Edgar Filing: ADOBE INC.

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.)



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Adobe Inc.
(Name of Registrant as Specified In Its Charter)

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Adobe Inc.

345 Park Avenue

San Jose, California 95110

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held April 11, 2019

Dear Stockholders:

You are cordially invited to attend our 2019 Annual Meeting of Stockholders to be held on Thursday, April 11, 2019 at 9:00 a.m. local time at our Almaden Tower building located at 151 Almaden Boulevard, San Jose, California 95110. We are holding the meeting to:


1.	Elect eleven members of our Board of Directors named herein to serve for a one-year term;


2.	Approve a new 2019 Equity Incentive Plan to replace our 2003 Equity Incentive Plan;


3.	Ratify the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year ending on November 29, 2019;


4.	Approve, on an advisory basis, the compensation of our named executive officers;


5.	Consider and vote upon one stockholder proposal; and

6. Transact any other business that may properly come before the meeting.

If you owned our common stock at the close of business on February 13, 2019, you may attend and vote at the meeting. A list of stockholders eligible to vote at the meeting will be available for review during our regular business hours at our headquarters in San Jose, California for the ten days prior to the meeting for any purpose related to the meeting.

We are pleased to continue to take advantage of the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders over the Internet. As a result, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our 2018 Annual Report. We believe that this process allows us to provide our stockholders with the information they need in a timelier manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this proxy statement, our 2018 Annual Report and a form of proxy card. All stockholders who have previously requested a paper copy of our proxy materials will continue to receive a paper copy of the proxy materials by mail.

Your vote is important. Whether or not you plan to attend the meeting, we hope that you will vote as soon as possible. You may vote your shares via a toll-free telephone number or over the Internet. If you received a proxy card or voting instruction card by mail, you may submit your proxy card or voting instruction card by signing, dating and mailing your proxy card or voting instruction card in the envelope provided.



	Sincerely,

	Dana Rao Executive Vice President, General Counsel & Corporate Secretary

March 1, 2019

San Jose, California

ADOBE INC.

Proxy Statement

for the

Annual Meeting of Stockholders

To Be Held April 11, 2019

TABLE OF CONTENTS



	Page
Information Concerning Solicitation and Voting	1
Questions and Answers	1
Board of Directors and Corporate Governance	5
Director Compensation	20
Security Ownership of Certain Beneficial Owners and Management	24
Section 16(a) Beneficial Ownership Reporting Compliance	27
Equity Compensation Plan Information	28
Compensation Discussion and Analysis	30
Report of the Executive Compensation Committee	50
Executive Compensation	51
Summary Compensation Table	51
Grants of Plan-Based Awards in Fiscal Year 2018	53
Outstanding Equity Awards at 2018 Fiscal Year End	55
Option Exercises and Stock Vested in Fiscal Year 2018	56
Nonqualified Deferred Compensation	57
Change of Control	58
Compensation Committee Interlocks and Insider Participation	63
Transactions with Related Persons	63
Proposal 1—Election of Directors	64
Proposal 2—Approval of the Adobe Inc. 2019 Equity Incentive Plan	65
Proposal 3—Ratification of Appointment of Independent Registered Public Accounting Firm	73
Principal Accounting Fees and Services	74
Audit Committee Pre-Approval of Services Performed by Our Independent Registered Public Accounting Firm	74
Report of the Audit Committee	75
Proposal 4—Advisory Vote on Executive Compensation	77
Proposal 5—Stockholder Proposal Regarding Median Gender Pay Report	78
Householding of Proxy Materials	81
Annual Report	81
Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting to be Held on April 11, 2019	81
Stockholder Proposals to be Presented at Next Annual Meeting	82

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____________________

ADOBE INC.

____________________

PROXY STATEMENT

____________________

INFORMATION CONCERNING SOLICITATION AND VOTING

Our Board of Directors (the “Board”) is soliciting proxies for our 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”) to be held on Thursday, April 11, 2019, at 9:00 a.m. local time at our Almaden Tower building located at 151 Almaden Boulevard, San Jose, California 95110. Our principal executive offices are located at 345 Park Avenue, San Jose, California 95110, and our telephone number is (408) 536-6000.

The proxy materials, including this proxy statement, proxy card and our 2018 Annual Report, are being distributed and made available on or about March 1, 2019. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the 2019 Annual Meeting. Please read it carefully.

In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”), we have elected to provide our stockholders access to our proxy materials over the Internet. Accordingly, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed on or about March 1, 2019 to most of our stockholders who owned our common stock at the close of business on the record date, February 13, 2019. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent to them by following the instructions in the Notice.

The Notice will also provide instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election.

Choosing to receive future proxy materials electronically will allow us to provide you with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you and will conserve natural resources.

We will bear the expense of soliciting proxies. In addition to these proxy materials, our directors and employees (who will receive no compensation in addition to their regular salaries) may solicit proxies in person, by telephone or email. We have also retained Innisfree M&A Incorporated to help us solicit proxies from brokers, bank nominees and other institutional owners. We expect to pay Innisfree a fee of $20,000 for its services and will reimburse Innisfree for reasonable out-of-pocket expenses. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable charges and expenses incurred in forwarding soliciting materials to their clients.

QUESTIONS AND ANSWERS



Q:	Who may vote at the 2019 Annual Meeting?

A:	Our Board set February 13, 2019 as the record date for the meeting. If you owned our common stock at the close of business on February 13, 2019, you may attend and vote at the meeting. Each stockholder is entitled to one vote for each share of common stock held on all matters to be voted on. As of February 13, 2019, there were 489,114,862 shares of our common stock outstanding and entitled to vote at the meeting.

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Q:	What is the quorum requirement for the 2019 Annual Meeting?

A:	A majority of our outstanding shares entitled to vote as of the record date must be present at the meeting in order to hold the meeting and conduct business. This is called a quorum.

	Your shares will be counted as present at the meeting if you are entitled to vote and you:

	•	are present in person at the meeting; or
	•	have properly submitted a proxy card or voting instruction card, or voted by telephone or over the Internet.

	Both abstentions and broker non-votes (as described below) are counted for the purpose of determining the presence of a quorum.

	Each proposal identifies the votes needed to approve or ratify the proposed action.

Q:	What proposals will be voted on at the 2019 Annual Meeting?

A:	There are five proposals scheduled to be voted on at the meeting:

	•	Election of eleven members of our Board named herein to serve for a one-year term;

	•	Approval of the 2019 Equity Incentive Plan to replace our 2003 Equity Incentive Plan;

	•	Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending November 29, 2019;

	•	Approval, on an advisory basis, of the compensation of our named executive officers; and

	•	Consider and vote upon one stockholder proposal.

	We will also consider any other business that properly comes before the meeting. If any other matters are properly brought before the meeting, the persons named in the enclosed proxy card or voter instruction card will vote the shares they represent using their best judgment.

Q:	Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

A:	We are pleased to continue to take advantage of the SEC rule that allows companies to furnish their proxy materials over the Internet. Accordingly, we have sent to most of our stockholders of record and beneficial owners a notice regarding Internet availability of proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically on an ongoing basis. A stockholder’s election to receive proxy materials by mail or electronically by email will remain in effect until the stockholder terminates such election.

Q:	Why did I receive a full set of proxy materials in the mail instead of a notice regarding the Internet availability of proxy materials?

A:	We are providing stockholders who have previously requested to receive paper copies of the proxy materials with paper copies of the proxy materials instead of a Notice. If you would like to reduce the environmental impact and the costs incurred by us in mailing proxy materials, you may elect to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided with your proxy materials and on your proxy card or voting instruction card to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years. Alternatively, you can go to https://www.icsdelivery.com/adobe and enroll for online delivery of annual meeting and proxy voting materials.

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Q:	How can I get electronic access to the proxy materials?

A:	You can view the proxy materials on the Internet at http://www.proxyvote.com. Please have your 12 digit control number available. Your 12 digit control number can be found on your Notice. If you received a paper copy of your proxy materials, your 12 digit control number can be found on your proxy card or voting instruction card.

	Our proxy materials are also available on our Investor Relations website at http://www.adobe.com/adbe.

Q:	Can I vote my shares by filling out and returning the Notice?

A:	No. The Notice will, however, provide instructions on how to vote by Internet, by telephone, by requesting and returning a paper proxy card or voting instruction card, or by submitting a ballot in person at the meeting.

Q:	How may I vote my shares in person at the meeting?

A:	If your shares are registered directly in your name with our transfer agent, Broadridge Corporate Issuer Solutions, Inc., you are considered, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to vote in person at the meeting. If your shares are held in a brokerage account or by another nominee or trustee, you are considered the beneficial owner of shares held in street name. As the beneficial owner, you are also invited to attend the meeting. Since a beneficial owner is not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from your broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. The meeting will be held at our Almaden Tower building located at 151 Almaden Boulevard, San Jose, California 95110. If you need directions to the meeting, please contact Adobe Investor Relations at ir@adobe.com.

Q:	How can I vote my shares without attending the meeting?

A:	Whether you hold shares directly as a registered stockholder of record or beneficially in street name, you may vote without attending the meeting. You may vote by granting a proxy or, for shares held beneficially in street name, by submitting voting instructions to your broker, trustee or nominee. In most cases, you will be able to do this by telephone, by using the Internet or by mail if you received a printed set of the proxy materials.

	By Telephone or Internet. If you have telephone or Internet access, you may submit your proxy by following the instructions provided in the Notice, or if you received a printed version of the proxy materials by mail, by following the instructions provided with your proxy materials and on your proxy card or voting instruction card. Delaware law specifically permits electronically transmitted proxies as long as they contain or are submitted with information from which the inspector of elections can determine that the proxy was authorized by the stockholder. The Internet voting procedures for the 2019 Annual Meeting are designed to authenticate each stockholder by use of a control number to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded.

	By Mail. If you received printed proxy materials, you may submit your proxy by mail by signing your proxy card if your shares are registered or, for shares held beneficially in street name, by following the voting instructions included by your stockbroker, trustee or nominee, and mailing it in the enclosed envelope. If you provide specific voting instructions, your shares will be voted as you have instructed.

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Q:	What happens if I do not give specific voting instructions?

A:	Registered Stockholder of Record. If you are a registered stockholder of record and you indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or you sign, date and return a proxy card without giving specific voting instructions, then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement and as the proxy holders may determine in their best judgment with respect to any other matters properly presented for a vote at the meeting.

	Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, the organization that holds your shares may generally vote at its discretion on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization will inform the inspector of elections that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.” In tabulating the voting results for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the meeting, assuming that a quorum is obtained.

Q:	Which ballot measures are considered “routine” or “non-routine”?

A:	The ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending November 29, 2019 (Proposal 3), is considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal 3. The election of directors (Proposal 1), the approval of the 2019 Equity Incentive Plan (Proposal 2), the advisory vote on executive compensation (Proposal 4) and the vote on the stockholder proposal (Proposal 5) are matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and, therefore, there may be broker non-votes on Proposals 1, 2, 4 and 5.

Q:	How can I revoke my proxy and change my vote?

A:	You may revoke your proxy and change your vote at any time before the final vote at the meeting. If you are a stockholder of record, you may do this by signing and submitting a new proxy card with a later date; by voting by telephone or by using the Internet, either of which must be completed by 11:59 p.m. Eastern Time on April 10, 2019 (your latest telephone or Internet proxy is counted); or by attending the meeting and voting in person by ballot. Attending the meeting alone will not revoke your proxy unless you specifically request your proxy to be revoked. If you hold shares through a bank or brokerage firm, you must contact that bank or firm directly to revoke any prior voting instructions.

Q:	Where can I find the voting results of the meeting?

A:	The preliminary voting results will be announced at the meeting. The final voting results will be reported in a Current Report on Form 8-K, which will be filed with the SEC within four business days after the meeting. If our final voting results are not available within four business days after the meeting, we will file a Current Report on Form 8-K reporting the preliminary voting results and subsequently file the final voting results in an amendment to the Current Report on Form 8-K within four business days after the final voting results are known to us.

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Our Board of Directors

Adobe’s stockholders elect the company’s Board members annually, and ten of our current directors were elected by our stockholders to serve for a term expiring at the 2019 Annual Meeting. David Ricks was appointed to the Board on April 12, 2018, and Kathleen Oberg and Dheeraj Pandey were appointed to the Board on January 22, 2019. Edward Barnholt and Robert Burgess are not seeking re-election to the Adobe Board effective as of the 2019 Annual Meeting. We thank Messrs. Barnholt and Burgess for their contributions and many years of service to Adobe during periods of significant company transformation and growth.

The following tables and charts set forth the general criteria the Board has identified when it evaluates the composition of the Board and Board member nominees, the ages, tenure and minority representation of nominees, and a summary of the attributes and experience of the nominees based on the biographical information listed below for each them.

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The following table highlights the number of our director nominees who share certain categories of attributes and experiences that uniquely qualify them to serve on our Board of Directors. We believe the diversity of experiences and qualifications represented by our directors is critical to Adobe’s success. We have narrowly tailored and defined these categories, although inclusion on certain categories will in many cases provide experience and expertise covered by other categories. For example, directors with CEO experience will also have gained significant exposure to operational and regulatory issues.

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Nominees for Election for a One-Year Term Expiring in 2020



Name	Principal Occupation During Last Five Years and Relevant Experience, Qualifications, Attributes or Skills	Age	Director Since

Amy Banse	Ms. Banse serves as Managing Director and Head of Funds, Comcast Ventures and Senior Vice President, Comcast Corporation, a global media and technology company. Prior to this role, she was President of Comcast Interactive Media (CIM), a division of Comcast responsible for developing Comcast's online strategy and operating Comcast's digital properties, including Fandango, Xfinity.com and Xfinitytv.com. Ms. Banse joined Comcast in 1991 and spent the early part of her career at Comcast overseeing the development of Comcast's cable network portfolio. Ms. Banse serves on the board of directors of The Clorox Company, a multinational manufacturer and marketer of consumer and professional products. She received a B.A. from Harvard and a J.D. from Temple University School of Law.	59	2012

	As the Managing Director and Head of Funds for Comcast Ventures and Senior Vice President, Comcast Corporation, as well as her prior executive positions, including President of CIM, Ms. Banse has extensive executive leadership experience, as well as extensive knowledge of financial and strategic issues. She also brings to the Board a deep expertise in global media and technology organizations in online business.

Frank Calderoni	Mr. Calderoni currently serves as the President and Chief Executive Officer of Anaplan, a planning and performance management platform provider. Prior to joining Anaplan in January 2017, he served as Executive Vice President, Operations and Chief Financial Officer at Red Hat from June 2015 to December 2016. Until June 2015, he was an Executive Advisor at Cisco, a designer, manufacturer and seller of IP-based networking and other products related to the communications and information technology industry. From 2008 to January 2015, Mr. Calderoni served as Executive Vice President and Chief Financial Officer at Cisco, managing the company's financial strategy and operations. He joined Cisco in 2004 from QLogic Corporation, a storage networking company where he was Senior Vice President and Chief Financial Officer. Prior to that, he was Senior Vice President, Finance and Administration and Chief Financial Officer for SanDisk Corporation, a flash data storage company. Before joining SanDisk, Mr. Calderoni spent 21 years at IBM, a global services, software and systems company, where he became Vice President and held controller responsibilities for several divisions within the company. Mr. Calderoni currently serves on the boards of Palo Alto Networks, Inc., a network and enterprise security company, and Anaplan, Inc., a planning and performance management platform provider. Mr. Calderoni holds a B.S. in Accounting and Finance from Fordham University and an M.B.A. in Finance from Pace University.	61	2012

	As a result of his position at Anaplan, as well as his past service as chief financial officer of publicly traded global technology companies, Mr. Calderoni brings to the Board abundant financial expertise that includes extensive knowledge of the complex financial and operational issues facing large global companies, and a deep understanding of accounting principles and financial reporting rules and regulations. He provides the Board and Audit Committee with significant insight into the preparation of financial statements and knowledge of audit procedures. Through his senior executive positions, Mr. Calderoni has demonstrated his global leadership and business acumen.

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Name	Principal Occupation During Last Five Years and Relevant Experience, Qualifications, Attributes or Skills	Age	Director Since

James Daley	Mr. Daley has served as our Lead Director since January 2017. Mr. Daley has been an independent consultant since his retirement in July 2003 from Electronic Data Systems Corporation (EDS), an information technology service company. Mr. Daley served as Executive Vice President and Chief Financial Officer of EDS from March 1999 to February 2003, and as its Executive Vice President of Client Solutions, Global Sales and Marketing from February 2003 to July 2003. From 1963 until his retirement in 1998, Mr. Daley was with Price Waterhouse, where he served as Co-Chairman-Operations and Vice-Chairman-International from 1988 to 1998. From 1985 to 1997 he was a member of the U.S. firm's Policy Board and from 1990 to 1998 a member of the firm's World Board. Mr. Daley holds a B.B.A. from Ohio University where he served for over twenty years as a Trustee of The Ohio University Foundation, including Chairing the Foundation's Board of Trustees from 1997 to 2002. Mr. Daley also served as a member of the board of directors of The Guardian Life Insurance Company of America for seventeen years where he Chaired the Board's Human Resources & Compensation Committee and the Product & Distribution Committee for a number of years.	77	2001

	With more than 35 years of service with the international accounting firm Price Waterhouse, as well as his past service as the Chief Financial Officer of a publicly traded global technology company, and his board level experience with Price Waterhouse, The Guardian Life Insurance Company of America and The Ohio University Foundation, Mr. Daley brings to the Board extensive expertise related to the business, operational and financial issues facing large global technology corporations, as well as a comprehensive understanding of international business, regulatory compliance and corporate governance matters.

