Edgar Filing: ADOBE SYSTEMS INC

adbedef14a 2014

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.)



Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨	Preliminary Proxy Statement
¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
¨	Definitive Additional Materials
¨	Soliciting Material under §240.14a-12



Adobe Systems Incorporated
(Name of Registrant as Specified In Its Charter)

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

Table of Contents

Adobe Systems Incorporated

345 Park Avenue

San Jose, California 95110-2704

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held April 10, 2014

Dear Stockholders:

You are cordially invited to attend our 2014 Annual Meeting of Stockholders to be held on Thursday, April 10, 2014 at 9:00 a.m. local time at our East Tower building located at 321 Park Avenue, San Jose, California 95110. We are holding the meeting to:


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


2.	Approve an amendment to the 2003 Equity Incentive Plan to increase the available share reserve by 8.85 million shares;


3.	Ratify the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year ending on November 28, 2014;


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


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

If you owned our common stock at the close of business on February 14, 2014, 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 2013 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 2013 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.

Table of Contents

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 completing, signing, dating and mailing your proxy card or voting instruction card in the envelope provided.



	Sincerely,

	Michael Dillon Senior Vice President, General Counsel & Corporate Secretary

February 28, 2014

San Jose, California

Table of Contents

ADOBE SYSTEMS INCORPORATED

Proxy Statement

for the

Annual Meeting of Stockholders

To Be Held April 10, 2014

TABLE OF CONTENTS



	Page
Information Concerning Solicitation and Voting	1
Questions and Answers	1
Board of Directors and Corporate Governance	5
Security Ownership of Certain Beneficial Owners and Management	17
Section 16(a) Beneficial Ownership Reporting Compliance	21
Equity Compensation Plan Information	22
Compensation Discussion and Analysis	25
Report of the Executive Compensation Committee	42
Executive Compensation	43
Summary Compensation Table	43
Grants of Plan-Based Awards in Fiscal Year 2013	45
Outstanding Equity Awards at 2013 Fiscal Year End	48
Option Exercises and Stock Vested in Fiscal Year 2013	51
Nonqualified Deferred Compensation	51
Change of Control	52
Director Compensation	57
Compensation Committee Interlocks and Insider Participation	62
Transactions with Related Persons	62
Proposal 1—Election of Directors	63
Proposal 2—Approval of an Amendment to the Adobe Systems Incorporated 2003 Equity Incentive Plan	64
Proposal 3—Ratification of Appointment of Independent Registered Public Accounting Firm	74
Principal Accounting Fees and Services	75
Audit Committee Pre-Approval of Services Performed by Our Independent Registered Public Accounting Firm	75
Report of the Audit Committee	76
Proposal 4—Advisory Vote on Executive Compensation	77
Householding of Proxy Materials	78
Annual Report	78
Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting to be Held on April 10, 2014	78
Stockholder Proposals to be Presented at Next Annual Meeting	79

Table of Contents

____________________

ADOBE SYSTEMS INCORPORATED

____________________

PROXY STATEMENT

____________________

INFORMATION CONCERNING SOLICITATION AND VOTING

Our Board of Directors (the “Board”) is soliciting proxies for our 2014 Annual Meeting of Stockholders (the “2014 Annual Meeting”) to be held on Thursday, April 10, 2014, at 9:00 a.m. local time at our East Tower building located at 321 Park Avenue, 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 2013 Annual Report, are being distributed and made available on or about February 28, 2014. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the 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 February 28, 2014 to most of our stockholders who owned our common stock at the close of business on the record date, February 14, 2014. 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 $12,500 for its services and will reimburse Innisfree for reasonable out-of-pocket expenses, for which we budget up to $20,000. 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 meeting?

A:	Our Board set February 14, 2014 as the record date for the meeting. If you owned our common stock at the close of business on February 14, 2014, 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 14, 2014, there were 499,466,920 shares of our common stock outstanding and entitled to vote at the meeting.

Table of Contents



Q:	What is the quorum requirement for the 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 meeting?

