Edgar Filing: MASIMO CORP

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

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Securities Exchange Act of 1934

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MASIMO CORPORATION
(Name of Registrant as Specified In Its Charter)
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Table of Contents		ABOUT MASIMO

About Masimo

Improve patient outcomes and reduce the cost of care

________

Masimo Corporation is a global medical technology company that develops, manufactures and markets a variety of noninvasive patient monitoring technologies. Our mission is to improve patient outcomes and reduce the cost of care. Our patient monitoring solutions generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software and/or cables. We primarily sell our products to hospitals, emergency medical service providers, home care providers, physician offices, veterinarians, long-term care facilities and consumers through its direct sales force, distributors and original equipment manufacturer (OEM) partners.

Global Reach

Masimo is committed to improving patient care globally, with over 1,500 full-time employees and approximately 3,000 dedicated contract personnel worldwide and operations in North America, Europe, Latin America the Middle East, Asia and Australia.



Table of Contents




MASIMO CORPORATION
Dear Stockholder: You are cordially invited to attend the Annual Meeting of Stockholders (the “Annual Meeting”) of Masimo Corporation, a Delaware corporation (the “Company”), or any adjournment or postponement thereof. The Annual Meeting will be held on Thursday, May 30, 2019, at 2:00 p.m. Pacific Time at the principal executive offices of the Company at 52 Discovery, Irvine, California 92618. Information concerning the matters to be considered and voted upon at the 2019 Annual Meeting is set out in the attached Notice of Annual Meeting of Stockholders and Proxy Statement. In 2018, we experienced strong momentum in our business. Our global organization executed on our strategy to deliver above-market growth and drive operational efficiencies throughout the business. Our product revenues increased 12% to $830 million and we shipped a record number of noninvasive technology boards and monitors, which exclude handheld and finger oximeters. In addition, we delivered significant operating margin improvements and earnings per share (“EPS”) growth that exceeded expectations. Our strong performance in 2018 demonstrates the significant progress that we are making to drive operational efficiencies throughout the business and take further steps towards achieving our long term goal of 30% operating profit margins. Most importantly, we are making this progress on the profitability front while at the same time increasing our research and development investment as we continue to deliver innovative technologies to the marketplace. Regardless of the number of shares you hold or whether you plan to attend the Annual Meeting in person, you are encouraged to make sure that your shares are represented at our Annual Meeting. Accordingly, please authorize a proxy to vote your shares as soon as possible in accordance with the instructions you received. This will not prevent you from voting your shares in person if you hold your shares in record name or have a valid proxy and subsequently choose to attend the Annual Meeting. We look forward to your continued support.

Joe Kiani Chairman and Chief Executive Officer
“Improve Patient Outcomes and Reduce the Cost of Care.”



Table of Contents

NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS



	TIME AND DATE
	Thursday, May 30, 2019
	2:00 p.m. local time

	PLACE
	Masimo Corporation Headquarters
	52 Discovery
	Irvine, California 92618

	ITEMS OF BUSINESS
	l	To elect two Class III directors as named in our Proxy Statement;
	l	To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for our fiscal year ending December 28, 2019;
	l	To provide an advisory vote to approve the compensation of our named executive officers;
	l	To vote on a stockholder proposal described in the proxy statement if properly presented at the meeting; and
	l	To conduct any other business properly brought before the Annual Meeting and any adjournment or postponement thereof.
	(These items of business are more fully described in the Proxy Statement accompanying this Notice.)


	RECORD DATE
	April 1, 2019

	Only stockholders of record at the close of business on that date may vote at the Annual Meeting or any adjournment or postponement thereof. On or about April 15, 2019, we expect to mail our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy statement and our annual report. The Notice provides instructions on how to vote via the internet or by telephone and includes instructions on how to receive a paper copy of our proxy materials by mail. The accompanying proxy statement and our annual report can be accessed directly at www.envisionreports.com/MASI.



	YOUR VOTE IS IMPORTANT!!
	You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please complete, date and sign and return the enclosed proxy or submit your proxy through the internet or by telephone as promptly as possible in order to ensure your representation at the meeting.





	By internet
		Visit www.envisionreports.com/MASI




	By telephone
		Dial the toll-free telephone number listed on your proxy card under the heading “vote by telephone”, follow the recorded instructions.




	By mail
		Using the enclosed proxy card, complete, sign and date your proxy card and return it promptly in the envelope provided.




	By QR Code
		Scan this QR code to vote with your mobile device




	If you vote by proxy, your vote must be received by 11:00 p.m. Pacific Time on May 29, 2019 to be counted.

	By Order of the Board of Directors

	Chairman & Chief Executive Officer
	Irvine, California
	April 10, 2019



Table of Contents



TABLE OF CONTENTS
n	NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS		5
n	PROXY STATEMENT SUMMARY		9
n	2018 BUSINESS AND FINANCIAL HIGHLIGHTS		14
n	OUR EXECUTIVE OFFICERS		16
n	OUR BOARD OF DIRECTORS		19
n	CORPORATE GOVERNANCE AND BOARD MATTERS		25
	¡	Corporate Governance Guidelines	25
	¡	Consideration of Director Nominees	25
	¡	Board Leadership Structure	27
	¡	Board’s Role in Risk Oversight	27
	¡	Investor Feedback and Engagement	28
	¡	Meetings and Executive Sessions	29
	¡	Policy Regarding Board Member Attendance at Annual Meetings	29
	¡	Independence of the Board of Directors	29
	¡	Code of Business Conduct and Ethics	29
	¡	Stockholder Communications with the Board of Directors	29
	¡	Information Regarding Board Committees	30
	¡	Non-Employee Director Compensation	34
n	AUDIT COMMITTEE MATTERS		36
	¡	Audit Committee’s Pre-Approval Policies and Procedures	36
	¡	Principal Accountant Fees and Services	36
	¡	Audit Committee Report	37
n	EXECUTIVE COMPENSATION		38
	¡	Compensation Discussion and Analysis	38
	¡	Compensation Committee Report	59
	¡	Compensation Committee Interlocks and Insider Participation	59



Table of Contents




TABLE OF CONTENTS - CONTINUED
	¡	Summary Compensation Table	61
	¡	Grants of Plan-Based Awards During Fiscal Year 2018	63
	¡	Outstanding Equity Awards on December 29, 2018	65
	¡	Option Exercises and Stock Vested During Fiscal Year 2018	67
	¡	Employment Arrangements with Named Executive Officers	67
	¡	Pay Ratio Disclosure	76
n	OWNERSHIP OF OUR STOCK		77
	¡	Security Ownership of Certain Beneficial Owners and Management	77
	¡	Securities Authorized for Issuance	79
		Section 16(a) Beneficial Ownership Reporting Compliance	79
		Stock Ownership Policy	80
	¡	Non-Employee Director Stock Ownership Policy	81
n	ADDITIONAL INFORMATION		82
	¡	PROPOSAL 1: Election of Directors	82
	¡	PROPOSAL 2: Ratification of Selection of Independent Registered Public Accounting Firm	84
	¡	PROPOSAL 3: Advisory Vote to Approve the Compensation of Our Named Executive Officers	85
	¡	PROPOSAL 4: Stockholder Proposal for Proxy Access	88
	¡	Transactions with Related Persons, Promoters and Certain Control Persons	91
	¡	Questions and Answers You May Have About These Proxy Materials and Voting	94
	¡	Householding	100
	¡	Annual Report on Form 10-K	100
	¡	Important Notice Regarding Availability of Proxy Materials for Stockholders Meeting to be Held on May 30, 2019	101
	¡	Other Matters	101
n	APPENDIX A		A-1
n	APPENDIX B		B-1



Table of Contents

YOUR VOTE IS IMPORTANT

You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please complete, date and sign and return the enclosed proxy or submit your proxy through the internet or by telephone as promptly as possible in order to ensure your representation at the meeting. If you choose to submit your proxy by mail, a return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other agent and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

The Notice of Internet Availability of Proxy Materials containing instructions on how to access this proxy statement and our annual report is first being mailed on or about April 15, 2019 to all stockholders entitled to receive notice of and to vote at the Annual Meeting.



SPECIAL NOTE ON FORWARD LOOKING INFORMATION

This proxy statement contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. These statements are often identified by the use of words such as “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “ongoing”, “opportunity”, “plan”, “potential”, “predicts”, “seek”, “should”, “will” or “would”, and similar expressions and variations or negatives of these words. These forward-looking statements are based on the expectations, estimates, projections, beliefs and assumptions of our management based on information currently available to management, all of which is subject to change. Such forward-looking statements are subject to risks, uncertainties and other factors that are difficult to predict and could cause our actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed under Item 1A-“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2018, as filed with the Securities and Exchange Commission on February 26, 2019. Furthermore, such forward-looking statements speak only as of the date of this proxy statement. We undertake no obligation to update or revise publicly any forward-looking statements to reflect events or circumstances after the date of such statements for any reason, except as required by law.



Table of Contents		PROXY STATEMENT SUMMARY




2019 PROXY STATEMENT SUMMARY

The Annual Meeting and this Proxy Statement provide an important opportunity for us to communicate with you about the achievements of the past year and our leadership of Masimo. YOUR VOTE IS IMPORTANT TO US!

As you consider your vote, we ask that you carefully review the information in this Proxy Statement, which includes an overview of our business and summarizes key aspects of our performance, executive compensation and corporate governance.

The following summary highlights certain information contained elsewhere in this Proxy Statement. This summary does not contain all the information that you should consider, and you should read the entire Proxy Statement carefully before voting.




WHEN	WHERE	RECORD DATE
Thursday, May 30, 2019	52 Discovery, Irvine California 92618	Monday, April 1, 2019
2:00 p.m. local time



SUMMARY OF PROPOSAL FOR VOTING
PROPOSAL 1		Election of two Class III director nominees
þ	Our Board recommends a vote FOR each nominee.
See page	82	for further information.

Director Nominees

Below are the director nominees you are being asked to elect at the 2019 Annual Meeting:



					Committees⁽¹⁾
Nominee	Age	Director Since	Independent	Other Public Boards	AC	CC	NCGC
Adam Mikkelson	40	2015	Yes	None	ü	ü	ü
Craig Reynolds	70	2014	Yes	Vapotherm, Inc.		ü	ü

_______________


⁽¹⁾	AC - Audit Committee; CC - Compensation Committee; NCGC - Nominating, Compliance and Corporate Governance Committee

| 2019 Proxy Statement



Table of Contents		PROXY STATEMENT SUMMARY

Board Snapshot

Our Nominating, Compliance and Corporate Governance Committee is responsible for identifying and recommending director candidates to our Board for nomination. The Nominating, Compliance and Corporate Governance Committee reviews candidates for director nominees in the context of the current composition of our Board and committees, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Nominating, Compliance and Corporate Governance Committee may consider the director nominee’s qualifications, diversity, skills and such other factors as it deems appropriate given the current needs of our Board, the committees and Masimo, to maintain a balance of knowledge, experience, diversity and capability.

| 2019 Proxy Statement



Table of Contents		PROXY STATEMENT SUMMARY

Since 2015, we have taken several steps to refresh our Board. These steps include:



Ø	2019	We appointed Julie A. Shimer, Ph.D. to the Board and the Audit Committee.

Ø	2018	We appointed H Michael Cohen to the Board and the Audit Committee.

Ø	2016	Following the retirement of one of our Board members, we appointed Adam Mikkelson to the Board and the Audit Committee, the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee.

Ø	2015	Following the retirement of one of our Board members, we appointed Thomas Harkin to the Board and appointed him to the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee.



PROPOSAL 2		Ratification of the selection of our independent registered public accounting firm
þ	Our Board recommends a vote FOR this proposal.
See page	84	for further information.