Laura Desmond	Ms. Desmond has been a member of Adobe’s Board of Directors since 2012. She is currently Founder and CEO of Eagle Vista Partners, a strategic advisory and investment firm focused on marketing and digital technology, and an Operating Partner in the Media & Technology Practice at Providence Equity Partners, a private equity investment firm. Prior to this, she was the Chief Revenue Officer of Publicis Groupe, a group of global marketing, communication and business transformation companies from December 2016 to December 2017. From 2008 to December 2016 she was the Global Chief Executive Officer of Starcom MediaVest Group (SMG), a global marketing and media services company which is part of the Publicis Groupe. Prior to her appointment as Global Chief Executive Officer in 2008, Ms. Desmond was Chief Executive Officer of SMG - The Americas from 2007 to 2008 where she managed a network spanning the United States, Canada and Latin America. She was Chief Executive Officer of MediaVest, based in New York, from 2003 to 2007, and from 2000 to 2002 she was Chief Executive Officer of SMG's Latin America group. She holds a B.B.A. in Marketing from the University of Iowa.	53	2012

	With her experience as Chief Revenue Officer of Publicis Groupe and Global Chief Executive Officer of SMG, Ms. Desmond brings to the Board a deep expertise in global media and marketing technology organizations, leadership capabilities and business acumen. In addition, her past service on other boards gives her valuable knowledge and perspective. As an expert in the marketing space, Ms. Desmond speaks frequently with Adobe’s management outside of scheduled board meetings to provide specific insight regarding Adobe’s Digital Experience business.

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Name	Principal Occupation During Last Five Years and Relevant Experience, Qualifications, Attributes or Skills	Age	Director Since

Charles Geschke	Dr. Geschke was a founder of Adobe and served as our Chairman of the Board from September 1997 to January 2017, sharing that office with John E. Warnock. Dr. Geschke was our Chief Operating Officer from December 1986 until July 1994 and our President from April 1989 until his retirement in April 2000. He holds a Ph.D. in Computer Science from Carnegie Mellon University as well as an M.S. in Mathematics and an A.B. in Classics, both from Xavier University.	79	1983

	As a co-founder of Adobe and its former President and Chief Operating Officer, Dr. Geschke has experience growing Adobe from a start-up to a large publicly traded company. His nearly 20 years of executive and technological leadership at Adobe provide the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As former Co-Chairman of the Board, Dr. Geschke has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.

Shantanu Narayen	Mr. Narayen currently serves as our President, Chief Executive Officer and Chairman of the Board. He joined Adobe in January 1998 as Vice President and General Manager of our engineering technology group. In January 1999, he was promoted to Senior Vice President, Worldwide Products, and in March 2001 he was promoted to Executive Vice President, Worldwide Product Marketing and Development. In January 2005, Mr. Narayen was promoted to President and Chief Operating Officer, and effective December 2007, he was appointed our Chief Executive Officer and joined our Board of Directors. In January 2017, he was named our Chairman of the Board. Mr. Narayen serves as lead independent director on the board of directors of Pfizer, a multinational pharmaceutical corporation. Mr. Narayen holds a B.S. in Electronics Engineering from Osmania University in India, a M.S. in Computer Science from Bowling Green State University and an M.B.A. from the Haas School of Business, University of California, Berkeley.	55	2007

	As our President, Chief Executive Officer, Chairman of the Board and as an Adobe employee for more than 20 years, Mr. Narayen brings to the Board extensive leadership and industry experience, including a deep knowledge and understanding of our business, operations and employees, the opportunities and risks faced by Adobe, and management’s current and future strategy and plans. In addition, his service on other boards gives him a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.

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Name	Principal Occupation During Last Five Years and Relevant Experience, Qualifications, Attributes or Skills	Age	Director Since

Kathleen Oberg	Ms. Oberg currently serves as Executive Vice President and Chief Financial Officer for Marriott International, Inc. Beginning in 2013 and until January 2016, Ms. Oberg served as Chief Financial Officer for Ritz-Carlton. From 2008 until she joined the Ritz-Carlton in 2013, Ms. Oberg served as Marriott’s Senior Vice President, Corporate Development Finance and from 2006 to 2008, she served as Marriott’s Senior Vice President, International Project Finance and Asset Management for Europe, the Middle East and Africa, and as a senior finance executive for the region. Ms. Oberg’s career with Marriott began in 1999 where she served as a member of its Investor Relations group. Prior to initially joining Marriott in 1999, Ms. Oberg held various financial leadership positions with Sodexo, Sallie Mae, Goldman Sachs and Chase Manhattan Bank. Ms. Oberg holds a B.S. in Commerce with concentrations in Finance/Management Information Systems from the University of Virginia, McIntyre School of Business and an M.B.A from the Stanford University Graduate School of Business.	58	2019

	As a result of her position at Marriott and her past service in financial leadership positions, Ms. Oberg brings to the Board financial expertise, including an in-depth knowledge of financial reporting rules and regulations, and accounting principles. Her deep understanding of the multifaceted financial and operational issues affecting large global organizations and leadership experience with development projects and merger and acquisition opportunities brings the Board and Audit Committee valuable insight into preparing long-range plans, annual budgets, and capital allocation strategy.

Dheeraj Pandey	Mr. Pandey co-founded Nutanix in 2009 and currently serves as its Chief Executive Officer and as the Chairman of its board of directors. He also served as the President of Nutanix from September 2009 until February 2016. From February 2009 to September 2009, Mr. Pandey served as Vice President, Engineering at Teradata Corporation (fka Aster Data Systems), a data management and analysis software company, and from September 2007 to February 2009 as its Director of Engineering. Prior to joining Teradata, Mr. Pandey served in software engineering roles at Oracle Corporation, Zambeel, Inc., and Trilogy Software, Inc. Mr. Pandey holds a B. of Tech. in Computer Science from the Indian Institute of Technology, Kanpur, and a M.S. in Computer Science from the University of Texas at Austin. He was a Graduate Fellow of Computer Science in the University of Texas at Austin Ph.D. program.	43	2019

	With his experience in the technology industry as a global executive leader and technologist, including co-founding and serving as Chief Executive Officer, Chairman, and President of Nutanix and as a software engineer at various companies over the course of nearly 20 years, Mr. Pandey brings to the Board engineering expertise, financial acumen, an in-depth understanding of the technology landscape, and valuable insight on growing a company from a start-up to a publicly traded company.

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Name	Principal Occupation During Last Five Years and Relevant Experience, Qualifications, Attributes or Skills	Age	Director Since

David Ricks	Mr. Ricks currently serves as Chief Executive Officer of Eli Lilly and Company and became Chairman of the Eli Lilly and Company board of directors in June 2017. Prior to January 2017, Mr. Ricks served as President of Lilly Bio-Medicines. From 2009 to 2012, he served as President of Lilly USA, the company’s largest affiliate. Mr. Ricks served as President and General Manager of Lilly China, operating in one of the world’s fastest-growing emerging markets, from 2008 to 2009. He was general manager of Lilly Canada from 2005 to 2008, after roles as Director of Pharmaceutical Marketing and National Sales Director in Canada. Mr. Ricks joined Eli Lilly and Company in 1996 as a Business Development Associate and held several management roles in U.S. marketing and sales before moving to Lilly Canada. He currently serves on the board of directors of Elanco Animal Health, Inc., an animal health care company providing products and services for companion and food animals. Mr. Ricks earned a Bachelor of Science from Purdue University in 1990 and an MBA from Indiana University in 1996.	51	2018

	As a result of his years of global experience as President, and recently, as CEO of Eli Lilly and Company, Mr. Ricks brings to the Board executive leadership, marketing, sales and financial expertise, business acumen and relevant worldwide operational insight.

Daniel Rosensweig	Mr. Rosensweig is currently President, Chief Executive Officer and Chairman of the board of directors of Chegg.com, an online textbook rental company. Prior to joining Chegg.com in February 2010, Mr. Rosensweig served as President and Chief Executive Officer of RedOctane, a business unit of Activision Publishing, a developer, publisher and distributor of interactive entertainment and leisure products. Prior to joining RedOctane in March 2009, Mr. Rosensweig was an Operating Principal at the Quadrangle Group, a private investment firm. Prior to joining the Quadrangle Group in August 2007, Mr. Rosensweig served as Chief Operating Officer of Yahoo!, which he joined in April 2002. Prior to joining Yahoo!, Mr. Rosensweig was President of CNET Networks, Inc., an interactive media company, which he joined in October 2000. Mr. Rosensweig served for 18 years with Ziff-Davis, an integrated media and marketing services company, including roles as President and Chief Executive Officer of its subsidiary ZDNet, from 1997 until 2000 when ZDNet was acquired by CNET. Mr. Rosensweig served on the board of directors of Time Inc., a media company comprised of many global news an culture brands, from June 2017 to January 2018. Mr. Rosensweig holds a B.A. in Political Science from Hobart College.	57	2009

	As a result of his current executive position at Chegg.com, as well as his former positions as a senior executive at global media and technology organizations, Mr. Rosensweig provides the Board with extensive and relevant executive leadership, worldwide operations and technology industry experience.

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Name	Principal Occupation During Last Five Years and Relevant Experience, Qualifications, Attributes or Skills	Age	Director Since


John Warnock	Dr. Warnock was a founder of Adobe and was our Chairman of the Board from April 1989 to January 2017. From September 1997 to January 2017, he shared the position of Chairman with Dr. Geschke. Dr. Warnock served as our Chief Executive Officer from 1982 until December 2000. From December 2000 until his retirement in March 2001, Dr. Warnock served as our Chief Technical Officer. Dr. Warnock currently serves as Chairman of the board of Salon Media Group. Dr. Warnock holds a Ph.D. in Electrical Engineering, an M.S. in Mathematics, and a B.S. in Mathematics and Philosophy from the University of Utah.	78	1983

	As a co-founder of Adobe and its former Chief Executive Officer, Chief Technical Officer and Chairman of the Board, Dr. Warnock has experience growing Adobe from a start-up to a large publicly traded company. His nearly 20 years of executive and technological leadership at Adobe provide the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As former Co-Chairman of the Board of Directors of Adobe and Chairman of the board of Salon, Dr. Warnock has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.

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Independence of Directors

As required by the NASDAQ listing standards, a majority of the members of our Board must qualify as “independent,” as affirmatively determined by our Board. Our Board consults with our legal counsel to ensure that its determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in the applicable NASDAQ listing standards.

After review of all relevant transactions and relationships between each director, any of their family members, Adobe, our executive officers and our independent registered public accounting firm, the Board has affirmatively determined that a majority of our Board is comprised of independent directors. Our current independent directors are: Ms. Banse, Mr. Barnholt, Mr. Burgess, Mr. Calderoni, Mr. Daley, Ms. Desmond, Dr. Geschke, Ms. Oberg, Mr. Pandey, Mr. Ricks, Mr. Rosensweig and Dr. Warnock.

Committees of the Board

The Audit Committee’s role includes assisting the Board in fulfilling its responsibilities related to the oversight of our financial, accounting and reporting processes; our system of internal accounting and financial controls; our enterprise risk management program; and our compliance with related legal, regulatory and ethical requirements. The Audit Committee’s responsibilities include:


•	the appointment, compensation, engagement, retention, termination and services of our independent registered public accounting firm, including conducting a review of its independence;


•	reviewing and approving the planned scope of our annual audit;


•	overseeing our independent registered public accounting firm’s audit work;


•	reviewing and pre-approving any audit and non-audit services that may be performed by our independent registered public accounting firm;


•	reviewing with management and our independent registered public accounting firm the adequacy of our internal financial and disclosure controls;


•	reviewing our critical accounting policies and the application of accounting principles;


•	monitoring the rotation of partners of our independent registered public accounting firm on our audit engagement team as required by regulation;


•	reviewing our policies and practices with respect to swaps transactions;


•	overseeing Adobe’s worldwide investment policy;


•	overseeing the performance of our internal audit function;


•	establishing procedures, as required under applicable regulation, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;


•	reviewing relevant elements of Adobe’s enterprise risk management program, including elements related to cyber-security, privacy, and Adobe’s information and technology security policies; and


•	reviewing our annual audited financial statements and quarterly financial statements with management and our independent registered public accounting firm.

The Audit Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. See “Report of the Audit Committee” contained in this proxy statement.

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Each member of the Audit Committee meets the independence criteria prescribed by applicable regulations and the rules of the SEC for audit committee membership and is an “independent director” within the meaning of applicable NASDAQ listing standards. Each Audit Committee member meets NASDAQ’s financial sophistication requirements, and the Board has further determined that each Audit Committee member is an “audit committee financial expert” as such term is defined in Item 407(d) of Regulation S-K promulgated by the SEC. The Audit Committee acts pursuant to a written charter, which complies with the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules of the SEC and NASDAQ, a copy of which can be found on our website at http://www.adobe.com/investor-relations/governance.html.

The Nominating and Governance Committee’s primary purpose is to evaluate candidates for membership on our Board and make recommendations to our Board regarding corporate governance matters and candidates for director. The committee also:


•	makes recommendations with respect to the composition of our Board and its committees;


•	reviews and makes recommendations regarding the functioning of our Board as an entity;


•	recommends corporate governance principles applicable to Adobe;


•	manages periodic review, discussion and evaluation of the performance of our Board, its committees and its members;


•	assesses the independence of our directors;


•	reviews and approves or disapproves any related-person transaction as defined under Item 404 of Regulation S-K, after examining each such transaction for potential conflicts of interest and other improprieties; and


•	reviews the board memberships of other entities held by members of the Board and approves such memberships for our executive officers.

If requested by the Board, the Nominating and Governance Committee also may assist our Board in reviewing and assessing management development and succession planning for our executive officers. The Nominating and Governance Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. The members of our Nominating and Governance Committee are all independent directors within the meaning of applicable NASDAQ listing standards. The Nominating and Governance Committee operates pursuant to a written charter, a copy of which can be found on our website at http://www.adobe.com/investor-relations/governance.html.

In carrying out its function to nominate candidates for election to our Board, the Nominating and Governance Committee considers the criteria, attributes and experience discussed above in “Our Board of Directors.” In reviewing potential candidates, the Nominating and Governance Committee will also consider all relationships between any proposed nominee and any of Adobe’s stockholders, competitors, customers, suppliers or other persons with a relationship to Adobe. In addition, the Nominating and Governance Committee believes it is appropriate for at least one member of our Audit Committee to meet the criteria for an “audit committee financial expert” as defined by SEC rules, that each member of our Executive Compensation Committee be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the “Exchange Act”) and an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and that a majority of the members of our Board meet the definition of “independent director” within the meaning of applicable NASDAQ listing standards.

The Nominating and Governance Committee, from time to time, retains for a fee one or more third-party search firms to identify suitable candidates. In recruiting Ms. Oberg and Mr. Pandey, the Nominating and Governance Committee retained a search firm to help identify director prospects, perform candidate outreach, assist in reference checks, and provide other related services.

The Nominating and Governance Committee considers stockholder recommendations for candidates for the Board of Directors. The name of any recommended candidate for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve if elected, and evidence of the recommending stockholder’s ownership of company stock must be sent to the attention of our Corporate Secretary.

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In August 2016, the Board amended our Bylaws to implement proxy access. Under Article III, Section 6 of our Bylaws, a stockholder (or group of up to twenty stockholders) owning at least three percent of Adobe’s outstanding shares of common stock continuously for at least three years may nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two directors or twenty percent of the Board, provided the stockholders and nominees satisfy the requirements specified in our Bylaws. In addition to proxy access nominations, any of our stockholders may nominate one or more persons for election as a director at our annual meeting of stockholders. In either case, a stockholder who wishes to formally nominate a candidate must comply with the notice, information and consent provisions contained in our Bylaws, including that the notice must include information required pursuant to Section 14 of the Exchange Act. In order for the proxy access nomination to be timely for our 2020 Annual Meeting of Stockholders, a stockholder’s notice to our Corporate Secretary must be received at our principal executive offices no later than November 2, 2019 nor earlier than October 3, 2019. In order for a stockholder nomination of a director candidate that is not a proxy access nomination to be timely for our 2020 Annual Meeting of Stockholders, a stockholder’s notice to our Corporate Secretary must be received at our principal executive offices no later than December 2, 2019 nor earlier than November 2, 2019. Our Bylaws specify additional requirements if stockholders wish to nominate directors at special meetings of stockholders.

