible share reserve ratio. Represents the actual number of restricted stock awards granted.
(4)
Represents the actual number of restricted stock units cancelled, prior to the reverse application of the fungible share reserve ratio.
Description of the 2006 Employee Plan, as Amended
The material terms and provisions of the 2006 Employee Plan, as amended, are summarized below. This summary, however, does not purport to be a complete description of the 2006 Employee Plan. The following summary of the 2006 Employee Plan is qualified in its entirety by reference to the complete text of the 2006 Employee Plan, a copy of which is included as Appendix A to this Proxy Statement. Any stockholder that wishes to obtain a paper copy of the plan document may do so by written request to: Corporate Secretary, Synopsys, Inc., 690 East Middlefield Road, Mountain View, California 94043.
As further described in this Proposal 2, the 2006 Employee Plan has been amended to provide for:
an increase of 3,200,000 shares in the share reserve and incentive stock option limits; and
certain clarifying amendments to ease administration, eliminate potential ambiguities in plan interpretation and reflect recent changes in law.
 

Synopsys Inc. | 22 | 2019 Proxy Statement

Table of Contents

General
The 2006 Employee Plan was originally adopted by our Board of Directors in March 2006 and approved by stockholders in April 2006 as a successor plan to prior stock option plans for our employees. The 2006 Employee Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, stock appreciation rights, and other forms of equity compensation (collectively referred to in this Proxy Statement as equity awards). The 2006 Employee Plan also provides the ability to grant performance equity awards and performance cash awards (together referred to in this Proxy Statement as performance awards), which enable our Compensation Committee to use performance criteria in establishing specific targets to be attained as a condition to the vesting of awards.
Incentive stock options granted under the 2006 Employee Plan are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code (referred to in this Proxy Statement as the Code). Non-statutory stock options granted under the 2006 Employee Plan are not intended to qualify as incentive stock options under the Code. See “U.S. Federal Income Tax Information” below for a discussion of the tax treatment of equity awards.
Purpose
The 2006 Employee Plan is intended to create an incentive for our eligible employees and consultants to exert maximum efforts toward our success and provides such individuals with the opportunity to benefit from increases in the value of our common stock, thereby aligning their interests with the interests of our stockholders.
Administration
The 2006 Employee Plan provides that our Board of Directors has the authority to construe and interpret the 2006 Employee Plan and to determine the persons to whom and the dates on which equity awards will be granted, the number of shares of common stock to be subject to each equity award, the time or times during the term of each equity award within which all or a portion of the award may be exercised, the exercise, purchase, or strike price of each equity award, the type of consideration permitted to exercise or purchase each equity award, and other terms of the equity awards.
Our Board of Directors has the authority to delegate some or all of the administration of the 2006 Employee Plan to a committee or committees composed of members of our Board. In the discretion of our Board of Directors, a committee may consist solely of two or more (a) “non-employee directors” and/or (b) "outside directors", in each case as defined in the 2006 Employee Plan. The 2006 Employee Plan also permits delegation of administration of the plan to one or more executive officers with respect to grants to employees of Synopsys and its subsidiaries. Our Board of Directors has delegated to the Compensation Committee administration of the 2006 Employee Plan. Our Board of Directors has also delegated to each of our co-Chief Executive Officers, as both officers and members of our Board of Directors, administration of the 2006 Employee Plan with respect to equity awards to employees other than executive officers, subject to specified limitations and restrictions.
Eligibility
General. As of February 2, 2019, Synopsys had 11,846 eligible employees under the 2006 Employee Plan. Synopsys does not currently expect to grant awards to consultants under the 2006 Employee Plan, but it is permitted to do so under the plan’s terms. Our non-employee directors are not eligible to receive any awards under the 2006 Employee Plan. The requirements for eligibility are further described below, and the basis for participation is being selected by the plan administrator.
Incentive Stock Options. Incentive stock options may be granted under the 2006 Employee Plan only to employees (including executive officers) of Synopsys and its affiliates. The aggregate maximum number of shares of common stock that may be issued pursuant to the exercise of incentive stock options will be 94,797,248 shares of common stock. Stockholder approval of this Proposal 2 will constitute approval of this maximum limit for incentive stock options.
No incentive stock option may be granted under the 2006 Employee Plan to any person who, at the time of the grant, owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of Synopsys or its affiliates, unless the exercise price of such stock option is at least 110% of the fair market value of the stock subject to the stock option on the date of grant and the term of the stock

Synopsys Inc. | 23 | 2019 Proxy Statement

Table of Contents

option does not exceed five years from the date of grant. In addition, the aggregate fair market value, determined on the date of grant, of the shares of common stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year (under the 2006 Employee Plan and any other equity plans of Synopsys and its affiliates) may not exceed $100,000 (any excess of such amount shall be treated as non-statutory stock options).
Non-Statutory Stock Options, Restricted Stock, Restricted Stock Units and Other Awards. Non-statutory stock options, restricted stock, restricted stock units and all other types of equity awards and performance awards authorized under the 2006 Employee Plan may be granted to employees (including executive officers) and consultants of Synopsys and its affiliates.
Individual Limit. No person may be granted stock options or stock appreciation rights under the 2006 Employee Plan covering more than 1,000,000 shares of common stock during any calendar year. The 2006 Employee Plan also includes annual limits on grants of performance awards to individuals, as described below.
Stock Subject to the 2006 Employee Plan
As of February 2, 2019, 11,681,129 shares of common stock were available for future grants under the 2006 Employee Plan. If this Proposal 2 is approved by our stockholders, an additional 3,200,000 shares will be available for future grants under the 2006 Employee Plan. Assuming the stockholders approve this Proposal 2, 94,797,248 shares of our common stock will have been reserved for issuance under the 2006 Employee Plan.
The number of shares of common stock available for issuance under the 2006 Employee Plan is currently reduced by one share for each share of common stock issued pursuant to a stock option or a stock appreciation right and by 1.70 shares for each share of common stock issued on or after March 29, 2016 pursuant to restricted stock awards, restricted stock unit awards or other awards (excluding options and stock appreciation rights).
If a stock option or stock appreciation right award expires or otherwise terminates without being fully exercised, if shares subject to a restricted stock award or restricted stock unit award are forfeited to or repurchased by us, or if an equity award is settled in cash, the shares not issued under those awards, or the shares forfeited to or repurchased by us, become available for subsequent issuance under the 2006 Employee Plan. Such returning shares increase the number of shares available for issuance under the 2006 Employee Plan by one share if they were issued pursuant to a stock option or stock appreciation right and, by 1.70 shares if they were issued pursuant to restricted stock awards, restricted stock unit awards or other awards (excluding options and stock appreciation rights).
If shares subject to an award granted under the 2006 Employee Plan are not delivered to a participant because:
an equity award is exercised through a reduction in the number of shares subject to the equity award (a “net exercise”),
the appreciation distribution upon exercise of a stock appreciation right is paid in shares of common stock, or
shares are withheld in satisfaction of applicable withholding taxes,
then those shares do not become available for subsequent issuance under the 2006 Employee Plan. If the exercise price of an award is satisfied by a participant tendering previously held shares, the tendered shares do not become available for subsequent issuance under the 2006 Employee Plan.
Terms of Stock Options
We may grant stock options under the 2006 Employee Plan pursuant to stock option agreements adopted by our Board of Directors or a duly authorized committee. The following is a description of the permissible terms of stock options under the 2006 Employee Plan. Individual stock option agreements may be more restrictive as to any or all of the permissible terms described below.
Exercise Price. The exercise price of incentive stock options and non-statutory stock options may not be less than 100% of the fair market value of the stock subject to the stock option on the date of grant and, in some cases (see “Eligibility” above), may not be less than 110% of such fair market value.

Synopsys Inc. | 24 | 2019 Proxy Statement

Table of Contents

As of February 1, 2019 (the last trading day of the first quarter of fiscal 2019), the closing price of our common stock as reported on the Nasdaq Global Select Market was $94.79 per share.
Consideration. The stock option exercise price may, at the discretion of our Board of Directors, be paid in cash or by check, pursuant to a broker-assisted cashless exercise, by delivery of other shares of Synopsys common stock, pursuant to a net exercise arrangement, or in any other form of legal consideration reasonably acceptable to our Board of Directors.
Vesting. Stock options granted under the 2006 Employee Plan vest, or become exercisable, as determined by our Board of Directors. Vesting typically occurs during the optionholder’s continued service with Synopsys or an affiliate, whether such service is in the capacity of an employee, director or consultant (collectively referred to as service) and regardless of any change in the capacity of the optionholder, or upon achievement of quantitative or qualitative goals determined by the plan administrator. Shares covered by different stock options may be subject to different vesting terms.
Term. Under the current 2006 Employee Plan, the maximum term of a stock option is seven years, except that in certain cases (see “Eligibility” above) the maximum term is five years.
Termination of Service. Stock options generally terminate three months after termination of a participant’s service unless:
the stock option agreement by its terms specifically provides otherwise,
termination is due to the participant’s disability, in which case the stock option may be exercised (to the extent the stock option was exercisable at the time of the termination of service) at any time within 12 months of termination,
the participant dies while in service, or the participant dies within a specified period after termination of service, in which case the stock option may be exercised (to the extent the stock option was exercisable at the time of the participant’s death) within 12 months of the participant’s death by the person or persons to whom the rights to such stock option have passed, or
the participant is terminated for cause (as defined under the 2006 Employee Plan), in which case the stock option will terminate and cease to be exercisable (whether vested or unvested) at the time of such termination.
The stock option term may be extended in the event that exercise of the stock option following termination of service is prohibited by applicable securities laws. In no event, however, may a stock option be exercised beyond the expiration of its term.
Restrictions on Transfer. A participant generally may not transfer a stock option other than by will, by the laws of descent and distribution, or pursuant to a domestic relations order. During the lifetime of the participant, only the participant may exercise a stock option (except in instances pursuant to a domestic relations order). A participant may also designate a beneficiary who may exercise a stock option following the participant’s death.
Terms of Restricted Stock
We may grant restricted stock awards under the 2006 Employee Plan pursuant to restricted stock award agreements adopted by our Board of Directors or a duly authorized committee. Restricted stock awards are shares of our common stock that may be subject to restrictions, such as vesting requirements.
Consideration. Our Board of Directors may grant restricted stock awards in consideration for past or future services rendered to Synopsys or an affiliate, or any other form of legal consideration acceptable to our Board.
 
Vesting. Shares of stock acquired under a restricted stock award may, but need not, be subject to a repurchase option in favor of Synopsys or forfeiture to Synopsys in accordance with a vesting schedule as determined by our Board of Directors.
Termination of Service. Upon termination of a participant’s service, Synopsys may repurchase or otherwise reacquire any forfeited shares of stock that have not vested as of such termination under the terms of the applicable restricted stock award.

Synopsys Inc. | 25 | 2019 Proxy Statement

Table of Contents

Terms of Restricted Stock Units
We may grant restricted stock unit awards under the 2006 Employee Plan pursuant to restricted stock unit award agreements adopted by our Board of Directors or a duly authorized committee. Restricted stock units represent the value of a fixed number of shares of Synopsys common stock on the date of grant.
Consideration. Our Board of Directors may grant restricted stock units in consideration for past or future services rendered to Synopsys or an affiliate, or any other form of legal consideration acceptable to our Board.
Vesting. Restricted stock units vest at the rate or on the terms specified in the restricted stock unit award agreement as determined by our Board of Directors.
Settlement. Restricted stock units may be settled by the delivery of shares of Synopsys common stock, cash, or any combination as determined by our Board of Directors. At the time of grant, our Board of Directors may impose additional restrictions or conditions that delay the delivery of stock or cash subject to the restricted stock unit award after vesting.
Termination of Service. Except as otherwise provided in the applicable award agreement, restricted stock units that have not vested will be forfeited upon the participant’s termination of service.
Terms of Stock Appreciation Rights
We may grant stock appreciation rights under the 2006 Employee Plan pursuant to stock appreciation rights agreements adopted by our Board of Directors or a duly authorized committee. A stock appreciation right is a right to receive the excess value over the strike price of a fixed number of shares. Individual stock appreciation right agreements may be more restrictive as to any or all of the permissible terms described below. Each stock appreciation right is denominated in shares of common stock equivalents but may be settled in cash.
Term. The maximum term of stock appreciation rights is seven years.
Strike Price. The strike price of stock appreciation rights may not be less than 100% of the fair market value of the common stock equivalents subject to the stock appreciation rights on the date of grant.
Exercise. Upon exercise of a stock appreciation right, Synopsys will pay the participant an amount equal to the excess of the aggregate fair market value on the date of exercise of a number of common stock equivalents with respect to which the participant is exercising the stock appreciation right, over the strike price determined by our Board of Directors on the date of grant. The appreciation distribution upon exercise of a stock appreciation right may be paid in cash, shares of our common stock, or any other form of consideration determined by our Board of Directors.
Vesting. Stock appreciation rights vest and become exercisable at the rate specified in the stock appreciation right agreement as determined by our Board of Directors.
Termination of Service. Stock appreciation rights generally terminate three months after termination of a participant’s service unless:
the stock appreciation rights agreement by its terms specifically provides otherwise,
termination is due to the participant’s disability, in which case the stock appreciation right may be exercised (to the extent vested at the time of the termination of service) at any time within 12 months of termination,
 
the participant dies while in service, or within a specified period after termination of service, in which case the stock appreciation right may be exercised (to the extent vested at the time of the participant’s death) within 12 months of the participant’s death by the person or persons to whom the rights to such stock appreciation right have passed, or
the participant is terminated for cause (as defined under the 2006 Employee Plan), in which case the stock appreciation right will terminate and cease to be exercisable (whether vested or unvested) at the time of such termination.
The term of a stock appreciation right may be extended in the event that exercise following termination of service is prohibited by applicable securities laws. In no event may a stock appreciation right be exercised beyond the expiration of its term.