To help ensure continued auditor independence, our Audit Committee annually reviews Grant Thornton’s independence and performance in connection with the Audit Committee’s determination of whether to retain Grant Thornton or engage another firm as our independent registered public accounting firm. Based on this evaluation, our Audit Committee has determined that Grant Thornton is independent and that it is in the best interest of Masimo and its stockholders to continue to retain Grant Thornton to serve as our independent registered public accounting firm for 2019.



PROPOSAL 3		Advisory vote to approve the compensation of our named executive officers
þ	Our Board recommends a vote FOR the compensation of our named executive officers.
See page	85	for further information.

2018 Executive Compensation Highlights

Pay-for-Performance Alignment

Masimo’s executive compensation programs are designed to align the interests of Masimo’s executive officers with those of its stockholders:


•	We provide market-competitive compensation programs that enable Masimo to attract and retain highly talented individuals.


•	Pay is directly linked to the achievement of performance goals designed to foster the creation of sustainable long-term stockholder value.


•	Our pay-for-performance principles dictate that our executive officers should only receive target payouts when Masimo achieves its financial goals. For this reason, our Compensation Committee sets financial targets for incentive pay that align with or exceed the external guidance communicated to stockholders.

| 2019 Proxy Statement



Table of Contents		PROXY STATEMENT SUMMARY

2018 Executive Compensation Program Enhancements

To further align the compensation of our executive officers with long-term performance, the Compensation Committee decided to extend the performance period for the 2018 performance-based restricted share unit (“PSU”) awards from one to three years. Accordingly, the Compensation Committee granted 2018 long-term equity awards to our executive officers consisting of the following award mix.


•	25% in the form of stock options that vest annually over a five year period; and

•

75% in the form of PSUs that vest after three years based on our actual performance as measured against multiple pre-established performance objectives. For fiscal 2018, the Compensation Committee selected fiscal 2020 Adjusted Product Revenue² and fiscal 2020 Non-GAAP Operating Profit Margin²as the performance measures for the target PSU award percentages, each weighted equally. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2020 (or such later date determined by the Compensation Committee).

2018 “At Risk” Compensation

Masimo’s annual bonus plan and long-term incentive (“LTI”) compensation awards resulted in 92.3% of our CEO’s and an average of 79.0% of our other Named Executive Officers’ (“NEOs”) fiscal 2018 target total direct compensation being “at risk” as highlighted in the following charts:



Total “at risk” compensation =	92.3%	Total “at risk” compensation =	79.0%

Our compensation philosophy and structure has continued to evolve, based on changing market conditions, input from our Compensation Committee’s independent compensation consultant and direct feedback from our stockholders. The Compensation Committee believes that the current LTI equity award structure focuses our NEOs on driving increased stockholder value over a multi-year period and enables us to achieve our retention objectives, while maintaining a conservative approach to overall share usage. As a result, our company-wide equity burn rate was low in 2016 and 2017, and further declined in 2018.

_______________


²	Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

| 2019 Proxy Statement



Table of Contents		PROXY STATEMENT SUMMARY

Compensation Policies and Practices at a Glance



	þ		ý
	What We Do		What We Don’t Do
þ	Maintain an Independent Compensation Committee	ý	No Guaranteed Bonuses
þ	Compensation Committee Retains an Independent Compensation Advisor	ý	No Special Executive Retirement Plans
þ	Annual Executive Compensation Review	ý	No Hedging; Pledging Requires Pre-Approval
þ	Compensation At-Risk - Pay For Performance	ý	No Tax Payments on Perquisites
þ	Annual Compensation-Related Risk Assessment	ý	No Tax Gross-Up Payments on Post-Employment Compensation Arrangements
þ	Multi-Year Vesting Requirements	ý	No Special Welfare or Health Benefits
þ	Compensation Recovery (“Clawback”) Policy	ý	No Stock Option Re-pricing
þ	Stock Ownership Policy
þ	Annual Stockholder Advisory Vote on Named Executive Officer Compensation
þ	Stockholder Engagement that includes our Compensation Committee Chairperson



	ü Approximately 84% of the votes cast on our Say-On-Pay proposal for fiscal year 2017 compensation voted in favor of our executive compensation program and policies.



PROPOSAL 4		Stockholder Proposal - for Proxy Access
ý	Our Board recommends a vote AGAINST this proposal.
See page	88	for further information.

| 2019 Proxy Statement



Table of Contents	2018 BUSINESS AND FINANCIAL HIGHLIGHTS



2018 BUSINESS AND FINANCIAL HIGHLIGHTS

In 2018, we experienced strong momentum in our business. Our global organization executed on our strategy to deliver above-market growth and drive operational efficiencies throughout the business. Our product revenues increased 12% to $830 million and we shipped a record number of noninvasive technology boards and monitors, which exclude handheld and finger oximeters. In addition, we delivered significant operating margin improvements and earnings per share (“EPS”) growth that exceeded expectations.

Our strong performance in 2018 demonstrates the significant progress that we are making to drive operational efficiencies throughout the business and take further steps towards achieving our long term goal of 30% operating profit margins. Most importantly, we are making this progress on the profitability front while at the same time increasing our R&D investment and improving the growth profile of the overall business.

Some of our notable fiscal 2018 financial and operational highlights included the following GAAP and non-GAAP measures¹:



	l Total revenues, including royalties and other revenue of $858 million, which significantly exceeded our original fiscal 2018 financial guidance of $836 million.
	l Product revenue increased 12.4% to $830 million, or 11.9% on a constant currency basis¹, which significantly exceeded our original fiscal 2018 financial guidance of $808 million.
	l Shipments of noninvasive technology boards and monitors increased 14.1% to 231,700.
	l GAAP operating profit margin was 24.2%; l Non-GAAP operating profit¹ margin improved 100 basis points to 24.5%; l Non-GAAP product operating margin¹, excluding the impact of royalty and NRE, improved 340 bps to 22.0%.
	l GAAP EPS was $3.45; l Non-GAAP total EPS¹ increased 31.7% to $3.03; l Non-GAAP product EPS¹, excluding the impact of royalty and NRE, increased 53.2% to $2.65.
	l Adjusted free cash flow was $222 million or 26.0% of total revenue, which was driven by strong earnings performance and significant working capital improvements; l Days sales outstanding (“DSO”) improved 10 days to reach 45 days at the end of fiscal 2018; l Inventory days on hand (“DOH”) improved 10 days to reach 113 days at the end of fiscal 2018.

The following non-GAAP financial measures were used in our executive compensation programs to incentivize pay-for-performance. Please note that the corresponding GAAP financial measures were included in the table above.

Product Revenue

Constant Currency Product Revenue Growth¹

Non-GAAP

EPS¹

Non-GAAP
EPS Growth¹

in Millions

% growth on a constant
currency basis

$ per diluted share

% growth

$830

11.9%

$3.03

31.7%

Goal: $808M

Goal: $2.80

_____________


¹	Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

| 2019 Proxy Statement



Table of Contents	2018 BUSINESS AND FINANCIAL HIGHLIGHTS

Other key fiscal 2018 financial and operational achievements included (in millions, other than EPS)¹:

_______________


^*	Constant currency growth


^**	Of total revenue




			Stock Price
			December 29, 2018
			$105.56





			Stock Price
			at IPO
			(August 2007)
			$17.00

_______________


¹	Constant currency product revenue and non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

| 2019 Proxy Statement



Table of Contents		EXECUTIVE OFFICERS



EXECUTIVE OFFICERS

Our executive officers are appointed by and serve at the discretion of our Board. Our executive officers, their ages, respective positions and biographies are listed below:



Name	Age⁽¹⁾	Position(s)
Joe Kiani	54	Chief Executive Officer & Chairman of the Board
Micah Young	40	Executive Vice President, Finance & Chief Financial Officer
Anand Sampath	52	Chief Operating Officer
Jon Coleman	55	President, Worldwide Sales, Professional Services & Medical Affairs
Yongsam Lee	54	Executive Vice President, Chief Information Officer
Tao Levy	45	Executive Vice President, Business Development
Tom McClenahan	46	Executive Vice President, General Counsel & Corporate Secretary
Bilal Muhsin	38	Executive Vice President, Engineering, Marketing & Regulatory Affairs

____________


⁽¹⁾	As of April 20, 2019.



	Joe Kiani
	Chief Executive Officer & Chairman of the Board
	Employee Since: 1989
Joe Kiani is the founder of Masimo and has served as Chief Executive Officer (CEO) & Chairman of the Board since our inception in 1989. He is an inventor on more than 100 patents related to signal processing, sensors and patient monitoring, including patents for the invention of Measure-through motion and low-perfusion pulse oximetry. Since September 2016, Mr. Kiani has served on the Board of Directors of Stereotaxis, Inc. (OTCQX: STXS), a manufacturer of robotic cardiology instrument navigation systems. From 1998 to March 2013, Mr. Kiani served on the Board of Directors of Saba Software, Inc., a publicly-traded software company focused on human capital development and management solutions. Mr. Kiani holds a B.S.E.E. and an M.S.E.E. from San Diego State University. In addition to Mr. Kiani’s role at Masimo, he is also the Chairman of the Masimo Foundation for Ethics, Innovation and Competition in Healthcare, Chairman of the Patient Safety Movement Foundation, Chairman and CEO of the Patient Safety Movement Coalition and Chairman and CEO of Cercacor Laboratories, Inc. He also sits on a number of other Boards of Directors, including Atheer Labs, CHOC Children’s Orange/CHOC Children’s at Mission Hospital, Bioniz Therapeutics, Inc. and the Medical Device Manufacturers Association. As Masimo’s founder, Chief Executive Officer and Chairman of the Board since our formation in 1989, Mr. Kiani has the deepest understanding of Masimo, our history, our culture and our technology. He has broad experience in a wide range of functional areas, including strategic planning, strategic investments, engineering and development, and legal and governmental affairs. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Kiani is critical to our continued development and growth.

| 2019 Proxy Statement



Table of Contents		EXECUTIVE OFFICERS



	Micah Young
	Executive Vice President, Finance & Chief Financial Officer
	Employee Since: 2017
Micah Young has served as our Executive Vice President, Finance & Chief Financial Officer (“CFO”) since October 2017. From July 2012 to September 2017, Mr. Young served as Vice President, Finance, at NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. Prior to that time, he served as NuVasive, Inc.’s Senior Director, Finance, Global Operations, from December 2009 to July 2012. From 2002 to 2009, Mr. Young held various accounting and finance positions with Zimmer Holdings, Inc., a company focused on the design, development, manufacture and marketing of orthopedic reconstructive, spinal and trauma devices, dental implants and related surgical products. Prior to his time at Zimmer Holdings, Inc., Mr. Young was an accountant at Deloitte & Touche LLP from 2000 to 2002. He holds a Bachelor of Science, Accounting and Criminal Justice from Indiana Wesleyan University and is a certified public accountant (inactive).

	Anand Sampath
	Chief Operating Officer
	Employee Since: 2006
Anand Sampath has served as our Chief Operating Officer since August 2014. Prior to that, he served as Executive Vice President, Engineering since March 2007. He is an inventor on more than ten patents relating to patient monitoring, wireless networks and communications. From April 2006 to March 2007, Mr. Sampath was our Director of Systems Engineering. From October 1995 to March 2006, he held various positions, including Program Manager, Engineering Manager and Distinguished Member of Technical Staff, at Motorola, Inc. Mr. Sampath holds a B.S. in Engineering from Bangalore University.

