View:
September
27, 2007
Via
Federal Express
Ms.
Hanna
T. Teshome
Special
Counsel
U.S.
Securities and Exchange Commission
450
Fifth
Street, N.W.
Washington,
DC 20549-0609
Re: Texas
Instruments Incorporated
Definitive
14A
Filed
March 9, 2007
SEC
File No. 001-03761
Dear
Ms.
Teshome:
I
am
writing in response to your letter dated August 29, 2007, to Texas Instruments
Incorporated (the "company" or "TI") containing comments on our Definitive
14A
filed on Marcy 9, 2007 (“2007 Proxy Statement”). TI will address your
comments in future filings as discussed below. In addition, we
draw your attention below to selected portions of our 2007 Proxy Statement
where
we feel they are relevant to the comment.
Compensation
Discussion and Analysis, page 16
What
are the objectives of our compensation program, page
17
COMMENT
1: You state that
the committee judges performance-based on three specific measures one of which
is "total shareholder return." Without further insight into what this
term means, how it is determined, and how it impacts bonus awards, your
disclosure is not easily understood. Please revise your disclosure to
clarify what constitutes total shareholder return.
RESPONSE
1: As used in the
Compensation Discussion and Analysis section (“CD&A”) of TI’s 2007 Proxy
Statement, one- and three-year “total shareholder return” (“TSR”) refers to the
percentage change in the value of a stockholder’s investment in a company over a
one-year and a three-year period, as determined by dividends paid and the change
in the company’s share price during the period. To the extent the
Committee continues to use TSR as a performance measure in determining
compensation for the named executive officers, TI will include a definition
of
TSR in its future filings.
Analysis
of Compensation Determinations for 2006, page
21
COMMENT
2: Please expand
your disclosure to address the committee's analysis of "total compensation"
and
how the evaluation of this data resulted in specific awards for 2006 or
modifications to the manner in which you implement your compensation
program.
RESPONSE
2: In future
filings, TI will expand the discussion of total compensation to include, to
the
extent applicable, the impact that the Committee’s evaluation of total
compensation had on the level and form of compensation awarded by the Committee
to the named executive officer in the reporting year. For example, if
the Committee lowers the amount of equity compensation from targeted levels
as a
result of its review of an officer’s total compensation, TI will note that fact
in the CD&A. If the review of total compensation results in no
change to the officer’s compensation, TI will include a statement to that
effect.
COMMENT
3: Please revise the
compensation discussion and analysis to discuss material differences in
compensation policies with respect to individual named executive officers in
accordance with Section II.B.1. of Commission Release No.
33-8732A. Refer to the disparity between Mr. Templeton's salary, the
compensation awarded to him under the performance bonus and profit sharing
programs and the TI Executive Officer Performance Corporate Incentive Plan,
and
the equity awards made on January 19, 2006. Provide a more detailed
discussion of how and why Mr. Templeton's compensation differs from that of
the
other named executive officers. If policies or decisions relating to
a named executive officer are materially different than the other officers,
please discuss this on an individualized basis.
RESPONSE
3: In
preparing the CD&A for its 2007 Proxy Statement (“2007 CD&A”), TI
considered whether there were material differences in its compensation policies
with respect to the named executive officers and concluded that there were
no
material differences. (For TI’s chairman, the Compensation Committee
used a different methodology to set base salary, bonus and equity compensation
than for the other named executive officers, because of limited peer group
data
on executive chairmen. For a description of this methodology, please
see the 2007 Proxy Statement at pages 21, 22 and 27.) The differences
between the named executive officers’ levels of compensation did not result from
any formula used to achieve those differences. Instead, the elements
of compensation were determined separately for each officer applying the factors
described in the 2007 CD&A. In future filings, if there are
material differences in the compensation policies used by the Committee in
setting the compensation of specific named executive officers, TI will describe
them; or if there are no such differences, TI will clarify that there are
none. In addition, TI will disclose any multiples or other set
differentials that are applied to derive the officers’ compensation, or clarify
that they did not play a role in the determinations.
Assessment
of 2006 Company Performance, page 23
COMMENT
4: You provide
little discussion and analysis of the effect of individual performance on
performance based compensation despite disclosure suggesting it is a significant
factor considered by the committee. Please provide additional detail
and an analysis of how individual performance contributed to actual compensation
for the named executive officers. For example, disclose the elements
of individual performance, both quantitative and qualitative, and specific
contributions the compensation committee considered in its evaluation, and
if
applicable, how the committee weighted and factored them into specific
compensation decisions. Please refer to Item 402(b)(2)(vii) of
Regulation S-K.