Synopsys Inc. | 26 | 2019 Proxy Statement

Table of Contents

Terms of Other Stock Awards
Our Board of Directors may grant other equity awards based in whole or in part by reference to the value of our common stock. Subject to the provisions of the 2006 Employee Plan, our Board has the authority to determine the persons to whom and the dates on which such other equity awards will be granted, the number of shares of common stock (or cash equivalents) to be subject to each award, and other terms and conditions of such awards. Such awards may be granted either alone or in addition to other equity awards granted under the 2006 Employee Plan. These awards may not have a term in excess of seven years from the date of grant.
Terms of Performance Awards
General. Our Board of Directors and Compensation Committee may grant performance equity awards and performance cash awards that vest based on the attainment of performance goals during a designated performance period.
Performance Goals. Our Board of Directors and Compensation Committee has the authority to structure one or more such awards so that stock or cash will be issued or paid pursuant to the award only upon the achievement of certain pre-established performance goals. Future performance-based awards under the 2006 Employee Plan will not be able to qualify for the historical Code Section 162(m) performance-based exception, which was repealed pursuant to tax reform legislation adopted in late 2017. However, the 2006 Employee Plan includes a list of performance goals that may be used (alone or in combination with each other) for performance-based awards, which may consist of any measures of performance selected by our Board of Directors.
Performance goals may be set on a company-wide basis, with respect to one or more business units, divisions, affiliates, or business segments, and in either absolute terms or relative to internally generated business plans, the performance of one or more comparable companies or the performance of one or more relevant indices. Adjustments may be made in the method of calculating the attainment of performance goals as follows: (i) to exclude restructuring and/or other nonrecurring charges (including but not limited to the effect of tax or legal settlements); (ii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the effects of changes to generally accepted accounting standards required by the Financial Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; (v) to exclude stock-based compensation expense determined under generally accepted accounting principles; (vi) to exclude any other unusual or infrequently occurring item (including but not limited to various income tax impacts prompted by tax reform legislation adopted in late 2017, including the income tax related to transition tax, the tax rate change, and tax restructuring; and the tax impact of repatriation); (vii) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (viii) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (ix) to exclude the dilutive effects of acquisitions or joint ventures; (x) to assume that any business divested by Synopsys achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (xi) to exclude the effect of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; (xii) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); (xiii) to reflect any partial or complete corporate liquidation; (xiv) to exclude the effect of in-process research and development expenses; and (xv) to exclude the income tax effect of non-GAAP pre-tax adjustments from the provision for income taxes.
Annual Limitation. The maximum benefit to be granted to a participant in any calendar year attributable to performance equity awards may not exceed 1,000,000 shares of common stock. The maximum benefit to be granted to a participant in any calendar year attributable to performance cash awards granted pursuant to the amended 2006 Employee Plan may not exceed $4,000,000.

Synopsys Inc. | 27 | 2019 Proxy Statement

Table of Contents

Changes to Capital Structure
In the event any change is made to the outstanding shares of our common stock without receipt of consideration (whether through a stock split, reverse stock split or other changes in the capital structure), appropriate adjustments will be made to the class of securities issuable under the 2006 Employee Plan, the maximum number of securities issuable under the 2006 Employee Plan, the incentive stock option limitation, the maximum award that one person may be granted in a calendar year under the 2006 Employee Plan, and the number, class and price per share under outstanding equity awards under the 2006 Employee Plan.
Corporate Transactions; Changes in Control
Unless otherwise provided in a written agreement between Synopsys or an affiliate and a participant, or unless otherwise expressly provided by our Board of Directors or Compensation Committee at the time of grant of an equity award, in the event of significant corporate transactions, outstanding equity awards under the 2006 Employee Plan may be assumed, continued or substituted by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute such equity awards, then:
with respect to any such equity awards that are held by individuals then performing services for Synopsys or its affiliates, the vesting and exercisability provisions of such equity awards will be accelerated in full and such awards will be terminated if not exercised prior to the effective date of the corporate transaction and any reacquisition or repurchase rights will lapse (contingent upon the effectiveness of the corporate transaction),
all other outstanding equity awards will be terminated if not exercised prior to the effective date of the corporate transaction, except that certain equity awards, such as restricted stock awards, may have their reacquisition or repurchase rights assigned to the surviving or acquiring entity (or its parent company) in the corporate transaction, though if such reacquisition or repurchase rights are not assigned, then such equity awards will become fully vested, and
no vested restricted stock unit award will terminate without being settled by delivery of shares of common stock, their cash equivalent or in any other form of consideration, as determined by the Board of Directors, prior to the effectiveness of the corporate transaction.
A significant corporate transaction will be deemed to occur in the event of:
a sale of all or substantially all of the consolidated assets of Synopsys and its subsidiaries,
a sale of at least 90% of the outstanding securities of Synopsys,
a merger, consolidation or similar transaction in which Synopsys is not the surviving corporation, or
a merger, consolidation or similar transaction in which Synopsys is the surviving corporation, but shares of Synopsys outstanding common stock are converted into other property by virtue of the corporate transaction.
The 2006 Employee Plan provides, at the discretion of our Board of Directors, that the holder of an outstanding equity award that would otherwise terminate if not exercised prior to the corporate transaction may surrender such equity award in exchange for a payment equal to the excess of the value of the property that the holder would have received upon exercise of the equity award immediately prior to the corporate transaction, over the exercise price otherwise payable in connection with the equity award, which excess amount may be fully vested at the time of the corporate transaction or may be required to vest after the time of the corporate transaction substantially in accordance with the schedule in effect immediately prior to the corporate transaction.
An equity award may be subject to additional acceleration of vesting and exercisability upon or after a change in control as may be provided in the award agreement for such equity award, or as may be provided in any other written agreement between Synopsys or any affiliate and the participant. An equity award may vest as to all or any portion of the shares subject to the equity award (a) immediately upon the occurrence of a change in control, whether or not such equity award is assumed, continued, or substituted by a surviving or acquiring entity in the change in control, or (b) in the event a participant’s service is terminated, actually or constructively, within a designated period prior to, at, or following the

Synopsys Inc. | 28 | 2019 Proxy Statement

Table of Contents

occurrence of a change in control. In the absence of a determination by the plan administrator, no such acceleration will occur.
The acceleration of an equity award in the event of an acquisition or similar corporate event may be viewed as an anti-takeover provision, which may have the effect of discouraging a proposal to acquire or otherwise obtain control of Synopsys.
Duration, Termination and Amendment
Our Board of Directors may suspend or terminate the 2006 Employee Plan without stockholder approval or ratification at any time. The 2006 Employee Plan will expire on April 1, 2026, unless terminated sooner by our Board. Our Board may amend or modify the 2006 Employee Plan at any time, subject to any required stockholder approval. To the extent required by applicable law or regulation, stockholder approval will be required for any amendment that:
materially increases the number of shares available for issuance under the 2006 Employee Plan,
materially expands the class of individuals eligible to receive awards under the 2006 Employee Plan,
materially increases the benefits accruing to the participants under the 2006 Employee Plan or materially reduces the price at which shares of common stock may be issued or purchased under the 2006 Employee Plan,
materially extends the term of the 2006 Employee Plan, or
expands the types of awards available for issuance under the 2006 Employee Plan.
Our Board of Directors also may submit to stockholders any other amendment to the 2006 Employee Plan.
U.S. Federal Income Tax Information
The following is a summary of the principal United States federal income taxation consequences to participants and Synopsys with respect to participation in the 2006 Employee Plan. This summary is not intended to be exhaustive, and does not discuss the income tax laws of any city, state or foreign jurisdiction in which a participant may reside.
Incentive Stock Options. Incentive stock options granted under the 2006 Employee Plan are intended to qualify for the favorable federal income tax treatment accorded “incentive stock options” under the Code. There generally are no federal ordinary income tax consequences to the participant or Synopsys by reason of the grant or exercise of an incentive stock option. However, the exercise of an incentive stock option may increase the participant’s alternative minimum tax liability, if any.
 
The excess, if any, of the fair market value of the incentive stock option shares on the date of exercise over the exercise price is an adjustment to income for purposes of the alternative minimum tax. Alternative minimum taxable income is determined by adjusting regular taxable income for certain items, increasing that income by certain tax preference items and reducing this amount by the applicable exemption amount.
If a participant holds stock acquired through exercise of an incentive stock option for more than two years from the date on which the stock option was granted and more than one year after the date the stock option was exercised for those shares, any gain or loss on a disposition of those shares (referred to in this Proxy Statement as a qualifying disposition) will be a long-term capital gain or loss.
Generally, if the participant disposes of the stock before the expiration of either of those holding periods (referred to in this Proxy Statement as a disqualifying disposition), then at the time of disposition the participant will realize taxable ordinary income equal to the lesser of (a) the excess of the stock’s fair market value on the date of exercise over the exercise price, or (b) the participant’s actual gain, if any, on the purchase and sale. The participant’s additional gain or any loss upon the disqualifying disposition will be a capital gain or loss, which will be long-term or short-term depending on whether the stock was held for more than one year after exercise.
Non-Statutory Stock Options. No taxable income is generally recognized by a participant upon the grant or vesting of a non-statutory stock option under the 2006 Employee Plan. Upon exercise of a non-

Synopsys Inc. | 29 | 2019 Proxy Statement

Table of Contents

statutory stock option, the participant will recognize ordinary income equal to the excess, if any, of the fair market value of the purchased shares on the exercise date over the exercise price paid for those shares.
Upon disposition of the common stock, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such common stock plus any amount recognized as ordinary income upon acquisition of the stock. Such gain or loss will be long-term or short-term depending on whether the common stock was held for more than one year.
Stock appreciation rights are generally taxed in a manner similar to non-statutory stock options.
Restricted Stock Awards. Upon the grant of a restricted stock award which is unvested and subject to reacquisition by Synopsys in the event of the participant’s termination of service prior to vesting in those shares, the participant will not recognize any taxable income at the time of issuance, but will have to report as ordinary income, as and when our reacquisition right lapses, an amount equal to the fair market value of the shares on the dates the reacquisition right lapses. The participant may, however, elect under Section 83(b) of the Code to include as ordinary income in the year of issuance an amount equal to the fair market value of the shares on the date of issuance. If the Section 83(b) election is made, the participant will not recognize any additional income as and when the reacquisition right lapses.
Upon disposition of the common stock acquired upon the receipt of a restricted stock award, the participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such common stock plus any amount previously recognized as ordinary income in respect of such common stock. Such gain or loss will be long-term or short-term depending on whether the common stock was held for more than one year.
Restricted Stock Unit Awards. No taxable income is generally recognized upon receipt of a restricted stock unit award under the 2006 Employee Plan. In general, the participant will recognize ordinary income in the year in which the shares to be issued in respect of that unit are issued in an amount equal to the fair market value of the shares on the issuance date. Amounts taxed as ordinary income from non-statutory stock options, restricted stock awards and restricted stock unit awards are subject to income tax withholding and applicable employment taxes.
Tax Consequences to the Company. To the extent the participant recognizes ordinary income in the circumstances described above, we will generally be entitled to a corresponding income tax deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code, and is not disallowed by the $1,000,000 limitation on certain executive compensation under Section 162(m) of the Code. However, we will not be entitled to any income tax deduction upon a qualifying disposition of an incentive stock option.
Compensation qualifying for a performance-based exception as “qualified performance-based compensation” under Section 162(m) of the Code has historically not been subject to the Section 162(m) deduction limit (which, beginning in 2018, applies to certain executive officers and former executive officers). That exception has been repealed, however, effective for taxable years beginning after December 31, 2017, unless transition relief for certain compensation arrangements in place as of November 2, 2017 is available. The 2006 Employee Plan retains legacy provisions that were originally included such that certain awards granted under the plan could potentially qualify for the “qualified performance-based compensation” exception.
Stockholders are not being asked to approve the 2006 Employee Plan (or any of its provisions) for purposes of Section 162(m) of the Code or the “qualified performance-based compensation” exception. Synopsys will not be able to make any future grants under the 2006 Employee Plan that will be intended to qualify for the performance-based exception; thus, while certain references to Section 162(m) of the Code remain in the 2006 Employee Plan, Synopsys does not expect that such Code Section 162(m)-related provisions will be operable for purposes of future grants made under the plan.