	Jon Coleman
	President, Worldwide Sales, Professional Services & Medical Affairs
	Employee Since: 2008
Jon Coleman has served as our President, Worldwide Sales, Professional Services & Medical Affairs since February 2011, and was our President, International from August 2008 to February 2011. From October 2007 to August 2008, Mr. Coleman was President and Chief Executive Officer of You Take Control, Inc., a healthcare information technology start-up company. He served as General Manager, Americas of Targus Group International, a supplier of mobile computing cases and accessories, from March 2006 to February 2007. From March 1994 to February 2006, he held progressive leadership positions with Pfizer, Inc., most recently as Vice President and General Manager, Canada & Caribbean Region. Mr. Coleman holds a M.B.A. from Harvard Business School, and a B.A. in International Relations from Brigham Young University.

| 2019 Proxy Statement



Table of Contents		EXECUTIVE OFFICERS




	Yongsam Lee
	Executive Vice President, Chief Information Officer
	Employee Since: 1996
Yongsam Lee has served as our Executive Vice President, Chief Information Officer since August 2014. From March 1996 to October 2001 and from April 2002 to August 2014, Mr. Lee held various positions with us, including Vice President, IT, Chief Information Officer, Executive Vice President, Operations, Executive Vice President, Regulatory Affairs & Chief Information Officer. From October 2001 to April 2002, he served as Director of IT at SMC Networks, Inc., a provider of networking solutions. Mr. Lee holds a B.S. in Applied Physics from the University of California, Irvine.

	Tao Levy
	Executive Vice President, Business Development
	Employee Since: 2018
Tao Levy has served as our Executive Vice President, Business Development since January 2018. From March 2013 to December 2017, Mr. Levy served as Managing Director, Medical Devices Equity Research, at Wedbush Securities. Prior to that time, he served as Senior Analyst, Medical Devices Equity Research at Loewen Ondaatje McCutcheon, from August 2012 to March 2013. From September 2010 to February 2012, Mr. Levy was Managing Director, Medical Devices Equity Research at Collins Stewart. Prior to his time at Collins Stewart, Mr. Levy was Director, Medical Devices Equity Research at Deutsche Bank where he served from 2002 to 2010. He holds a Bachelor of Arts in Biology from the University of Pennsylvania.

	Tom McClenahan
	Executive Vice President, General Counsel & Corporate Secretary
	Employee Since: 2011
Tom McClenahan has served as our Executive Vice President & General Counsel since April 2013 and as our Corporate Secretary since August 2014. From April 2011 to April 2013, Mr. McClenahan was our Vice President and Assistant General Counsel. From November 2002 to April 2011, he was an associate and then principal with the law firm of Fish & Richardson. From September 1999 to November 2002, he was an associate with the law firm of Knobbe, Martens, Olson & Bear. Mr. McClenahan holds a B.S. in Mechanical Engineering from Iowa State University and a J.D. from the University of Minnesota Law School.

	Bilal Muhsin
	Executive Vice President, Engineering, Marketing & Regulatory Affairs
	Employee Since: 2000
Bilal Muhsin has served as our Executive Vice President, Engineering, Marketing and Regulatory Affairs since March 2018. In May 2015, Mr. Muhsin became Executive Vice President, Engineering after having served as Vice President, Engineering, Instruments and Systems since April 2012. Prior to this, Mr. Muhsin held other Director and Manager level positions within the Company since June 2000. Mr. Muhsin’s technical, product and overall leadership skills have helped Masimo bring revolutionary new products to the marketplace, including Masimo’s Patient Safety Net, Radical-7^®, Root^™ and various significant software products. Mr. Muhsin holds a B.S. in Computer Science from San Diego State University.

There are no family relationships between or among any of our executive officers or directors.

| 2019 Proxy Statement



Table of Contents		OUR BOARD OF DIRECTORS



BOARD OF DIRECTORS

Our Board presently has eight members and is divided into three classes, designated Class I, Class II and Class III. Each class currently consists of at least two directors and has a three-year term. Class I, Class II and Class III directors currently have a remaining term of office until the 2020, 2021, and 2019 Annual Meeting of Stockholders, respectively. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors in office (even though the remaining directors may constitute less than a quorum). A director elected by our Board to fill a vacancy in a Class, including a vacancy created by an increase in the number of directors, will serve for the remainder of the full term of that Class and until the director’s successor is elected and qualified or until the director’s earlier death, resignation or removal.

The names of our current directors, their ages, director class and position(s) are listed below.



Name	Age⁽¹⁾	Director Class	Term Expires	Position(s)
Steven J. Barker, M.D., Ph.D.	74	Class I	2020	Director
H Michael Cohen	54	Class II	2021	Director
Sanford Fitch	78	Class I	2020	Director
Thomas Harkin	79	Class II	2021	Director
Joe Kiani⁽²⁾	54	Class II	2021	Chief Executive Officer & Chairman of the Board
Adam Mikkelson	40	Class III	2019	Director
Craig Reynolds	70	Class III	2019	Director
Julie A. Shimer, Ph.D.	65	Class I	2020	Director

______________


⁽¹⁾	As of April 20, 2019.


⁽²⁾	Please see “Executive Officers” on page 16 of this Proxy Statement for Mr. Kiani’s biography.



SKILLS AND QUALIFICATION OF OUR BOARD OF DIRECTORS

The table below illustrates some of the skills, qualifications, background and experience of each member of the Board of Directors. This high level summary is not intended to be an exhaustive list of each of the board members skills or contributions to the Board.



Skills and Qualification	Barker	Cohen	Fitch	Harkin	Kiani	Mikkelson	Reynolds	Shimer
Active/Retired CEO or COO					n		n	n
Financial expertise		n	n			n
Government				n
Healthcare management/banking		n				n
Healthcare industry	n		n	n	n	n	n	n
Medical device manufacturing			n		n		n	n
Ph.D. or M.D.	n							n

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Table of Contents		OUR BOARD OF DIRECTORS



Steven J. Barker, M.D., Ph.D.
Board Committees: None			Director since: 2005
Experience and Qualification of Particular Relevance to Masimo:
Dr. Barker’s academic and medical background, as well as his in-depth knowledge of the healthcare industry and hospital operations, academic administration and managed care industry, provide him with a critical perspective regarding Masimo’s products, technologies and prospects. His medical background, including his expertise in anesthesiology, is particularly relevant to Masimo when we evaluate our products and technologies. In addition, Dr. Barker is able to provide us with the unique perspective of a physician.
Career Highlights:
n	Masimo Corporation
	l	Chief Science Officer and Chairman of our Scientific Advisory Board - (2015-present)
	l	Interim Chief Medical Officer - (2013-2015)
n	University of Arizona
	l	Professor Emeritus of Anesthesiology and Mechanical and Aerospace Engineering at the University of Arizona College of Medicine - (2013-present)
	l	Professor and Head of Anesthesiology, University of Arizona College of Medicine - (1995-2013)
n	University of California, Irvine
	l	Dr. Barker served as Chairman of Anesthesiology at the University of California, Irvine - (1990-1995)
Business Experience:			Education/Professional Background:
l	Physician, Anesthesiology		l	B.S. in Physics from Harvey Mudd College
l	Healthcare industry, hospital operations, academic administration, managed care industry		l	M.S. and a Ph.D. in Mechanical Engineering from the California Institute of Technology
			l	M.D. from the University of Miami
Current/Past Public Company Boards:			Additional Information:
l	None		l	Previously oral examiner, American Board of Anesthesiology
			l	Section editor for Technology, Computing, and Simulation in the Journal of Anesthesia and Analgesia
			l	Joint appointment as Professor of Mechanical and Aerospace Engineering at the University of Arizona.

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Table of Contents		OUR BOARD OF DIRECTORS




H Michael Cohen
Board Committee: Audit Committee			Director since: 2018
Experience and Qualification of Particular Relevance to Masimo:
Mr. Cohen’s financial background is extremely helpful to the Board and his previous experience in investment banking uniquely qualifies him to serve on the Audit Committee.
Career Highlights:
n	Deutsche Bank
	l	Global Head, Healthcare Investment Banking
	l	Vice Chairman, Healthcare Investment Banking
n	SG Cowen
n	Union Bank of Switzerland
n	Booz Allen Hamilton
n	Hambrecht & Quist
Business Experience:			Education/Professional Background:
l	Healthcare investment banking		l	B.A. in Economics from the University of Vermont
			l	M.B.A. from Columbia University.
Current/Past Public Company Boards:			Additional Information:
l	None		l	Financial expertise


Sanford Fitch
Board Committee: Audit Committee			Director since: 2006
Experience and Qualification of Particular Relevance to Masimo:
Mr. Fitch’s financial background is extremely helpful to the Board and suited to his role as Chairperson of our Audit Committee. Mr. Fitch brings to us previous experience as a Chief Financial Officer for multiple companies over his long career, and as audit committee chairperson of public companies, which uniquely qualifies him to serve as our Audit Committee Chairperson. In addition to Mr. Fitch’s prior leadership and management experience working with medical technology companies, Mr. Fitch has considerable financial, auditing, risk management and corporate governance experience and he is an audit committee financial expert under the rules of the SEC, all of which enable him to make valuable contributions to the Board and the Audit Committee.
Career Highlights:
n	Iridex
	l	Audit Committee Chairman and member of the Compensation Committee - (2004-present)
n	Foxhollow Technologies, Inc.
	l	Audit Committee Chairman and member of the Compensation Committee - (2004-2007)
n	Conceptus, Inc.
	l	Audit Committee Chairman and member of the Compensation Committee - (1994-2004)
	l	Chief Financial Officer - (1994-1998)
	l	Senior Vice President of Operations - (1994-1998)
n	Chief Financial Officer of several start-up technology companies - (1998-2002)
n	Chief Financial Officer of various public technology companies - (1983-2002)
Business Experience:			Education/Professional Background:
l	Medical device manufacturing		l	B.S. Chemistry from Stanford University
			l	M.B.A. from Stanford University
Current Public Company Boards:			Additional Information:
l	Iridex		l	Audit Committee Chairman, financial expert

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Table of Contents		OUR BOARD OF DIRECTORS




Thomas Harkin
Board Committees: Compensation Committee and Nominating, Compliance and Corporate Governance Committee		Director since: 2015

Experience and Qualification of Particular Relevance to Masimo:
Mr. Harkin’s experience in the Senate, and in particular his work on healthcare-related legislation, as well as his extensive understanding of the healthcare system in the U.S., bring a unique perspective and insight to the Board and the Compensation and Nominating, Compliance and Corporate Governance Committees.
Career Highlights:
n	U.S. Senate, Senator from Iowa - (1985-2015)
n	U.S. House of Representatives, Congressman from Iowa, 5th District - (1974-1984)
n	U.S. Navy - Lieutenant Commander
Business Experience:		Education/Professional Background:
l	Healthcare related legislation/government	l	B.S. Government and Economics from Iowa State University
		l	J.D. from The Catholic University of America’s Columbus School of Law
Current Public Company Boards:		Additional Information:
l	None	l	Nominating, Compliance and Corporate Governance Chairman


Adam Mikkelson
Board Committees: Audit Committee, Compensation Committee and Nominating, Compliance and Corporate Governance Committee		Director since: 2015

Experience and Qualification of Particular Relevance to Masimo:
Mr. Mikkelson’s investment management experience allows him to provide additional insight to the Board on strategy and business decisions as well as make valuable contributions to the Audit, Compensation and Nominating, Compliance and Corporate Governance Committees.
Career Highlights:
n	Partner, Camber Capital Management, LLC - (2007-2015)
n	Datamonitor, plc
n	Leerink Partners
Business Experience:		Education/Professional Background:
l	Healthcare investment management, focusing on therapeutic and medical device sectors	l	B.S. Business Administration from Boston University
l
Current Public Company Boards:
l	None

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Table of Contents		OUR BOARD OF DIRECTORS



Craig Reynolds
Board Committees: Compensation Committee and Nominating, Compliance and Corporate Governance Committee			Director since: 2014