The Nominating and Governance Committee will consider all candidates identified through the processes described above, and will evaluate each candidate, including incumbents, based on the same criteria.

The Executive Compensation Committee sets and administers the policies that govern, and reviews and approves, all compensation of our executive officers, including cash, equity and other compensation programs. The Executive Compensation Committee is also responsible for making recommendations to the Board concerning Board and committee compensation. The Executive Compensation Committee may also review and approve equity-based compensation grants to our non-executive officer employees and consultants; however, restricted stock unit grants to our non-executive officer employees are generally approved by a Management Committee for Employee Equity Awards appointed by the Board and currently consisting of our Chief Executive Officer and Chief Human Resources Officer within parameters established by the Executive Compensation Committee. See “Granting Guidelines for Equity Compensation” and “Role of Our Executive Compensation Committee, External Compensation Consultant and Management” under “Compensation Discussion and Analysis—Equity-Related Policies” for additional information. In addition, the Executive Compensation Committee reviews our stock ownership guidelines for senior management, which are described below in “Compensation Discussion and Analysis—Equity-Related Policies—Stock Ownership Guidelines.”

The Executive Compensation Committee is also responsible for oversight of our overall compensation plans and benefit programs, as well as the approval of all employment, severance and change of control agreements and plans applicable to our executive officers. In connection with this oversight, the Executive Compensation Committee reviews and approves annual performance objectives and goals relevant to executive officers. The Executive Compensation Committee oversees all matters related to stockholder approval of executive compensation, including the advisory vote on executive compensation, and evaluates the risk-taking incentives and risk management of our compensation policies and practices. The Executive Compensation Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. The Executive Compensation Committee assesses the independence and any potential conflicts of interest of compensation advisors in accordance with applicable law and NASDAQ listing standards. The members of the Executive Compensation Committee are all independent directors within the meaning of applicable NASDAQ listing standards, and all of the members are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and “outside directors” for purposes of Section 162(m) of the Code. The Executive Compensation Committee acts pursuant to a written charter, a copy of which can be found on our website at http://www.adobe.com/investor-relations/governance.html.

Risk Analysis of Performance-Based Compensation Plans

Our Executive Compensation Committee believes that our employee compensation programs do not encourage excessive and unnecessary risk-taking that would be reasonably likely to have a material adverse effect on Adobe. The Executive Compensation Committee oversaw the performance of a risk assessment of our compensation programs as generally applicable to our employees to ascertain any potential material risks that may be created by our compensation programs. The Executive Compensation Committee considered the findings of the assessment conducted internally and concluded that our compensation programs are designed and administered with the appropriate balance of risk and reward in relation to our overall business strategy and do not encourage employees to take unnecessary or excessive risks, and that the level of risk that they might encourage is not reasonably likely to materially harm our business or financial condition, after considering mitigating controls.

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Although the majority of target total direct compensation provided to our executive officers is incentive based, the Executive Compensation Committee believes that our executive compensation programs have been designed with appropriate controls and other mitigating measures to prevent excessive and unnecessary risk taking. Incentive-based employee compensation programs typically make up a smaller percentage of our other employees’ overall compensation and therefore provide less motivation for risk taking. The design of these compensation programs is intended to encourage our employees to remain focused on both short- and long-term operational and financial goals of the company in several key respects:

•

While our Executive Incentive Plans for fiscal years 2018 and 2019 focus on the achievement of bookings and recurring revenue targets, they also include an individual performance component with objectives for many of our executives relating to strategic objectives; together with our long-term equity incentive programs that motivate our executives to build stockholder value, our fiscal year 2018 and 2019 compensation programs (which are described further below in the “Compensation Discussion and Analysis” section of this proxy statement) continue to provide balanced objectives while driving our short- and long-term business strategies.

•

Our Performance Share Program is based on Adobe’s total stockholder return (“TSR”) over a three-year period relative to the companies in the NASDAQ 100 Index, so unlike stock options, the program will not reward short-term spikes in the price of our stock, but instead requires sustained, measurable performance over a three-year period. In the event Adobe’s TSR places in the bottom 25% relative to the companies in the NASDAQ 100 Index, no shares will be awarded, meaning our executives will be rewarded only when Adobe’s stock is performing adequately relative to the market.


•	Our system of internal controls over financial reporting, standards of business conduct and compliance programs, among other things, reduce the likelihood of manipulation of our financial performance to enhance payments under our bonus and sales compensation plans.


•	Our performance-based plans include a 200% cap of the target awards. We believe this cap limits the incentive for excessive risk-taking by our employees.

•

For our non-executive employees, equity incentive awards are solely in the form of restricted stock units (“RSUs”) that vest over three or four years. Annual equity incentive awards for our executive officers and certain senior employees for fiscal year 2018 include RSUs that vest one-third each year over three years and performance shares that vest 100% after a three-year cliff, encouraging executive officers and such other employees to focus on sustained stock price appreciation over the long term. For calendar year 2019, the Executive Compensation Committee adopted a new general vesting schedule in which the RSUs vest 25% upon the one-year anniversary of the vesting commencement date, and 6.25% quarterly thereafter. Stock options are not granted to members of our Board, our executive officers or any other employees generally, which our Executive Compensation Committee believes further mitigates the potential value of unnecessary or excessive risk-taking.


•	Our officers at the senior vice president level and above are all subject to, and in compliance with, our stock ownership guidelines, described under “Compensation Discussion and Analysis—Equity-Related Policies—Stock Ownership Guidelines,” which encourage a robust level of stock ownership aligning our executives’ long-term interests with those of our stockholders.


•	Our Insider Trading Policy prohibits all employees and officers from pledging shares, engaging in short sales or hedging transactions involving Adobe’s securities.


•	We have a clawback policy for certain performance-based incentive compensation of our executive officers.

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Fiscal Year 2018 Meetings of the Board and Committees

During fiscal year 2018, our Board held seven meetings, and its three standing committees—Audit Committee, Executive Compensation Committee, and Nominating and Governance Committee—collectively held 20 meetings. Each director attended at least 75% of the meetings of the Board and the committees on which such director served in fiscal year 2018. Members of our Board are encouraged to attend our annual meetings of stockholders. Nine of our ten then-current Board members attended our 2018 Annual Meeting of Stockholders (“2018 Annual Meeting”).

The following table sets forth the three standing committees of our Board, the members of each committee, and the number of meetings held by our Board and the committees during fiscal year 2018:



Name	Board	Audit⁽¹⁾	Executive Compensation⁽²⁾	Nominating and Governance⁽³⁾

Ms. Banse	X		Chair	X
Mr. Barnholt	X		X
Mr. Burgess	X	X
Mr. Calderoni	X	Chair		X
Mr. Daley	Lead Director			Chair
Ms. Desmond	X		X
Dr. Geschke	X
Mr. Narayen	Chair
Mr. Ricks⁽⁴⁾	X		X
Mr. Rosensweig	X	X
Dr. Warnock	X
Number of meetings held in fiscal year 2018	7	8	8	4


⁽¹⁾	The following changes to Audit Committee membership became effective after the 2018 Annual Meeting: Mr. Daley left the committee and Mr. Rosensweig joined the committee. Mr. Pandey and Ms. Oberg joined the Audit Committee in January 2019.


⁽²⁾	The following changes to Executive Compensation Committee membership became effective after the 2018 Annual Meeting: Ms. Banse began service as Chair of the committee, Mr. Ricks joined the committee, and Mr. Rosensweig left the committee.


⁽³⁾	The following changes to Nominating and Governance Committee membership became effective after the 2018 Annual Meeting: Mr. Daley began service as Chair of the committee, Ms. Desmond, Mr. Barnholt and Mr. Rosensweig left the committee, and Ms. Banse and Mr. Calderoni joined the committee.


⁽⁴⁾	Mr. Ricks’ membership on the Board and the Executive Compensation Committee became effective after the 2018 Annual Meeting.

Communications with the Board

Any stockholder who desires to contact our Board, or specific members of our Board, may do so electronically by sending an email to the following address: directors@adobe.com. Alternatively, a stockholder may contact our Board, or specific members of our Board, by writing to: Stockholder Communications, Adobe Inc., 345 Park Avenue, San Jose, California 95110 USA. All such communications will be initially received and processed by the office of our Corporate Secretary. Accounting, audit, internal accounting controls and other financial matters will be referred to the Chair of the Audit Committee. Other matters will be referred to the Board, the non-employee directors or individual directors as appropriate.

Board Leadership Structure

Each year, our Board evaluates whether its leadership structure is appropriate to effectively address the specific needs of our business and the long-term interests of our stockholders. Given the dynamic and competitive environment in which Adobe operates, the Board believes that Adobe and our stockholders are best served by a Chairman who has broad

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and deep knowledge of Adobe’s business operations and the competitive landscape, the ability to identify strategic issues and the vision to create sustainable long-term value for stockholders. Based on these considerations, the Board has determined that, at this time, our Chief Executive Officer, Shantanu Narayen, is the director best qualified to serve in the role of Chairman. The Board believes that Mr. Narayen’s combined role enables decisive leadership, ensures clear accountability and enhances the Board’s ability to focus its meetings on the issues most critical to Adobe’s success, as well as Adobe’s ability to communicate its message and strategy clearly and consistently to its stockholders, employees and customers.

To maintain an appropriate level of independent checks and balances in our corporate governance, our Corporate Governance Guidelines provide that if the Chairman of the Board and the Chief Executive Officer are the same person, the independent members of the Board will annually select an independent director to serve in a lead capacity, who we refer to as our Lead Director. Our Board believes that there are advantages to having a Lead Director for matters such as communications and relations among our Board, the Chief Executive Officer and other members of senior management and in assisting our Board in reaching consensus on particular strategies and policies. The independent members of our Board have selected James Daley to serve as Lead Director.

Our Lead Director coordinates the activities of the other independent directors and has the following additional responsibilities, as outlined in a Lead Director Charter adopted by the Board and available on our website at http://www.adobe.com/investor-relations/governance.html:


•	presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;


•	working to optimize Board performance through regular feedback that ensures that diverse viewpoints of all directors are heard, and creating a climate of constructive candor in which frank and thoughtful discussion occurs;


•	meeting with the Chairman and Chief Executive Officer to discuss Board agendas, materials and the schedule of meetings;


•	calling meetings of the independent directors, as needed;


•	providing feedback to directors in connection with the periodic Board evaluation process;


•	administering, with the Chair of the Executive Compensation Committee, the Board’s evaluation of the performance of the Chairman and Chief Executive Officer; and


•	making himself available for communication with Adobe’s significant stockholders.

Our Board believes that stockholders are best served by the Board’s current leadership structure because it provides Adobe with the benefits of combining the leadership role of Chairman and Chief Executive Officer, while at the same time featuring a strong and empowered independent Lead Director who provides an effective independent voice and further enhances the contributions of our independent directors.

The Board’s Role in Risk Oversight

Risk assessment and oversight are an integral part of our governance and management processes. Our Board takes an active role in reviewing Adobe’s corporate strategy and priorities on an ongoing basis, and also encourages management to promote a culture that actively manages risks as a part of Adobe’s corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing Adobe. Throughout the year, senior management reviews these risks with the Board at regular Board and committee meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate such risks. The Board regularly provides management with input on these risks and mitigation steps.

Our Board administers this oversight function directly through our Board as a whole, as well as through various standing committees of our Board that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure, and our Audit Committee has the responsibility to

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oversee our major cyber-security, privacy, information security, and financial risk exposures and the steps our management has taken to monitor and control these exposures, as well as oversight of our enterprise risk management program. The Audit Committee also monitors compliance with legal and regulatory requirements and oversees the performance of our internal audit function. Our Nominating and Governance Committee monitors the effectiveness of our Corporate Governance Guidelines and approves or disapproves any related-persons transactions. Our Executive Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking, which determination is reviewed by our Audit Committee.

Corporate Governance Guidelines

We believe in sound corporate governance practices and have adopted formal Corporate Governance Guidelines to enhance our effectiveness. Our Board adopted these Corporate Governance Guidelines in order to ensure that it has the necessary practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The Corporate Governance Guidelines set forth the practices our Board follows with respect to Board and committee composition and selection, Board meetings, Chief Executive Officer performance evaluation and management development and succession planning for senior management, including the Chief Executive Officer position. A copy of our Corporate Governance Guidelines is available on our website at http://www.adobe.com/investor-relations/governance.html.

Code of Ethics

We adopted a Code of Ethics applicable to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Treasurer and certain other finance department executives, which is a “code of ethics” as defined by applicable SEC rules. The Code of Ethics is publicly available on our website at http://www.adobe.com/investor-relations/governance.html. If we make any amendments to the Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this Code of Ethics to our Chief Executive Officer, Chief Financial Officer, Corporate Controller, Treasurer or certain other finance department executives, we will disclose the nature of the amendment or waiver, its effective date, and to whom it applies, on our website at http://www.adobe.com/company/integrity.html or in a Current Report on Form 8-K filed with the SEC. There were no waivers of the Code of Ethics during fiscal year 2018.

Code of Business Conduct

We have also adopted a Code of Business Conduct applicable to all officers, directors and employees of Adobe as required by applicable NASDAQ listing standards. This Code of Business Conduct is publicly available on our website at http://www.adobe.com/company/integrity.html. There were no waivers of the Code of Business Conduct for any of our directors or executive officers during fiscal year 2018.

Board Evaluation

On a regular basis, we engage an outside advisor to conduct a comprehensive Board self-evaluation to assess the effectiveness of our Board, committees and members. The process is facilitated by an independent third party to preserve integrity and anonymity of the Board members and company’s senior executives. The evaluation process facilitator meets with each director and some of the company’s senior executives individually to obtain and compile responses to the evaluation for review by the Board and senior executives of the company. The Board and senior executives of the company then review and discuss the evaluation results and any actions to be taken as a result of the discussion. The results are used to inform Board and committee composition and refreshment, including expansion and refinement of the attributes and experience criteria for Board membership, and to address the evolving needs of the company. The evaluation aims (1) to find opportunities where our Board and committees can improve their performance and effectiveness, (2) to assess any need to evolve the composition and expertise of our Board, and (3) to assure that our Board and committees are operating in accordance with our Corporate Governance Guidelines and committee charters.

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DIRECTOR COMPENSATION FOR FISCAL YEAR 2018

The following table sets forth certain information with respect to compensation awarded to, paid to or earned by each of Adobe’s non-employee directors during fiscal year 2018 and does not include information regarding directors who were appointed to the Board in fiscal year 2019.



Name	Fees Earned or Paid in Cash^(1)(2)(3) ($)	Stock Awards⁽⁴⁾⁽⁵⁾ ($)	Option Awards ($)	Total ($)

Charles M. Geschke	60,000	263,719	—	323,719
John E. Warnock	60,000	263,719	—	323,719
Amy L. Banse	90,934	263,719	—	354,653
Edward W. Barnholt	82,253	263,719	—	345,972
Robert K. Burgess	80,000	263,719	—	343,719
Frank A. Calderoni	106,374	263,719	—	370,093
James E. Daley	133,626	263,719	—	397,345
Laura B. Desmond	78,626	263,719	—	342,345
David A. Ricks	48,009	263,719	—	311,728
Daniel L. Rosensweig	87,252	263,719	—	350,971

_________________________


⁽¹⁾	Director fees were paid at the end of the quarter for which services were provided.


⁽²⁾	The following table provides a breakdown of the annual retainers and committee fees earned or paid in cash:



Name	Annual Board Retainers ($)	Audit Committee Fees⁽⁶⁾ ($)	Executive Compensation Committee Fees⁽⁷⁾ ($)	Nominating and Governance Committee Fees⁽⁸⁾ ($)	Total ($)

Dr. Geschke	60,000	—	—	—	60,000
Dr. Warnock	60,000	—	—	—	60,000
Ms. Banse	60,000	—	24,560	6,374	90,934
Mr. Barnholt	60,000	—	15,000	7,253	82,253
Mr. Burgess	60,000	20,000	—	—	80,000
Mr. Calderoni	60,000	40,000	—	6,374	106,374
Mr. Daley	110,000	7,253	—	16,373	133,626
Ms. Desmond	60,000	—	15,000	3,626	78,626
Mr. Ricks*	38,407	—	9,602	—	48,009
Mr. Rosensweig	60,000	12,747	10,879	3,626	87,252


*	Annual board retainer fees and Executive Compensation Committee fees for Mr. Ricks are prorated as he was added to the Board and the Executive Compensation Committee on April 12, 2018.


⁽³⁾	Mr. Calderoni, Mr. Daley, Ms. Desmond and Mr. Rosensweig each deferred all cash fees pursuant to Adobe’s Deferred Compensation Plan. For more information on this plan, see “Deferred Compensation Plan” below.