Synopsys Inc. | 30 | 2019 Proxy Statement

Table of Contents

Proposal 3 – Advisory Vote to Approve Executive
Compensation
As required pursuant to Section 14A of the Securities Exchange Act, we are requesting our stockholders to provide advisory approval of the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the narrative discussion set forth on pages 32 to 65 of this Proxy Statement. This non-binding advisory vote is commonly referred to as a “say-on-pay” vote.
Our Board of Directors Recommends that You Vote FOR the Compensation of Our Named Executive Officers
as Disclosed in this Proxy Statement
Background
At last year’s annual meeting, we provided our stockholders with the opportunity to cast an advisory vote regarding the compensation of our named executive officers as disclosed in the proxy statement for the 2018 Annual Meeting of Stockholders. At our 2018 Annual Meeting, our stockholders overwhelmingly approved the proposal, with approximately 93% of voted shares in favor of the proposal.
We have held a stockholder say-on-pay vote annually, as elected by our Board of Directors and consistent with a past advisory vote by our stockholders. Accordingly, this year we are again asking our stockholders to vote “For” the compensation of our named executive officers as disclosed in this Proxy Statement. The next say-on-pay vote is expected to occur at our 2020 Annual Meeting of Stockholders.
Our Compensation Committee, which is responsible for designing and administering our executive compensation program, has designed our executive compensation program to provide a competitive and internally equitable compensation and benefits package that reflects company performance, job complexity and the value provided, while also promoting long-term retention, motivation and alignment with the long-term interests of Synopsys’ stockholders. Synopsys has maintained profitability and increased revenue each year since fiscal 2006, and we believe the compensation program for our named executive officers has been instrumental in helping Synopsys achieve strong financial performance over the past few years.
We encourage you to carefully review the “Compensation Discussion and Analysis” beginning on page 32 of this Proxy Statement for additional details on Synopsys’ executive compensation, including Synopsys’ compensation philosophy and objectives, as well as the processes our Compensation Committee used to determine the structure and amounts of the compensation for our named executive officers.
We are asking you to indicate your support for the compensation of our named executive officers as described in this Proxy Statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking you to vote, on an advisory basis, “For” the following resolution at the Annual Meeting:
RESOLVED, that the compensation paid to Synopsys, Inc.’s named executive officers, as disclosed pursuant to the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth on pages 32 to 65 of this Proxy Statement, is hereby approved.”
This advisory resolution will be approved if the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting, and voting on this Proposal 3, vote “For” this Proposal 3. Abstentions will not be counted as either votes cast “For” or “Against” this Proposal 3 and have no effect on the vote for this Proposal 3.
While the results of this advisory vote are not binding, the Compensation Committee will consider the outcome of the vote in making future compensation decisions for named executive officers.

Synopsys Inc. | 31 | 2019 Proxy Statement

Table of Contents

Compensation Discussion and Analysis
This Compensation Discussion and Analysis discusses the compensation of our named executive officers (NEOs) for fiscal 2018.
Fiscal 2018 NEOs
Aart J. de Geus
Co-Chief Executive Officer and Chairman of the Board of Directors
Chi-Foon Chan
Co-Chief Executive Officer, President and Member of the Board of Directors
Trac Pham
Chief Financial Officer
Joseph W. Logan
Sales and Corporate Marketing Officer
John F. Runkel, Jr.
General Counsel and Corporate Secretary
We are led by Dr. Aart J. de Geus and Dr. Chi-Foon Chan, our co-Chief Executive Officers. Dr. de Geus is an electronic design automation (EDA) pioneer who co-founded Synopsys over 32 years ago. Dr. de Geus has long been considered one of the world’s leading experts on logic synthesis and simulation, and over the years, has been widely recognized for his technical, business and community achievements by leading organizations throughout the world. Dr. Chan has been with Synopsys for over 28 years. Over the years, Dr. Chan pioneered many aspects of Synopsys including the initiation of our intellectual property (IP) business, leading our global expansion efforts in Asia, and more recently, overseeing the growth of our software integrity portfolio.
We believe we continue to benefit from our co-CEO structure. This structure enables both Dr. de Geus and Dr. Chan to speak with the authority of a CEO as they guide our product innovations across various fields and support our relationships with key customers. Both Dr. de Geus and Dr. Chan have extensive knowledge of our products, customers, and industry while providing different strengths. Dr. Chan contributes expertise in the day-to-day operations of our business, while Dr. de Geus leads us in developing and communicating our long-term vision. We rely on the expertise of Dr. de Geus, Dr. Chan and our other NEOs to assist us in growing our business and building stockholder value, with stockholder value steadily increasing since the co-CEO structure was established in fiscal 2013.
Executive Summary
Fiscal 2018 Business Performance Overview
Synopsys delivered an outstanding year in fiscal 2018 - financially, operationally, and strategically. We crossed the $3 billion revenue mark, with very good growth across all product groups and all geographies. In addition, we reported double-digit growth in non-GAAP earnings per share (EPS) for the second straight year. The excellent financial results highlight a five-year period of technology innovation, market share growth, total available market expansion, and strong financial execution. A few of our business highlights include the following:
In 2018, we delivered a stream of innovations aimed at enabling the most complex chip and system designs ever, and those products are in the early stages of a multi-year upgrade cycle. One of those innovations is our new Fusion Compiler™ product, the only single product in the market that integrates the market-leading critical elements of design-synthesis, place and route, and signoff. We also launched a new emulation product—the fastest, largest-capacity emulator available today.
Our semiconductor intellectual property (IP) portfolio delivered another record year, as our broad offering that spans interfaces, memories, analog, and processor IP continues to have solid impact on our customers’ designs. For applications such as automotive and artificial intelligence, our high-quality IP has become a staple for many companies.
Our software integrity product group, which provides solutions that test for security vulnerabilities and quality defects in software code, had another excellent year of growth. In addition, we acquired the leading open-source software testing company in Black Duck Software, Inc. and successfully integrated the company into Synopsys. Identified as a leader in the Gartner Magic

Synopsys Inc. | 32 | 2019 Proxy Statement

Table of Contents

Quadrant for Application Security Testing for the second year in a row, our brand recognition and business continue to expand.
From a financial performance standpoint:
We reported excellent results, with double-digit revenue and non-GAAP EPS growth. We saw revenue strength across all product groups and geographies, and an approximate $300 million increase in non-cancellable backlog.
We invested substantially in critical products across our portfolio, bolstering our technology position for the future.
We continued to drive long-term shareholder value by balancing our investment priorities while executing $400 million in share repurchases during fiscal 2018. We have completed $1.2 billion in share repurchases over the past three years.
Revenue for fiscal 2018 was $3.12 billion, an increase of approximately 14.5% over fiscal 2017.
GAAP net income for fiscal 2018 was approximately $432.5 million, or $2.82 per share. Non-GAAP net income for fiscal 2018 was $599.7 million (versus a fiscal 2018 non-GAAP net income target of $529.0 million, as described below in “Equity Awards”), or $3.91 per share.
Fiscal 2018 Executive Compensation Overview
The cornerstone of our compensation philosophy is pay for performance. We closely align the compensation paid to our NEOs with achievement of both near- and long-term financial goals. In fiscal 2018, we structured our compensation mix such that approximately 92% of the target compensation of Dr. de Geus and Dr. Chan, our co-CEOs, was performance-based and approximately 83% of the target compensation of our other NEOs, as a group, was performance-based.
Our NEOs receive a salary, a cash incentive opportunity under our Executive Incentive Plan (EIP), and equity awards, each determined by the Compensation Committee. The equity awards consist of stock options and performance-based restricted stock units (PRSUs) typically split 50/50. The performance goals for our EIP and PRSUs support our primary financial objectives of achieving profitable revenue growth and creating a stable and predictable future revenue stream. Our EIP requires a minimum average achievement of 90% of our goals before any payment can be earned, a threshold that is above common industry practice.
After reviewing our strong fiscal 2017 performance, and considering peer compensation data and the company’s compensation budget, in December 2017, the Compensation Committee adjusted the target total direct compensation for our NEOs in fiscal 2018 as follows:
NEO
Change in Target
Compensation from
Fiscal 2017 to 2018
Commentary
Aart J. de Geus and
Chi-Foon Chan
Co-Chief Executive Officers
14.6%
The Compensation Committee increased the target dollar value of our co-CEOs’ annual equity grant to recognize their contributions in significantly growing the company from both a financial and operational standpoint.
Trac Pham
Chief Financial Officer
22.8%
The Compensation Committee increased the target dollar value of Mr. Pham’s annual equity grant to reflect his expanded scope of responsibilities in light of our Chief Administrative Officer’s retirement last year, as well as improve the competitiveness of his overall compensation as compared to our peers.
Joseph W. Logan
Sales and Corporate Marketing Officer
—%
The Compensation Committee evaluated Mr. Logan’s target compensation and determined his existing target level was consistent with our pay philosophy.
John F. Runkel, Jr.
General Counsel and Corporate Secretary
6.5%
The Compensation Committee increased Mr. Runkel’s salary and the target dollar value of his annual equity grant to improve the competitiveness of his overall compensation as compared to our peers.

Synopsys Inc. | 33 | 2019 Proxy Statement

Table of Contents

We performed well against our fiscal 2018 goals. As further described below:
The Average Achievement of our Fiscal 2018 Corporate Financial Goals was 104.8%, thereby yielding a Corporate Financial Payout Factor of 119.3% under our EIP.
We achieved 111.2% of our Fiscal 2020 Revenue Backlog Goal. Based on our EIP Payment Formula, our EIP funding increased to 150.0% of target levels.
We achieved 113.4% of our Fiscal 2018 Non-GAAP Net Income Performance Goal, and accordingly, our NEOs’ fiscal 2018 PRSUs are eligible to vest based on continued service.
 
Compensation Practices and Governance Policies
In designing our executive compensation program, our goal is a competitive and internally equitable program that reflects company performance, job complexity, and the value provided by our executives, while also promoting long-term retention and motivation. We have increased our revenue, while remaining profitable, over the past decade. We believe our compensation practices and governance policies have been important in helping us achieve this consistent long-term financial performance, and we must continue to cultivate executive talent to lead our business and engage our global workforce to remain successful.  
Our Compensation Practices
ü  Pay for Performance. Performance-based pay represents a significant portion of our NEO’s target total direct compensation.
 
In the beginning of fiscal 2018, the Compensation Committee set fixed compensation at 8% of target total direct compensation for our co-CEOs and, on average, 17% for our other NEOs as a group.
×  No All-or-Nothing Approach. Our cash and equity incentive awards contain a range of performance levels and payouts to discourage risky actions to meet an all-or-nothing performance goal.
ü  Balanced Mix of Performance Goals. The performance goals for our cash and equity incentive awards use a variety of performance metrics and focus on both near-term and long-term goals.
×  No Excessive Risks. Our cash-based Executive Incentive Plan encourages our NEOs to achieve current fiscal year revenue and operating margin goals as well as revenue backlog goals for multiple years in the future, which promote a predictable long-term revenue stream and help minimize incentives for risky short-term business practices.
ü  Competitive Pay. In setting fiscal 2018 total direct compensation for our NEOs other than the co-CEOs, the Compensation Committee reviewed peer data, with an emphasis on the 25th to the 75th percentile of our peer group as a reference to avoid focusing on extreme outliers. The Committee also takes into consideration other factors such as an NEO’s level of experience, contributions, performance, retention value of unvested awards, and our compensation budget.
×  No Above-Market CEO Pay. The Compensation Committee set fiscal 2018 target direct compensation for each of our co-CEOs at approximately the 25th percentile, reflecting our co-CEOs’ emphasis on internal pay equity and our Compensation Committee’s sensitivity to budgetary concerns raised by a co-CEO leadership structure.
ü  Double Trigger Change of Control Benefits. Our NEO change of control agreements are “double trigger.” NEOs do not receive a payment simply due to a change of control and are not eligible for severance benefits if they continue to be employed in a similar role after the change of control.
×  No Excessive Change of Control Payments. The “double trigger” change of control salary continuation and cash incentive award payments potentially owed to our NEOs do not exceed two times their annual target cash compensation.
ü  Maximum Payout Caps. The Compensation Committee evaluates our NEOs’ performance to determine the level of awards that are earned under our EIP and 2006 Employee Plan. Both plans maintain maximum payout caps to avoid excessive payments to our NEOs.
 