Experience and Qualification of Particular Relevance to Masimo:
Mr. Reynolds’ experience with other medical device companies allows him to provide additional insight to the Board on strategy decisions as well as make valuable contributions to the Compensation and Nominating, Compliance and Corporate Governance Committees.
Career Highlights:
n	Ebb Therapeutics - private medical company engaged in resolving insomnia issues
	l	Chief Executive Officer & Member of Board of Directors - (2011-2017, 2011-present)
n	Symmetry Surgical, Inc., Chairman - (2014-2016)
n	Symmetry Medical, Inc., Chairman - (2008-2014)
n	Vapotherm, Inc., Member of Board of Directors - (2010-Present)
n	Philips-Respironics Home Health Solutions - (acquired by Philips)
	l	Chief Operating Officer & Member of the Board of Directors - (2008-2010)
n	Respironics, Inc.
	l	Chief Operating Officer - (1998-2008)
n	Healthdyne Technologies, Inc.
	l	Chief Executive Officer & Member of Board of Directors - (1993-1998)
	l	President of Healthdyne Homecare Division - (1986-1992)
	l	President of Healthdyne Cardiovascular Division - (1984-1985)
	l	Executive Vice President - (1981-1983)
Business Experience:			Education/Professional Background:
l	Hospital and home healthcare medical device manufacturer		l	B.S. Industrial Management from Georgia Institute of Technology
			l	M.B.A. from Georgia State University
Current Public Company Boards:			Additional Information:
l	Vapotherm, Inc.		l	Compensation Committee Chairman

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Table of Contents		OUR BOARD OF DIRECTORS



Julie A. Shimer, Ph.D.
Board Committees: Audit Committee			Director since: 2019
Experience and Qualification of Particular Relevance to Masimo:
Dr. Shimer’s experience with other medical device companies allows her to provide insight to the Board on strategy decisions, as well as make valuable contributions to the Audit Committee.
Career Highlights:
n	Welch Allyn, Inc.
	l	Member of Board of Directors - (2002-2012)
	l	Chief Executive Officer - (2007-2012)
n	Vocera Communications, Inc.
	l	Member of Board of Directors - (2001-2007)
	l	President and Chief Executive Officer - (2001-2007)
n	3Com Corporation, Inc. - (2000-2001)
	l	General Manager
n	Motorola Corporation, Inc. - (1993-1999)
	l	Senior Vice President
Business Experience:			Education/Professional Background:
l	International healthcare industry		l	B.S. Physics from Rensselaer Polytechnic Institute
l	Medical device manufacturing		l	M.S. and Ph.D. Electrical Engineering from Lehigh University
l	Telecommunication/Wireless connectivity
Current Public Company Boards:
l	Apollo Endosurgery, Inc. - (2018-present)
l	Avanos Medical, Inc. (formerly known as Halyard Health) - (2014-present)
l	Netgear Inc. - (2007-present)
l	Windstream Holdings, Inc. - (2017-present)

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS



CORPORATE GOVERNANCE AND BOARD MATTERS

This section describes key corporate governance guidelines and practices that we have adopted. Complete copies of our Corporate Governance Guidelines, the charters of the committees of our Board and our Code of Business Conduct and Ethics described below may be viewed on our website at http://www.masimo.com/company/investors/corporate-governance/ under “Corporate Governance.” Alternatively, you can request a copy of any of these documents free of charge by writing to our Corporate Secretary, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618.



CORPORATE GOVERNANCE PRACTICES

Our Board has adopted corporate governance guidelines to ensure that our Board will have the necessary authority and practices in place to exercise its duties and responsibilities, to review and evaluate our business operations as needed, to make decisions that are independent of our management and to serve the best interests of Masimo and our stockholders. These corporate governance guidelines provide a framework for the conduct of the Board’s business and provide that:


•	except in unusual circumstances, the positions of Chairman of our Board and CEO will each be held by the same person;


•	ordinarily, directors should not serve on more than five boards of publicly-traded companies, including our Board, and all of our directors currently satisfy this requirement;


•	outside directors must own a minimum number of shares of our common stock (see “Non-Employee Director Compensation—Non-Employee Director Stock Ownership Policy” on page 81 of this Proxy Statement for additional information); and

•

a non-employee director will not be nominated for re-election at the next annual meeting of stockholders for which his or her class of directors is up for election following his or her 15th anniversary of service on our Board, unless our Board waives this term limit with respect to such non-employee director as a result of its determination that such nomination is in the best interests of Masimo and its stockholders.



CONSIDERATION OF DIRECTOR NOMINEES

Director Qualifications

The Board does not prescribe any minimum qualifications for director candidates. The Nominating, Compliance and Corporate Governance Committee may consider a potential director candidate’s experience, areas of expertise and other factors relative to the overall composition of our Board and its committees, including the following characteristics:


•	the highest ethical standards and integrity and a strong personal reputation;


•	a background that demonstrates experience and achievement in business, finance, technology, healthcare or other activities relevant to our business and activities;


•	a willingness to act on and be accountable for Board and, as applicable, committee decisions;


•	an ability to provide reasoned, informed and thoughtful counsel to management on a range of issues affecting us and our stockholders;


•	an ability to work effectively and collegially with other individuals;


•	loyalty and commitment to driving our success and increasing long-term value for our stockholders;


•	sufficient time to devote to our Board and, as applicable, committee membership and matters; and


•	meeting the independence requirements imposed by the SEC and Nasdaq.

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Diversity of background, including diversity of gender, race, ethnic or national origin, and experience (including in business, finance, government, technology, healthcare or other activities relevant to our business) is also a relevant factor, as a diverse Board is more likely to reflect varying perspectives and a breadth of experience that will positively contribute to robust discussion at Board meetings.

The Nominating, Compliance and Corporate Governance Committee retains the right to modify these criteria from time to time.

Stockholder Nominations

The Nominating, Compliance and Corporate Governance Committee will consider director candidates recommended by our stockholders. The Nominating, Compliance and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates based on whether a candidate was recommended by a stockholder or not. Stockholders who wish to recommend individuals for consideration by the Nominating, Compliance and Corporate Governance Committee to become nominees for election to the Board at the 2020 Annual Meeting of Stockholders, must do so by delivering a written recommendation to the Nominating, Compliance and Corporate Governance Committee, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618, Attention: Corporate Secretary, no later than the close of business on March 1, 2020, and no earlier than January 31, 2020, unless the meeting date is more than 30 days before or after May 30, 2020, in which case the written recommendation must be received by our Corporate Secretary no later than the close of business on the later of (i) the 90th day before the 2020 Annual Meeting of Stockholders, or (ii) the 10th day following the day on which we first publicly announce the date of the 2020 Annual Meeting of Stockholders. Each written recommendation must contain the following minimum information:


•	the name and address of the stockholder and any beneficial owner on whose behalf the nomination is being made;


•	the class, series and number of shares of Masimo, and any convertible securities of Masimo, that are beneficially owned by the stockholder and any beneficial owner on whose behalf the nomination is being made;


•	any proxy, contract, arrangement, understanding or relationship pursuant to which the stockholder and any beneficial owner on whose behalf the nomination is being made has the right to vote any of Masimo’s voting securities;


•	any “short” interest in Masimo’s securities held by the stockholder and any beneficial owner on whose behalf the nomination is being made;


•	the proposed director candidate’s full legal name, age, business address and residential address;


•	complete biographical information for the proposed director candidate, including the proposed director candidate’s principal occupation or employment and business experience for at least the previous five years;


•	a description of the proposed candidate’s qualifications as a director;


•	the class and number of shares of Masimo that are beneficially owned by the proposed director candidate as of the date of the written recommendation; and


•	any other information relating to the proposed director candidate that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A promulgated under the Exchange Act.

Director candidate recommendations from stockholders must include the written consent of each proposed nominee to serve as director if so elected. If a proposed director candidate is recommended by a stockholder in accordance with the procedural requirements discussed above, the Corporate Secretary will provide the foregoing information to the Nominating, Compliance and Corporate Governance Committee.

Evaluating Nominees for Director

Our Nominating, Compliance and Corporate Governance Committee will consider director candidates that are recommended by members of the committee, other members of our Board, members of management, advisors and our stockholders who submit recommendations in accordance with the requirements set forth above. The Nominating, Compliance and Corporate Governance Committee may also retain a third-party search firm to identify candidates on

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS

terms and conditions acceptable to the Nominating, Compliance and Corporate Governance Committee, but has not done so to date. The Nominating, Compliance and Corporate Governance Committee will evaluate all candidates for director using the same approach regardless of who recommended them.

The Nominating, Compliance and Corporate Governance Committee will review candidates for director nominees in the context of the current composition of our Board and committees, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the Nominating, Compliance and Corporate Governance Committee may consider the director nominee’s qualifications, diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board, the committees and Masimo, to maintain a balance of knowledge, experience, diversity and capability. In the case of incumbent directors whose terms of office are set to expire, the Nominating, Compliance and Corporate Governance Committee may review such directors’ overall service to the Board, the committees and Masimo during their term, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the Nominating, Compliance and Corporate Governance Committee will also determine whether the nominee must be independent for Nasdaq purposes, which determination will be based upon applicable Nasdaq listing standards and applicable SEC rules and regulations. Although we do not have a formal diversity policy, when considering diversity in evaluating director nominees, the Nominating, Compliance and Corporate Governance Committee will focus on whether the nominees can contribute varied perspectives, skills, experiences and expertise to the Board. Diversity of background, including diversity of gender, race, ethnic or national origin, and experience (including in business, finance, government, technology, healthcare or other activities relevant to our business) is also a relevant factor in considering nominees to the Board, as a diverse Board is more likely to reflect varying perspectives and a breadth of experience that will positively contribute to robust discussion at Board meetings.

The Nominating, Compliance and Corporate Governance Committee will evaluate each of the director candidates and recommend whether the Board should nominate the proposed director candidate for election by our stockholders.



BOARD LEADERSHIP STRUCTURE

Our Board believes that our CEO is best situated to serve as Chairman because he is the director who is most familiar with our business and industry, possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing us and is therefore best positioned to ensure that the Board’s time and attention are focused on the most critical matters. Our independent directors bring experience, oversight and expertise from outside the Company and industry, while the CEO brings Company-specific experience and expertise. The Board believes that the combined role of Chairman and CEO facilitates information flow between management and the Board, which is essential to effective governance. We have no lead independent director.



BOARD’S ROLE IN RISK OVERSIGHT

Our Board has an active role, as a whole and also at the committee level, in overseeing management of our risks. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our entire Board is informed about such risks by the committees.

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS

The Board of Directors

Audit Committee

Nominating, Compliance and Corporate Governance Committee

Compensation Committee

Oversees management of financial risks including:

Oversees management of non-financial risks including:

Oversees management of risks relating to our compensation plans and arrangements including:

= Financial statement integrity and reporting;

= Internal controls;

= Major financial and other business risk exposures

= Legal, environmental, health, safety;

= Board governance, independence of the Board and conflicts of interest

= Employee compensation policies and practices;

= Non-employee director compensation policies and practices



INVESTOR FEEDBACK AND ENGAGEMENT

We value the feedback from our potential investors and stockholders. During fiscal 2018, members of the Board met with holders of approximately 23% of our outstanding shares. In addition, one or more members of management were involved in more than 13 in-person or telephonic meetings with stockholders representing more than 27% of our outstanding shares. These discussions helped us shape our compensation programs, board composition, and other strategic priorities.



FALL		WINTER	INVESTOR DISCUSSION POINTS
Conduct meetings between investors and management	ð	Review feedback from investors with Board and incorporate into proxy disclosures, update governance as necessary	= Financial performance, corporate governance matters and proxy related matters including: board composition, diversity and succession planning. = Executive compensation; including fiscal 2017 executive compensation program
ñ		ò
SUMMER		SPRING	FISCAL 2018 ENHANCEMENTS
Review stockholder votes from our annual meeting and trends from proxy season		Conduct meetings between investors and management	= Updated executive compensation program, lengthening the PSU vesting windows from one year under the fiscal 2017 executive compensation program to three years under the fiscal 2018 executive compensation program; = Refined performance metrics for performance-based equity compensation, focusing on driving long-term stockholder value, product revenue and operating profit margin; = Addition of H Michael Cohen to the Board.
ñ		ò
ANNUAL STOCKHOLDER MEETING

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS



MEETINGS AND EXECUTIVE SESSIONS

Our Board meets on a regular basis throughout the year to review significant developments affecting the Company and to act upon matters requiring its approval. Our Board also holds special meetings, as required from time to time, when important matters arise requiring Board action between scheduled meetings. During fiscal 2018, our Board met six times. None of our directors attended fewer than 75% of the total number of meetings held by the Board and the committees (on which and for the period during which the director served) during fiscal 2018.