⁽⁴⁾

On April 13, 2018, each non-employee director then sitting on the Board received an RSU grant per the terms of the Board’s 2018 Non-Employee Director Compensation Policy, as described below. Ms. Banse, Mr. Calderoni, Mr. Daley and Mr. Rosensweig each elected to defer 100% of their RSU awards granted in 2018 pursuant to Adobe’s Deferred Compensation Plan. For more information on this plan, see “Deferred Compensation Plan” below.

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⁽⁵⁾

These amounts do not reflect the actual economic value realized by the director for these awards. In accordance with SEC rules, this column reflects the grant date fair value of 1,177 RSUs for each director at a price of $224.06 per share as of April 13, 2018, disregarding estimates of forfeitures related to service-based vesting conditions. At 2018 fiscal year end, each non-employee director held a total of 1,177 unvested RSUs.


⁽⁶⁾	Compensation for the following Audit Committee members was prorated based on membership changes effective April 12, 2018: Mr. Daley left the committee and Mr. Rosensweig joined the committee.


⁽⁷⁾	Compensation for the following Executive Compensation Committee members was prorated based on membership changes effective April 12, 2018: Ms. Banse began service as committee Chair, Mr. Ricks joined the committee, and Mr. Rosensweig left the committee.


⁽⁸⁾	Compensation for the following Nominating and Governance Committee members was prorated based on membership changes effective April 12, 2018: Mr. Daley began service as committee Chair, Ms. Desmond, Mr. Barnholt and Mr. Rosensweig left the committee, and Ms. Banse and Mr. Calderoni joined the committee.


⁽⁹⁾	As of February 13, 2019, Dr. Geschke held vested stock options to purchase in aggregate 16,764 shares of our common stock. He is the only non-employee director to hold such options.

Compensation Philosophy

The general philosophy of our Board is that compensation for non-employee directors should be a mix of cash, payable quarterly, and equity-based compensation to reward them for a year of service in fulfilling their oversight responsibilities. Adobe does not compensate its management director (our Chief Executive Officer) for Board service in addition to his regular employee compensation.

Decisions regarding the non-employee director compensation program are approved by our full Board based on recommendations by the Executive Compensation Committee. In making such recommendations, the Committee evaluates the appropriate level and form of compensation for non-employee directors and considers potential changes, if any. The Executive Compensation Committee considers advice from Compensia, when appropriate, including consideration of the director compensation practices of peer companies. The Executive Compensation Committee also considers the extent to which our Board compensation practices align with the interests of our stockholders. Our Board reviews the Executive Compensation Committee’s recommendations and then determines the amount of director compensation.

The Executive Compensation Committee reviews the total compensation of our non-employee directors and each element of our director compensation program annually. At the Executive Compensation Committee’s direction, Compensia analyzes the competitive position of our director compensation program against the peer group used to benchmark executive compensation and examines how director compensation levels, practices and design features compare to members of the peer group.

Following a review with Compensia of peer company board compensation trends, the Executive Compensation Committee recommended, and our Board approved, a Non-Employee Director Compensation Policy for fiscal years 2019 and 2020, which increased the equity annual award value from $260,000 to $285,000. With this change, our overall compensation for non-employee directors remains near the peer median, on a per-director basis, which is in line with our target positioning.

Fees Earned or Paid in Cash

Our Board approved a fiscal year 2018 Non-Employee Director Compensation Policy, effective December 2, 2017. Under the policy, each non-employee director received an annual retainer of $60,000 and our Lead Director received an additional Lead Director annual retainer of $50,000, plus committee fees for each committee on which he or she served, as follows:



Committee	Chair ($)	Members ($)

Audit	40,000	20,000
Executive Compensation	30,000	15,000
Nominating and Governance	20,000	10,000

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The committee fees for 2018 were consistent with the prior year, other than the increase of the Nominating and Governance Chair fee to $20,000 and the increase of the Nominating and Governance member fee to $10,000, each of which was recommended by Compensia in order to better align with peer companies.

Equity Awards

The 2018 Non-Employee Director Compensation Policy also included an annual grant of RSUs to non-employee directors. The RSUs granted to each non-employee director vest 100% on the day immediately preceding our next annual meeting of stockholders. The annual award was valued at $260,000 (based on the estimated value on the date of grant), and was converted into a number of RSUs based on the average closing market price over the 30 calendar days ending the day prior to the grant date. New directors joining our Board between annual meetings will receive a pro-rated annual grant of RSUs. Non-employee directors receive no other equity awards/compensation.

If a non-employee director’s service terminates due to death or disability, the director will be given credit for an additional 12 months of service for the vesting of both stock options and RSUs, and stock options will remain exercisable for one year following the termination or until the expiration of the stock option, if earlier.

In the event of a change of control, any unvested portion of a non-employee director option shall become fully vested and exercisable as of immediately prior to the transaction resulting in a change of control, subject to the consummation of the change of control. If the stock option is not assumed or substituted by the acquiring company, it will terminate to the extent it is not exercised on or before the date of such a transaction. Any unvested portion of RSUs will become vested in full immediately prior to the effective date of a change of control.

Deferred Compensation Plan

Our Deferred Compensation Plan allows non-employee directors to defer from 5% up to 100% of their cash compensation, which amounts are deemed invested in the investment funds selected by the director from the same fund options as generally available in Adobe’s 401(k) Plan (other than the individual direct brokerage account and Retirement Savings Trust). Participants may also contribute 100% per vesting tranche of their RSU awards. Deferred Compensation Plan participants must elect irrevocably to receive the deferred funds on a specified date at least three years in the future in the form of a lump sum or annual installments subject to the terms of the plan. Payments of equity deferrals may only be made in the form of a lump sum. Mr. Calderoni, Mr. Daley, Ms. Desmond and Mr. Rosensweig participated in the Deferred Compensation Plan with respect to 100% of their respective retainers and committee fees for their services in fiscal year 2018. Ms. Banse, Mr. Calderoni, Mr. Daley and Mr. Rosensweig elected to defer 100% of their RSU awards granted in 2018. See “Executive Compensation—Nonqualified Deferred Compensation” in this proxy statement for more information regarding our Deferred Compensation Plan.

Expenses

We reimburse our directors for their reasonable travel and related expenses in connection with attending Board and committee meetings, as well as costs and expenses incurred in attending director education programs and other Adobe-related seminars and conferences.

Other Benefits

In fiscal year 2018, our founders, Drs. Geschke and Warnock, were offered an opportunity to purchase certain Adobe health, dental, and vision insurance while serving as a Board member. Participants were responsible for paying 100% of their own insurance premiums.

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Stock Ownership Guidelines

We have adopted stock ownership guidelines for members of our Board. Under these guidelines, each non-employee director should hold 50% of the net shares acquired from Adobe until the total number of shares held by such non-employee director equals or exceeds (and continues to equal or exceed) the minimum share ownership requirement. Determined annually, the minimum share ownership for a non-employee director is calculated as follows: shares required to equal a value of ten times the annual retainer divided by the average daily closing share price for the 30-days ending on December 31. Once achieved (following all permissible dispositions under the guidelines), this minimum share value ownership threshold should be maintained going forward. Shares that count toward the ownership requirement include shares owned outright and beneficially owned, vested restricted stock, vested RSUs, and shares issued upon the exercise of vested options, as well as vested performance shares or performance units, as applicable, including such shares that have been deferred into our Deferred Compensation Plan. As of November 30, 2018, each of our non-employee directors was in compliance with these guidelines.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our common stock as of February 13, 2019 by each entity or person who is known to beneficially own 5% or more of our common stock, each of our directors, each named executive officer (“NEO”) identified in “Executive Compensation—Summary Compensation Table” contained in this proxy statement and all of our directors and current executive officers as a group.



Name of Beneficial Owner⁽¹⁾	Amount and Nature of Beneficial Ownership⁽²⁾⁽³⁾		Percent of Class⁽⁴⁾

FMR LLC	38,018,212	⁽⁵⁾	7.77%
245 Summer Street Boston, MA 02210
The Vanguard Group	37,374,183	⁽⁶⁾	7.64%
100 Vanguard Blvd. Malvern, PA 19355
BlackRock, Inc.	32,629,559	⁽⁷⁾	6.67%
55 East 52nd Street New York, NY 10022
Shantanu Narayen	299,654	⁽⁸⁾	*
John Murphy	16,032	⁽⁹⁾	*
Mark Garrett	—	⁽¹⁰⁾	*
Scott Belsky	7,103		*
Bryan Lamkin	63,087		*
Bradley Rencher	80,066		*
Amy Banse	34,665	⁽¹¹⁾	*
Edward Barnholt	38,191	⁽¹²⁾	*
Robert Burgess	17,207	⁽¹³⁾	*
Frank Calderoni	27,064	⁽¹⁴⁾	*
James Daley	34,099	⁽¹⁵⁾	*
Laura Desmond	27,060	⁽¹⁶⁾	*
Charles Geschke	151,794	⁽¹⁷⁾	*
Kathleen Oberg	267	⁽¹⁸⁾	*
Dheeraj Pandey	267	⁽¹⁹⁾	*
David Ricks	1,327	⁽²⁰⁾	*
Daniel Rosensweig	14,281	⁽²¹⁾	*
John Warnock	470,511	⁽²²⁾	*
All directors and current executive officers as a group (23 persons)	1,552,592	⁽²³⁾	*

_________________________


*	Less than 1%.


⁽¹⁾	The address of each person named in the table, unless otherwise indicated, is c/o Adobe Inc., 345 Park Avenue, San Jose, California 95110.

⁽²⁾

This table is based upon information supplied by executive officers, directors and principal stockholders, as well as beneficial ownership reports filed with the SEC. Unless otherwise indicated in the footnotes to this table, and subject to community property laws where applicable, each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. None of the shares beneficially owned by our executive officers and directors are pledged as security.


⁽³⁾	Holdings reported include any equity awards deferred under our deferred compensation plan.

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⁽⁴⁾	Applicable percentages are based on 489,114,862 shares outstanding on February 13, 2019, adjusted as required by rules promulgated by the SEC.


⁽⁵⁾	Based solely on a Schedule 13G/A filed with the SEC on February 13, 2019, reporting beneficial ownership as of December 31, 2018, with sole dispositive power as to all shares and sole voting power with respect to 5,979,613 shares.


⁽⁶⁾	Based solely on a Schedule 13G/A filed with the SEC on February 11, 2019, reporting beneficial ownership as of December 31, 2018, with sole dispositive power as to 36,674,051 shares, sole voting power with respect to 605,083 shares, shared dispositive power as to 700,132 shares and shared voting power with respect to 108,271 shares.


⁽⁷⁾	Based solely on a Schedule 13G/A filed with the SEC on February 4, 2019, reporting beneficial ownership as of December 31, 2018, with sole dispositive power as to all shares and sole voting power with respect to 28,187,115 shares.


⁽⁸⁾	Shares held by the Narayen Family Trust, of which Mr. Narayen is a trustee.


⁽⁹⁾	Includes 11,480 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Murphy.


⁽¹⁰⁾	Mr. Garrett retired in fiscal year 2018 and no longer owns any shares.


⁽¹¹⁾	Includes 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Ms. Banse.


⁽¹²⁾	Consists of 5,000 shares held by a family trust, of which Mr. Barnholt is a trustee; 32,014 shares held by Mr. Barnholt; and 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Barnholt.


⁽¹³⁾	Consists of 1,620 shares, for which Mr. Burgess has shared voting and dispositive power, held in trust for the benefit of his children; 2,035 shares held by The Burgess Family Trust, of which Mr. Burgess is a trustee; 12,375 shares held by Mr. Burgess; and 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Burgess.


⁽¹⁴⁾	Includes 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Calderoni.


⁽¹⁵⁾	Includes 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Daley.


⁽¹⁶⁾	Includes 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Ms. Desmond.


⁽¹⁷⁾	Consists of 133,853 shares held by the Geschke Family Trust, of which Dr. Geschke is a trustee, and 17,941 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Dr. Geschke.


⁽¹⁸⁾	Includes 267 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Ms. Oberg.


⁽¹⁹⁾	Includes 267 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Pandey.


⁽²⁰⁾	Includes 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Ricks.

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⁽²¹⁾	Consists of 2,268 shares held by The Rosensweig 2012 Irrevocable Children’s Trust, of which Mr. Rosensweig is a trustee; 10,836 shares held by Mr. Rosensweig; and 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Rosensweig.


⁽²²⁾	Consists of 453,246 shares held by the Warnock Family Trust, of which Dr. Warnock is a trustee; 16,088 shares held by Dr. Warnock; and 1,177 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Dr. Warnock.


⁽²³⁾	Includes 40,548 shares issuable within 60 days of the date of this table upon vesting of restricted stock units or the exercise of outstanding exercisable options held by our directors and current executive officers. See also footnotes 8 through 22.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our executive officers and directors, as well as any person or entity who owns more than 10% of a registered class of our common stock or other equity securities, to file with the SEC certain reports of ownership and changes in ownership of our securities. Executive officers, directors and stockholders who hold more than 10% of our outstanding common stock are required by the SEC to furnish us with copies of all required forms filed under Section 16(a). We typically prepare Section 16(a) forms on behalf of our executive officers and directors based on the information provided by them.

Based solely on review of this information and written representations by our executive officers and directors that no other reports were required, we believe that, during fiscal year 2018, no reporting person failed to file the forms required by Section 16(a) of the Exchange Act on a timely basis other than a late Form 4 filed on behalf of Mr. Rao regarding the vesting of a previously reported RSU award.

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EQUITY COMPENSATION PLAN INFORMATION

The following table shows information related to our common stock which may be issued under our existing equity compensation plans as of November 30, 2018, including our 1997 Employee Stock Purchase Plan and 2003 Equity Incentive Plan, plus certain non-stockholder-approved equity compensation plans and awards assumed by us (and which were not subsequently voted on by Adobe’s stockholders) in connection with certain acquisitions described below:



Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights⁽¹⁾	Weighted-average exercise price of outstanding options, warrants and rights⁽¹⁾⁽²⁾	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)

Equity compensation plans approved by Adobe’s stockholders	10,879,264⁽³⁾	$38.40	57,366,351⁽⁴⁾
Equity compensation plans not approved by Adobe’s stockholders⁽⁵⁾	416,521	$68.85	—
Total	11,295,785	$65.17	57,366,351

_________________________


⁽¹⁾	Rights include performance shares and RSUs.


⁽²⁾	Weighted-average exercise prices are calculated without regard to performance shares and RSUs, which do not have any exercise price.

⁽³⁾

Includes 830,090 shares of common stock issuable pursuant to the terms of our 2016 Performance Share Program at maximum levels (200%) as of November 30, 2018. However, 219,062 shares were forfeited due to participants’ departure from Adobe prior to the certification date. Includes 849,510 shares of common stock issuable pursuant to the terms of our 2017 Performance Share Program at maximum levels (200%) as of November 30, 2018. This number does not include 187,600 shares at maximum levels (200%) under our 2017 Performance Share Program that were forfeited due to participants’ departure from Adobe prior to the certification date. Includes 616,230 shares of common stock issuable pursuant to the terms of our 2018 Performance Share Program at maximum levels (200%) as of November 30, 2018. This number does not include 11,520 shares at maximum levels (200%) under our 2018 Performance Shares Program that were forfeited due to participants’ departure from Adobe prior to the certification date.


⁽⁴⁾	Includes 5,256,475 shares that are reserved for issuance under the 1997 Employee Stock Purchase Plan as of November 30, 2018 and 52,109,876 shares that are reserved for issuance under the 2003 Equity Incentive Plan.


⁽⁵⁾	We assumed the outstanding stock awards under various equity incentive plans maintained by companies we acquired, as follows:

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Company	Date of Acquisition
Omniture	October 23, 2009
Demdex	January 18, 2011
EchoSign	July 15, 2011
Auditude	October 18, 2011
Efficient Frontier	January 13, 2012
Behance	December 20, 2012
Neolane	July 22, 2013
Aviary	September 22, 2014
Fotolia	January 27, 2015
TubeMogul	December 19, 2016
Magento	June 19, 2018

Effective December 3, 2005, our Board adopted the Adobe Systems Incorporated 2005 Equity Incentive Assumption Plan (the “Assumption Plan”). The Assumption Plan permits the grant of non-statutory stock options, stock appreciation rights, stock purchase rights, stock bonuses, restricted stock, restricted stock units, performance shares and performance units using shares reserved under certain assumed plans (as described below). In connection with our assumption of the Omniture plans, on November 16, 2009, the Assumption Plan was amended by the Executive Compensation Committee to include shares reserved under certain of the assumed Omniture plans (as described below). The Assumption Plan has not been approved by our stockholders. The terms and conditions of stock awards under the Assumption Plan are substantially similar to those under our 2003 Equity Incentive Plan. In accordance with applicable NASDAQ listing requirements, we previously granted new stock awards under the Assumption Plan to our employees who were not employed by or providing services to us or any of our affiliates prior to December 3, 2005 (other than employees of certain acquired companies prior to the acquisition dates, and their respective affiliates and subsidiaries).