 
×  No Excise Tax Gross Ups. We do not provide for “golden parachute” excise tax gross ups.

Synopsys Inc. | 34 | 2019 Proxy Statement

Table of Contents

Our Compensation Practices
ü Clawback Policy. We maintain a clawback policy for the recovery of performance-based compensation (both cash and equity) in the event of a substantial financial restatement.
×  No Excessive Perks. We generally do not provide any executive-specific perquisites to our NEOs. We do not provide a matching contribution or preferential interest rates in our deferred compensation plans.
ü  Robust Stock Ownership Guidelines. All of our NEOs are in compliance with our Stock Ownership Guidelines as of the end of fiscal year 2018: Dr. de Geus held 540,728 shares of our common stock, valued at over 92 times his salary and Dr. Chan held 202,244 shares, valued at over 34 times his salary.
×  No Hedging or Pledging. Our NEOs are prohibited from engaging in hedging transactions in our stock, holding our stock in a margin account, or pledging our stock as collateral for a loan.
ü  Independent Compensation Committee. Our Compensation Committee is composed solely of independent directors. The Compensation Committee regularly meets in executive sessions without management present.
×  No Option Repricing. Our 2006 Employee Equity Incentive Plan forbids the repricing of equity awards without stockholder approval and contains other features designed to protect stockholder interests.
ü  Independent Compensation Consultant. The Compensation Committee directly retains a compensation consultant the Committee has determined to be independent, using the factors set out in applicable SEC and Nasdaq rules.
 
ü  Advisory Say-on-Pay Vote. Our Board of Directors elected to hold an annual advisory say-on-pay vote, and our Compensation Committee considers the outcome of our favorable vote in making compensation decisions.
 
ü  Comprehensive Review of Executive Compensation. In addition to considering the outcome of the annual advisory say-on-pay vote, our Compensation Committee also reviews tally sheets of executive compensation, which provide a holistic view of NEO compensation.
 
ü Equity Burn Rate. We continue to closely manage our equity burn rate, limiting gross share usage to 1.8% in fiscal 2018.
 
Fiscal 2018 NEO Compensation Details
Our three core elements of NEO direct compensation are salary, an annual cash incentive opportunity and equity awards. Our NEOs are also compensated through our employee health and welfare benefit plans, employee-funded defined contribution deferred compensation plan, and executive change in control and severance benefit plan.
 
The large majority of each NEO’s target total direct compensation is “performance-based”—that is, contingent upon the overall performance of our business or our stock price. The Compensation Committee uses a balanced mix of performance metrics with varying near- and long-term impact in our performance-based compensation. The graphic below reflects the general allocation of the three core elements of NEO target total direct compensation for fiscal 2018 as determined by our Compensation Committee in December 2017.

Synopsys Inc. | 35 | 2019 Proxy Statement

Table of Contents

 
coceos.jpg
otherneos.jpg
Salary
Salaries compensate our NEOs for expected levels of day-to-day performance. Our Compensation Committee believes that salaries should be determined by each NEO’s role and responsibilities, our financial projections, peer data, our budget for the coming year, historical salary levels, and the resulting total target compensation that can be earned given the individual’s base salary and related target incentive opportunity.
chart-46fc0955000e2cb4e14.jpg
In fiscal 2018, Mr. Runkel’s salary was increased by $25,000, or approximately 7.1% over fiscal 2017, to $375,000. The modest salary increase improved the competitiveness of Mr. Runkel’s base salary level as compared to our peers. No changes were made to our other NEOs’ base salary levels.
Cash Incentive Payment
We use annual cash incentive compensation to align NEO performance with near-term financial objectives and future revenue goals, which reward contributions that have a multi-year impact. These cash incentive payments can be earned by our NEOs only if we achieve a significant level of our financial performance goals, which advance our long-term strategic plans and, ultimately, shareholder value, over time. Our Compensation Committee grants cash incentive compensation opportunities under our Executive Incentive Plan (EIP), which was last reviewed by the Compensation Committee in January 2019.
Executive Incentive Plan. For fiscal 2018, the Compensation Committee approved a threshold level of performance that must be achieved (e.g., a funding goal), cash incentive targets, performance goals and a payout matrix that determines how much of the target may be paid at each level of achievement of our performance goals. After the end of the fiscal year, the Compensation Committee applies a pre-

Synopsys Inc. | 36 | 2019 Proxy Statement

Table of Contents

determined formula provided by the EIP to calculate the amount of potential cash incentive payments, but it retains discretion to adjust those payments produced by the formula. In no event can an actual cash incentive payment exceed 200% of the NEO’s cash incentive target.
Cash Incentive Target. A cash incentive target is the amount of cash incentive compensation that an NEO could earn if we achieve our performance goals. Targets are expressed as a percentage of an NEO’s salary. In reviewing targets, our Compensation Committee takes into consideration each NEO’s role and responsibilities, our financial projections, the budget for the coming year, peer data, historical compensation levels and the resulting total target compensation that can be earned given the individual’s base salary and related target incentive opportunity.
chart-202dc96effbc00ea655a05.jpg
 
 The cash incentive target of each of our NEOs did not change in fiscal 2018, as the Compensation Committee determined that the existing levels were consistent with our pay philosophy.
Performance Goals. The EIP requires our NEOs to achieve a high level of performance each year for any payments to be earned under the plan. On an annual basis, our Compensation Committee sets a funding goal for the EIP as well as performance goals based on revenue, operating margin, and revenue backlog. As an initial threshold, we must achieve our funding goal in order for any amounts to be earned under the EIP. If we fail to achieve our funding goal, no cash incentive payments will be earned under the EIP. Assuming the funding goal is achieved, we must still achieve at least a 90% average performance level for our Corporate Financial Goals, before any cash incentive payment may be earned. In addition, the Compensation Committee sets a further revenue backlog goal called a Revenue Predictability Goal that, if fully achieved, can increase the funding in the EIP through a multiplier.
The EIP uses (1) current fiscal year revenue, (2) current fiscal year non-GAAP operating margin, and (3) future fiscal years’ revenue backlog to focus our NEOs on revenue growth and cost control for the current fiscal year and future revenue and revenue predictability. We use non-GAAP operating margin as a metric for both our funding goal and as a component of our Corporate Financial Goals because of its important connection to our overall profitability in the current fiscal year. We use current fiscal year revenue as a metric for our Corporate Financial Goals to reward efforts to expand our business. We use revenue backlog based on two subsequent fiscal years of revenue backlog to encourage our NEOs to address future revenue and revenue predictability, rewarding contributions that have a multi-year impact. We believe the exclusive use of corporate performance metrics, rather than a mix of corporate and individual metrics, fosters teamwork among our NEOs and reflects the importance of company-wide performance to stockholder value. Our Compensation Committee believes the consistent application of this blend of performance measures permits our NEOs to focus on sustained performance rather than short-term accomplishments and has contributed to our consistent revenue growth and profitability.
The Compensation Committee sets the numeric goals for each performance metric based on the operating plan approved by our Board of Directors.

Synopsys Inc. | 37 | 2019 Proxy Statement

Table of Contents

Fiscal 2018 Funding Goal, Corporate Financial Goals, Revenue Predictability Goal and Goal Achievement
Fiscal 2018 Funding Goal (initial threshold)
 
 
 
Fiscal 2018 
Target Achieved
70% of Fiscal 2018 non-GAAP operating margin(1)
 
 
 
Yes
Corporate Financial Goals
Performance 
Weight

Fiscal 2018 Target

Fiscal 2018 Actual

Fiscal 2018 % Achieved

Fiscal 2018 revenue
33.33
%
$ 2.910 billion

$ 3.121 billion

107.3
%
Fiscal 2018 non-GAAP operating margin(1)
33.33
%
23.2
%
22.1
%
95.2
%
Fiscal 2019 revenue backlog(2)
33.34
%
$ 2.073 billion

$ 2.322 billion

112.0
%
Average Achievement
 
 
 
104.8
%
Revenue Predictability Goal
 
 
Fiscal 2018 Target
Fiscal 2018 % Achieved

Fiscal 2020 revenue backlog(2)
 
 
(3)
111.2
%
(1)
Non-GAAP operating margin is GAAP operating margin adjusted to exclude the amortization of acquired intangible assets, the impact of stock compensation, acquisition-related costs, restructuring charges, the effects of certain settlements, final judgments and loss contingencies related to legal proceedings, the various income tax impacts prompted by tax reform legislation adopted in late 2017, including the income tax related to transition tax, the tax rate change, and tax restructuring, the tax impact of repatriation, and the income tax effect of non-GAAP pre-tax adjustments.
(2)
Revenue backlog for a particular year is the portion of committed orders not yet recognized as revenue but that we expect to be recognized in that particular year, measured as of the end of the current fiscal year.
(3)
We consider our second-year revenue backlog target to be confidential, and the disclosure of this target would cause us competitive harm. In general, the Compensation Committee sets revenue backlog targets from year to year that it believes to be challenging but attainable with considerable effort by our NEOs and employees, and in the absence of significant deterioration in macroeconomic or broader industry conditions.
We achieved strong financial results in fiscal 2018, with an average achievement of our three Corporate Financial Goals of 104.8%. We also performed well against our Revenue Predictability Goal, achieving 111.2% of our target, which resulted in the application of a multiplier to potential NEO cash incentive payments, as described below.
Corporate Financial Goals Payout Matrix. Each year, our Compensation Committee approves a payout matrix that determines, within boundaries established by the EIP, what percentage of cash incentive targets can be earned at each level of achievement of our Corporate Financial Goals. The EIP requires a minimum average performance achievement of 90% for our Corporate Financial Goals before our NEOs can earn any cash incentive payment. At this level of achievement under the EIP, the payout matrix provides funding of 67.5% of target payment for 90% average performance achievement.
The EIP is structured in this way to provide a limited payment opportunity when performance goals are narrowly missed. We believe this limits our exposure to excessive risk-taking that can arise with “all or nothing” performance conditions. We believe this minimum 90% average achievement level holds our NEOs to a higher level of performance than peer practice. Our EIP also has a higher performance threshold than our broad-based employee incentive compensation plans to reinforce accountability at the leadership level.

Synopsys Inc. | 38 | 2019 Proxy Statement

Table of Contents

Overview of Fiscal 2018 Corporate Financial Goal Payout Matrix
Percentage of Average Achievement of Corporate Financial Goals
Corporate Financial Payout Factor(1)

≥125%
150
%
105%
120.2
%
100%
100
%
90%
67.5
%
<90%
%
(1)
We round our average achievement to the nearest quarter percent and use linear interpolation to calculate the exact payout factor for achievement levels that fall in between levels specified in the matrix. Since we achieved our Corporate Financial Goals at an average of 104.8%, the Corporate Financial Payout Factor is 119.3% for fiscal 2018.
Revenue Predictability Goal Payout Matrix. Each year, our Compensation Committee also approves a matrix that determines the Revenue Predictability Payout Factor that will be applied at each level of achievement of the Revenue Predictability Goal. For fiscal 2018, achievement of 100% or less of the Revenue Predictability Goal would result in no increase to the payout determined by the other metrics established for the cash incentive award. Achievement above that level, however, could result in a Revenue Predictability Payout Factor of up to 150%.
The Revenue Predictability Factor acts only as a “multiplier” for the Corporate Financial Payout Factor and, regardless of the level of achievement of the Revenue Predictability Goal, no payment could be made under the EIP for fiscal 2018 if the minimum 90% average achievement level was not met under the Corporate Financial Goals.

Overview of Fiscal 2018 Revenue Predictability Goal Payout Matrix
Percentage of Average Achievement of Revenue Predictability Goal
Revenue Predictability
Payout Factor(1)

≥125%
150
%
111%
150
%
105%
125
%
100%
100
%
≤90%
100
%

(1)
We round our average achievement to the nearest quarter percent and use linear interpolation to calculate the exact payout factor for achievement levels that fall between 100% to 110%. Since we achieved 111.2% of our Revenue Predictability Goal, the Revenue Predictability Payout Factor is 150% for fiscal 2018.