As required under applicable Nasdaq listing standards, our independent directors periodically meet in executive sessions at which only they are present.



POLICY REGARDING BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS

It is the policy of our Board to invite directors and nominees for director to attend annual meetings of our stockholders. We held an annual meeting of stockholders in fiscal 2018, which was attended by Mr. Kiani.



INDEPENDENCE OF THE BOARD OF DIRECTORS

Our Board has the responsibility for establishing corporate policies and for the overall performance of the Company, although it is not involved in day-to-day operations. As required under the Nasdaq rules, a majority of the members of our Board must qualify as “independent” as affirmatively determined by our Board. Our Board consults with our counsel to ensure that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent” including those set forth in applicable Nasdaq rules. Consistent with these considerations, after review of all relevant transactions or relationships between each director, and the director’s family members and Masimo, our senior management, and our independent registered public accounting firm, our Board has determined that all of our directors other than Mr. Kiani and Dr. Barker are independent, as that term is defined in Nasdaq Listing Rule 5605(a)(2).



CODE OF BUSINESS CONDUCT AND ETHICS

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, executive officers and directors. The Code of Business Conduct and Ethics is available to stockholders on our website at http://www.masimo.com/company/investors/corporate-governance/ under “Corporate Governance.” If we make any substantive amendments to our Code of Business Conduct and Ethics or grant any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website at http://www.masimo.com/company/investors/corporate-governance/ under “Corporate Governance” and/or in our public filings with the SEC.



STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

Our Board has adopted a formal process by which stockholders may communicate with the Board or any of its directors. Stockholders of Masimo wishing to communicate with our Board or an individual director may send a written communication to the Board or such director, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618, Attention: Compliance Officer. Each communication must set forth:


•	the name and address of all the Masimo stockholders on whose behalf the communication is sent; and


•	the number of Masimo shares that are beneficially owned by the stockholders as of the date of the communication.

Each communication will be reviewed by Masimo’s Compliance Officer to determine whether it is appropriate for presentation to the Board or the individual director. Examples of inappropriate communications include junk mail, spam, mass mailings, product complaints, product inquiries, new product suggestions, resumes, job inquiries, surveys,

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS

business solicitations and advertisements, as well as unduly hostile, threatening, illegal, unsuitable, frivolous, patently offensive or otherwise inappropriate material. These screening procedures have been approved by a majority of the independent members of our Board. Communications determined by our Compliance Officer to be appropriate for presentation to the Board or such director will be submitted to the Board or the individual director on a periodic basis.

In accordance with our Open Door Policy for Reporting Accounting, Audit, and Other Compliance Concerns, (the “Open Door Policy”), all communications directed to the Board, a committee of the Board or an individual director relating to accounting topics, internal accounting controls, or auditing matters involving the Company are forwarded to our Compliance Officer regardless of the method of communication, and then promptly and directly forwarded by the Compliance Officer to the Audit Committee or the Board, as appropriate. All communications directed to the Board, committee, or individual director that relate to non-financial matters (including, without limitation, purported or suspected violations of any law or regulation, our Code of Business Conduct and Ethics or other policies) will be forwarded to Masimo’s Compliance Officer, and, if the Compliance Officer deems the matter to be a potentially significant violation of law, the Code of Business Conduct and Ethics, or company policy, the Compliance Officer will promptly and directly forward the communication to the Nominating, Compliance and Corporate Governance Committee.



INFORMATION REGARDING BOARD COMMITTEES

Our Board has established a standing Audit Committee, Compensation Committee and Nominating, Compliance and Corporate Governance Committee to devote attention to specific subjects and to assist it in the discharge of the Board’s responsibilities. All of these committees operate under a written charter adopted by our Board, each of which is available on our website at http://www.masimo.com/company/investors/corporate-governance/ under “Corporate Governance.” The following table provides membership and meeting information for fiscal 2018 for the Audit Committee, Compensation Committee and Nominating, Compliance and Corporate Governance Committee.



		Committee Membership
Name	Independent	Audit		Compensation	Nominating, Compliance and Corporate Governance	Scientific Advisory
Employee Director:
Joe Kiani	—	—		—	—	—
Non-Employee Directors:
Steven J. Barker, Ph.D., M.D.⁽¹⁾	—	—		—	—	¬
H Michael Cohen⁽²⁾	5	ü				—
Sanford Fitch	5	¬		—	—	—
Thomas Harkin	5	—		ü	¬	—
Adam Mikkelson	5	ü		ü	ü	—
Craig Reynolds	5	—	⁽³⁾	¬	ü	—
Julie A. Shimer, Ph.D.⁽⁴⁾	5	—		—	—	—
Total meetings in fiscal 2018		5		4	3

______________


¬	Committee Chairperson. À Financial Expert. ü Member. 5 Independent.


⁽¹⁾	Dr. Barker has provided consulting services to Masimo since July 2013. He currently serves as our Chief Science Officer and Chairman of our Scientific Advisory Board and previously served as our interim Chief Medical Officer from July 2013 to March 2015.


⁽²⁾	Mr. Cohen has been a member of our Board since July 31, 2018. He was appointed to the Audit Committee on July 31, 2018.


⁽³⁾	Mr. Reynolds served on the Audit Committee until July 31, 2018.


⁽⁴⁾	Dr. Shimer has been a member of our Board since January 2, 2019. She was appointed to the Audit Committee on March 15, 2019.

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS

Audit Committee

We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our Board has adopted a written charter of the Audit Committee that is available to stockholders on our website at http://www.masimo.com/company/investors/corporate-governance/ under “Corporate Governance.”

Our Board has determined that all members of the Audit Committee meet the criteria for independence and financial literacy under Nasdaq Listing Rule 5605(c)(2)(A)(i) and (ii) and Rule 10A-3(b)(1) under the Exchange Act and qualify as financial experts under the applicable Nasdaq and SEC rules



Members and Number of Meetings		Primary Committee Functions

Committee Members:⁽¹⁾		l Appointing, retaining and determining the compensation of our independent registered public accounting firm; l Overseeing and approving any proposed audit and permissible non-audit services provided by our independent registered public accounting firm; l Reviewing at least annually the qualifications, performance and independence of our independent registered public accounting firm; l Overseeing the relationship with our independent registered public accounting firm, including the rotation of the audit partners, as well as reviewing and resolving any disagreements between our management and ensuring discussions with our management and our independent registered public accounting firm relating to financial controls over financial reporting; l Discussing with our management and our independent registered public accounting firm the design, implementation and effectiveness of our internal controls; l Reviewing and discussing with our management and our independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements; l Overseeing and approving the annual Committee Report to be included in our annual public filings; l Reviewing the quarterly earnings announcements and any other public announcements regarding our results of operations with our management; l Reviewing and discussing reports from our independent registered public accounting firm relating to our critical accounting policies and practices; l Establishing and overseeing the processes and procedures for the receipt, retention and treatment of any complaints regarding accounting, internal controls or audit matters, as well as the confidential and anonymous submissions by employees concerning questionable accounting, auditing and internal control matters; l Investigating any matter brought to its attention, with full access to our books, records, facilities and employees, and with sole authority to select, retain and terminate any consultants, legal counsel or advisors to advise the Audit Committee; and l Reviewing and evaluating, at least annually, the performance of the Audit Committee and its members, including compliance of the Audit Committee with its charter.
Mr. Fitch, Chair
Mr. Mikkelson
Mr. Reynolds⁽²⁾
Mr. Cohen⁽²⁾
Dr. Shimer⁽³⁾


Number of Meetings:⁽⁴⁾
5


Attendance Rate:
100%













_____________
⁽¹⁾Our Board has determined that Mr. Fitch, the Chairperson of our Audit Committee, is an audit committee financial expert, as defined under applicable SEC rules, and that Mr. Fitch meets the background and financial sophistication requirements under Nasdaq Listing Rule 5605(c)(2)(A). In making this determination, the Board made a qualitative assessment of Mr. Fitch’s level of knowledge and experience based on a number of factors, including his formal education and experience. Both our independent registered public accounting firm and internal financial personnel regularly meet privately with our Audit Committee and have unrestricted access to this committee.
⁽²⁾Mr. Reynolds served on the Audit Committee until July 31, 2018. Mr. Cohen was appointed to the Audit Committee on July 31, 2018.
⁽³⁾Dr. Shimer was appointed to the Audit Committee effective March 15, 2019.
⁽⁴⁾Typically, the Audit Committee meets at least quarterly and with greater frequency if necessary.

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS

Compensation Committee

Our Board has adopted a written charter for the Compensation Committee that is available to stockholders on our website at http://www.masimo.com/company/investors/corporate-governance/ under “Corporate Governance.” The charter of the Compensation Committee grants the Compensation Committee full access to all of our books, records, facilities and personnel. The Compensation Committee has the authority, in its sole discretion, to retain and terminate (or obtain the advice of) any advisor to assist it in the performance of its duties, but only after taking into consideration factors relevant to the advisor’s independence specified in Nasdaq Listing Rule 5605(d)(3). The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any advisor retained by the Compensation Committee, and has sole authority to approve the advisor’s fees and the other terms and conditions of the advisor’s retention.

Our Board has determined that all members of our Compensation Committee meet the criteria for independence under Nasdaq Listing Rule 5605(a)(2).



Members and Number of Meetings		Primary Committee Functions

Committee Members:		l Reviewing and approving our general compensation strategy; l Establishing annual and long-term performance goals for our executive officers; l Conducting and reviewing with the Board an annual evaluation of the performance of our CEO and other executive officers; l Considering the competitiveness of the compensation of our executive officers; l Reviewing and approving all salaries, bonuses, equity awards, perquisites, post-service arrangements, and other compensation and benefit plans for our CEO and all other executive officers; l Reviewing and approving the terms of any offer letters, employment agreements, termination agreements or arrangements, change in control agreements and other material agreements between us, on the one hand, and any of our executive officers, on the other; l Acting as the administering committee of our Board for our executive compensation and cash incentive plans and for any equity incentive plans, including establishing performance metrics, determining bonus payouts and granting equity awards to employees and executive officers; l Providing oversight for our overall compensation plans and benefit programs; l Reviewing and approving compensation programs as well as salaries, fees, bonuses and equity awards for the non-employee members of our Board; l Reviewing and discussing with management the annual Compensation Discussion and Analysis and the related tabular and narrative disclosure regarding named executive officer compensation; l Overseeing and approving the annual Compensation Committee Report to be included in our annual filings; l Overseeing risks and exposures associated with executive compensation programs and arrangements, including incentive plans; and l Reviewing and evaluating, at least annually, the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter.
Mr. Reynolds, Chair
Mr. Harkin
Mr. Mikkelson


Number of Meetings:⁽¹⁾
4


Attendance Rate:
100%












_____________
⁽¹⁾The Compensation Committee meets from time to time during the year.

Since the fourth quarter of fiscal 2016, the Compensation Committee has retained the services of Compensia, Inc. (“Compensia”) to assist the Compensation Committee in assessing and determining competitive compensation packages and to provide input on other executive compensation related matters. Compensia provides no other services to Masimo, and its sole relationship with Masimo is as an advisor to the Compensation Committee.

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS

For more information regarding the Compensation Committee’s engagement of Compensia, see “Executive Compensation—Compensation Discussion and Analysis” starting on page 38.