Our Executive Compensation Committee elected to retire all remaining outstanding share reserves under the Assumption Plan in 2015 and no additional shares will be granted out of those Assumption Plan reserves. However, the plan remains in place to govern the awards issued and outstanding thereunder and to facilitate the assumption of, and grants from, equity plan share reserves as deemed appropriate in connection with potential future acquisitions.

In addition to the Assumption Plan, as of the fiscal year ended November 30, 2018, we maintained equity compensation plans covering stock awards that were assumed by us as follows: seven plans in connection with the Omniture acquisition; one plan in connection with the Demdex acquisition; one plan in connection with the EchoSign acquisition; two plans in connection with the Auditude acquisition; one plan in connection with the Efficient Frontier acquisition; one plan in connection with the Behance acquisition; two plans in connection with the Neolane acquisition; one plan in connection with the Aviary acquisition; one plan in connection with the Fotolia acquisition; two plans in connection with the TubeMogul acquisition; and one plan in connection with the Magento acquisition, in each case under which stock awards had been granted by these predecessor entities that remained outstanding at the time of the respective acquisition. We did not assume the reserves of the plans from which these awards were issued. The “Equity compensation plans not approved by Adobe’s stockholders” row in the “Equity Compensation Plan Information” table above shows aggregated share reserve information for these awards in addition to the Assumption Plan. No future awards may be granted under any of our acquired plans.

Please see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2018 Annual Report on Form 10-K and the notes to Consolidated Financial Statements at Note 11, “Stock-based Compensation” for further information regarding our equity compensation plans and awards.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides information regarding our executive compensation programs during fiscal year 2018 for the following executive officers of Adobe:


•	Shantanu Narayen, Chairman, President and Chief Executive Officer


•	John Murphy, Executive Vice President and Chief Financial Officer


•	Mark Garrett, Former Executive Vice President and Chief Financial Officer


•	Scott Belsky, Chief Product Officer and Executive Vice President, Creative Cloud


•	Bryan Lamkin, Executive Vice President and General Manager, Digital Media


•	Bradley Rencher, Executive Vice President and General Manager, Digital Experience

These executive officers are referred to in this Compensation Discussion and Analysis and in the accompanying compensation tables as our named executive officers, or “NEOs.”

This Compensation Discussion and Analysis describes the material elements of our executive compensation programs for our executive officers during fiscal year 2018. It also provides an overview of our executive compensation philosophy, including our principal compensation programs. Finally, it analyzes how and why the Executive Compensation Committee of our Board (the “Committee”) made its compensation decisions for our executive officers, including our NEOs, in fiscal year 2018.

Fiscal Year 2018 Business Highlights

Adobe continues to execute on its mission of changing the world through digital experiences with its best-in-class cloud businesses: Creative Cloud, Document Cloud, and Adobe Experience Cloud. In fiscal year 2018, the company’s cloud strategies continued to produce strong results and steady, predictable growth. Adobe also made strategic acquisitions that we believe will fuel continued top and bottom-line performance in the future. Financially, our 2018 fiscal year was a record-breaking year for the company in terms of revenue, earnings and operating cash flow. For the fiscal year ended November 30, 2018:


•	Adobe achieved record annual revenue of $9.03 billion, representing 24 percent year-over-year growth;


•	The company reported annual GAAP earnings per share of $5.20, representing 54 percent year-over-year growth;


•	Digital Media segment revenue grew 26 percent year-over-year;


•	Digital Experience segment revenue grew 20 percent year-over-year;


•	Adobe Experience Cloud subscription revenue grew 26 percent year-over-year;


•	Operating income grew 31 percent and net income grew 53 percent year-over-year on a GAAP-basis;


•	Adobe generated a record $4.03 billion in operating cash flow during the year; and


•	Adobe repurchased 8.7 million shares during the year, returning $2.00 billion of cash to stockholders.

Our executive officers also delivered on key strategic performance objectives established by the Committee for fiscal year 2018 and other corporate initiatives. In addition to producing strong financial results in fiscal year 2018, achievements included:


•	Adobe was recognized as a technology and vision leader in digital marketing and advertising, including Adobe Experience Cloud being named a leader in the inaugural Digital Experience Platform Magic Quadrant, a leader in the Gartner Multichannel Marketing Hub Magic Quadrant, and a leader in the Forrester Enterprise Marketing Software Suites Wave report;


•	Recognition as one of the “Best Places to Work” around the globe by a number of publications, including #26 on Fortune’s “100 Best Companies to Work For” list; #16 on Fortune’s “Best Workplace for Parents”; #60 on the list of “100 Best Companies” by Working Mother Magazine; #47 on Fortune’s “Best Workplaces for

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Women” list; #1 out of 250 companies on Forbes “Best Employers for New Graduates” list; and #13 out of 50 on Glassdoor’s “Highest Rated CEOs”;


•	For the third year, being named to the “Dow Jones Sustainability Index (DJSI) World” - the gold standard of corporate responsibility reporting for the investor community and one of only six software companies worldwide to place on the index;


•	Receipt of a perfect score on the 2019 Corporate Equality Index report from the Human Rights Campaign Foundation;


•	Climbing to #51 on Interbrand’s 2018 list of Best 100 Global Brands;


•	Making advancements in our 100% renewable energy by 2035 commitment, including 100% of our Bangalore, India electricity load covered by a solar power purchase agreement and signing a wind agreement that will match 100% of our California electricity demand;


•	Achieving pay parity between women and men globally across nearly 40 countries; and


•	Continued emphasis on key sustainability and social impact objectives as Adobe continues to impact our environment and our community, donating millions of dollars to charitable causes (directly and through the Adobe Foundation), and serving in the community through our employees, who contributed thousands of hours volunteering through pro bono initiatives and Adobe-sponsored programs.

Fiscal Year 2018 Compensation Highlights

Our executive compensation programs are designed to directly tie the outcomes of our incentive compensation awards for our executive officers to the achievement of our key strategic performance objectives and returns to our stockholders, and drive the creation of sustainable long-term stockholder value. Our fiscal year 2018 compensation programs reflected this philosophy, and compensation earned reflected our business achievements discussed above.

•

Cash Incentive Plan - In 2018, the Executive Compensation Committee streamlined and simplified the structure of our executive cash incentive plan, while continuing to emphasize Digital Media ARR and Digital Experience subscription bookings to drive growth in our strategic businesses. The modified plan allows the Committee to make an adjustment of up to 25 percentage points up or down based on its evaluation of the company’s performance against its corporate priorities and objectives. Additionally, as in previous years, an executive’s individual performance is a key component in the calculation of their incentive award.


•	Cash Incentive Plan Performance - With record revenue, ARR in our Digital Media business, and strong bookings in Digital Experience, the Financial Performance Result under our 2018 cash incentive plan was 110%. For more discussion of cash awards, see the section captioned “Cash Incentives” below.

•

Performance Share Program Result - The three-year performance period under Adobe’s 2016 Performance Share Program closed at the end of our 2018 fiscal year. Under this program, shares were earned based on relative total stockholder return (“TSR”) over a three-year performance period, during which Adobe achieved a total return of approximately 195%. During the performance period, the price of Adobe’s common stock increased from $85.48 to $251.77 (using the 90 calendar day averages preceding the beginning and end of the performance period). With this performance, our percentile rank among the companies included in the NASDAQ 100 Index as of November 28, 2015 was approximately 96th, which under the plan resulted in each of the participants being awarded performance shares equal to 200% of the executive’s target number of shares.

•

Continued Emphasis on Pay for Performance - Approximately 89% of our CEO’s target compensation in fiscal year 2018 was comprised of equity awards. A substantial percentage (50%) of those awards are based on relative TSR (compared against companies included in the NASDAQ 100 Index) over a three-year performance period issued under our Performance Share Program, with the balance of equity value issued as time-based RSUs that vest annually over three years. This means that, unless we achieve the TSR performance objective of the Performance Share Program each year and over the long-term, our CEO and other executive officers will not realize the full potential value of their long-term incentive compensation.

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Further, because Adobe common stock underlies our equity-based compensation awards, the immediate value of these awards is subject to fluctuations in our stock price, strongly aligning the interests of our executive officers, including our CEO, with those of our stockholders.

Our pay-for-performance philosophy is reflected in the pie charts below, which depict the composition of our CEO and other NEOs’ targeted 2018 compensation:

Mr. Narayen’s and Other NEOs’ Target Pay Mix⁽¹⁾⁽²⁾

⁽¹⁾

The mechanism for calculating target equity award values is described in detail under “Equity Incentives— Equity Compensation Mix.” The amounts shown for our other NEOs represent their average target pay mix. For the actual grant date fair value of equity awards, computed in accordance with stock-based compensation accounting principles, please see “Executive Compensation—Summary Compensation Table.”

⁽²⁾The RSUs for All Other NEOs excludes Mr. Belsky’s December 6, 2017 new hire award of $7,500,000 and Mr. Murphy’s April 9, 2018 promotion award of $5,000,000.

Response to 2018 Say-on-Pay Vote and Stockholder Feedback

Adobe values the input of our stockholders on our compensation programs. We hold an advisory vote on executive compensation on an annual basis. We also regularly communicate with our stockholders to better understand their opinions on governance issues, including compensation. The Executive Compensation Committee carefully considers stockholder feedback and the outcome of each vote when reviewing our executive compensation programs each year.

At our 2018 annual meeting, approximately 95% of the votes cast approved, on an advisory basis, our NEO compensation and disclosures for fiscal year 2017. This percentage of votes in favor of our compensation approach continued to validate our programs. In particular, we believe the strong approval was largely driven by the following attributes of our fiscal year 2017 executive compensation programs: (1) the high degree of alignment between company performance and our executive compensation programs; (2) basing our Performance Share Program with a three-year performance period on a single objective metric—relative TSR—closely aligning the compensation opportunity of our NEOs to long-term stockholder interests; and (3) basing our short-term cash incentive program on financial metrics that align with our growth strategy.

While we welcome stockholder interaction throughout the year, we generally engage in stockholder outreach during two key periods each fiscal year: (1) leading up to our annual meeting of stockholders and (2) during the months of September and October, when Adobe’s management, Executive Compensation Committee and its independent compensation consultant are in the preliminary planning stages for the subsequent year’s compensation programs. During 2018, we engaged with several of our largest stockholders in discussions regarding our existing programs and potential changes for the future, and we value the input received during those discussions. We expect to

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continue stockholder engagement throughout fiscal year 2019 as we consider potential changes to our compensation programs in the future.

Compensation Approach in Fiscal Year 2019

In addition to taking stockholder feedback into account, the Committee has evaluated a number of other factors discussed below in making decisions about our executive compensation approach. Following this evaluation, the Committee determined not to make any significant changes to our cash incentive plan design for fiscal year 2019.

The Committee chose to generally continue the approach to the equity compensation program from recent fiscal years for fiscal year 2019, but amended the vesting schedule for time-based RSU grants. In order to more closely align with our peers and strengthen employee retention incentives, these RSUs will now be four-year awards in which 25% of shares will vest on the first anniversary of the vesting commencement date, and the remaining RSUs will vest quarterly (6.25% per quarter) thereafter.

In 2019, the Committee modified the mix of Mr. Narayen’s annual equity awards from a 50/50 mix of TSR-based performance shares and time-based RSUs to a 60/40 mix with the emphasis on rewarding performance to further align his interests with those of our stockholders. Additionally, the Committee granted Mr. Narayen a special performance award with a target value of $7,500,000. This award, which is 100% performance based, is intended to reward Mr. Narayen should Adobe continue its industry-leading performance over the three-year period of the award.

The Committee believes that both the cash incentive and equity compensation programs have created the desired pay-for-performance incentives, and that these incentives have been driving the intended outcomes in recent fiscal years, resulting in top-line and bottom-line growth and generating significant stockholder value.

Additional information regarding our fiscal year 2019 executive compensation programs is available in our Current Report on Form 8-K filed with the SEC on January 28, 2019.

Compensation Philosophy and Objectives

Adobe’s vision is to change the world through digital experiences. To support our product and technical innovation with strong execution, we strive to create a dynamic work environment that attracts and retains great people who drive successful business outcomes, growth, innovation and a focus on creating a world-class experience for Adobe’s customers.

We believe that the skills, experience and dedication of our executive officers are critical factors that contribute directly to our operating results, thereby enhancing stockholder value. In order to continue to develop and bring to market the products that drive our financial performance, we must attract, motivate, and retain the top talent within our industry. As such, our compensation programs are designed: (1) to provide competitive compensation opportunities that attract, as needed, individuals with the skills necessary for us to achieve our business objectives and retain those top performing individuals; (2) to relate directly to our corporate performance and meaningfully drive our business objectives; (3) to reward and motivate strong individual performance, but with a substantial majority of compensation tied to corporate objectives; (4) to avoid undue compensation-related risk; and (5) to create direct alignment with our stockholders by providing equity ownership in the company. Further, the following aspects of our compensation program underscore our continued commitment to corporate governance and compensation best practices:


•	Our executives’ total compensation is designed to pay for performance and is comprised of elements that address both short-term and long-term financial performance.


•	Our Insider Trading Policy, which applies to all employees, officers and directors of the company, prohibits transactions involving pledging, hedging or short sales of Adobe equity.


•	Our officers at the senior vice president level and above are subject to substantial stock ownership guidelines.


•	We do not provide golden parachute excise tax gross-up payments.


•	We do not provide defined benefit pension plans, supplemental executive retirement plans or retiree health benefits.

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•	We have a clawback policy for certain performance-based incentive compensation of our executive officers.


•	Our equity plans do not include an evergreen feature that would automatically replenish the shares available for issuance.

We believe our executive compensation programs have been effective at driving the achievement of our target financial and strategic results, appropriately aligning executive pay and corporate performance and enabling us to attract and retain top executives within our industry.

Peer Group and Competitive Positioning

The Committee regularly reviews relevant market and industry practices on executive compensation. We do so to balance our need to compete for talent with the need to maintain a reasonable and responsible cost structure while aligning our executive officers’ interests with those of our stockholders.

Each year, to assist the Committee in its deliberations on executive compensation, the Committee reviews and updates our list of peer companies as points of comparison, as necessary, to ensure that the comparisons are meaningful. Compensia, Inc., the Committee’s independent compensation consultant, provides recommendations on the composition of our compensation “peer group” using the criteria described in the table below. Based on the factors described in the table below and input from management and Compensia, the Committee made no changes to the peer group for 2018.



Peer Group for Fiscal Year 2018
General Description	Criteria Considered	Peer Group List

Technology companies at which our NEOs’ positions would be analogous in scope and complexity, which operate in similar or related businesses to Adobe, and with which Adobe competes for talent	Companies with revenues within 0.5x to 2.0x of Adobe’s and market capitalization within 0.33x to 3.0x of Adobe’s, and taking into account the following criteria: (1) global multi-faceted software/Internet company; (2) profit margin within 0.5x to 2.0x of Adobe’s; (3) number of employees within 0.5x to 2.0x of Adobe’s; (4) stockholder advisory firm names company as Adobe’s peer; (5) companies that list Adobe as a peer; and (6) positive revenue growth	Activision Blizzard, Inc. Autodesk, Inc. eBay, Inc. Electronic Arts, Inc. Intuit, Inc. Netflix, Inc. PayPal Holdings Inc. The Priceline Group, Inc. salesforce.com, Inc. Symantec, Inc. VMWare Inc.

Our independent compensation consultant then prepares a compensation analysis compiled from both executive compensation surveys and data gathered from publicly available information for our peer group companies. The Committee uses this data to compare the current compensation of our NEOs to the peer group and to determine the relative market value for each NEO position. In addition, because Adobe’s market capitalization is within the top quartile of its peer companies, the Committee and management also specifically consider position of market cap relative to peers when reviewing equity and target total direct compensation levels.

Elements of Compensation

Our executive compensation programs include base salary, an annual cash incentive opportunity, equity incentive awards and employee benefits. The percentage of performance-based compensation, or “at risk” pay, for Adobe’s management and other employees generally increases with job responsibility, reflecting our view of internal pay equity and the ability of a given employee to contribute to our results. We also generally align our compensation strategy with the practices of our peer group when possible and to the extent consistent with our business model. Our executive compensation programs focus on linking pay to performance and reinforcing the alignment of our executives’ interests with those of our stockholders. If results do not meet our expectations, our NEOs will receive compensation that is below our target levels and may be below market in comparison to our peer group. Similarly,

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when superior results are achieved, our NEOs may receive compensation that is above our target levels and above market. For more information, see the section captioned “Realizable Pay” below.