Synopsys Inc. | 39 | 2019 Proxy Statement

Table of Contents

EIP Payment Formula. After the end of our fiscal year, our Compensation Committee certifies whether the funding goal and performance goals were met and uses the following formula from the EIP to calculate potential cash incentive payments:
fy18eippaymentformula.jpg

The EIP Payment Formula above will not be applicable, and our NEOs will not earn any cash incentive payments under the EIP, if the funding goal is not achieved for the fiscal year.
Actual Fiscal 2018 Cash Incentive Payments. Actual cash incentive payments are only earned after our Compensation Committee has reviewed the potential cash incentive payment calculations under the objective EIP payment formula and considered other relevant information not incorporated into the formula, such as the impact of major acquisitions during the year, individual performance, and affordability. The Compensation Committee is empowered to adjust potential cash incentive payments, regardless of whether any multiplier has been earned. In no event can an actual cash incentive payment exceed 200% of the NEO’s cash incentive target.
Our Compensation Committee convened in December 2018 to discuss the fiscal 2018 performance of each of our NEOs, review potential cash incentive payments, and determine the actual incentive payments. Based on our achievement of EIP performance goals, the calculation of cash incentive payments using the EIP’s payment formula yielded awards of 196.8% of our NEOs’ targets, which is based on:
actualfiscal2018cashincentiv.jpg
After considering a number of factors, including internal cost considerations, the Compensation Committee reduced the total EIP awards by approximately 5.8% in the aggregate to yield awards of 191.0% of our NEOs’ targets as a group. Notwithstanding the foregoing, Mr. Logan’s actual cash incentive payment was paid at 200.0% of his cash incentive target to recognize his key contributions to the company in an increasingly competitive sales environment.

Synopsys Inc. | 40 | 2019 Proxy Statement

Table of Contents

 
NEO
Target Cash Incentive
Payment

Actual Cash Incentive
Payment

Aart J. de Geus
$
1,260,000

$
2,394,000

Chi-Foon Chan
1,260,000

2,394,000

Trac Pham
382,500

726,800

Joseph W. Logan
660,000

1,320,000

John F. Runkel, Jr.
262,500

472,500

Equity Awards
We believe that equity awards align the interests of our NEOs with the long-term interests of our stockholders by rewarding long-term value creation measured by our stock price and by providing retention incentives through multi-year vesting periods.
Our Compensation Committee generally grants the following equity awards to our NEOs under our 2006 Employee Plan:
Performance-based restricted stock units (PRSUs), which are eligible to vest only upon the achievement of pre-established performance criteria and are subject to time-based vesting in three equal annual installments thereafter. Following achievement of the performance criteria, PRSUs increase or decrease in value directly with our stock price, further aligning NEO and stockholder interests.
Stock options with time-based vesting. Stock options encourage long-term performance as they are only valuable if our stock price increases over time, as the awards vest. Accordingly, the Compensation Committee considers stock options, as well as PRSUs, to be performance-based compensation.

The size of equity awards granted to each NEO is based on an estimated target dollar value. The Compensation Committee considers each NEO’s role and responsibilities, historical compensation levels, the impact of award size on our burn rate, and peer data in determining awards. The Compensation Committee does not have a specific formula that weights these factors. Our equity budget for the coming year is also a critical factor, as the Compensation Committee is mindful of potential stockholder dilution and internal pay equity between our NEOs and employees in general when approving grants.
Fiscal 2018 Equity Grants
NEO
Stock Options(1)

PRSU Shares(2)

Grant Date Fair
Value of
Equity Awards

Aart J. de Geus
120,839

24,859

$
4,499,986

Chi-Foon Chan
120,839

24,859

4,499,986

Trac Pham
57,734

11,877

2,149,983

Joseph W. Logan
53,706

11,049

2,000,040

John F. Runkel, Jr.
21,483

4,419

799,973

 
(1)
Stock options vest as to 25% of the shares subject to the option grant on the first anniversary of the grant date and as to 3/48ths of the shares subject to the option grant quarterly thereafter.
(2)
As discussed further under “PRSUs Terms” below, these PRSUs were subject to a non-GAAP net income performance goal of $529.0 million for fiscal 2018.
Co-CEOs. The Compensation Committee approved an estimated target dollar value of $4.50 million for the equity grants to each of our co-CEOs, an increase of approximately 21.6% from fiscal 2017, to recognize their significant contributions in growing the company despite industry and customer consolidation, and to help improve the competitiveness of our co-CEOs’ target compensation. Furthermore, this continues the trend of keeping our co-CEOs’ salary low relative to our peers and maintaining a higher equity award target to award attainment of performance goals. The target dollar value was converted into a number of shares based on estimated conditions on the grant date, as

Synopsys Inc. | 41 | 2019 Proxy Statement

Table of Contents

described in “Equity Element Allocation” below. The grant date fair value reported in the subsection titled Summary Compensation Table within the Executive Compensation Tables section below reflects actual conditions on the grant date.
Other NEOs. The Compensation Committee approved an estimated target dollar value of $2.15 million for the equity grants to Mr. Pham, an increase of approximately 34.4% from fiscal 2017, to improve the competitiveness of his target compensation and to further enhance the overall retention features of his total compensation package. The Compensation Committee approved an estimated target dollar value of $800,000 for the equity grants to Mr. Runkel, an increase of approximately 6.0% from fiscal 2017, to improve the competitiveness of his target compensation.
Equity Element Allocation. After choosing the estimated target dollar value for each NEO’s equity awards, the Compensation Committee sought to allocate the dollar value equally between stock options and PRSUs. The Compensation Committee believes this approximate 50/50 ratio is appropriate because it encourages our NEOs to focus both on near-term results, by requiring the achievement of a near-term performance condition for the PRSUs to vest, and on long-term value creation, since stock options and PRSUs reward sustained increases in our stock price, though only to the extent the employee vests in the award by remaining in service for four years.
To determine the target number of PRSU shares to be granted for fiscal 2018, the Compensation Committee used our closing stock price on the grant date to calculate an award worth half of the estimated target equity value. For stock options, the Compensation Committee used a Black-Scholes option-pricing model to estimate the fair value of a stock option share on the expected grant date. Because the grants were based on estimates of conditions on the grant date, the actual grant date fair value of the PRSUs and stock options reported in the Summary Compensation Table below is different, as it is based on our value on the effective grant date.
PRSUs Terms. As in past years, the Compensation Committee selected a non-GAAP net income goal for our fiscal 2018 PRSUs because it is an important measure of our success that is distinct from other metrics used in our EIP, such as the revenue backlog goals focused on our future revenue streams. Non-GAAP net income is GAAP net income adjusted for the amortization of acquired intangible assets, the impact of stock compensation, acquisition-related costs, restructuring charges, the effects of certain settlements, final judgments and loss contingencies related to legal proceedings, the various income tax impacts prompted by tax reform legislation adopted in late 2017, including the income tax related to transition tax, the tax rate change, and tax restructuring, the tax impact of repatriation, and the income tax effect of non-GAAP pre-tax adjustments. Our fiscal 2018 goal was increased above our fiscal 2017 goal to a non-GAAP net income of $529.0 million, which we believe was established at a level that would be appropriately difficult to attain.
Our PRSUs vest over four years. If the performance goal is achieved, only 25% of the PRSU shares that are eligible to vest based on such performance will vest at the end of the performance year. The remaining PRSU shares that are eligible to vest generally vest annually over the following three years, provided the NEO continues to remain employed by Synopsys, which encourages retention as well as long-term focus and accountability.
Each PRSU grant is made at the maximum amount of shares that can be earned if we fully achieve our goal and will be reduced for actual performance below it. There is no increase in shares for overachievement. The actual number of shares that are eligible to vest depends on the level of achievement of our goal, and achievement below 95% results in the cancellation of the entire award:

Synopsys Inc. | 42 | 2019 Proxy Statement

Table of Contents

percentageachievement02.jpg
If we achieve between 95% and 100% of our performance goal, then between 50% and 100% of the PRSU award is eligible to vest. The exact amount of shares eligible to vest is calculated according to the following matrix approved by the Compensation Committee.
Percentage Achievement of
Performance Goal
Percentage of PRSUs Eligible to Vest

<95%
%
95%
50
%
96%
70
%
97%
86
%
98%
94
%
99%
98
%
100%
100
%
The Compensation Committee rewards performance levels between 95% and 100% to provide our NEOs with a partial award for substantially achieving our non-GAAP net income goal. The Compensation Committee believes this limits excessive risk-taking that can be encouraged by a single “all or nothing” performance condition.
Fiscal 2018 PRSU Achievement. We achieved 113.4% of our fiscal 2018 non-GAAP net income performance goal of $529.0 million, and accordingly, 25% of our NEOs’ fiscal 2018 PRSUs vested on December 12, 2018. The remaining 75% of the shares are scheduled to vest in three equal annual installments beginning on December 8, 2019, as long as the NEO provides continuous services to us.
NEO
Maximum
PRSU Shares at Grant
Actual PRSU Shares
Eligible for Vesting

Aart J. de Geus
24,859
24,859

Chi-Foon Chan
24,859
24,859

Trac Pham
11,877
11,877

Joseph W. Logan
11,049
11,049

John F. Runkel, Jr.
4,419
4,419


Other Awards. The Compensation Committee retains discretion to grant new-hire, promotional or special recognition awards to NEOs on terms that vary from our annual grants. Except in the case of these special awards, the Compensation Committee generally does not grant restricted stock units unless they are subject to performance conditions. There were no new-hire, promotional or special recognition equity awards in fiscal 2018.
Other Benefits
General Health, Welfare and Other Benefit Plans. Our NEOs are eligible to participate in a variety of employee benefit plans on the same terms as our other employees, including medical, dental and vision care plans, life and disability insurance, our tax-qualified 401(k) plan, and our Employee Stock Purchase

Synopsys Inc. | 43 | 2019 Proxy Statement

Table of Contents

Plan. We believe these benefits are consistent with benefits provided by our peer group and help us to attract and retain high quality executives.
Perquisites and Other Benefits. No executive perquisites or other special executive benefits were given to our NEOs in fiscal 2018. In general, Synopsys and our Compensation Committee do not provide perquisites to our NEOs.
Deferred Compensation Plans. In 1996, the Compensation Committee established a deferred compensation program that allows our NEOs and other highly compensated individuals to save a portion of their compensation on a tax-deferred basis. We offer this program in order to remain competitive with a number of our peer companies and because the tax benefit it offers comes at a relatively low cost to us. The program is currently administered through two deferred compensation plans (one of which is “grandfathered” and closed to new participants). Under these plans, our NEOs and other highly compensated employees may elect to defer up to 50% of their salaries and up to 100% of their cash incentive compensation. Distributions from the deferred compensation plans are generally payable upon termination of employment and are made over 5 to 15 years or as a lump sum, at the option of the participant. We do not make any matching or discretionary contributions to the plans, there are no guarantees or minimum returns on investments, and undistributed amounts under the plans are subject to the claims of our creditors.
Severance and Change of Control Benefits
Executive Change of Control Severance Benefit Plan. We maintain an Executive Change of Control Severance Benefit Plan (Change of Control Plan) that was approved by our Board of Directors in March 2006 and most recently amended in December 2016 primarily to reflect changes in applicable law and administrative practices. Each of our current executive officers is covered under the Change of Control Plan, except Drs. de Geus and Chan, whose benefits are described below. The Change of Control Plan provides for limited cash and equity benefits in the event an executive’s employment is terminated in connection with a change of control of Synopsys. The Compensation Committee believes these incentives will help us retain our executives, and therefore maintain the stability of our business, during the potentially volatile period accompanying a change of control. The Compensation Committee believes the benefits are also comparable to benefits offered by our peer group, which helps us attract talented executives and maintain a consistent management team.
The Change of Control Plan only provides benefits if there is a “double trigger”: in addition to requiring a change of control for Synopsys, benefits are only provided if either (1) the eligible executive is involuntarily terminated without cause during the 30 days before or 12 months after the change of control; or (2) there is a constructive termination of the executive within 12 months after the change of control.
Our potential payment obligations under the Change of Control Plan are described in the subsection titled “Potential Payments upon Termination of Employment or Change of Control” in the “Executive Compensation Tables” section below.
Severance and Change of Control Arrangements for Dr. Aart de Geus and Dr. Chi-Foon Chan. Drs. de Geus and Chan are not covered by the Change of Control Plan described above but are eligible for severance and change of control benefits through their respective employment agreements, which were entered into in October 1997 and most recently amended in December 2016 primarily to reflect changes in applicable law and administrative practices. As with our other NEOs, we believe that the change of control benefits we offer are reasonable, consistent with benefits offered by our peer group, and help retain the focused services of Drs. de Geus and Chan in the event of a change of control transaction. We further offer severance benefits to Drs. de Geus and Chan, which are only provided for an involuntary termination, because the benefits help us remain competitive for their services, are comparable to the benefits provided by our peer group to similarly situated executives, and are reasonable in amount.