RESPONSE
4: Please note that
in the discussion of the bonus determinations for 2006 (page 24 of the 2007
Proxy Statement), TI stated that the individual performance assessment for
each
officer “was based primarily on the financial performance of the business
operation for which the officer was responsible and the strategic progress
of
the organization for which the officer was responsible.” Elsewhere in
the 2007 CD&A, TI noted that the company’s relative performance as compared
to that of competitors is “[m]ost crucial” in the Compensation Committee’s
assessment of performance. (Please see the 2007 Proxy Statement at
page 17.) In future filings, TI will specify more clearly the
relative importance of individual performance as compared to other factors
such
as company-level performance and peer group compensation data in the
determination of base salary, long-term compensation and bonus, as
applicable. In addition, to the extent individual performance is a
significant consideration, TI will confirm that individual performance
evaluations are based primarily on the performance of the organization for
which
the officer is responsible, or it will identify such other principal factors
as
may apply.
COMMENT
5: Please disclose
the necessary targets or performance measures to be achieved in order for your
named executive officers to earn their incentive compensation. To the
extent you believe that such disclosure would result in competitive harm such
that you may exclude it under Instruction 4 to Item 402(b) of Regulation S-K,
please provide a detailed supplemental analysis supporting your conclusions
and
disclose how difficult or likely it would be for the company or the named
executive officers to meet those goals. In discussing how difficult
it will be for an executive or how likely it will be for you to achieve the
target levels or other factors, please provide as much detail as necessary
without providing information that would result in competitive
harm. Provide appropriate insight into the factors you considered in
setting performance related objectives such as assessments of historical
incentive practice and the incentive parameters set for the relevant fiscal
period.
RESPONSE
5: In the 2007
CD&A, TI disclosed the material aspects of all necessary targets and
performance measures to be achieved with respect to incentive compensation
for
2006. Please see pages 17, 19 and 23 of the 2007 Proxy
Statement. Equity compensation awarded in 2006 was not subject to
targets or performance measures. For profit sharing, there was a
performance threshold of 10 percent annual operating margin. The
bonus plan for executive officers (the Texas Instruments Executive Officers
Performance Plan) provides that executive officers can be paid a cash bonus
under the plan equal to 0.5 percent of the company’s consolidated income as
defined in the plan, subject to the discretion of the Compensation Committee
to
set bonuses at a lower level. TI stockholders approved the plan,
including the 0.5 percent formula, in 2002. In exercising its
discretion, the Committee has followed a policy of setting total cash
compensation at a level above the market median if the company performed better
than competitors, and below the market median if the company performed worse
than competitors. The Committee makes this performance assessment at
the end of the year, focusing on the company’s relative performance on
specific measures that TI identified in the CD&A. TI “believe[s]
this approach is important, as our industry changes rapidly and thresholds
that
appear challenging at the beginning of a year could prove to be irrelevant
by
year-end.” (2007 Proxy Statement at page 17.)
Decisions
on 2006 Performance Bonuses, page 24
COMMENT
6: Please provide
additional analysis about how you determined the amount of compensation paid
under the profit sharing program and the Executive Officer Performance Plan.
See
Item 402(b)(1)(v) of Regulation S-K. Provide a more focused
discussion that not only sets forth the amount of compensation awarded under
these programs but also provides substantive analysis and insight regarding
the
extent to which you achieved target or maximum levels of performance and how
achievement of the corporate performance objectives and individual goals
resulted in specific payouts for 2006. To the extent the committee
exercised its discretion in making awards under these programs, as your
disclosure on page 23 indicates, please disclose the specific exercises of
discretion in accordance with Item 402(b)(2)(vi) of Regulation
S-K.