Compensation Objectives

		Objectives
Compensation Element	Description	Attract/Retain Key Performers	Reward Short-Term Performance	Reward Long-Term Performance

Base Salary	Base salary provides market competitive compensation in recognition of role and responsibilities.	ü
Cash Incentives	Cash incentives are earned in full or in part only if (1) we achieve certain pre-established one-year company performance targets, (2) the recipient achieves individual performance levels or objectives, and (3) the recipient remains employed with Adobe for the performance period.	ü	ü
Equity Incentives	Equity incentives are awarded upon hire and then typically annually thereafter. Awards are both performance-based and time-based, each vesting over multiple years, aligning employee interests with stockholder interests.	ü	ü	ü
Employee Benefits and Perquisites	Benefits programs for all Adobe eligible employees provide protection for health, welfare and retirement.	ü

In setting the mix among the different elements of executive compensation, we do not target specific allocations, but generally emphasize performance-based compensation, both cash and equity, in our executive officers’ compensation. Total target cash compensation opportunity (base salary and target cash incentives) represents less of our executive officers’ total target compensation than the total target equity compensation opportunity, to increase alignment with our stockholders’ interests and motivate performance that creates sustainable long-term stockholder value.

These allocations reflect our belief that a significant portion of our NEOs’ compensation should be performance based and therefore “at risk” based on company and individual performance, as well as NEO service requirements. Since our cash incentive opportunities and equity incentive awards have both upside opportunities and downside risks, and our actual performance can deviate from the target goals, the amount of compensation actually earned will differ from the target allocations.

The fiscal year 2018 target total direct compensation (“TDC”) for each of our NEOs was set by the Committee based on a number of factors, including: competitive pay practices reflected in the peer group data; each executive’s contribution to Adobe; company and individual performance; anticipated future contributions; internal pay equity; and historical pay levels. The Committee also reviewed the positioning of the total target cash and equity elements of compensation against levels at our peer companies, but these individual elements of NEO compensation may vary based on the importance of the other factors noted above in any given year with respect to any given NEO. Because our fiscal year begins earlier than most of our peer companies, our target TDC attempts to anticipate what the competitive compensation positioning for each role will be for the coming fiscal year.

Base Salary

For fiscal year 2018, the Committee reviewed the base salaries of our NEOs, comparing these salaries to the base salary levels at the companies in our peer group, as well as considering the roles and responsibilities, performance and potential performance of the NEOs and their mix of other compensation elements (cash and equity incentives). Following its review, the Committee made no change to Mr. Narayen’s base salary and chose to increase the base salaries for Messrs. Lamkin and Rencher in order to better align their base pay with peer companies and to reward their performance in fiscal year 2017.

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Fiscal Year 2018 Base Salaries

Name	2017 Salary ($)	2018 Salary ($)

Shantanu Narayen	1,000,000	1,000,000
John Murphy⁽¹⁾	—	575,000
Mark Garrett	725,000	725,000
Scott Belsky⁽¹⁾	—	550,000
Bryan Lamkin	600,000	650,000
Bradley Rencher	600,000	625,000

________________________


⁽¹⁾	Mr. Murphy and Mr. Belsky were not NEOs during fiscal 2017, so their prior year salaries are not disclosed.

Cash Incentives

Annual Cash Incentive Plan

At the outset of 2018, the Committee approved the Fiscal Year 2018 Executive Annual Incentive Plan (the “Executive Incentive Plan”) to drive revenue growth, encourage accountability, drive execution of short-term priorities tied to long-term strategy and annual operating plan objectives, and recognize and reward the company’s executives upon the achievement of certain objectives. The Committee set threshold, target and maximum performance levels for these goals that were based on our Board-approved operating plan for fiscal year 2018 (the “Operating Plan”).

Plan Design and Target Annual Incentive Opportunity

In 2018, the Committee streamlined and simplified the structure of our Executive Incentive Plan. The basic structure of our 2018 Executive Incentive Plan is shown in the following chart:

The Committee set the target annual cash incentive opportunity for fiscal year 2018 (expressed as a percentage of base salary) for each NEO early in the fiscal year. In setting the target levels, the Committee considered each NEO’s fiscal year 2018 target total cash opportunity against the peer group data provided by our independent compensation consultant, internal pay equity and the roles and responsibilities of the NEOs. The Committee increased Mr. Narayen’s target annual cash incentive opportunity to 200% to drive the company’s short-term growth initiatives and to better align with peers.

As with our fiscal year 2017 program, the Executive Incentive Plan was designed to align our NEOs’ cash bonus incentives with the company’s strategic priorities of driving financial performance based on ARR growth in Digital Media and subscription bookings growth (“Bookings”) in Digital Experience. Focusing our business on subscriptions and cloud-based services, such as Creative Cloud and Adobe Experience Cloud, encourages our executives to continue to grow our recurring revenue streams. As discussed in our recent Annual Reports, the Committee and the company’s management feel that these metrics are the best indicators of the forward-looking health of Adobe’s business as we continue to grow the business.

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The Committee determined that, for purposes of earning any award under the Executive Incentive Plan for fiscal year 2018, we must have achieved a threshold goal of 90% of the GAAP revenue target set forth in the Operating Plan. If the threshold goal was not achieved, none of the participants in the Executive Incentive Plan would have been eligible to earn any annual cash incentive award. If we achieved the GAAP revenue threshold, each participant would be eligible to earn a maximum award of 200% of such participant’s bonus target, up to a maximum of $5.0 million.

The maximum award for each participant is subject to adjustment based on our performance against our corporate priorities and objectives, as well the individual’s performance against goals tailored to each executive.

A participant’s award is comprised of:

*Digital Media New New Recurring (ARR) and Digital Experience Net New Annual Subscription Bookings

** +/- 25 percentage points

*** Ranges from 0%-200%

Corporate Performance Result

The “Corporate Performance Result” (expressed as a percentage) is based on the financial performance of the company and a discretionary performance adjustment. The company’s financial performance for the 2018 fiscal year performance period (the “Financial Performance Result”) is determined by a metric comprised of both (1) net new Digital Media ARR (as defined below) and (2) Bookings growth in Digital Experience, in both cases as set forth in the Operating Plan. As described in our Annual Report on Form 10-K for the fiscal year ended November 30, 2018, we define annualized recurring revenue, or ARR, in our Digital Media business as the sum of Creative ARR and Document Cloud ARR. We define Creative ARR as the sum of (1) the annual value of Creative Cloud subscriptions and services, plus (2) the annual contract value of Digital Publishing Suite, plus (3) the annual contract value of Creative Enterprise Term License Agreements. We define Document Cloud ARR as the sum of (1) the annual value of Document Cloud subscriptions and services, plus (2) the annual contract value of Document Cloud Enterprise Term License Agreements. A table showing the relationships between financial performance, as a percentage of the Operating Plan targets, and the funding results under the Executive Incentive Plan can be found in Exhibit 10.5 to the Current Report on Form 8-K Adobe filed with the SEC on January 26, 2018.

The Financial Performance result is subject to adjustment by the Committee of up to 25 percentage points up or down based on the Committee’s assessment of the company’s performance against its corporate priorities and objectives during the performance period (the “Strategic Performance Adjustment”). The adjusted number is referred to under the Executive Incentive Plan as the “Corporate Performance Result”.

Individual Performance Result

The “Individual Performance Result” is based on the Committee’s assessment of each participant’s individual performance including, without limitation, achievement of individual goals set by the Committee at the outset of the fiscal year.

The individual goals were selected by the Committee in consultation with our CEO (other than with respect to his own goals) at the outset of fiscal year 2018, and the Committee reviewed the achievement of such individual goals for each NEO to determine the NEO’s Individual Performance Result. For our CEO, these individual goals for fiscal year 2018 included driving the company’s multi-year growth strategy, focusing on product and platform innovation, and deepening the leadership bench strength and scale. For our other NEOs, the individual goals for fiscal year 2018 were specifically tailored to the functions led by each NEO and aligned to the achievement of our overall Operating Plan, including goals shown in the table below:

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Executive Officer		Individual Performance Goals

John Murphy		Successfully implement new revenue recognition and leasing standards; develop long-term tax strategy; position finance organization for success and scale.
Scott Belsky		Execute on creative product roadmap, including updates to video and photography products; execute on a number of customer experience initiatives.
Bryan Lamkin		Drive customer engagement; improve execution through data-driven operating model; deliver expanded mobile experiences.
Bradley Rencher		Drive increased adoption of Adobe Experience cloud; improve pipeline creation; execute on strategic partnerships; increase value utilization of Adobe Experience Cloud.

A participant’s Individual Performance Result may range from 0% to 200%.

Once each component described above is certified by the Committee, the award earned by each participant is determined using the formula above, provided that in no event will a participant’s award exceed the participant’s individual target award if the Financial Performance Result is not at least 90%. Amounts paid under the Executive Incentive Plan are subject to recoupment from the participants in accordance with our clawback policies.

Fiscal Year 2018 Results and Payouts

At the time the corporate and individual goals were set for fiscal year 2018, the Committee believed that the Executive Incentive Plan goals were aggressive, achievable only with significant effort.

In fiscal year 2018, we achieved $9.03 billion of revenue, exceeding our GAAP Revenue funding threshold level. According to the matrix included as Exhibit A to the Executive Incentive Plan, as set forth in our 8-K filed with the SEC on January 26, 2018, Digital Media ARR growth resulted in a payout of 123% and Bookings growth in Digital Experience resulted in a payout of 97%. This produced an overall Financial Performance Result of 110%. The Committee emphasized the importance of strategic priorities and made a downward Strategic Performance Adjustment of ten percentage points to recognize the opportunities that were not realized during fiscal year 2018.

The Committee monitored each NEO’s performance on a periodic basis during the year and measured total achievement at year end. Based on the Committee’s assessment of each NEO’s individual performance during the fiscal year, including progress against the individual goals shown above, the Committee determined the individual performance assessment for the participants as shown in the table below. In January 2018, Mr. Garrett announced his intent to retire during 2018 and, consequently, did not receive any cash bonus under the Executive Incentive Plan. As a result, Mr. Garrett is excluded from the discussion that follows.



Name	Individual Performance Result		Corporate Performance Result		Actual Award Payout (% of Target Award)

Shantanu Narayen	95%	x	100%	=	95%
John Murphy	95%	x	100%	=	95%
Scott Belsky	95%	x	100%	=	95%
Bryan Lamkin	95%	x	100%	=	95%
Bradley Rencher	75%	x	100%	=	75%

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The following table shows the calculation of the individual cash bonuses awarded by the Committee based on the formulas set forth above:

Fiscal Year 2018 Executive Bonus Plan Cash Incentives

Name	Salary⁽¹⁾ ($)	Target Cash Incentive (%)	Target Cash Incentive⁽²⁾ ($)	Actual Award Payout (%)	Actual Cash Incentive Earned ($)

Shantanu Narayen	1,000,000	200	1,920,330	95	1,824,313
John Murphy	575,000	100	494,121	95	469,415
Scott Belsky	550,000	100	543,956	95	516,758
Bryan Lamkin	650,000	100	650,000	95	617,500
Bradley Rencher	625,000	100	625,000	75	468,750

________________________


⁽¹⁾	Base salary in effect at end of fiscal year 2018.


⁽²⁾	Amounts are prorated for Mr. Narayen and Mr. Murphy, whose target percentages changed during the fiscal year, and Mr. Belsky, who was not employed at the company for the full fiscal year.

Other Cash Incentives

The Committee retains authority to pay additional discretionary bonuses outside the Executive Incentive Plan. The only such bonus granted during fiscal year 2018 was a $1,250,000 sign-on bonus payable upon the commencement of Mr. Belsky’s employment in December 2017.

Equity Incentives

Goals of Equity Compensation

We use equity compensation to motivate and reward strong corporate performance and to retain valued executive officers. We also use equity incentive awards as a means to attract and recruit qualified executives. We believe that equity awards serve to align the interests of our NEOs with those of our stockholders by rewarding them for growing the value of the company. By having a significant percentage of our NEOs’ target TDC payable in the form of multi-year equity and, thus, subject to higher risk and longer vesting than cash compensation, our NEOs are motivated to make decisions that will benefit Adobe and its stockholders in the long term.

Equity Compensation Mix

For our fiscal year 2018 equity program established in January 2018, the target mix of equity incentive awards to our NEOs consisted of 50% performance share awards and 50% time-based RSUs. The Committee determined that this mix of equity compensation would appropriately balance and meet our compensation objectives, as described in the table below. The Committee calculated the target values for equity to achieve this desired mix, based on a price of $195.63 per share, the trailing 10-day average of the closing price per share of our common stock as of January 22, 2018, the period just prior to the development of the equity compensation award recommendations. Based on this price per share, the total desired number of targeted shares was determined and rounded up to the nearest ten shares, then split equally between performance shares and time-based RSUs.

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Fiscal Year 2018 Mix of Annual Equity Incentive Awards

Type of Equity (Allocation Percentage)	Description	Objectives/Dilutive Effect	Vesting⁽¹⁾

Performance Share Awards (50%)	Stock-settled awards subject to performance- and time-based vesting conditions; three-year cliff performance period determines the total number of shares earned, with significant benefits for overachievement and significant consequences for underachievement, including the potential for no award being earned; no purchase cost to executive, so awards always have value if earned	Focus NEOs on a three-year performance goal tied to long-term stockholder returns while also providing a strong retention incentive, requiring continuous employment to vest; provide significant incentive to grow our stock price; and use fewer shares than stock options, so less dilution	Performance shares vest upon the certification of performance results following a three-year performance period

Time-Based RSUs (50%)	Stock-settled awards subject to time-based vesting conditions; no purchase cost to executive, so awards always have value	Provide a strong incentive for our NEOs to remain employed with us, as they require continuous employment while vesting; provide moderate reward for growth in our stock price; and use fewer shares than stock options, so less dilution	Vest in equal annual installments over a period of three years starting with the first anniversary of the vesting commencement date.

_________________________

⁽¹⁾

Our NEOs’ equity awards are also subject to certain acceleration provisions as described under “Severance and Change of Control Compensation” and “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2018—Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2018 Table—Effect of Retirement, Death and Disability on Equity Compensation Awards.”

Target Value and Award Determination

For fiscal year 2018, the Committee, with input from its independent compensation consultant, management, and our Chief Executive Officer, took a number of factors into account in determining the target value of the equity compensation opportunity for each of our NEOs. Among these factors were the individual performance of executives, peer group positioning, internal pay equity, employee retention and the other factors for determining compensation discussed under “Compensation Philosophy and Objectives” above. With regard to peer pay positioning, the Committee reviews the value of equity awards in the aggregate because of the different mix of equity awards granted by our peers, and the aggregated manner in which this data is presented in the peer group surveys. The Committee increased Mr. Narayen’s target equity opportunity for fiscal year 2018 in order to reward and retain him as we enter the next phase of growth and scale. The Committee also increased the target equity opportunity of Mr. Lamkin and Mr. Rencher to better align their equity in relation to peer group companies. Each year, the Committee considers internal and external benchmarks in determining the appropriate amount of multi-year equity grants for Adobe’s executives, and the Committee believes that the target equity incentive compensation opportunity should make up a greater portion of an NEO’s potential TDC as the individual’s level of responsibility increases.

The following table sets forth the total target value determined by the Committee, as well as the resulting number of performance shares (target and maximum) and RSUs granted to each of our NEOs at the outset of fiscal year 2018. Note that this table reflects the values targeted by the Committee; for the actual grant date fair values of

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these equity awards, computed in accordance with stock-based compensation accounting principles, please see “Executive Compensation—Summary Compensation Table.”

Equity Awards Granted by the Committee During Fiscal Year 2018

			Performance Share Program⁽¹⁾
Name	Total Target Value of Equity Award ($)⁽²⁾		Target Award (#)	Maximum Award (#)	RSU Award (#)

Shantanu Narayen	$	24,000,000	61,345	122,690	61,345
John Murphy⁽³⁾	$	6,500,000	3,835	7,670	26,755
Scott Belsky⁽⁴⁾	$	10,000,000	12,780	25,560	42,650
Bryan Lamkin	$	6,500,000	16,615	33,230	16,615
Bradley Rencher	$	6,250,000	15,975	31,950	15,975

_________________________


⁽¹⁾	Achievement of performance shares granted in 2018 will be certified by the Committee following the three-year performance period.


⁽²⁾	Amount of performance shares and RSUs awarded to each NEO based on target value of equity award is described above under “Equity Compensation Mix.”


⁽³⁾	Includes April 9, 2018 promotion award of 22,920 RSUs.


⁽⁴⁾	Includes December 6, 2017 new hire award of 42,650 RSUs.

2018 Performance Share Program

As with our 2017 Performance Share Program, under our 2018 Performance Share Program shares are earned based on a single objective financial measure—relative TSR over a three-year performance period. All earned performance share awards will vest upon the later of the Committee’s certification of results and the three-year anniversary of the vesting commencement date. Accordingly, the performance shares will align our NEOs’ interests with those of our stockholders over the long term, while also providing key retention incentives, as the shares will only be awarded if an NEO remains providing service to Adobe (or an affiliate) upon the date of the Committee’s certification of results following the end of the three-year performance period. Moreover, the design of our Performance Share Program will result in strengthened retention incentives for our executives during periods over which the company is delivering favorable returns to our investors. The Committee believes in the importance of balancing absolute performance with that of relative performance to ensure that the company performs well relative to benchmark companies.