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

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

	•	Approval of an amendment to the 2003 Equity Incentive Plan to increase the available share reserve by 8.85 million shares;

	•	Ratification of KPMG LLP as our independent registered public accounting firm for the fiscal year ending November 28, 2014; and

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

	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.

Table of Contents



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

A:	You can view the proxy materials on the internet at 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 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, Computershare Investor Services LLC, 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, nominee, or trustee that holds your shares, giving you the right to vote the shares at the meeting. The meeting will be held at our East Tower building located at 321 Park Avenue, San Jose, California 95110. If you need directions to the meeting, please visit http://www.adobe.com/aboutadobe/maps/sj_map.html.

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.

	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.

Table of Contents



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 sign 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 election 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 28, 2014 (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 amendment of the 2003 Equity Incentive Plan to increase the available share reserve by 8.85 million shares (Proposal 2) and the advisory vote on executive compensation (Proposal 4) 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 and 4.

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 9, 2014 (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.

Table of Contents

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Our Board of Directors

The following tables set forth the biographical information listed below for each nominee, such as relevant experience, qualifications, attributes and skills, and including other directorships held in public companies.

Nominees for Election for a One-Year Term Expiring in 2015



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

Amy L. Banse	Ms. Banse serves as Managing Director and Head of Funds, Comcast Ventures and Senior Vice President, Comcast Corporation. 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. She received a B.A. from Harvard and a J.D. from Temple University School of Law.	54	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 operations, financial and strategic issues. She also brings to the Board a deep expertise in global media and technology organizations in online business.

Kelly J. Barlow	Mr. Barlow has been a Partner of ValueAct Capital, an investment partnership engaged in public and private equity investing, since August 2003. Prior to joining ValueAct Capital, Mr. Barlow worked at EGM Capital from 1997 to 2003 where he served primarily as portfolio manager of the firm’s long/short equity fund. Prior to EGM Capital, Mr. Barlow worked at Wells Capital Management, a wholly owned subsidiary of Wells Fargo Bank, in the small capitalization equity department from 1993 to 1997. Mr. Barlow previously served as a director of KAR Auction Services, Inc. from December 2011 to September 2013, of Allscripts Healthcare Solutions, Inc. from October 2008 to August 2010 and of SIRVA, Inc. from September 2006 to December 2007. Mr. Barlow holds a B.S. from California State University, Chico and is a CFA Charterholder.	45	2012

	Mr. Barlow’s years of experience as a seasoned investor with financial expertise and public company board experience brings significant value to our Board. He also provides the Board a unique perspective as a representative of a major stockholder.

Table of Contents



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

Edward W. Barnholt	Mr. Barnholt served as President and Chief Executive Officer of Agilent Technologies, Inc., a measurement company, from March 1999 to March 2005 and as its Chairman of the Board from November 2002 until his retirement in March 2005. From 1990 to 1999, Mr. Barnholt served in several executive positions at Hewlett-Packard Company, a computer and electronics company, including serving as Executive Vice President and General Manager of its Measurements Organization. Mr. Barnholt currently serves on the board of directors of eBay Inc., a global online marketplace and as Chairman of the Board of KLA-Tencor Corporation, a provider of process control and yield management solutions. Mr. Barnholt holds a B.S. and a M.S. in Electrical Engineering from Stanford University.	70	2005

	As the former President, Chief Executive Officer and Chairman of the Board of Agilent, as well as a former senior executive with Hewlett-Packard, Mr. Barnholt possesses significant leadership and operational experience, including on matters particularly relevant to companies with complex technology and international issues. As a board member of two other public companies, Mr. Barnholt also has strong corporate governance expertise and a global business perspective.