Synopsys Inc. | 44 | 2019 Proxy Statement

Table of Contents

The severance and change of control provisions are the same in each agreement. Change of control benefits require a “double trigger”: they are only provided for (1) an involuntary termination of employment without cause within 24 months following a change of control or (2) a voluntary resignation of employment for good reason within 24 months following a change of control. Severance benefits are only payable for (a) an involuntary termination without cause or (b) a voluntary resignation for good reason.
Our potential payment obligations under the employment agreements of Drs. de Geus and Chan are described in the subsection titled “Potential Payments upon Termination of Employment or Change of Control” in the “Executive Compensation Tables” section below.
Equity Plans. If we are acquired or involved in a similar corporate transaction, and the surviving company does not assume, replace or otherwise continue our outstanding equity awards, our equity incentive plans generally provide that all employee awards will fully vest. We provide this benefit to all employees who hold equity awards under our plans to promote the stability and focused service of our workforce during a potentially uncertain time. Our Compensation Committee believes this benefit encourages our employees to work diligently towards the completion of a transaction that would potentially maximize stockholder value, even when our employees’ own equity awards would not survive the transaction.
Fiscal 2019 NEO Target Compensation Decisions
Our overall compensation philosophy for fiscal 2019 strongly emphasizes pay for performance. After considering a number of factors, including our fiscal 2018 performance, preliminary fiscal 2019 outlook, and the positive results of our 2018 say-on-pay vote, the Compensation Committee decided to use the same metrics as fiscal 2018 in setting performance goals under our EIP and for our PRSUs, and set the levels of achievement based on our fiscal 2019 corporate financial plan.
At its meetings in December 2018, the Compensation Committee made several adjustments to individual NEO compensation levels for fiscal 2019:
Co-CEOs. The salary for each of our co-CEOs increased by $15,000, or approximately 2.9% over fiscal 2018. Consistent with our compensation philosophy, the total target compensation for each of our co-CEOs remains below the median, aligned with approximately the 25th percentile of our peer group.
Other NEOs. In recognition of Mr. Pham’s contributions to the company’s growth, the Compensation Committee increased Mr. Pham’s overall target compensation by approximately 8.7% over fiscal 2018. The Compensation Committee increased Mr. Pham’s salary by $30,000, or approximately 7.1% over fiscal 2018. Furthermore, the estimated target dollar value of Mr. Pham’s equity grants increased by $200,000, or approximately 9.3% over fiscal 2018, with the total value split approximately equally between PRSUs and stock options.
 
In recognition of Mr. Runkel’s contributions in leading our legal and corporate affairs department and to better align his compensation with current market practices, Mr. Runkel’s overall target compensation was increased by approximately 9.9% over fiscal 2018. Mr. Runkel’s salary was increased by $25,000, or approximately 6.7% over fiscal 2018. The Compensation Committee also increased the estimated target dollar value of his equity grants by $100,000, or approximately 12.5% over fiscal 2018, split approximately equally between PRSUs and stock options.
The salary for Mr. Logan increased by $10,000, or approximately 2.3% over fiscal 2018, to recognize his role in driving our business growth and to align his total target compensation with approximately the 50th percentile of our peer group.
For fiscal 2019, performance-based compensation is targeted at approximately 92% of total direct compensation for our co-CEOs and at approximately 83% for our other NEOs, on average, as a group.

Synopsys Inc. | 45 | 2019 Proxy Statement

Table of Contents

Compensation Governance and Our Compensation Philosophy
We have designed our executive compensation program to attract, motivate and retain a team of highly qualified executives who will drive technological and business success. In order to motivate and reward our NEOs for work that improves our long-term business performance and increases stockholder value, we have set out the following objectives:
Pay for Performance
Align NEO compensation to the success of our business objectives
Competitiveness
Provide competitive compensation that attracts and retains top-performing NEOs
 
 
Outperformance
Motivate NEOs to achieve results that exceed our strategic plan targets
 
 
Stockholder Alignment
Align the interests of NEOs and stockholders through the managed use of long-term incentives
 
 
Balance
Set performance goals that reward an appropriate balance of near- and long-term results
 
 
Internal Pay Equity
Promote teamwork among NEOs by considering internal fairness in setting compensation levels
Pay for Performance
Underlying these objectives is our pay for performance philosophy. A large majority of each NEO’s target total direct compensation is “performance-based”—that is, contingent upon the overall performance of our business and our stock performance. We believe the direct link between pay and performance is an effective way to motivate our NEOs to achieve key financial objectives and, ultimately, increase stockholder value.
Role of Compensation Committee
Our Compensation Committee is responsible for determining NEO compensation. The Compensation Committee is comprised of three independent directors and meets regularly throughout the year to review and discuss, among other items, our compensation philosophy, changes in compensation governance and compliance rules and best practices, and the composition of our peer group for pay comparisons. In December 2018, the Compensation Committee reviewed and approved:
The level of achievement of financial performance goals for the prior fiscal year;
Annual incentive compensation earned, if any, based on the prior fiscal year achievement;
Annual financial performance goals for the current fiscal year; and
The level and mix of NEO target compensation for the current fiscal year.
 Role of Compensation Committee Consultant
Our Compensation Committee directly retained the services of Radford, an Aon company, as an independent compensation consultant for fiscal 2018. The Compensation Committee conducts an annual assessment of its consultant’s performance and re-appoints its consultant each year. Radford has served as the Compensation Committee’s consultant since September 2006. The Compensation Committee may replace Radford or hire additional consultants at any time. The Compensation Committee retains sole authority to appoint and compensate Radford and to oversee its work for the Committee. Synopsys pays the fees for the services provided by Radford to the Compensation Committee. In fiscal 2018, the services provided by Radford included:
Assisting in the selection of our peer group companies for fiscal 2019 (and with the determination of our fiscal 2018 peer group in fiscal 2017);
Providing and analyzing compensation survey data;
Helping the Compensation Committee interpret compensation data;
Assisting in the review of recent governance trends for potential policy updates;
Advising on the reasonableness of our NEO compensation levels and programs;
Assisting in the review of non-employee director compensation, including analysis of benchmarking data;
Assisting in the review of the NEO compensation disclosure in this Proxy Statement;

Synopsys Inc. | 46 | 2019 Proxy Statement

Table of Contents

Conducting a detailed review of our cash and equity compensation plans to provide an independent view of the risks associated with our compensation programs, including those for our NEOs; and
Attending each Compensation Committee meeting, including meeting with the Committee in private sessions, without management present.
In addition to the fees we paid Radford for services provided to our Compensation Committee, we also paid $100,300 in fees to Radford during fiscal 2018 for access by our Human Resources department to Radford’s general employee compensation benchmarking data. After considering the factors set forth in Rule 10C-1(b)(4) under the Exchange Act and Nasdaq Listing Rule 5605(d)(3)(D), including a review of the access fees described above and Radford’s representations to the Compensation Committee regarding each factor, the Committee determined that Radford was independent.
Peer Group Comparisons
Our Compensation Committee reviews compensation data from a specific group of companies that are similar to us in scale and organizational complexity in considering the compensation of our NEOs. At the time of the selection in April 2017, the Compensation Committee selected the peer group companies listed below for fiscal 2018 because they (1) were business or labor market competitors in the software (excluding gaming and e-commerce) or fabless semiconductor industries; (2) generated annual revenues between approximately 0.5 and 2.5 times Synopsys’ revenue (approximately $1.3 billion to $6.5 billion); and (3) had a market capitalization between approximately 0.5 and 3.0 times Synopsys’ market capitalization (approximately $5.0 billion to $32.0 billion).
 
Fiscal 2018 Peer Group
ANSYS, Inc.
Microchip Technology Inc.
Autodesk, Inc.
Nuance Communications, Inc.
CA, Inc.
Open Text Corporation
Cadence Design Systems, Inc.
PTC Inc.
Citrix Systems, Inc.
Red Hat, Inc.
Intuit Inc.
Symantec Corporation
Marvell Technology Group Ltd.
Trimble Navigation Ltd.
Mentor Graphics Corporation
Xilinx, Inc.

Linear Technology Corporation, which was included in our fiscal 2017 peer group, was acquired by Analog Devices, Inc. in March 2017.
The Compensation Committee uses peer group comparisons to measure the competitiveness of our compensation practices. Peer data is just one of the factors in the Compensation Committee’s pay decisions, however, which also take into account individual performance, an NEO’s level of experience and responsibilities, internal pay equity, our compensation budget, historical compensation levels, and other considerations.
For fiscal 2018, the Compensation Committee referred to the 25th to 75th percentiles of our peers to compare target total direct compensation levels. The Compensation Committee believes this range provides meaningful differentials in pay levels that represent differences in the criticality and performance of each role across companies, and also reflects the full range of competitive pay at our peer companies without focusing on extreme outliers.

Synopsys Inc. | 47 | 2019 Proxy Statement

Table of Contents

Fiscal 2018 total target compensation for each of our co-CEOs was at approximately the 25th percentile of our peers. The Compensation Committee believes this level was appropriate as it reflects our co-CEOs’ emphasis on internal pay equity and helps manage the overall budgetary cost of our co-CEO structure.
Role of Management
Our Compensation Committee discusses NEO performance assessments and compensation targets with Dr. de Geus and our Human Resources and Facilities Officer. To assess co-CEO performance, the Compensation Committee oversees a comprehensive assessment process that includes feedback from our Board of Directors and members of senior management and is facilitated by our Human Resources and Facilities Officer. We also have an executive compensation team that provides background on company budgetary constraints and internal pay comparisons to help the Compensation Committee understand Radford’s recommendations in those contexts. No NEO is present for Compensation Committee decisions related to their individual compensation.
Tally Sheets
Prior to approving target compensation levels for the upcoming fiscal year, our Compensation Committee reviews tally sheets for each NEO to review how each core element of compensation relates to other elements and to total pay. The tally sheets summarize target total direct compensation, as well as potential payments upon change of control or, if applicable, involuntary termination. The tally sheets also summarize historical compensation for our NEOs, allowing the Compensation Committee to review NEO total pay that could be earned over time.
Annual Say-on-Pay Vote
Our stockholders have the opportunity to cast an annual advisory vote on our NEO compensation (say-on-pay vote)—see Proposal 3 above. Last year’s proxy statement detailed our fiscal 2017 named executive officer compensation as well as important compensation decisions for fiscal 2018, including fiscal 2018 NEO salaries, equity grants, and the metrics that would be used in determining achievement of performance-based compensation.
 
Approximately 93% of voted shares approved our named executive officer compensation as disclosed in last year’s proxy statement. Although the vote is non-binding, the Compensation Committee considers the results of the say-on-pay vote when making compensation decisions, allowing our stockholders to provide input on our compensation philosophy, policies and practices. The Compensation Committee believes that our historical voting results demonstrate strong support for its decision to maintain a similar compensation philosophy and structure each year. Accordingly, we did not make any changes to our compensation policies and practices.
We are committed to engagement with our stockholders, as we believe that understanding our current and potential stockholders’ perspectives is vital to how we conduct our business. During fiscal 2018, we augmented this program by holding a series of meetings with the corporate governance leaders of institutional stockholders who own a significant percentage of our outstanding common stock. We believe that ongoing relationships and conversations enable us to better understand their views on important issues such as corporate governance, executive compensation, and corporate social responsibility.  The feedback that we receive from our stockholders—through these meetings, regular stockholder outreach, and perception surveys—helps to strengthen our corporate practices over time.
Other Important Compensation Practices
Stock Ownership Guidelines. Our Compensation Committee has maintained stock ownership guidelines since fiscal 2003, and reviews those guidelines periodically in accordance with best practices, to further align the interests of our senior management with those of our stockholders. Under our current guidelines, individuals employed in certain specified positions are encouraged to achieve the recommended stock ownership level within four years. Such individuals may accumulate shares of our common stock through stock option exercises, purchases under our Employee Stock Purchase Plan, through open market purchases made in compliance with applicable securities laws, or through any other equity plans that we may adopt from time to time. The stock ownership recommendations for our current NEOs are: Dr. de Geus—50,000 shares; Dr. Chan—50,000 shares; Mr. Pham—10,000 shares; Mr. Logan