Under the 2018 Performance Share Program, the participants can earn between 0% and 200% (the payout cap under our program) of the target amount of performance shares. The three-year TSR measure compares the TSR of our common stock against the TSR of the companies included in the NASDAQ 100 Index as of December 1, 2017, using a cumulative 90 calendar day look-back as of the beginning and the end of the three-year period. This TSR metric creates accountability since the payout depends upon our stockholder return being better than other companies in the NASDAQ 100 Index, companies the Committee and Adobe’s management believe constitute the most relevant market benchmark for Adobe’s performance. Also, the NASDAQ 100 (as opposed to our peer group) is broad enough to accommodate the high amount of consolidation and acquisition in our industry sector without significantly impacting the overall makeup of comparative companies between the start and end of the performance period. The number of performance shares awarded will increase or decrease 2.5% for every percentile that Adobe’s TSR percentile rank is above or below, respectively, the NASDAQ 100 companies’ 50th percentile, and no shares will be awarded if our performance ranks below the 25th percentile for the three-year performance period. Additionally, regardless of our relative position with respect to the NASDAQ 100 companies, the award will be capped at 100% of target in the case of Adobe having a negative absolute TSR over the measurement period. The Performance Share Program pays above target for significant market performance. To summarize:

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Company Percentile Rank as Compared to Index Companies	Shares of Stock That May Be Earned (as a Percentage of Target Shares)
Below 25^{th (1)}	0%
25^th	38%
35^th	63%
50^th	100% ⁽²⁾
75^th	163%
90^th	200% ⁽³⁾
100^th	200%

_________________________


⁽¹⁾	A threshold percentile rank of 25% is required before any Performance Share Program awards can be earned.


⁽²⁾	The maximum shares that may be earned at the 50th percentile or higher is 100% of target, if company TSR is not positive.


⁽³⁾	The maximum shares that may be earned is 200% of target, if company TSR is positive.

Because our 2018 Program is based on a three-year performance period, none of the performance shares can be earned until the certification of the performance period closes at the outset of our 2021 fiscal year.

For more information on performance shares granted during fiscal year 2018, see the “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2018” table and accompanying narrative.

Performance Share Program Results and Payouts

The three-year performance period under Adobe’s 2016 Performance Share Program closed at the end of our 2018 fiscal year. As with our 2018 program described above, shares under the 2016 Performance Share Program were earned based on relative TSR over a three-year performance period. At the end of the performance period, there were 95 firms remaining in the relative peer group identified in the 2016 program. During the three-year performance period Adobe’s TSR was approximately 195%, calculated based on the methodology set forth in the program.

The Committee engages an independent outside consultant to review the peer group data and calculate the results under our 2016 Performance Share Program. Of the peer firms remaining following the 2016 program’s performance period, 90 had TSRs less than Adobe’s, and four had TSRs greater than Adobe’s, resulting in a percentile rank of 96 and a payout of 200%.

As described in our 2016 Performance Share Program, if the company’s TSR is positive, the company's achievement of a Percentile Rank that exceeds the 50th percentile will increase the number of shares of stock that will become eligible to be earned by increments of two and one-half percent (2.5%), rounded up to the nearest whole percent, using the following formula:

100% - ((50 - Percentile Rank) * 2.5%) = Percentage Payout

Under this formula, our percentile rank resulted in the maximum percentage payout of 200%. The target, maximum and actual shares awarded for our NEO participants under the 2016 Performance Share Program are set forth in the table below, as certified by the Committee:

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2016 Performance Share Program Results

Name⁽¹⁾	Target Award (#)	Maximum Award (#)	Actual Achievement (%)		Shares Awarded (#)

Shantanu Narayen	97,965	195,930	200	%	195,930
Mark Garrett⁽²⁾	27,215	54,430	—	%	—
Bryan Lamkin	25,855	51,710	200	%	51,710
Bradley Rencher	25,855	51,710	200	%	51,710

________________________


⁽¹⁾	Mr. Murphy and Mr. Belsky were not participants in the 2016 Performance Share Program because they were not employed by Adobe at the time the awards were granted. Therefore, they are excluded from this table.


⁽²⁾	Mr. Garrett retired in fiscal 2018 and forfeited the awards upon his termination of employment from Adobe.

2018 RSU Program

Recognizing that a substantial portion of our NEOs’ compensation is performance based, and therefore inherently at risk, the Committee granted time-based RSUs to our NEOs in order to promote retention and continuity in our business. In fiscal year 2018, our time-based RSUs were subject to vesting at a rate of 1/3 per year over three years to provide additional retention incentives. Accordingly, our RSU program provides our NEOs with strong incentives to remain employed by Adobe, while providing additional rewards for growth in our stock price with less dilution to the company than time-based stock options, which were not granted by Adobe to any executive officer in fiscal year 2018.

Realizable Pay

Realizable pay reflects the real value of equity awards and increases or decreases with fluctuations in market value. When determining the annual equity grants to our executives in January of each year, the Committee believes it is important to take into account not only the grant date values included in our Summary Compensation Table, but also to consider the effect of the year-end value of our stock on those awards over time.

Given that approximately 89% of our CEO’s and 78% of our other NEOs’ target pay is equity based, the Committee and the company consider it especially important to focus on realizable pay when evaluating pay for performance. For example, decreases in our stock price could cause stock-based awards to have realizable values that are less than what was targeted at the time of grant, including performance periods under our Performance Share Programs potentially closing with no value earned and no dilutive effect to the company.

As the following chart illustrates, when the company’s stock price increases and generates positive returns for Adobe’s stockholders, the increase impacts an executive’s realizable pay during the present fiscal year and for past fiscal years during which the executive received equity awards that are held or still subject to vesting. Accordingly, a significant portion of our NEOs’ TDC is closely linked to the performance of Adobe’s stock over time, motivating our executives to generate positive returns to Adobe’s stockholders.

The following chart demonstrates the relationship between the target and realizable values of our CEO’s total direct compensation and Adobe’s indexed TSR for the past five completed fiscal years:

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Target TDC: Target TDC is the sum of the CEO’s target base salary as disclosed in the Compensation Discussion and Analysis sections of this and prior proxy statements, the target incentive amount (which is the target bonus percentage multiplied by the respective target base salary), and equity award target grant date fair values. No target value for All Other Compensation is included.

Realizable TDC: Realizable TDC is calculated using our CEO’s actual earned base salary, bonus, non-equity incentive plan compensation, and all other compensation as disclosed in the “Summary Compensation Table,” and equity award values of all restricted stock units and performance shares granted (adjusted to reflect current estimated payout of outstanding PSUs) in each year multiplied by the stock price per share on the last day of fiscal year 2018 of $250.89.

Indexed TSR: Indexed TSR is calculated by taking the stock price per share on the last day of fiscal years 2014 to 2018 of $73.68, $92.17, $99.73, $179.52, and $250.89 respectively, and dividing each by the stock price per share on the last day of fiscal year 2013 of $56.78.

Retirement and Deferred Compensation Plan Benefits

We do not provide our employees, including our NEOs, with a defined benefit pension plan, any supplemental executive retirement plans or retiree health benefits, except as required by local law or custom for employees outside the United States. Our NEOs may participate on the same basis as other U.S. employees in our Section 401(k) Retirement Savings Plan (the “401(k) Plan”) with a company-sponsored match component.

We also maintain an unfunded, nonqualified deferred compensation plan (the “Deferred Compensation Plan”). Our executives and our Board members are eligible to participate at their election. The Deferred Compensation Plan provides the ability to defer receipt of income to a later date, which may be an attractive tax planning opportunity. We generally do not contribute to the Deferred Compensation Plan on behalf of the participants; therefore, our cost to maintain the Deferred Compensation Plan is limited to administration expenses, which are minimal. Other than Messrs. Narayen and Lamkin, no other NEOs participated in or had an accrued balance under the Deferred Compensation Plan in fiscal year 2018.

Perquisites and Additional Benefits and Programs

We provide limited perquisites to our executives, including our NEOs. In considering potential perquisites, the Committee considers the cost to Adobe as compared to the perceived value to our employees as well as other corporate governance and employee relations factors. We offer our executives at the director level and above, including our NEOs, an annual comprehensive physical examination that is fully funded by Adobe, as an added benefit to the Adobe medical insurance provided. Alternatively, our NEOs may choose to enroll in a health concierge service. Adobe recognizes the significant role of its executives and offers this program to encourage a focus on keeping well.

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In addition, during fiscal year 2018 we maintained limited memberships in private jet programs. Our policy related to these programs, adopted to enable efficient travel, allows our Chief Executive Officer the use of a private jet for business travel. A limited number of other executive officers and employees may accompany our CEO only if required for business purposes, and none of our executives or employees used our private jet program for non-business-related travel. The NEOs complied with this policy at all times during fiscal year 2018.

We also provide the following benefits to our NEOs, on the same terms and conditions as provided to all other eligible employees: health, dental and vision insurance; life insurance; an Employee Stock Purchase Plan; health savings account; medical and dependent care flexible spending account; and short- and long-term disability, accidental death and dismemberment insurance. We believe these benefits are consistent with benefits provided by companies with which we compete for executive-level talent.

Equity-Related Policies

Stock Ownership Guidelines

In 2003, our Board adopted stock ownership guidelines for all employees at the senior vice president level and above (including our executive officers) and directors, which the Committee reviews periodically and updated in 2018. These guidelines are designed to align our officers’ interests with those of our stockholders by promoting long-term share ownership, which reduces the incentive for excessive short-term risk taking. Under the amended guidelines, our executive officers should hold 50% of net shares acquired until they satisfy (and continue to satisfy) the minimum share ownership value requirements listed in the table below.



Position		Minimum Ownership Value

Chief Executive Officer		20x base salary
President, Executive Vice President or Chief Financial Officer		10x base salary
Senior Vice President		3x base salary

The minimum share ownership levels for each title will be determined annually using the following:

•average base salary of the individuals holding such title as of December 31; and

•the average daily closing share price for the 30 days ending on December 31.

Once an executive officer achieves the minimum share threshold measured by the value of shares held, they should retain shares necessary to meet the minimum ownership requirement throughout the year. Shares that count toward the minimum share ownership include: shares owned outright and beneficially owned; shares purchased in the open market or inherited; shares acquired through the company’s Employee Stock Purchase Plan; vested restricted stock; vested RSUs, performance shares and performance units in our Deferred Compensation Plan; and shares issued from the exercise of vested options. Any shares held prior to the executive’s date of appointment will also count toward the ownership requirement.

The Committee reviews quarterly reports of the stock holdings of our officers and directors. Our Board may evaluate whether exceptions should be made in the case of any covered person who, due to his or her unique financial circumstances, would incur a hardship by complying with these guidelines. No such exceptions were granted or were in place in fiscal year 2018. As of November 30, 2018, each of our NEOs was in compliance with the applicable guidelines.

Anti-Hedging and Anti-Pledging Policy

Our insider trading policy explicitly prohibits any director or employee, including our NEOs, from hedging their equity ownership in Adobe by engaging in short sales or trading in any derivatives involving Adobe securities. Our employees are also prohibited from holding Adobe stock in a margin account or otherwise pledging Adobe stock or using financial instruments such as prepaid forwards, equity swaps and collars.

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Performance-Based Compensation Recovery Policy

Adobe’s Board adopted a Clawback Policy applicable in the event of a material restatement of our financial statements that results from the intentional misconduct or fraud of a Section 16 executive officer. The Clawback Policy enables the Board to require repayment or cancellation of the incremental portion of the performance-based incentive compensation paid or payable to such officer in excess of the amount that would have been paid or payable based on the restated financial results. We will also continue to monitor rule-making actions of the SEC and NASDAQ related to clawback policies and implement such rules when required.

In addition, as a public company subject to Section 304 of the Sarbanes-Oxley Act of 2002, if we are required to restate our financial results as the result of misconduct or due to our material noncompliance with any financial reporting requirements under the federal securities laws, our CEO and CFO may be legally required to reimburse us for any bonus or incentive-based or equity-based compensation they receive.

Granting Guidelines for Equity Compensation

Adobe has adopted written guidelines setting forth our grant practices and procedures for all equity awards. Pursuant to these guidelines:


•	the vesting commencement date for our annual equity awards granted to our employees, including the NEOs, is January 24 of each year unless another date is approved and documented by the Committee;


•	the effective grant date for executive officer new hire RSU and performance share awards is the executive officer’s hire date;


•	the effective grant date for non-executive officer new hire stock option, performance share and RSU awards is the 15th day of the month following the month of the employee’s hire date, or, if that is not a trading day, the first trading day thereafter; and


•	the effective grant date for promotion RSU awards is the 15th day of the month following the month of the employee’s promotion, or, if that is not a trading day, the first trading day thereafter.

Because the grant dates are pre-established, the timing of the release of material non-public information does not affect the grant dates for equity awards, and Adobe does not time the release of material non-public information based on equity award grant dates.

The Committee approves all grants made to our executive officers on or before the grant date. The Committee also has the authority to approve non-executive officer stock option, performance share and RSU awards on or before the grant date. Our Board has also delegated to a Management Committee for Employee Equity Awards (consisting of the Chief Executive Officer and the Chief Human Resources Officer & Executive Vice President, Employee Experience) the authority to approve RSU awards to non-executive officer employees in accordance with the granting guidelines described above and subject to Committee-approved vesting schedules and share limits. In addition, our Board has delegated to an Acquired Company & Retention Equity Awards Committee (consisting of the CEO in his capacity as a member of the Board) the authority to approve the assumption of outstanding awards in an acquisition, and the granting of stock option, performance share and RSU awards to employees. Pursuant to its charter, the Committee has the authority to establish the terms and conditions of our equity awards; therefore, the Committee may make exceptions to Adobe’s granting guidelines.

In the event we award stock options, all stock option awards would be granted with an exercise price equal to or greater than the fair market value of the underlying stock on the effective grant date or, in accordance with the terms of our approved equity plans, the fair market value of the underlying stock on the last trading day prior to the effective grant date, if an award is granted on a non-trading day.

Employment Agreements

Each of our NEOs is employed “at will.” Except in limited circumstances, such as when an employment agreement that provides for severance is assumed or renegotiated as part of a corporate transaction, we only enter into agreements providing for severance benefits with our U.S. executive officers in relation to a change of control of Adobe or an executive transition plan.

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Severance and Change of Control Compensation

The Committee believes that change of control vesting and severance benefits, if structured appropriately, serve to minimize the distraction caused by a potential transaction and reduce the risk that an executive departs Adobe before an acquisition is consummated. The Committee and the company believe that a pre-existing plan will allow our executives to focus on continuing normal business operations and on the success of a potential business combination, rather than on seeking alternative employment. Further, a pre-existing plan ensures stability and will enable our executives to maintain a balanced perspective in making overall business decisions during a potentially uncertain period. To that end, Adobe provides certain change of control benefits as described below.

Each of our NEOs is an eligible participant in our 2017 Executive Severance Plan in the Event of a Change of Control (the “Change of Control Plan”). The Change of Control Plan provides for severance payments and fully accelerated vesting of outstanding equity awards for our NEOs and other members of senior management upon an involuntary termination of employment upon or following a qualifying change of control. The terms of the Change of Control Plan are described below.

We also maintain a Retention Agreement with Mr. Narayen, which provides similar benefits but does not require termination of his employment in order for him to receive the equity acceleration, as described below under “Executive Compensation—Change of Control.” Mr. Narayen’s original Retention Agreement, dated January 12, 1998, was amended February 11, 2008 based on his promotion to Chief Executive Officer, and was further amended on December 11, 2010 and December 5, 2014 in order to clarify the manner of compliance with, or exemption from, Internal Revenue Code Section 409A.

The Change of Control Plan and the Retention Agreement with Mr. Narayen do not provide for reimbursements or “gross-ups” of excise tax amounts under Section 4999 of the Code. Rather, under both of these arrangements, benefits would be reduced if doing so would result in a better after-tax economic position for the affected executive. The Committee and the company believe this is an appropriate allocation of the tax cost of these arrangements between Adobe and the executive and is consistent with market practice.

Our change of control arrangements are designed to be competitive with the pay practices of our peer group. The Committee periodically reviews the terms and conditions of our change of control arrangements and will make adjustments when and to the extent it deems appropriate. The Change of Control Plan will expire on December 13, 2020.

Additional details regarding our Change of Control Plan and the Retention Agreement with Mr. Narayen, including estimates of amounts payable in specified circumstances as of the last day of fiscal year 2018, are disclosed in the “Executive Compensation—Change of Control—Potential Payments upon Termination and/or a Change of Control” table contained in this proxy statement.

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Role of Our Executive Compensation Committee, External Compensation Consultant and Management

The Executive Compensation Committee oversees and provides strategic direction to management regarding many elements of our executive compensation programs. It reviews and approves the compensation and severance benefits of Adobe’s executive officers, including our NEOs. As part of this review, the Committee regularly solicits input from its independent compensation consultant. In fiscal year 2018, the Committee met regularly in executive session with its independent compensation consultant and without management present. The Chair of the Committee also met separately with the consultant, both with and without management present. The Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. The Committee also discusses Mr. Narayen’s performance with the Board and our Lead Director and remains solely responsible for making the final decisions on compensation for our executive officers, including our NEOs.