Robert K. Burgess	Mr. Burgess has been an independent consultant since December 2005. He served as Chief Executive Officer of Macromedia, Inc., a provider of internet and multimedia software, from November 1996 to January 2005. He also served on the board of directors of Macromedia from November 1996 until December 2005, as Chairman of the Board of Macromedia from July 1998 until December 2005 and as Executive Chairman of Macromedia from January 2005 until December 2005, when Macromedia was acquired by Adobe. Prior to joining Macromedia, Mr. Burgess held key executive positions at Silicon Graphics, Inc., a graphics and computing company, and from 1991 to 1995 served as Chief Executive Officer and a member of the board of directors of Alias Research, Inc., a publicly traded 3D software company, prior to its acquisition by Silicon Graphics. Mr. Burgess currently serves on the board of NVIDIA Corporation, a provider of programmable graphics processing technologies. He previously served on the board of IMRIS Inc. from September 2010 to November 2013. Mr. Burgess holds a B.Com. from McMaster University in Canada.	56	2005

	As the former Executive Chairman, Chief Executive Officer and Chairman of the Board of Macromedia, as well as several other executive positions, Mr. Burgess has extensive executive leadership experience, as well as extensive knowledge of operational, financial and strategic issues. He also possesses significant experience with business issues in technology organizations as a result of his former executive roles. With more than 20 years experience as a board member of publicly traded companies, Mr. Burgess also has a broad understanding of the role and responsibilities of the Board and valuable insight on a number of significant issues in the technology industry.

Table of Contents



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

Frank A. Calderoni	Mr. Calderoni serves as Executive Vice President and Chief Financial Officer at Cisco Systems, Inc., a designer, manufacturer and seller of Internet Protocol (IP)-based networking and other products related to the communications and information technology industry, 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 holds a B.S. in Accounting and Finance from Fordham University and an M.B.A. in Finance from Pace University.	56	2012

	As a result of his current position at Cisco, 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.

Michael R. Cannon	Mr. Cannon served as President, Global Operations of Dell Inc., a computer systems manufacturer and services provider, from February 2007 until his retirement in January 2009, and as a consultant to Dell from January 2009 until January 2011. Prior to joining Dell, Mr. Cannon was the President and Chief Executive Officer of Solectron Corporation, an electronic manufacturing services company, from January 2003 until February 2007. From July 1996 until January 2003, Mr. Cannon served as the Chief Executive Officer of Maxtor Corporation, a disk drive and storage systems manufacturer. Prior to joining Maxtor, Mr. Cannon held senior management positions at IBM, a global services, software and systems company. Mr. Cannon also serves on the board of directors of Seagate Technology Public Limited Company, a disk drive and storage solutions company, Lam Research Corporation, a semiconductor wafer fabrication equipment company, and Dialog Semiconductor, a mixed signal semiconductor company. He previously served as a director of Elster Group SE from October 2010 to August 2012. Mr. Cannon studied mechanical engineering at Michigan State University and completed the Advanced Management Program at Harvard Business School.	61	2003

	Mr. Cannon’s career spans more than 35 years in technology. As a result of his former senior executive positions at Dell, Solectron and Maxtor, Mr. Cannon possesses a significant amount of leadership and worldwide operational experience with companies in high technology industries. In addition, as Chief Executive Officer with financial oversight responsibilities at both Solectron and Maxtor, Mr. Cannon possesses extensive financial expertise. Also, from his service as a board member with four other public companies, Mr. Cannon offers our Board a deep understanding of corporate governance matters.

Table of Contents



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

James E. Daley	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, L.L.P., an accounting firm, where he served as Co-Chairman-Operations and Vice-Chairman-International from 1988 to 1998. Mr. Daley currently serves on the board of directors of The Guardian Life Insurance Company of America. Mr. Daley holds a B.B.A. from Ohio University.	72	2001

	With more than 35 years of service with the international accounting firm Price Waterhouse, L.L.P., as well as his past service as the Chief Financial Officer of a publicly traded global technology company, Mr. Daley brings to the Board extensive financial expertise related to the business and financial issues facing large global technology corporations, as well as a comprehensive understanding of international business and corporate governance matters.

Laura B. Desmond	Ms. Desmond is the Global Chief Executive Officer of Starcom MediaVest Group (SMG), a global marketing and media services company which is part of the Publicis Groupe. She is also a member of the Publicis Groupe P12, an executive committee comprised of the company’s top global leaders. 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. Ms. Desmond previously served as a director of Tremor Video, Inc. from January 2012 to September 2013. She holds a B.B.A. in Marketing from the University of Iowa.	48	2012

	With her experience as Global Chief Executive Officer of SMG as well as her prior senior executive positions at 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.