Synopsys Inc. | 48 | 2019 Proxy Statement

Table of Contents

—10,000 shares; and Mr. Runkel—10,000 shares.
As of the end of fiscal 2018, each of our NEOs held the recommended number of shares. Furthermore, our co-CEOs each held at least four times their recommended number of shares.
Equity Grant Timing Policy. We generally grant equity awards to executives at the beginning of each fiscal year at a Compensation Committee meeting that is typically scheduled more than a year in advance. For stock option grants, the Compensation Committee sets the exercise price at the closing price of our common stock on the Nasdaq Global Select Market on the date of the meeting. We generally plan to hold the meeting within two weeks after the release of our financial results such that the option exercise price reflects a fully-informed market price. In the event the meeting falls before the release of our financial results, the Compensation Committee will generally approve the stock option grants prior to the release of our results but set the exercise price to be the market closing price on the second trading day following the release. In the case of new-hire, promotional, or special recognition equity grants for executives, the Compensation Committee typically grants such awards shortly after the hiring, promotion or special achievement occurs, unless it is during a closed company trading window, which includes periods immediately preceding the release of our financial results.
Burn Rate. Each fiscal year, the Compensation Committee approves an annual gross equity budget to closely manage our equity compensation share reserve and stockholder dilution. The Compensation Committee endeavors to achieve a gross burn rate that approximates the average rate for our peer group companies as well as for the software and services industry more generally, and to achieve burn rates that are within the limits published by independent shareholder advisory groups, such as ISS.
Our gross burn rate for each of the last several years has been well within the guidelines recommended by ISS. Even with executing $400 million in share repurchases during the fiscal year, our gross share usage was limited to 1.8% for fiscal 2018.
Tax Deductibility of NEO Compensation. Section 162(m) of the Code (Section 162(m)) generally disallows a federal tax deduction for compensation paid to certain executive officers (and, beginning in 2018, certain former executive officers) in excess of $1,000,000. Historically, compensation that qualifies as “performance-based compensation” under Section 162(m) could be excluded from this $1,000,000 limit, but this exception has now been repealed, effective for tax years beginning after December 31, 2017, unless transition relief for certain compensation arrangements in place as of November 2, 2017 is available.
Compensation decisions for our NEOs prior to 2018 were generally made after consideration of the Section 162(m) implications, but the Compensation Committee retained discretion to make compensation decisions in light of a variety of considerations. Based on the repeal described above and the operation of Section 162(m), compensation granted by the Compensation Committee may not qualify as “performance-based compensation” under certain circumstances. The Compensation Committee retains the flexibility to award compensation that is consistent with our objectives and philosophy even if it does not qualify for a tax deduction.
Clawback Policy. In December 2008, our Board of Directors adopted a Compensation Recovery Policy, which allows us to recover or “clawback” cash and equity compensation paid to covered employees under certain circumstances. Pursuant to the policy, we may require a covered employee to return all or a portion of any compensation paid or received after January 1, 2009, if: (1) the compensation was based on the achievement of financial results, and the results were the subject of a substantial restatement of our financial statements as filed with the Securities and Exchange Commission; and (2) less compensation would have been earned by the employee based on the restated financial results. Our Board of Directors has the sole authority to enforce this policy, and it is limited by applicable law. Each of our NEOs is subject to our Compensation Recovery Policy.
 
No Hedging Transactions. Our insider trading policy prohibits our employees, including our NEOs, and directors from engaging in hedging transactions (as defined in our policy) in our common stock.
No Pledging. Our insider trading policy prohibits our employees, including our NEOs, and directors from holding our common stock in a margin account or pledging it as collateral for a loan.

Synopsys Inc. | 49 | 2019 Proxy Statement

Table of Contents

Conclusion
We remain strongly committed to our pay for performance philosophy. As a result of the compensation program described above, the majority of each NEO’s compensation depends upon the achievement of our business goals. Our Compensation Committee gives careful consideration to each core element of direct compensation for each NEO. The Compensation Committee believes our NEO compensation program is effective in advancing our goals, reasonable in light of the programs of our peers, and responsible in encouraging our NEOs to work for crucial innovation, business growth and outstanding stockholder returns, without promoting unnecessary or excessive risks.
Compensation Risk Assessment
Our Compensation Committee aims to establish company-wide compensation policies and practices that reward contributions to long-term stockholder value and do not promote unnecessary or excessive risk-taking. In furtherance of this objective, in December 2018, our Compensation Committee conducted an assessment of our company-wide compensation arrangements. The assessment process included, among other things, a review of our (1) compensation philosophy, (2) compensation at peer group companies, (3) our core compensation element mix and (4) the terms and payments under our cash and equity incentive plans. As part of that review, our Compensation Committee asked Radford, its independent compensation consultant, to perform a detailed review of our cash and equity compensation plans in comparison to market practices.
The Compensation Committee considered the following, among other factors:
• Our revenue model and our cash incentive plan that is available to both executives and non-executive employees encourage our employees to focus on creating a stable, predictable stream of revenue over multiple years, rather than focusing on current year revenue at the expense of succeeding years.
 
• The allocation of compensation among our core compensation elements effectively balances short-term performance and long-term performance.
 
• Our cash and equity incentive awards focus on both near-term and long-term goals and, in the case of equity incentive awards, provide for compensation over a four-year period, to encourage our employees to remain focused on our performance beyond the immediate fiscal year.
 
• The performance goals for our cash and equity incentive awards use a variety of performance metrics, which diversifies the risk associated with any one metric or aspect of performance.
 
• Our cash and equity incentive awards contain a range of performance levels and payouts to discourage employees from taking risky actions to meet a single target with an all-or-nothing result of compensation or no compensation.
 
• Our Executive Incentive Plan caps cash incentive payments at a maximum award size. In addition, the Compensation Committee retains discretion to adjust our employees’ incentive payments under the plan.
 
• Our cash incentive payments and equity awards are subject to a clawback policy to recover compensation in the event of a substantial financial restatement.
 
• Our executives are encouraged to hold a meaningful number of shares of our common stock under our stock ownership policy.
Based upon this assessment, our Compensation Committee believes that our company-wide compensation policies and practices are reasonable and encourage appropriate behaviors without creating risks that are reasonably likely to have a material adverse effect on us.


Synopsys Inc. | 50 | 2019 Proxy Statement

Table of Contents

Compensation Committee Report*
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on the Compensation Committee’s review of, and the discussions with management with respect to, the Compensation Discussion and Analysis, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in our Annual Report on Form 10-K for filing with the Securities and Exchange Commission.
The foregoing report is provided by the following directors, who constitute the Compensation Committee:
 
COMPENSATION COMMITTEE 
 
Chrysostomos L. “Max” Nikias, Chair
 
Janice D. Chaffin
 
Bruce R. Chizen

*
This report shall not constitute “soliciting material,” shall not be deemed “filed” with the Securities and Exchange Commission, and is not to be incorporated by reference into any of our other filings under the Securities Act of 1933, as amended (referred to in this Proxy Statement as the Securities Act), or the Exchange Act, except to the extent we specifically incorporate this report by reference therein.

 


Synopsys Inc. | 51 | 2019 Proxy Statement

Table of Contents

Compensation Committee Interlocks and Insider
Participation
During fiscal 2018, the Compensation Committee consisted of Bruce R. Chizen, Chrysostomos L. “Max” Nikias and Steven C. Walske. None of the members of the Compensation Committee is nor was, during fiscal 2018, an officer or employee of Synopsys, none of the members of the Compensation Committee was formerly an officer of Synopsys, and none of our executive officers serves or, during fiscal 2018, served as a member of a board of directors or compensation committee of any entity that has or, during fiscal 2018, had one or more executive officers serving as a member of our Board or Compensation Committee.

Synopsys Inc. | 52 | 2019 Proxy Statement

Table of Contents

Executive Compensation Tables
Summary Compensation Table
The following table shows compensation awarded to, paid to, or earned by each of our NEOs for fiscal 2018: Dr. de Geus and Dr. Chan, our co-Chief Executive Officers; Mr. Pham, our Chief Financial Officer; Mr. Logan, our Sales and Corporate Marketing Officer; and Mr. Runkel, our General Counsel and Corporate Secretary (collectively, NEOs). The table shows compensation for services performed during fiscal 2018, fiscal 2017, and fiscal 2016.
 
Name and Principal Position
Year
Salary
($)(1)

Bonus
($)

Stock
Awards
($)(2)

Option
Awards
($)(2)

Non-Equity
Incentive Plan
Compensation
($)(3)

All Other
Compensation
($)(4)

Total
($)(5)

Aart J. de Geus
Co-Chief Executive Officer
and Chairman of the Board
of Directors
2018
$
535,100

$

$
2,249,988

$
2,249,998

$
2,394,000

$
3,750

$
7,432,836

2017
525,000


1,849,978

1,878,174

2,395,000

4,000

6,652,152

2016
500,000


1,749,994

1,683,250

1,753,000

28,808

5,715,052

Chi-Foon Chan
Co-Chief Executive Officer
and President
2018
$
535,100

$

$
2,249,988

$
2,249,998

$
2,394,000

$
4,038

$
7,433,124

2017
525,000


1,849,978

1,878,174

2,395,000

4,000

6,652,152

2016
500,000


1,749,994

1,683,250

1,753,000

26,884

5,713,128

Trac Pham
Chief Financial Officer
2018
$
433,200

$

$
1,074,987

$
1,074,995

$
726,800

$
5,038

$
3,315,020

2017
409,000


799,926

808,376

695,000

4,000

2,716,302

2016
370,000


482,514

464,092

524,100

15,058

1,855,764

Joseph W. Logan
Sales and Corporate
Marketing Officer
2018
$
448,500

$

$
1,000,044

$
999,994

$
1,320,000

$
4,000

$
3,772,538

2017
440,000


1,000,029

1,015,235

1,255,000

3,000

3,713,264

2016
410,000

 
824,995

793,528

1,089,500

23,769

3,141,792

John F. Runkel, Jr.
General Counsel and
Corporate Secretary
2018
$
382,200

$

$
399,963

$
400,009

$
472,500

$
4,038

$
1,658,710

2017
350,000


377,493

383,247

404,300

4,000

1,519,040

2016
350,000


377,490

363,100

404,600

7,446

1,502,636

(1)
Since fiscal 2018 was a 53-week fiscal year, the salary amounts for fiscal 2018 reflect an extra week of pay.
(2)
The amounts shown for stock awards and option awards represent the aggregate grant date fair value of such awards granted to our NEOs in fiscal 2018, fiscal 2017, and fiscal 2016 as computed in accordance with ASC Topic 718, Compensation—Stock Compensation. For each award, the grant date fair value is calculated using the closing price of our common stock on the grant date and, in the case of performance-based restricted stock unit awards, assuming 100% probability of achievement of performance conditions as of the grant date, which is also the maximum level of performance that may be achieved for such awards. These amounts do not represent the actual value that may be realized by the NEO upon vesting or exercise of such awards. For information on the assumptions used to calculate the value of the awards, refer to Note 10 to the consolidated financial statements contained in our 2018 Annual Report on Form 10-K.
(3)
Amounts consist of cash-based incentive compensation earned for the achievement of performance objectives approved by our Compensation Committee for fiscal 2018, fiscal 2017, and fiscal 2016, as applicable, under our Executive Incentive Plan (EIP).
(4)
Amounts for fiscal 2018 include the following:
 
Name
401(k) Matching
Contributions
($)(A)

HSA Matching
Contributions
($)(B)

Charitable
Matching
Contributions 
($)(C)

Total ($)

Aart J. de Geus
$
3,000

$
750

$

$
3,750

Chi-Foon Chan
3,000

1,038


4,038

Trac Pham
3,000

1,038

1,000

5,038

Joseph W. Logan
3,000


1,000

4,000

John F. Runkel, Jr.
3,000

1,038


4,038

 

Synopsys Inc. | 53 | 2019 Proxy Statement

Table of Contents

(A)
Amounts include matching contributions made by Synopsys under our tax-qualified 401(k) plan, which provides for broad-based U.S. employee participation.
(B)
Amounts include matching contributions made by Synopsys to each NEO’s health savings account at the same rate as for our other employees who enroll in this health plan.
(C)
Amounts include matching contributions made by the Synopsys Foundation on behalf of our NEOs as part of a broad-based charitable matching program available to all U.S. employees.
(5)
Amounts exclude non-qualified deferred compensation earnings because we do not regard the returns from the investment alternatives selected by the executive for such earnings to be above-market or preferential as they are consistent with the types of investment opportunities generally provided to our employees under our tax-qualified 401(k) plan and Synopsys does not supplement or guarantee the returns on amounts deferred.