RESPONSE
6: Please see the
response to Comment 5 above. In future filings, TI will provide more
detail concerning the calculation of profit sharing for the reporting year
and
explain the role of discretion, if any, in the payment of profit sharing to
the
named executive officers. In addition, TI will explain more clearly
the relationship between profit sharing and the level of bonus paid to the
named
executive officers. With respect to the Executive Officer Performance
Plan, there are no minimum or maximum levels of performance or payout formulas,
except that the plan provides for a payment to each officer equal to 0.5 percent
of the company’s consolidated income and the Compensation Committee has the
discretion under the plan to lower the bonus amount to such level, including
$0,
as it considers appropriate. As noted in Response 5 above, the
Committee in exercising its discretion has focused on the company’s relative
performance, specifically how the company’s performance compared with that of
named competitors on certain performance measures that TI identified in the
CD&A. If the company’s performance on those measures was superior
to competitors on those measures, the Committee’s policy has been to set total
cash compensation above the market median. If the company’s
performance is inferior to competitors on those measures, the Committee’s policy
has been to set total cash below the market median. In the 2007
CD&A, TI stated the Committee’s assessment of the company’s relative
performance on each of the performance measures and the Committee’s conclusion
that overall performance was above median. See 2007 Proxy Statement
at pages 23-25. In future filings, TI will provide a more focused
discussion of bonus that relates the Committee’s performance assessment more
clearly to the level of bonuses awarded. In addition, if the
Committee adopts targets, goals and maximum or minimum levels of performance,
TI
will disclose them as required by the SEC’s rules.
COMMENT
7: Please discuss
and analyze how the compensation committee determined the actual number of
shares underlying the stock option and restricted stock unit awards and describe
the reasons why you allocated these awards in the proportions reflected in
columns (i) and (j) of the Grants of Plan Based Award table. Please
concisely set forth the rationale for the variances of these awards among the
named executive officers. Please refer to Items 402(b)(1)(v) and
402(b)(2)(iii) of Regulation S-K.
RESPONSE
7: In future
filings, TI will expand the discussion and analysis of equity compensation
to
state more clearly the relative importance of the factors considered in setting
the equity compensation levels of the named executive officers for the reporting
year. In addition, TI will discuss and analyze in greater detail why
the share amounts were allocated as they were between the forms of equity
compensation awarded to those officers.
Potential
Payments Upon Termination or Change in Control, page
38
COMMENT
8: Please describe
and explain how you determine the appropriate payment and benefit levels under
the various circumstances that trigger payments or provision of benefits under
the termination or change in control arrangements. Also, discuss how
these arrangements fit into your overall compensation objectives and affect
the
decisions you made regarding other compensation elements and the rationale
for
decisions made in connection with these arrangements. See paragraphs (b)(1)(v)
and (j)(3) of Item 402 of Regulation S-K.
RESPONSE
8: TI will include
in its Item 402(j) narrative a description and explanation of how the payment
and benefits levels were determined, or, if appropriate, TI will provide
cross-references to other portions of the proxy statement where the benefit
is described and explained (e.g., the CD&A and the narrative or notes
relating to the Pension Benefits and Nonqualified Deferred Compensation
tables). Similarly, in the Item 402(j) narrative, TI will explain the
rationale for TI’s termination and change in control arrangements and describe
how they fit into the objectives of TI’s executive compensation program, or
cross-reference to explanations and descriptions provided elsewhere in the
proxy
statement. For example, TI will describe and explain how the
termination provisions of TI’s equity compensation were determined and how they
fit into TI’s overall compensation objectives. To the extent the
termination and change in control benefits discussed in the narrative affect
the
determination of other compensation awarded in the reporting year, TI will
describe the effect or state that they had no effect in the reporting
year.
COMMENT
9: Please consider
aggregating the amounts payable for each situation that would generate a
payout.
RESPONSE
9: In future
filings, TI will aggregate the amounts payable for each situation that would
generate a payout.
In
connection with this response to your comments regarding our Definitive 14A
filed on March 9, 2007, TI acknowledges that:
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TI
is responsible for the adequacy and accuracy of the disclosure in
the
filing;
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staff
comments or changes to our disclosures in response to staff comments
do
not foreclose the Commission from taking any action with respect
to the
filing; and
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TI
may not assert staff comments as a defense in any proceeding initiated
by
the Commission or any person under the federal securities laws of
the
United States.
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We
trust
that the above information will be sufficient for your purposes. If
you have any questions, please call Daniel M. Drory (972-917-5449) or Cynthia
H.
Haynes (972-917-5434) of Texas Instruments.
Very
truly yours,
/s/
Joseph F.
Hubach
Joseph
F.
Hubach
Senior
Vice President, Secretary
and
General
Counsel
cc: Richard
K. Templeton, President and Chief Executive
Officer