Charles M. Geschke	Dr. Geschke was a founder of Adobe and has served as our Chairman of the Board since September 1997, sharing that office with John E. Warnock. He was our Chief Operating Officer from December 1986 until July 1994 and our President from April 1989 until his retirement in April 2000. Dr. Geschke holds a Ph.D. in Computer Science from Carnegie Mellon University.	74	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 provides the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As Chairman of the Board of Directors of Adobe, Dr. Geschke has a strong understanding of his role as a director and a broad perspective on key industry issues and corporate governance matters.

Table of Contents



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

Shantanu Narayen	Mr. Narayen currently serves as our President and Chief Executive Officer. 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. Mr. Narayen serves on the board of directors of Pfizer Inc., a multinational pharmaceutical corporation. He previously served as a director of Dell Inc. from September 2009 to October 2013. 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.	50	2007

	As our President and Chief Executive Officer and as an Adobe employee for more than 16 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.

Daniel L. 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, Inc., 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! Inc., an internet content and service provider, 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 holds a B.A. in Political Science from Hobart College.	52	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.

Table of Contents



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

Robert Sedgewick	Dr. Sedgewick has been a Professor of Computer Science at Princeton University since 1985, where he was the founding Chairman of the Department of Computer Science and is now the William O. Baker Professor of Computer Science. From 1975 to 1985, he served on the faculty at Brown University. Dr. Sedgewick holds a Ph.D. in Computer Science from Stanford University.	67	1990

	Professor Sedgewick has held visiting research positions at Xerox PARC in Palo Alto, Institute for Defense Analyses in Princeton and INRIA in Rocquencourt, France. He regularly serves on journal editorial boards and organizes program committees of conferences and workshops on data structures and the analysis of algorithms held throughout the world.

	Professor Sedgewick’s research interests include mathematical analysis of algorithms, design of data structures and algorithms and program visualization. He has published widely in these areas and is the author of several books. His latest books are “An Introduction to Programming in Java - An Interdisciplinary Approach” (with Kevin Wayne), “Analytic Combinatorics” (with Philippe Flajolet) and a new fourth edition of “Algorithms,” the latest in a series that has sold over one-half million copies.

	As a Professor and the founding Chairman of the Department of Computer Science, Dr. Sedgewick brings to the Board extensive leadership experience and expertise on technology issues in the software industry. Also, as the holder of a Ph.D. degree in Computer Science from Stanford University, and the author of numerous research papers and widely used series of textbooks on algorithms, Dr. Sedgewick offers relevant expertise on a broad range of technology issues. As a result of his membership on Adobe’s Board, Dr. Sedgewick also possesses experience with a range of corporate governance issues.

John E. Warnock	Dr. Warnock was a founder of Adobe and has been our Chairman of the Board since April 1989. Since September 1997, he has shared the position of Chairman with Charles M. 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, Inc. Dr. Warnock holds a Ph.D. in Electrical Engineering from the University of Utah.	73	1983

	As a co-founder of Adobe and its former Chief Executive Officer and Chief Technical Officer, 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 provides the Board with significant leadership, operations and technology experience, as well as important perspectives on innovation, management development, and global challenges and opportunities. As Chairman of the Board of Directors of Adobe and 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.

Table of Contents

Independence of Directors

As required by the NASDAQ Global Select Market’s (“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 independent directors include: Ms. Banse, Mr. Barlow, Mr. Barnholt, Mr. Burgess, Mr. Calderoni, Mr. Cannon, Mr. Daley, Ms. Desmond, Dr. Geschke, Mr. Rosensweig, Dr. Sedgewick and Dr. Warnock.

Committees of the Board

The Audit Committee’s role includes the oversight of our financial, accounting and reporting processes; our system of internal accounting and financial controls; our enterprise risk management program (in conjunction with the Board); and our compliance with related legal, regulatory and ethical requirements. The Audit Committee oversees 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 the company’s policies and practices with respect to swaps transactions; and overseeing the performance of our internal audit function. The Audit Committee establishes 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 submission by employees of concerns regarding questionable accounting or auditing matters. The Audit Committee’s role also includes meeting to review 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.