The Compensation Committee meets outside the presence of all of our executive officers, including the named executive officers, in order to consider appropriate compensation for our CEO. Our CEO may not participate in or be present during any deliberations or determinations of the Compensation Committee regarding his compensation. For all other named executive officers, the Compensation Committee meets outside the presence of all executive officers except our CEO. The specific determinations of the Compensation Committee with respect to executive compensation for fiscal 2018 are described in greater detail in the “Compensation Discussion and Analysis” section of this Proxy Statement.

Nominating, Compliance and Corporate Governance Committee

Our Board has adopted a written charter of the Nominating, Compliance and Corporate Governance Committee that is available to stockholders on our website at http://www.masimo.com/company/investors/corporate-governance/ under “Corporate Governance.” Our Board has determined that all members of our Nominating, Compliance and Corporate Governance Committee meet the criteria for independence under Nasdaq Listing Rule 5605(a)(2). The Nominating, Compliance and Corporate Governance Committee meets from time to time as it deems appropriate or necessary.



Members and Number of Meetings		Primary Committee Functions

Committee Members:		l Evaluating the composition, size, organization and governance of our Board and its committees, making recommendations to our Board about the appointment of directors to committees of our Board and recommending the selection of chairs of these committees to the Board; l Reviewing and recommending to our Board director independence determinations made with respect to continuing and prospective directors; l Reviewing and recommending to our Board “Section 16 officer” determinations with respect to our executive officers; l Developing and recommending to our Board policies for considering director nominees for election to the Board; l Identifying, reviewing, considering and evaluating candidates for election to the Board and recommending to the Board candidates to be nominated for election or incumbent directors to be nominated for re-election at each annual meeting of our stockholders or to fill any vacancies on the Board or any newly-created directorships; l Overseeing our Board’s performance and annual self-evaluation process and evaluating the participation of members of the Board in continuing education activities in accordance with Nasdaq rules; l Overseeing corporate governance; l Overseeing our corporate compliance programs; l Developing, and updating as necessary, a legal compliance and ethics program designed to evaluate, maintain and correct, when appropriate, our overall compliance with all federal and state rules and regulations and all of our codes of ethics and conduct; l In consultation with the Audit Committee, reviewing and, if appropriate, updating or recommending to our Board updates to our existing procedures for the receipt, retention and treatment of reports or evidence of violations of any federal or state rules or regulations or of our codes of ethics and conduct; and l Reviewing and evaluating, at least annually, the performance of the Nominating, Compliance and Corporate Governance Committee and its members, including compliance of the Nominating, Compliance and Corporate Governance Committee with its charter.
Mr. Harkin, Chair
Mr. Mikkelson
Mr. Reynolds

Number of Meetings:⁽¹⁾
3


Attendance Rate:
100%














__________________
⁽¹⁾ The Nominating, Compliance and Corporate Governance Committee meets from time to time during the year.

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS



NON-EMPLOYEE DIRECTOR COMPENSATION

In fiscal 2016, after consultation with the Compensation Committee’s independent compensation consultant and consideration of market data for a group of peer companies, our Board adopted a non-employee director compensation policy (the “Non-Employee Director Compensation Policy”), which was amended effective as of December 30, 2018. The Non-Employee Director Compensation Policy in the form adopted in 2016 was in effect for all of fiscal 2018, and provided for the following compensation:



Compensation Item(s):	Amount
Retainer⁽¹⁾- Board Service	$	50,000
Retainer⁽¹⁾ - Each Committee	7,500
Chairperson Additional Retainer⁽¹⁾ - Audit Committee	30,000
Chairperson Additional Retainer⁽¹⁾ - Compensation Committee	10,000
Chairperson Additional Retainer⁽¹⁾ - Nominating, Compliance and Corporate Governance Committee	7,500
Cash Fee Per Committee Meeting in Excess of First Eight Meetings⁽²⁾	1,000
Restricted Share Units⁽³⁾⁽⁴⁾	$	140,000

______________


⁽¹⁾	All cash retainers are payable on a quarterly basis in arrears.


⁽²⁾	Each non-employee director receives a $1,000 per meeting cash fee for each committee meeting attended in excess of the first eight meetings of each committee during the fiscal year.

⁽³⁾

Each year on the date of our annual meeting of stockholders, each non-employee director will be granted an award of restricted share units (“RSUs”) with respect to shares of our common stock having a grant date fair value of $140,000, rounded down to the nearest whole share, which vest on the earlier of the first anniversary of the grant date or the date of the next annual meeting of stockholders.


⁽⁴⁾	The Non-Employee Director Compensation Policy also provides that all RSU awards granted to the non-employee directors pursuant to the policy will vest in full in the event of a change in control of Masimo.

The following table sets forth summary information concerning compensation paid or accrued for services rendered to us in all capacities to the non-employee members of our Board for the fiscal year ended December 29, 2018.



Fiscal 2018 Director Compensation Table:
Name⁽¹⁾	Fees Earned or Paid in Cash		Stock Awards⁽²⁾⁽³⁾		Option Awards⁽⁴⁾		All Other Compensation			Total
Steven J. Barker, Ph.D., M.D.	$	51,729	$	139,937	$	—	$	120,000	⁽⁵⁾	$	311,666
H Michael Cohen⁽⁶⁾	24,011		—		—		—			24,011
Sanford Fitch	87,816		139,937		—		—			227,753
Thomas Harkin	72,500		139,937		—		—			212,437
Adam Mikkelson	72,500		139,937		—		—			212,437
Craig Reynolds	79,389		139,937		—		—			219,326

______________


⁽¹⁾	Our Chairman and CEO, Mr. Kiani, is not included in this table as he is an employee of Masimo and therefore receives no compensation for his service as a director. Mr. Kiani’s compensation is included in the “Summary Compensation Table” on page 61 of this Proxy Statement. Dr. Shimer is not included in this table as she was appointed to our Board effective January 2, 2019.


⁽³⁾	As of December 29, 2018, each of the listed non-employee directors held RSU awards with respect to 1,583 shares of our common stock, with the exception of H Michael Cohen, who held none.

⁽⁴⁾

These amounts generally represent the aggregate grant date fair value of the RSU awards granted to each listed non-employee director in fiscal 2018, computed in accordance with Financial Accounting Standard Board Accounting Standard Codification Topic 718 (“ASC Topic 718”). These amounts do not represent the actual amounts paid to or realized by the directors during fiscal 2018. The value as of the grant date for the RSU awards is calculated based on the number of RSUs at the grant date market price and is recognized once the requisite service period for the RSUs is satisfied. For a detailed description of the assumptions used for purposes of determining grant date fair value, see Note 14 to our Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of

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Table of Contents	CORPORATE GOVERNANCE AND BOARD MATTERS

Operations-Critical Accounting Estimates-Share-Based Compensation,” included in our Annual Report on Form 10-K for the year ended December 29, 2018 that was filed with the SEC on February 26, 2019.


⁽⁴⁾	As of December 29, 2018, each of the listed non-employee directors held the following number of options: Steven J. Barker, Ph.D., M.D.—110,000; H Michael Cohen—0; Sanford Fitch—80,000; Thomas Harkin—0; Adam Mikkelson—0 and Craig Reynolds—100,000.


⁽⁵⁾	Consists of fees earned by Dr. Barker for non-employee consulting services provided to the Company.


⁽⁶⁾	H Michael Cohen was appointed to our Board effective July 31, 2018.

Fiscal 2019 Non-Employee Director Compensation Program Changes

Following an extensive review of our non-employee director compensation policy and after taking into consideration market data and the responsibilities placed upon our non-employee directors, the Compensation Committee made the following changes to our Non-Employee Director Compensation Policy, effective beginning fiscal 2019:



Compensation Item(s):	2018		2019		Change
Retainer⁽¹⁾- Board Service	$	50,000	$	70,000	$	20,000
Retainer⁽¹⁾ - Audit Committee	7,500		12,500		5,000
Retainer⁽¹⁾ - Compensation Committee	7,500		10,000		2,500
Retainer⁽¹⁾ - Nominating, Compliance and Corporate Governance Committee	7,500		5,000		(2,500		)
Chairperson Additional Retainer⁽¹⁾ - Audit Committee	30,000		12,500		(17,500		)
Chairperson Additional Retainer⁽¹⁾ - Compensation Committee	10,000		10,000		—
Chairperson Additional Retainer⁽¹⁾ - Nominating, Compliance and Corporate Governance Committee	7,500		10,000		2,500
Cash Fee Per Committee Meeting in Excess of First Eight Meetings⁽²⁾	1,000		—		(1,000		)
Restricted Share Units⁽³⁾⁽⁴⁾	$	140,000	$	180,000	$	40,000

______________


⁽¹⁾	All cash retainers are payable on a quarterly basis in arrears.


⁽²⁾	Non-employee directors will no longer receive a per meeting cash fee for each committee meeting attended in excess of the first eight meetings of each committee during the fiscal year.


⁽³⁾	Each year on the date of our annual meeting of stockholders, each non-employee director will be granted an RSU award with respect to shares of our common stock having a grant date fair value of $180,000, rounded down to the nearest whole share, which vests on the first anniversary of the grant date.


⁽⁴⁾	The Non-Employee Director Compensation Policy also provides that all RSU awards granted to the non-employee directors pursuant to the policy will vest in full in the event of a change in control of Masimo.

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Table of Contents		AUDIT RELATED MATTERS



AUDIT RELATED MATTERS



AUDIT COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES

The Audit Committee has adopted a policy for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, Grant Thornton LLP. The policy generally pre-approves specified services in the defined categories of audit, audit-related and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting. By the adoption of this policy, the Audit Committee has delegated the authority to pre-approve services to the Chairperson of the Audit Committee, subject to certain limitations.

The Audit Committee has determined that the rendering of the services other than audit services by Grant Thornton LLP is compatible with maintaining the independent registered public accounting firm’s independence.



PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table represents aggregate fees billed to Masimo for the fiscal years ended December 29, 2018 and December 30, 2017 by Grant Thornton LLP, our independent registered public accounting firm for such periods. All fees described below were approved by the Audit Committee.



	Fiscal Year Ended
	December 29, 2018		December 30, 2017
Audit Fees⁽¹⁾	$	2,111,428	$	2,035,933
Audit-Related Fees⁽²⁾	69,839		122,453
Tax Fees⁽³⁾	36,305		36,952
All Other Fees	—		—
Total Fees	$	2,217,572	$	2,195,338

______________

⁽¹⁾

Audit fees consist of fees billed for services rendered for the audit of our consolidated annual financial statements, including performance of the attestation procedures required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Grant Thornton LLP in connection with statutory and regulatory filings or engagements.

⁽²⁾

Audit-related fees consist of fees for assurance and related services that are traditionally performed by our independent registered public accounting firm and include fees reasonably related to the performance of the audit or review of our interim consolidated financial statements and not reported under the caption “Audit Fees.” For the fiscal years ended December 29, 2018 and December 30, 2017, these services included fees primarily for the audit of our retirement savings plan.


⁽³⁾	Tax fees consist of fees for preparation of our federal and state income tax returns, general consultation and international tax research.

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Table of Contents		AUDIT RELATED MATTERS



AUDIT COMMITTEE REPORT

Our Audit Committee is composed of “independent directors,” as determined in accordance with Nasdaq Listing Rule 5605(a)(2) and Rule 10A-3 of the Exchange Act. The Audit Committee operates pursuant to a written charter adopted by the Board, a copy of which may be viewed on our website at http://www.masimo.com/company/investors/corporate-governance/ under “Corporate Governance.”

As described more fully in its charter, the purpose of the Audit Committee is to assist our Board with its oversight responsibilities regarding the integrity of our financial statements, assessing the independent registered public accounting firm’s qualifications and independence and the performance of the persons performing internal audit duties for us and the independent registered public accounting firm. Management is responsible for the preparation, presentation and integrity of our financial statements as well as our financial reporting process, accounting policies, internal audit function, internal accounting controls and disclosure controls and procedures. The independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements in accordance with generally-accepted auditing standards and issuing a report. The Audit Committee’s responsibility is to monitor and oversee these processes. The following is the Audit Committee’s report submitted to the Board for fiscal 2018.