The Executive Compensation Committee regularly reviews the compensation programs for our executive officers, including our NEOs, to ensure they achieve the desired goal of aligning our executive compensation structure with our stockholders’ interests. This includes using our incentive compensation awards to support our strategic and operating plans. As discussed above, we also closely monitor the compensation programs and pay levels of executives from companies of similar size and complexity, so that we may ensure that our compensation programs are within the norm of market practices. This aids in the retention of our NEOs in a competitive market for executive talent.

Since 2008, the Executive Compensation Committee has engaged Compensia to review and provide independent advice concerning all of the components of Adobe’s executive compensation program, on account of Compensia’s expertise in the software industry, its knowledge of our peer group, and its geographical proximity, enabling frequent in-person attendance at Committee meetings. Compensia provided the following services on behalf of the Committee during fiscal year 2018: (1) reviewed and provided recommendations on the composition of our peer group, and provided compensation data relating to executives at the selected companies in our peer group; (2) conducted a comprehensive review of the total compensation arrangements for all of our executive officers; (3) provided advice on our executive officers’ compensation; (4) assisted with executive equity program design, including analysis of equity mix and target grant levels; (5) assisted with review of our fiscal year 2018 Executive Annual Incentive Plan; (6) provided updates on say-on-pay results and regulatory developments; (7) conducted a comprehensive review of compensation paid to the Board and provided recommendations to the Committee and the Board regarding director pay; (8) updated the Committee on emerging trends and best practices in the area of executive and board compensation; (9) provided a market review and assistance in design of executive and non-employee director’s stock ownership guidelines; (10) provided assistance in reviewing executive perquisites and benefits; and (11) reviewed the Compensation Discussion and Analysis for inclusion in our 2018 proxy statement.

Our Employee Experience, Finance and Legal departments work with our Chief Executive Officer and Compensia to design and develop new compensation programs applicable to our NEOs and other executive officers, to recommend changes to existing compensation programs, to recommend financial and other performance targets to be achieved under those programs, to prepare analyses of financial data, to prepare peer group compensation comparisons and other Committee briefing materials and, ultimately, to implement the decisions of the Committee. Members of these departments and our Chief Executive Officer also meet with Compensia separately from the Committee to convey information on proposals that management may make to the Committee, as well as to allow Compensia to collect information about Adobe to develop its own proposals.

In addition, our Chief Executive Officer conducted reviews of the performance and compensation of the other NEOs, and based on these reviews, made his recommendations for fiscal year 2018 target compensation levels (including adjustments to base salary and target cash and equity incentive levels) directly to the Committee. No NEO was present or participated in the final determinations or deliberations of the Committee regarding the amount of any component of his own fiscal year 2018 compensation package.

The Committee conducted a formal review of Compensia’s independence and is satisfied with the qualifications, performance and independence of Compensia. Other than providing limited guidance to our Employee Experience department regarding Adobe’s broad-based equity compensation design for all employees (as approved by the Committee), Compensia does not provide any other services to Adobe. Adobe pays for the cost of Compensia’s services.

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Tax and Accounting Considerations

In designing our compensation programs, the Committee considers the financial accounting and tax consequences to Adobe as well as the tax consequences to our employees. In determining the aggregate number and mix of equity grants in any fiscal year, the Committee and management consider the size and share-based compensation expense of the outstanding and new equity awards. Section 162(m) of the Code generally disallows a tax deduction to public corporations for compensation greater than $1 million paid for any fiscal year to certain executive officers. However, prior to the enactment of tax legislation in December 2017 (“Tax Act”), certain types of performance-based compensation have been excluded from the $1 million deduction limit if specific requirements were met. Under the Tax Act, this special exclusion for performance-based compensation will not be available with respect to taxable years beginning after December 31, 2017 unless the compensation is pursuant to a written binding contract which was in effect on November 2, 2017 and is not modified in any material respect on or after such date. Pursuant to the Tax Act, for the taxable year beginning after December 31, 2017, Section 162(m) of the Code was expanded to cover additional executive officers including the chief financial officer so that the compensation of the chief executive officer and chief financial officer (at any time during the fiscal year), and the three other most highly compensated executive officers (as of the end of any fiscal year) will be subject to Section 162(m) of the Code. Any executive officer whose compensation is subject to Section 162(m) of the Code in taxable years beginning after December 31, 2016 will have compensation subject to Section 162(m) of the Code for all future years, including years after the executive terminates employment or dies.

The Committee has considered the impact of Section 162(m) when designing our executive compensation programs. We believe it is important to preserve flexibility in administering compensation programs as corporate objectives may not always be consistent with the requirements for full deductibility. The Committee expects it will grant awards and provide for compensation that will not be deductible under Section 162(m) when it determines that such non-deductible arrangements are otherwise in the best interests of Adobe and its stockholders. The Committee also expects to continue to provide performance-based compensation.

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REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE

The Executive Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” contained in this proxy statement. Based on this review and discussion, the Executive Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2018 and in this proxy statement.

Respectfully submitted,

EXECUTIVE COMPENSATION COMMITTEE

Amy Banse, Chair

Edward Barnholt

Laura Desmond

David Ricks

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EXECUTIVE COMPENSATION

Summary Compensation Table for Fiscal Years 2018, 2017 and 2016

The following table sets forth information regarding the compensation for services performed during fiscal years 2018, 2017 and 2016 awarded to, paid to or earned by the NEOs, which include (1) our Chief Executive Officer, (2) our Chief Financial Officers, including former Chief Financial Officer Mark Garrett who retired in fiscal year 2018 and our current Chief Financial Officer John Murphy who was appointed thereafter, and (3) our three other most highly compensated executive officers, as determined by reference to total compensation for fiscal year 2018, who were serving as executive officers at the end of fiscal year 2018.



Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards⁽¹⁾ ($)	Non-Equity Incentive Plan Compensation ⁽²⁾ ($)	All Other Compensation⁽³⁾ ($)	Total ($)

Shantanu Narayen	2018	1,000,000	—	25,539,764	1,824,313	33,451	28,397,528
Chairman, President and Chief Executive Officer	2017	1,000,000	—	19,762,949	1,118,813	52,271	21,934,033
Chairman, President and Chief Executive Officer	2016	1,010,260	—	17,629,781	1,342,500	52,793	20,035,334

John Murphy⁽⁴⁾	2018	532,115	—	6,620,002	469,415	200,011	7,821,543
Executive Vice President and Chief Financial Officer

Mark Garrett	2018	376,442	—	—	—	14,564	391,006
Former Executive Vice President and Chief Financial Officer	2017	720,192	—	6,039,583	540,759	14,619	7,315,153
Former Executive Vice President and Chief Financial Officer	2016	698,977	—	4,897,611	609,000	14,433	6,220,021

Scott Belsky⁽⁵⁾	2018	545,769	1,250,000	10,193,697	516,758	8,313	12,514,537
Chief Product Officer and Executive Vice President, Creative Cloud

Bryan Lamkin ⁽⁶⁾	2018	642,308	—	6,917,323	617,500	8,769	8,185,900
Executive Vice President and GM, Digital Media	2017	595,192	—	6,039,583	447,525	8,619	7,090,919

Bradley Rencher	2018	621,154	—	6,650,872	468,750	8,361	7,749,137
Executive Vice President and GM, Experience Cloud	2017	595,192	—	6,039,583	401,625	8,211	7,044,611
Executive Vice President and GM, Experience Cloud	2016	573,514	—	4,652,866	500,250	8,084	5,734,714

______________________________________

⁽¹⁾

These amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value, computed in accordance with stock-based compensation accounting principles, of performance shares, assuming the probable outcome of related performance conditions, and RSUs. Pursuant to SEC rules, the amounts shown disregard the impact of estimated forfeitures. As shown above in the table entitled “Equity Awards Granted by the Committee During Fiscal Year 2018,” performance share awards have a maximum payout of 200% of the target number of shares.


⁽²⁾	These amounts consist solely of amounts earned under our Executive Incentive Plans. Such amounts are paid in the subsequent fiscal year.

⁽³⁾

These amounts for fiscal year 2018 include matching contributions under Adobe’s 401(k) Plan (including an additional matching contribution made by Adobe early in the fiscal year to eligible participants who did not previously receive the maximum matching contribution during the prior 401(k) Plan year), and life insurance premiums for all NEOs. The amounts also include the cost of executive health concierge service in lieu of the executive physical for Mr. Narayen and Mr. Garrett. In addition, for Mr. Narayen, these amounts include the taxable value of the sales club trip of $5,949, which was grossed up to $11,007. It is our practice to cover the full costs of the sales club trip for any employee who is entitled to attend. For Mr. Narayen, these amounts also

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include the value of a gift commemorating his twentieth anniversary at Adobe (value of $7,885). Additionally for Mr. Murphy, included in other compensation are relocation fees of $193,117, which include a gross-up for taxes and were provided as part of his 2017 employment offer.


⁽⁴⁾	Mr. Murphy was not a named executive officer in fiscal year 2016 or 2017.


⁽⁵⁾	Mr. Belsky was not a named executive officer in fiscal year 2016 or 2017.


⁽⁶⁾	Mr. Lamkin was not a named executive officer in fiscal year 2016.

CEO Pay Ratio

The fiscal year 2018 annual total compensation of our CEO was $28,397,528 and the annual total compensation of our median compensated employee was $142,192, based on the methodology presented in the Summary Compensation Table. This resulted in a ratio of 200. For purposes of identifying the median employee, we took into account salary paid, target cash incentive bonus and grant date fair market value of RSUs granted during the year for our employees, excluding Mr. Narayen, as of November 30, 2018. We annualized this compensation for employees who did not work the entire year.

The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our internal records and the methodology described above. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s total annual compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.

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Grants of Plan-Based Awards in Fiscal Year 2018

The following table shows all plan-based awards granted to the NEOs during fiscal year 2018. The equity awards granted in fiscal year 2018 identified in the table below are also reported in “Outstanding Equity Awards at 2018 Fiscal Year End.” For additional information regarding incentive plan awards, please refer to the Cash Incentives and Equity Incentives sections of our “Compensation Discussion and Analysis.”



		Estimated Future Payouts Under Non-Equity Incentive Plan Awards⁽¹⁾			Estimated Future Payouts Under Equity Incentive Plan Awards⁽²⁾			All Other Stock Awards: Number of Shares of Stock or	Grant Date Fair Value of Stock and Option
Name	Grant Date	Threshold ($)	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)	Units⁽³⁾ (#)	Awards⁽⁴⁾ ($)

Shantanu Narayen	—	—	1,920,330	3,840,659	—	—	—	—	—
	1/24/2018	—	—	—	23,311	61,345	122,690	—	13,406,950	⁽⁵⁾
	1/24/2018	—	—	—	—	—	—	61,345	12,132,814
John Murphy	—	—	494,121	988,242	—	—	—	—	—
	1/24/2018	—	—	—	1,457	3,835	7,670	—	838,139	⁽⁵⁾
	1/24/2018	—	—	—	—	—	—	3,835	758,486
	4/9/2018	—	—	—	—	—	—	22,920	5,023,376
Mark Garrett⁽⁶⁾	—	—	—	—	—	—	—	—	—
Scott Belsky	—	—	543,956	1,087,912	—	—	—	—	—
	1/24/2018	—	—	—	4,856	12,780	25,560	—	2,793,069	⁽⁵⁾
	12/6/2017	—	—	—	—	—	—	42,650	7,400,628
Bryan Lamkin	—	—	650,000	1,300,000	—	—	—	—	—
	1/24/2018	—	—	—	6,313	16,615	33,230	—	3,631,208	⁽⁵⁾
	1/24/2018	—	—	—	—	—	—	16,615	3,286,115
Bradley Rencher	—	—	625,000	1,250,000	—	—	—	—	—
	1/24/2018	—	—	—	6,070	15,975	31,950	—	3,491,336	⁽⁵⁾
	1/24/2018	—	—	—	—	—	—	15,975	3,159,536

_________________________

⁽¹⁾

These columns represent awards granted under our Executive Incentive Plan for performance in fiscal year 2018. These columns show the awards that were possible at the threshold, target and maximum levels of performance. Minimum performance under the Executive Incentive Plan could have resulted in a threshold amount equal to $0. Actual cash incentive awards earned in fiscal year 2018 by the NEOs under the Executive Incentive Plan are shown in the column titled “Non-Equity Incentive Plan Compensation” in the “Summary Compensation Table.”

⁽²⁾

These columns represent awards granted under our 2018 Performance Share Program, which was adopted under our 2003 Equity Incentive Plan, as amended (the “2003 Plan”). These columns show the awards that are possible at the threshold, target and maximum levels of performance. If the company does not achieve the threshold performance metric, zero shares will be earned. Because our 2018 Performance Share Program is based on a three-year performance period, none of the performance shares can be earned until the performance period closes at the outset of our 2021 fiscal year. See “Equity Awards Granted by the Committee During Fiscal Year 2018” in the “Compensation Discussion and Analysis” section of this proxy statement for additional discussion.


⁽³⁾	This column represents awards of RSUs granted under our 2003 Plan.

⁽⁴⁾

These amounts do not reflect the actual economic value realized by the NEO. In accordance with SEC rules, this column represents the grant date fair value, computed in accordance with stock-based compensation accounting principles, of each equity award. For additional information on the valuation assumptions, see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2018 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements at Note 11, “Stock-Based Compensation.”


⁽⁵⁾	The grant date fair value included in this column for awards granted under our 2018 Performance Share Program is based on the probable outcome of the performance conditions associated with these grants determined as of the grant date, excluding the effect of estimated forfeitures.

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⁽⁶⁾	Mr. Garrett notified Adobe of his intent to retire on January 22, 2018. Accordingly, Mr. Garrett did not receive any equity grants in fiscal 2018.

Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2018 Table

The material terms of the NEOs’ annual compensation, including base salaries, the Executive Incentive Plan, the 2018 Performance Share Program, the time-based RSUs and the explanations of the amounts of salary, cash incentives and equity values in proportion to total compensation are described under “Compensation Discussion and Analysis” in this proxy statement. Our equity award granting practices are described above and our severance benefits are described under “Change of Control” in this proxy statement. None of our NEOs have entered into a written employment agreement with Adobe.

As discussed in greater detail in “Compensation Discussion and Analysis,” the fiscal year 2018 non-equity incentive awards were granted pursuant to the Executive Incentive Plan, with amounts earned based on the achievement of certain financial and strategic objective goals, as well as the individual performance applicable to each respective NEO. Cash incentives were fully vested when earned.

As discussed in greater detail in “Compensation Discussion and Analysis,” the fiscal year 2018 performance share awards will be settled in stock, subject to the terms of our 2018 Performance Share Program. Actual awards earned under the 2018 Performance Share Program will be determined based on the results achieved with respect to the three-year performance period, as certified by the Committee at the outset of our 2021 fiscal year, contingent upon each NEO’s continued service to Adobe.

The RSUs granted to our NEOs pursuant to our 2003 Plan at the outset of fiscal year 2018 vest over three years with one-third vesting on each anniversary of the grant date subject to continued service through each applicable vesting date. There is no purchase price associated with performance share or RSU awards. We did not pay dividends on our common stock during fiscal year 2018.

Effect of Retirement, Death and Disability on Equity Compensation Awards

The terms and conditions of our stock option and RSU awards provide that if a recipient’s employment is terminated due to death or disability, the recipient will be given credit for an additional 12 months of service, resulting in vesting for the applicable award accelerating by 12 months. In addition, our U.S. and certain other stock option agreements provide that if a recipient’s employment terminates on or after age 65, the individual will be given credit for an additional 12 months of service, resulting in vesting for the applicable award accelerating by 12 months.

The terms and conditions of our performance share awards granted in fiscal years 2016, 2017 and 2018 (which vest upon the later of the certification of the performance goals and the third anniversary of the grant date) provide that if a recipient’s employment is terminated due to death or disability before certification of the performance goals, the recipient will receive a prorated target award based on the number of months of service provided during the performance period.

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Outstanding Equity Awards at 2018 Fiscal Year End

The following table sets forth information regarding outstanding equity awards as of November 30, 2018 for each NEO. All vesting is contingent upon continued employment with Adobe through the applicable vesting date and certain equity awards are subject to performance conditions, each as specified in the footnotes. Market values and payout values in this table are calculated based on the closing market price of our common stock as reported on NASDAQ on November 30, 2018, which was $250.89 per share. Mr. Garrett, former Chief Financial Officer, retired in fiscal 2018 and forfeited the unvested awards upon his termination of employment from Adobe. Mr. Garrett did not have any outstanding equity awards as of November 30, 2018.



	Option Awards⁽¹⁾				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Shantanu Narayen	—	—	—	—	32,655⁽²⁾	8,192,813	—	—
	—	—	—