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 Mr. Burgess, Mr. Calderoni, Mr. Cannon and Mr. Daley are “audit committee financial experts” 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/corporate-responsibility/governance-policies-guidelines.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 candidates; make recommendations with respect to the composition of our Board and its committees; review and make recommendations regarding the functioning of our Board as an entity; recommend corporate governance principles applicable to Adobe; manage periodic review, discussion and evaluation of the performance of our Board, its committees and its members; assess the independence of our directors; consider and approve or disapprove any related-person transaction as defined under Item 404 of Regulation S-K promulgated by the SEC, after examining each such transaction for potential conflicts of interest and other improprieties; review the board memberships of other entities held by members of the Board and review and approve such memberships for our executive officers. The Nominating and Governance Committee also assists 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/corporate-responsibility/governance-policies-guidelines.html.

Table of Contents

In carrying out its function to nominate candidates for election to our Board, the Nominating and Governance Committee considers the Board’s mix of skills, experience, character, commitment and diversity—diversity being broadly construed to mean a variety of opinions, perspectives and backgrounds, such as gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements and needs of our Board and Adobe at that point in time. 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. The Nominating and Governance Committee believes that each candidate should be an individual who has demonstrated integrity and ethics in such candidate’s personal and professional life, has an understanding of elements relevant to the success of a publicly traded company and has established a record of professional accomplishment in such candidate’s chosen field. Each candidate should be prepared to participate fully in Board activities, including attendance at, and active participation in, meetings of the Board, and not have other personal or professional commitments that would, in the Nominating and Governance Committee’s judgment, interfere with or limit such candidate’s ability to do so. Each candidate should also be prepared to represent the best interests of all of our stockholders and not just one particular constituency. Additionally, in determining whether to recommend a director for re-election, the Nominating and Governance Committee also considers such director’s past attendance at Board and committee meetings and participation in and contributions to the activities of our Board. The Nominating and Governance Committee has no stated specific minimum qualifications that must be met by a candidate for a position on our Board. The Nominating and Governance Committee does, however, believe it 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’s methods for identifying candidates for election to our Board include the solicitation of ideas for possible candidates from a number of sources, including from members of our Board, our executive officers, individuals who our executive officers or Board members believe would be aware of candidates who would add value to our Board and through other research. The Nominating and Governance Committee, from time to time, retains for a fee one or more third-party search firms to identify suitable candidates.

Any of our stockholders may nominate one or more persons for election as a director at our annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in our Bylaws. In addition, the notice must include any other information required pursuant to Section 14 of the Exchange Act. In order for the director nomination to be timely for our 2015 Annual Meeting of Stockholders, a stockholder’s notice to our Corporate Secretary must be delivered to our principal executive offices no later than December 15, 2014 nor earlier than November 15, 2014. 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 and non-cash compensation and equity 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, stock option, performance share and 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 Senior Vice President, People and Places. In addition, the Executive Compensation Committee reviews our stock ownership guidelines for senior management, which are described below in “Compensation Discussion and Analysis—Ownership Guidelines and 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 certifies annual performance objectives and goals relevant to executive officers. The Executive Compensation Committee oversees all matters related to stockholder approval of executive compensation and evaluates the risk-taking incentives and risk management of our compensation policies and practices. The Executive Compensation Committee also 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

Table of Contents

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/corporate-responsibility/governance-policies-guidelines.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 do encourage is not reasonably likely to materially harm our business or financial condition, after considering mitigating controls.

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 even less motivation for risk taking. The design of these broad-based 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 Bonus Plans for fiscal years 2013 and 2014 focus on the achievement of bookings and recurring revenue targets and customer advocacy goals, they also include an individual goal component with objectives for many of our executives relating to both operating and profitability metrics; together with our long-term equity incentive program for fiscal years 2013 and 2014 that motivate our executives to build stockholder value, our fiscal year 2013 and 2014 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.