Synopsys Inc. | 54 | 2019 Proxy Statement

Table of Contents

Grants of Plan-Based Awards
The following table sets forth certain information with respect to grants of plan-based awards in fiscal 2018 to our NEOs, including cash awards and equity awards. The equity awards granted to our NEOs in fiscal 2018 were granted under our 2006 Employee Equity Incentive Plan.
Name
 
Estimated Possible Payouts
Under Non-Equity
Incentive Plan Awards(1)
Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
All Other
Stock
Awards:
Number of
Shares or
Stock of
Units
(#)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(3)

Exercise
or Base
Price of
Option
Awards
($/Sh)(4)

Grant Date
Fair Value
of Stock
and Option
Awards($)(5)

Grant
Date
Threshold
($)

Target
($)

Maximum
($)

Threshold
(#)

Target
(#)

Maximum
(#)

Aart J. de Geus
12/08/2017
$
850,500

$
1,260,000

$
2,520,000






$

$

 
12/08/2017



12,430

24,859

24,859




2,249,988

 
12/08/2017







120,839

90.51

2,249,998

Chi-Foon Chan
12/08/2017
$
850,500

$
1,260,000

$
2,520,000






$

$

 
12/08/2017



12,430

24,859

24,859




2,249,988

 
12/08/2017







120,839

90.51

2,249,998

Trac Pham
12/08/2017
$
258,188

$
382,500

$
765,000






$

$

 
12/08/2017



5,939

11,877

11,877




1,074,987

 
12/08/2017







57,734

90.51

1,074,995

Joseph W. Logan
12/08/2017
$
445,500

$
660,000

$
1,320,000






$

$

 
12/08/2017



5,525

11,049

11,049




1,000,044

 
12/08/2017







53,706

90.51

999,994

John F. Runkel, Jr.
12/08/2017
$
177,188

$
262,500

$
525,000






$

$

 
12/08/2017



2,210

4,419

4,419




399,963

 
12/08/2017







21,483

90.51

400,009

(1)
Represents possible cash award payouts for fiscal 2018 under the EIP. Cash awards paid to NEOs under the EIP are dependent on the achievement of certain performance targets, as well as the level of achievement. The amounts listed under the “Threshold” column represent the cash awards payable to NEOs under the EIP at a 90% average achievement of the Corporate Financial Goals described in “Compensation Discussion and Analysis” beginning on page 32 under the subsection titled “Cash Incentive Payment.” Pursuant to the EIP, if the average achievement of the Corporate Financial Goals is below 90%, no cash awards are paid. The amounts listed under the “Target” column represent the cash awards payable in fiscal 2018 at a 100% average achievement of the Corporate Financial Goals. The amounts listed under the “Maximum” column represent the maximum cash awards payable, which for each NEO equals the lesser of $4,000,000 or 200% of the NEO’s target variable cash incentive compensation. Actual cash awards paid to the NEOs for fiscal 2018 are reported in the Summary Compensation Table on page 53 under the “Non-Equity Incentive Plan Compensation” column.
(2)
Represents stock awards that are eligible to vest only upon achievement of pre-established performance goals. Such awards are granted as restricted stock units and are issued as an equivalent number of shares of our common stock following vesting. The vesting criterion for the target award was the achievement of $529.0 million of non-GAAP net income for fiscal 2018, as further described in “Compensation Discussion and Analysis” beginning on page 32 under the subsection titled “Equity Awards.” The amounts listed under the “Target” and “Maximum” columns represent the stock awards eligible to vest if 100%, or more than 100%, respectively, of such non-GAAP net income target is achieved. The amounts listed under the “Threshold” column represent the stock awards eligible to vest if 95% of the non-GAAP net income target is achieved. If less than 95% of the non-GAAP net income target is achieved, no stock awards are eligible to vest. As the target vesting criterion was achieved at more than 100%, 25% of each respective maximum award vested on December 12, 2018, and the remaining 75% of each respective award is scheduled to vest in three equal annual installments beginning on December 8, 2019, so long as the NEO provides continuous services to us.
(3)
The option vested with respect to 25% of the shares on the first anniversary of the Grant Date and with respect to 3/48ths of the shares quarterly thereafter, such that all shares subject to the stock option will vest on December 8, 2021, so long as the NEO provides continuous services to us.
(4)
Represents the closing price of our common stock as reported on the Nasdaq Global Select Market on December 8, 2017, the effective date of grant of these awards.
 
(5)
Represents the fair value of the stock and option awards on the grant date, as computed in accordance with FASB ASC Topic 718. These amounts do not represent the actual value that may be realized by the NEO upon vesting or exercise of such awards. For information on the assumptions used to calculate the fair value of the stock and option awards, refer to Note 10 to the consolidated financial statements contained in our 2018 Annual Report on Form 10-K.



Synopsys Inc. | 55 | 2019 Proxy Statement

Table of Contents

Outstanding Equity Awards at Fiscal 2018 Year-End
The following table summarizes the number of securities underlying outstanding equity awards for our NEOs as of November 3, 2018, the end of fiscal 2018:
 
 
Option Awards
Stock Awards
Name
Grant
Date
Number of Securities Underlying Unexercised Options (#) Exercisable

Number of Securities Underlying Unexercised Options (#) Unexercisable

Option Exercise Price
($)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested
(#)
 
Market Value of Shares or Units of Stock That Have Not Vested
($)(1)

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)(1)

Aart J. de Geus
12/12/2012
160,000


$
32.38

12/12/2019

 
$


$

 
12/12/2013
156,100


38.07

12/12/2020

 



 
12/12/2014
158,366

10,558(2)

42.43

12/12/2021

 



 
12/12/2014




7,365(3)
 
659,609



 
12/15/2015
128,567

58,440(4)

45.23

12/15/2022

 



 
12/15/2015



 
19,345(5)
 
1,732,538



 
12/15/2016
70,393

90,506(6)

60.37

12/15/2023

 



 
12/15/2016




22,983(7)
 
2,058,357



 
12/08/2017

120,839(8)

90.51

12/08/2024

 



 
12/08/2017




 

24,859(9)

2,226,372

Chi-Foon Chan
12/12/2013
117,075


$
38.07

12/12/2020

 
$


$

 
12/12/2014
158,366

10,558(2)

42.43

12/12/2021

 



 
12/12/2014




7,365(3)
 
659,609



 
12/12/2015
128,567

58,440(4)

45.23

12/15/2022

 



 
12/15/2015




19,345(5)
 
1,732,538



 
12/15/2016
70,393

90,506(6)

60.37

12/15/2023

 



 
12/15/2016




22,983(7)
 
2,058,357



 
12/08/2017

120,839(8)

90.51

12/08/2024

 



 
12/08/2017




 

24,859(9)

2,226,372

Trac Pham
05/24/2013
875


$
35.71

5/24/2020

 
$


$

 
05/23/2014
2,154


39.09

5/23/2021

 



 
12/12/2014
20,693

2,957(2)

42.43

12/12/2021

 



 
12/12/2014




2,062(3)
 
184,672



 
12/15/2015
35,447

16,113(4)

45.23

12/15/2022

 



 
12/15/2015




5,334(5)
 
477,713



 
12/15/2016
20,928

26,907(6)

60.37

12/15/2023

 



 
12/15/2016




6,832(7)
 
611,873



 
05/19/2017
5,867

12,907(10)

70.99

5/19/2024

 



 
05/19/2017




2,640(11)
 
236,438



 
12/08/2017

57,734(8)

90.51

12/08/2024

 



 
12/08/2017




 

11,877(9)

1,063,704

Joseph W. Logan
12/12/2012
20,000


$
32.38

12/12/2019

 
$


$

 
12/12/2013
64,800


38.07

12/12/2020

 



 
12/12/2013
25,000


38.07

12/12/2020

 



 
12/12/2014
88,685

5,913(2)

42.43

12/12/2021

 



 
12/12/2014




4,124(3)
 
369,345



 
12/15/2015
60,610

27,550(4)

45.23

12/15/2022

 



 
12/15/2015




9,120(5)
 
816,787



 
12/15/2016
38,050

48,923(6)

60.37

12/15/2023

 



 
12/15/2016




12,423(7)
 
1,112,603



 
12/08/2017

53,706(8)

90.51

12/08/2024

 



 
12/08/2017




 

11,049(9)

989,548

John F. Runkel, Jr.
12/12/2014
3,062

3,062(2)

$
42.43

12/12/2021

 
$


$

 
12/12/2014




2,136(3)
 
191,300



 
12/15/2015
20,796

12,606(4)

45.23

12/15/2022

 



 
12/15/2015




4,172(5)
 
373,644



 
12/15/2016
14,364

18,468(6)

60.37

12/15/2023

 




Synopsys Inc. | 56 | 2019 Proxy Statement

Table of Contents

 
 
Option Awards
Stock Awards
 
12/15/2016




4,689(7)
 
419,946



 
12/08/2017

21,483(8)

90.51

12/08/2024

 



 
12/08/2017




 

4,419(9)

395,765

(1)
The market value of stock awards was determined by multiplying the number of unvested or unearned shares by the closing price of our common stock of $89.56 on November 2, 2018, the last trading day of fiscal 2018, as reported on the Nasdaq Global Select Market.
 
(2)
Option vests over four years at a rate of 6.25% on the third monthly anniversary of the grant date and 6.25% per quarter thereafter, so long as the NEO provides continuous services to us. Accordingly, 6.25% of the underlying shares for these stock options became exercisable on March 12, 2015 and 6.25% became exercisable quarterly thereafter until the remaining 6.25% vested subsequent to fiscal year end on December 12, 2018.
(3)
These restricted stock unit awards were eligible to vest in four equal annual installments upon achievement of pre-established performance goals, namely the achievement of $414.0 million of non-GAAP net income for fiscal 2015. This goal was achieved and, accordingly, 25% of the target awards vested on December 15, 2015, December 8, 2016, and December 8, 2017, respectively, and the remaining 25% vested subsequent to fiscal year end on December 8, 2018.
(4)
Option vests over four years at a rate of 6.25% on the third monthly anniversary of the grant date and 6.25% per quarter thereafter, so long as the NEO provides continuous services to us. Accordingly, 6.25% of the underlying shares for these stock options became exercisable on March 15, 2016 and 6.25% became and, so long as the NEO provides continuous services to us, will become, exercisable quarterly thereafter until fully vested on December 15, 2019.
(5)
These restricted stock unit awards were eligible to vest in four equal annual installments upon achievement of pre-established performance goals, namely the achievement of $454.0 million of non-GAAP net income for fiscal 2016. This goal was achieved and, accordingly, 25% of the target awards vested on December 15, 2016 and December 8, 2017, and subsequent to fiscal year end on December 8, 2018, respectively, and the remaining 25% are scheduled to vest on December 8, 2019, so long as the NEO provides continuous services to us.
(6)
Option vests over four years at a rate of 6.25% on the third monthly anniversary of the grant date and 6.25% per quarter thereafter, so long as the NEO provides continuous services to us. Accordingly, 6.25% of the underlying shares for these stock options became exercisable on March 15, 2017 and 6.25% became and, so long as the NEO provides continuous services to us, will become, exercisable quarterly thereafter until fully vested on December 15, 2020.
(7)
These restricted stock unit awards were eligible to vest in four equal annual installments upon achievement of pre-established performance goals, namely the achievement of $480.0 million of non-GAAP net income for fiscal 2017. This goal was achieved and, accordingly, 25% of the target awards vested on December 8, 2017 and subsequent to fiscal year end on December 8, 2018, respectively, and the remaining 50% are scheduled to vest in two equal annual installments beginning on December 8, 2019, so long as the NEO provides continuous services to us.
(8)
Option vests as to 25% of the shares subject to the option on the one-year anniversary of the grant date and as to 6.25% of such shares per quarter thereafter, such that all shares will fully vest on December 8, 2021, so long as the NEO provides continuous services to us.
(9)
These restricted stock unit awards were eligible to vest in four equal annual installments upon achievement of pre-established performance goals, namely the achievement of $529.0 million of non-GAAP net income for fiscal 2018 as further described in the “Compensation Discussion and Analysis” section beginning on page 32, under the subsection titled “Equity Awards.” This goal was achieved and, accordingly, 25% of the target awards vested subsequent to fiscal year end on December 12, 2018, and the remaining 75% are scheduled to vest in three equal annual installments beginning on December 8, 2019, so long as the NEO provides continuous services to us.
(10)
Option vests over four years at a rate of 6.25% on the third monthly anniversary of the grant date and 6.25% per quarter thereafter, so long as Mr. Pham provides continuous services to us. Accordingly, 6.25% of the underlying shares for this stock option became exercisable on August 19, 2017 and 6.25% became and, so long as the NEO provides continuous services to us, will become, exercisable quarterly thereafter until fully vested on May 19, 2021.
(11)
This restricted stock unit award vests in four equal annual installments beginning on June 15, 2018, so long as Mr. Pham provides continuous services to us.

 

Synopsys Inc. | 57 | 2019 Proxy Statement

Table of Contents

Option Exercises and Stock Vested in Fiscal 2018
The following table provides information with respect to all stock options exercised and the value realized upon exercise, and all stock awards vested and the value realized upon vesting, by our NEOs during fiscal 2018.