The Audit Committee has:


•	reviewed and discussed our audited financial statements with management and Grant Thornton LLP, the independent registered public accounting firm;


•	discussed with Grant Thornton LLP the matters required to be discussed by Auditing Standard No. 1301 Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board; and


•	received from Grant Thornton LLP the written disclosures and the letter regarding their communications with the Audit Committee concerning independence as required by the Public Company Accounting Oversight Board and discussed the auditors’ independence with them.

In addition, the Audit Committee has met separately with management and with Grant Thornton LLP as part of the committee’s quarterly meetings.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 29, 2018 for filing with the SEC. The Audit Committee also has selected and engaged Grant Thornton LLP as Masimo’s independent registered public accounting firm for the fiscal year ending December 28, 2019, and is seeking ratification of the selection by Masimo’s stockholders.



	Audit Committee
	H Michael Cohen
	Mr. Sanford Fitch
	Mr. Adam Mikkelson

This foregoing audit committee report is not “soliciting material,” is not deemed “filed” with the SEC, and shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing of ours under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent we specifically incorporate this report by reference.

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Table of Contents		EXECUTIVE COMPENSATION



EXECUTIVE COMPENSATION



COMPENSATION DISCUSSION AND ANALYSIS

The following Compensation Discussion and Analysis may contain statements regarding future individual and Company performance targets and goals. Any targets and goals so disclosed are referenced in the limited context of Masimo’s compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. Masimo specifically cautions investors not to apply these statements to other contexts.

This Compensation Discussion and Analysis describes the compensation program for our Principal Executive Officer, Principal Financial Officer and the next three most highly-compensated Executive Officers of the Company for fiscal 2018 (our “Named Executive Officers” or “NEOs”). During fiscal 2018, these individuals were:



Name		Position(s)
Joe Kiani		Chief Executive Officer & Chairman of the Board
Micah Young		Executive Vice President, Finance & Chief Financial Officer
Anand Sampath		Chief Operating Officer
Tao Levy		Executive Vice President, Business Development
Bilal Muhsin		Executive Vice President, Engineering, Marketing & Regulatory Affairs

This Compensation Discussion and Analysis describes the material elements of our executive compensation program for fiscal 2018. It also provides an overview of our executive compensation philosophy and objectives. Finally, it analyzes how and why the Compensation Committee of our Board (the “Compensation Committee”) arrived at the specific compensation decisions for our executive officers, including our NEOs, for fiscal 2018, including the key factors that the Compensation Committee considered in determining their compensation.

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Table of Contents		EXECUTIVE COMPENSATION



EXECUTIVE SUMMARY

Fiscal 2018 Performance Highlights

Some of our notable fiscal 2018 financial and operational highlights included the following GAAP and non-GAAP measures¹:



	l Total revenues, including royalties and other revenue of $858 million, which significantly exceeded our original fiscal 2018 financial guidance of $836 million.
	l Product revenue increased 12.4% to $830 million, or 11.9% on a constant currency basis¹, which significantly exceeded our original fiscal 2018 financial guidance of $808 million.
	l Shipments of noninvasive technology boards and monitors increased 14.1% to 231,700.
	l GAAP operating profit margin was 24.2%; l Non-GAAP operating profit margin¹ improved 100 basis points to 24.5%; l Non-GAAP product operating margin¹, excluding the impact of royalty and NRE, improved 340 bps to 22.0%.
	l GAAP EPS was $3.45; l Non-GAAP total EPS¹ increased 31.7% to $3.03; l Non-GAAP product EPS¹, excluding the impact of royalty and NRE, increased 53.2% to $2.65.
	l Adjusted free cash flow was $222 million or 26.0% of total revenue, which was driven by strong earnings performance and significant working capital improvements; l Days sales outstanding (“DSO”) improved 10 days to reach 45 days at the end of fiscal 2018; l Inventory days on hand (“DOH”) improved 10 days to reach 113 days at the end of fiscal 2018.

The following financial and operational highlights include GAAP and non-GAAP measures¹:

Product Revenue

Constant Currency Product Revenue Growth⁽¹⁾

Non-GAAP

EPS⁽¹⁾

Non-GAAP
EPS Growth⁽¹⁾

in Millions

% growth on a constant
currency basis

$ per diluted share

% growth

$830

11.9%

$3.03

31.7%

Goal: $808M

Goal: $2.80

____________


¹	Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

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Table of Contents		EXECUTIVE COMPENSATION

Our Total Stockholder Return (“TSR”) reflects our strong 2018 results. We delivered 26.6% TSR, outperforming the median of our proxy peer group.

Our financial performance in fiscal 2018 is a continuation of the strong financial performance that we have delivered over the previous two years, which is highlighted in the following charts ($ in millions, excluding per share amounts)¹:

________________________


^*	Constant currency growth


^**	Of total revenue




			Stock Price
			December 29, 2018
			$105.56





			Stock Price
			at IPO
			(August 2007)
			$17.00

____________


¹	Constant currency product revenue and non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

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Table of Contents		EXECUTIVE COMPENSATION

Total Stockholder Return

PEER GROUP INDEX



	1 Year	3 Year	5 Year
Masimo TSR (%)	26.6%	37.3%	29.4%
NASDAQ Composite TSR (%)	3.9%	9.8%	9.7%
NASDAQ Medical Equipment TSR (%)	13.6%	14.7%	15.1%

Several widely accepted measures of operating performance reflect the strength of our fiscal 2018 financial performance on both an absolute and relative basis, as compared to other companies that comprised our fiscal 2018 compensation peer group, which included other publicly-traded companies classified as health care equipment and supplies companies in Global Industry Classification Standard Code 351010 (see “—Competitive Positioning” on page 51 of this Proxy Statement for a discussion of our fiscal 2018 compensation peer group). Such operating measures for the fiscal years ended nearest to December 29, 2018 were as follows:



Measures of Operating Performance	Masimo Performance	Percentile Ranking Versus Fiscal 2018 Compensation Peer Group Companies
Return on Equity	20%	83rd
Return on Capital	20%	88th
Return on Assets	16.8%	93rd
Total Revenue Growth	8.6%	34th
Operating Margin	24.2%	87th

We believe that our strong fiscal 2018 performance results reflect the continued attention and focus by our executive team on delivering financial results that reflect not only revenue growth, but also strong financial returns based on our assets, equity, and capital structure. In fact, our fiscal 2018 performance results placed Masimo at the 93rdpercentile of our compensation peer group for return on assets, with three additional percentile achievements at or above the 80th percentile. We believe that our strong operating performance measures relative to our compensation peer group further demonstrates the success of our executive team’s efforts during fiscal 2018.

Results of Fiscal 2018 Stockholder Advisory Vote

At our 2018 Annual Meeting of Stockholders, we conducted a non-binding stockholder advisory vote on the fiscal 2017 compensation of our named executive officers (commonly known as a “Say-on-Pay” vote). Our stockholders approved our Say-on-Pay proposal with approximately 84% of the votes cast in favor of the fiscal 2017 compensation of our named executive officers. While this represented an increase in support for our executive compensation program compared to fiscal 2017, our Board believes that it remains important to be responsive to the concerns expressed by our stockholders about our executive compensation program. Accordingly, our Board took several additional actions in fiscal 2018 to further enhance the relationship between our performance and the compensation of our executive officers as described below.

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Table of Contents		EXECUTIVE COMPENSATION

Fiscal 2018 Executive Compensation Program Enhancements

As previously noted, the Compensation Committee values the feedback we receive from our stockholders. In response to that feedback, the Compensation Committee implemented certain changes to our executive compensation program for fiscal 2018 to further align the compensation of our executive officers with both short-term and long-term performance that supports our business strategy.

•

Annual Cash Bonus - The annual cash bonus plan is designed to provide performance-based compensation that will be earned only upon achieving various pre-established levels of Company financial performance. For fiscal 2018, the Compensation Committee selected 2018 Adjusted Product Revenue² and 2018 Non-GAAP EPS² as the performance measures for the funding percentages, each weighted equally, as the Compensation Committee believes these performance measures directly support both our short-term strategy and our long-term objective of creating sustainable stockholder value.

•

Long-Term Incentive (“LTI”) Compensation - Equity Awards - The Compensation Committee believed that a one-year performance period was appropriate for the 2017 PSU awards in light of the transition to our new 2017 Equity Incentive Plan. However, to further align the compensation of our executive officers with long-term performance, the Compensation Committee decided to extend the performance period for the 2018 PSU awards from one year to three years. Accordingly, the Compensation Committee granted LTI awards to our executive officers for fiscal 2018 consisting of the following mix of equity awards:


◦	25% in the form of stock options that vest annually over a five year period; and

◦

75% in the form of PSU awards that are earned, if at all, at the end of a three-year performance period based on our actual performance as measured against pre-established performance objectives. For the fiscal 2018 PSU awards, the Compensation Committee selected fiscal 2020 Adjusted Product Revenue² and fiscal 2020 Non-GAAP Operating Profit Margin² as the performance measures for the targeted PSU award percentages, each weighted equally.



Performance Stock Unit Awards
	2017	2018	2019	2020	2021
2017 Grant	1-Year Performance Period	Vest⁽¹⁾	Vest⁽¹⁾	Vest⁽¹⁾	Vest⁽¹⁾
2018 Grant		3-Year Performance Period			Vest⁽²⁾⁽³⁾

_______________

⁽¹⁾The 2017 Grant will vest annually at 20% per year for the next four years.

⁽²⁾ Assuming threshold performance level achieved.


⁽³⁾	The 2018 Grant will vest in fiscal 2021 based on actual performance during 2020. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2020 (or such later date determined by the Compensation Committee).

______________


²	Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

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Table of Contents		EXECUTIVE COMPENSATION

Previous Executive Compensation Program Enhancements

The foregoing actions are in addition to the following changes that have been made to our executive compensation program in earlier years:



Corporate Governance or Compensation Practice	Issues Previously Raised in Stockholder Outreach or Corporate Governance Reviews	Our Response	Effective Date of Response
Executive compensation	Equity compensation is not directly tied to long-term Company performance	Granted performance based equity tied to three-year Company performance	Fiscal 2018
Executive compensation	Equity compensation includes a large discretionary component	Granted performance based equity tied to defined target matrix	Fiscal 2017
Stockholders’ rights agreement	Presence of “poison pill” arrangement	Eliminated the “poison pill”	Fiscal 2016
Non-employee directors’ stock ownership policy	Absence of stock ownership policy for members of Board of Directors	Adopted stock ownership policy for non-employee members of our Board, which requires each non-employee director to own and hold shares of our common stock with a value equal to at least $250,000	Fiscal 2016
Term limits for service on Board of Directors	Absence of term limits for non-employee members of Board of Directors	Adopted term limit of 15 years for non-employee members of our Board	Fiscal 2015
Executive stock ownership policy	Absence of formal stock ownership policy for executive officers	Adopted stock ownership policy for executive officers, which requires our CEO to own and hold shares of our common stock with a value equal to at least six times his annual base salary and our other executive officers to own and hold shares of our common stock with a value equal to their annual base salary	Fiscal 2013
Compensation recovery (“clawback”) policy	Absence of formal compensation recovery (“clawback”) policy	Adopted formal compensation recovery (“clawback”) policy for executive officers	Fiscal 2012

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Table of Contents		EXECUTIVE COMPENSATION



Tax “gross-up” payments	Absence of formal policy restricting the provision of tax “gross-up” or similar payments in connection with a change in control of the Company	Adopted formal policy providing that the Compensation Committee will no longer approve any arrangements with executive officers that include a tax “gross-up” or similar provision that results in the Company paying excise taxes on change in control payments	Fiscal 2011
		In addition, our CEO’s employment agreement, entered into in November 2015, eliminated similar tax “gross-up” provisions. After the elimination of this provision, there are no longer any “gross-up” provisions at the Company	Fiscal 2015

We continue to seek and value the opinions of our stockholders, as well as the insights gained from the discussions we have with specific stockholders. The Compensation Committee finds these discussions to be helpful as it considers and adopts compensation policies affecting our executive officers, including our NEOs. We will continue to consider the outcome of future Say-on-Pay votes, as well as feedback received throughout the year when making compensation decisions for our executive officers.

Fiscal 2018 NEO Compensation Highlights

The Compensation Committee took the following key actions for fiscal 2018 with respect to the compensation of our NEOs:


•	Base Salaries - Increased the annual base salaries of our NEOs, other than Mr. Young, by 3.0%, which was consistent with the increases provided to our other employees as a whole.

•

Annual Cash Bonuses - Based on our Adjusted Product Revenues²and Non-GAAP EPS² for fiscal 2018, under our fiscal 2018 Executive Bonus Incentive Plan, the Company paid annual cash bonuses to our NEOs (other than our CEO) for fiscal 2018 ranging from $240,780 to $335,031, and an annual cash bonus in the amount of $1,595,383 to our CEO. An additional cash bonus of $55,000 was awarded to Mr. Muhsin in connection with the successful and timely completion of a strategic management business objective.

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Long-Term Incentive (“LTI”) Compensation - Equity Awards - In March 2018, granted options to purchase shares of our common stock to each of our NEOs (other than our CEO) with a grant date fair value of $298,458 and an option to purchase shares of our common stock to our CEO with a grant date fair value in the amount of $2,984,635, in all cases with an exercise price equal to the fair market value of our common stock on the date of grant. In March 2018, also granted PSU awards with a target grant date fair value of $899,933 to each of our NEOs (other than our CEO) and a PSU award with a target grant date fair value of $8,999,934 to our CEO.

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²	Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

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Pay-for-Performance

We believe that our fiscal 2018 executive compensation was closely aligned with our stockholders’ interests. While base salary and an annual cash bonus opportunity focused on the achievement of shorter-term goals, our equity awards, in the form of options to purchase shares of our common stock and PSU awards, provided for a longer-term compensation structure to focus attention on our long-term operating results and promote retention. Most of the fiscal 2018 annual compensation of our executive officers was directly tied, through performance-based annual cash bonuses and LTI compensation in the form of stock options and PSU awards, to the achievement of financial and operating results that increased stockholder value.

The following charts show the mix of our CEO’s and, on average, each NEO’s target total direct compensation for fiscal 2018, consisting of base salary, a target annual cash bonus opportunity and the grant date fair value of the equity awards granted during the year:



Total “at risk” compensation =	92.3%	Total “at risk” compensation =	79.0%

As illustrated above, the target total direct compensation opportunities of our NEOs are directly linked to our financial performance. We believe that our executive officers’ interests were and continue to be aligned with those of our stockholders given that a substantial portion of their target total direct compensation was “at-risk” and variable commensurate with our financial performance. We also believe that our executive compensation program appropriately emphasized performance-based compensation that rewarded our executive officers for delivering financial, operational and strategic results that met or exceeded pre-established goals through our annual cash bonus plan and the PSU awards under our LTI compensation plans. In addition, we further aligned the interests of our executive officers with those of stockholders and our long-term interests through executive stock ownership requirements. As of the date of this Proxy Statement, each of our executive officers to whom such stock ownership requirements are applicable was in compliance with such requirements.

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Executive Compensation Policies and Practices

We endeavor to maintain sound executive compensation policies and practices, including compensation-related corporate governance standards, consistent with our executive compensation philosophy. During fiscal 2018, we maintained the following executive compensation policies and practices, including both policies and practices we have implemented to drive performance and policies and practices that either prohibit or minimize behaviors that we do not believe serve our stockholders’ long-term interests:

What We Do


ü	Maintain an Independent Compensation Committee. The Compensation Committee consists solely of independent directors who establish our compensation practices.


ü	Compensation Committee Retains an Independent Compensation Advisor. The Compensation Committee has engaged its own compensation consultant to provide information, analysis and other advice on executive compensation independent of management.


ü	Annual Executive Compensation Review. At least once a year, the Compensation Committee conducts a review of our compensation strategy.


ü	Compensation At-Risk - Pay For Performance. Our executive compensation program is designed so that a significant portion of our executive officers’ compensation is “at-risk” based on corporate performance, to align the interests of our executive officers and stockholders.

Annual Compensation-Related Risk Assessment. The Compensation Committee considers our compensation-related risk profile to ensure that our compensation plans and arrangements do not create inappropriate or excessive risk and are not reasonably likely to have a material adverse effect on the Company. The Compensation Committee has determined that there are no risks arising from our compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on the Company.

Multi-Year Vesting Requirements. To align the interests of our executive officers and stockholders, the time-based stock-option awards granted to our executive officers vest over a five-year period. In 2018, we granted our executive officers PSU awards that will be earned, if at all, at the end of a three-year performance period based on our actual performance as measured against pre-established performance objectives relating to fiscal 2020 Adjusted Product Revenue² and fiscal 2020 Non-GAAP Operating Profit Margin².

Compensation Recovery (“Clawback”) Policy. We have adopted a compensation recovery (“clawback”) policy, which enables our Board to recover incentive compensation (including gains from equity awards) from our current and former executive officers that is based on erroneous data, received during the three-year period preceding the date on which we become required to prepare an accounting restatement; and is in excess of what would have been paid if calculated under the restatement.

Stock Ownership Policies. We have adopted stock ownership policies for our executive officers and the non-employee members of our Board under which they must accumulate and maintain, consistent with the terms of our stock ownership policy, shares of our common stock. For additional information, see “Ownership Of Our Stock - Stock Ownership Policies” starting on page 80 of this Proxy Statement.


ü	Annual Stockholder Advisory Vote on Named Executive Officer Compensation. We conduct an annual stockholder advisory vote on the compensation of our NEOs. The Compensation Committee considers the results of this advisory vote during the course of its deliberations on our executive compensation program.


ü	Stockholder Engagement that Includes our Compensation Committee Chair. We engage with our stockholders on executive compensation matters and include our Compensation Committee Chairperson in these engagement activities.

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²	Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

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What We Do Not Do


û	No Guaranteed Bonuses. We do not provide guaranteed bonuses to our executive officers.

No Special Executive Retirement Plans. We do not currently offer, nor do we have plans to offer, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our executive officers other than the plans and arrangements that are available to all employees. Our executive officers are eligible to participate in our defined contribution plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), on the same basis as our other employees.

No Hedging; Pledging Requires Pre-Approval. We prohibit our employees, including our executive officers, and the non-employee members of our Board from hedging our equity securities. In addition, all pledging of our equity securities by our executive officers and members of our Board must be pre-approved by the Compensation Committee and, as a condition to pre-approving any pledge of our equity securities, the executive officer or member of our Board seeking to pledge securities must clearly demonstrate his or her financial capacity to repay any loan for which securities will be pledged as collateral without resort to the securities to be pledged.


û	No Tax Payments on Perquisites. We do not provide any tax reimbursement payments (including “gross-ups”) to our executive officers on any perquisites or other personal benefits.


û	No Gross-Up Payments on Post-Employment Compensation Arrangements. We do not provide any tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a change in control of the Company.


û	No Special Welfare or Health Benefits. We do not provide our executive officers with any welfare or health benefit programs, other than participation in our broad-based employee programs.


û	No Stock Option Re-pricing. We do not permit options to purchase shares of our common stock to be re-priced to a lower exercise price without the approval of our stockholders. We have never repriced our stock options.



COMPENSATION PHILOSOPHY AND OBJECTIVES

The primary objective of our executive compensation program is to attract and retain a talented, entrepreneurial and creative team of executives who will provide leadership for our success in driving our technologies and products to the broadest number of patients, and in turn, creating sustainable long-term value. We seek to accomplish this objective in a way that is aligned with the long-term interests of our stockholders.

Compensation Philosophy

We operate within a very complex business environment, which requires a very strong management team. Our business model requires our management team to be adept at developing competitive products and sales/marketing strategies to support multiple customers, including hospitals, alternate care facilities and OEMs within multiple geographies. Many of our competitors have substantially greater capital resources, larger customer bases and larger sales forces than we do, and have ties with group purchasing organizations (“GPOs”) and other purchasers that are stronger than ours. In addition, the medical device industry is characterized by rapid product development and technological advances, which require our management team to be adept at managing these key areas of the business.

The Compensation Committee believes that it is critical to attract, develop and retain a highly-qualified management team with the experience, knowledge, expertise and vision capable of not only operating, but also excelling, in this complex and competitive business environment, including competing against larger competitors and developing and commercializing new products, new and improved technologies and new applications for our existing technologies.

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Compensation Objectives and Program Design

Our executive compensation program is intended to help us achieve and foster a goal-oriented, highly-motivated management team with a clear understanding of our business objectives and shared corporate values. To this end, the Compensation Committee believes that our executive compensation program should provide compensation that:


•	attracts and retains the best executive talent;


•	appropriately aligns our business objectives and stockholder interests;


•	maintains a reasonable balance across types and purposes of compensation, particularly with respect to fixed compensation objectives, short-term and long-term performance-based objectives and retention objectives;


•	motivates our executive officers to achieve our annual and long-term strategic goals and rewards performance based on the attainment of such goals;


•	appropriately considers risk and reward in the context of our business environment and long-range business plans;


•	recognizes individual value and contributions to our success;


•	considers but does not exclusively rely upon competitive market data; and


•	supports our succession planning objectives.

We seek to achieve these objectives in a way that is consistent with our long-term interests and our stakeholders, including our stockholders and employees. We structure the annual compensation of our executive officers, including our NEOs, using three principal elements: base salary, annual cash bonus opportunities and LTI compensation opportunities in the form of equity awards. While the pay mix may vary from year to year, the ultimate goal is to achieve our compensation objectives as described above. The relationships between each element and such compensation objectives are as follows:



Type	Component	Objective
Fixed Compensation	Base Salary	l	attracts and retains talent
		l	motivates strong business performance without encouraging excessive risk-taking



Performance-Based	Cash Incentives	l	attracts and retains talent
Compensation		l	drives the achievement of key business results on an annual or multi-year basis
		l	recognizes individuals based on their contributions
		l	performance-based and not guaranteed


	Equity Awards	l	attracts and retains talent
		l	drives the achievement of key long-term business results on an annual or multi-year basis
		l	directly ties the interests of executive officers to the interests of our stockholders
		l	recognizes individuals based on their continued contributions

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GOVERNANCE OF EXECUTIVE COMPENSATION PROGRAM

Role of Compensation Committee

The Compensation Committee discharges the responsibilities of our Board relating to the compensation of our executive officers. The Compensation Committee consists of directors who are “independent” directors as required by the Nasdaq listing standards and “non-employee directors” for purposes of Exchange Act Rule 16b-3. During fiscal 2018, the Compensation Committee was comprised of Messrs. Harkin, Mikkelson and Reynolds (the current Chair of the Compensation Committee).

The Compensation Committee has responsibility for overseeing our compensation and benefits policies generally, and overseeing, evaluating and approving the compensation plans, policies, and programs applicable to our CEO, as well as our other executive officers, including our other NEOs. In carrying out its responsibilities, the Compensation Committee evaluates our compensation policies and practices with a focus on the degree to which these policies and practices reflect our executive compensation philosophy, develops recommendations, makes decisions that it believes advances our philosophy and reviews the performance of our executive officers when making decisions with respect to their compensation.

The Compensation Committee reviews the base salary levels, annual cash bonus opportunities, and LTI compensation opportunities of our executive officers, including our NEOs, annually or more frequently as warranted. In making decisions about the compensation of our executive officers, the Compensation Committee relies on its general experience and subjective considerations of various factors, including the following:


•	our performance against the financial, operational and strategic objectives established by the Compensation Committee and our Board;


•	each individual executive officer’s skills, experience, and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;


•	the scope of each executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;