•

As described below under “Compensation Discussion and Analysis—Elements of Compensation,” our Executive Compensation Committee exercised its discretion under our fiscal year 2013 Executive Bonus Plan to adjust actual awards downward on account of certain factors, primarily related to the company’s profitability during the year. This demonstrates that the Committee closely monitors both Adobe’s quantitative and qualitative performance, focusing on both the top and bottom lines.

•

Our Performance Share Program is based on Adobe’s total stockholder return (“TSR”) over a three-year period relative to the NASDAQ 100, 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 NASDAQ 100, no shares will be awarded, meaning our executives will be rewarded only when Adobe’s stock is performing 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 caps that in recent years have ranged from 150% to 200% of the target awards. We believe these caps limit the incentive for excessive risk-taking by our employees.

•

Equity incentive awards for our executive officers have included different types of equity instruments, which helps to diversify the executive officers’ interests and limit the potential value of excessive risk taking. For most of 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 2013 include RSUs that vest one-half each year over two years (and

Table of Contents

for fiscal year 2014 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. Stock options have been eliminated from the mix of equity incentive awards granted to members of our Board, our executive officers and all other employees generally, which our Executive Compensation Committee believes further mitigates the potential value to our executive officers 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—Ownership Guidelines and Policies—Stock Ownership Guidelines,” which encourage a level of stock ownership that we believe appropriately aligns their long-term interests with those of our stockholders. As described below under “Compensation Discussion and Analysis—Ownership Guidelines and Policies—Stock Ownership Guidelines,” the Executive Compensation Committee amended our stock ownership guidelines for senior executives in December 2013 to require threshold ownership levels to be maintained indefinitely, strengthening the alignment between our executives’ and stockholders’ interests.

Meetings of the Board and Committees

During fiscal year 2013, our Board held eight meetings, and its three standing committees—Audit Committee, Executive Compensation Committee, and Nominating and Governance Committee—collectively held 22 meetings. Each director attended at least 75% of the meetings (held during the period that such director served) of the Board and the committees on which such director served in fiscal year 2013. Members of our Board are encouraged to attend our annual meetings of stockholders. All thirteen of our Board members attended our 2013 Annual Meeting of Stockholders.

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 2013:



Name	Board	Audit	Executive Compensation⁽¹⁾	Nominating and Governance

Ms. Banse	X		X
Mr. Barlow⁽¹⁾	X		X
Mr. Barnholt	X		X	Chair
Mr. Burgess	X	X
Mr. Calderoni	X	X
Mr. Cannon	X	X
Mr. Daley	X	Chair		X
Ms. Desmond	X			X
Dr. Geschke	Chair
Mr. Narayen	X
Mr. Rosensweig	X		Chair	X
Dr. Sedgewick	X		X
Dr. Warnock	Chair
Number of meetings held in fiscal year 2013	8	11	8	3

_________________________


⁽¹⁾	Mr. Barlow was appointed to our Board on December 4, 2012, at which time he was added as a member of the Executive Compensation Committee.

The members of the respective committees satisfy the applicable qualification requirements of the SEC, NASDAQ and the Code.

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 Systems Incorporated, 345 Park

Table of Contents

Avenue, San Jose, California 95110-2704 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

We separate the roles of Chief Executive Officer and Chairmen of our Board. Our Board is currently chaired by Dr. Geschke and Dr. Warnock, Adobe’s founders and former President and Chief Executive Officer, respectively. The duties of the Chairmen of our Board include:


•	presiding over all meetings of the Board;


•	preparing the agenda for Board meetings in consultation with the Chief Executive Officer, other members of our executive management and other members of our Board;


•	calling and presiding over meetings of the independent directors;


•	managing the Board’s evaluation of the Chief Executive Officer; and


•	presiding over all meetings of stockholders.

Accordingly, the Chairmen have substantial ability to shape the work of our Board. We believe that separation of the positions of Chairmen and Chief Executive Officer reinforces the independence of our Board in its oversight of our business and affairs. In addition, such separation helps create an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of our Board to monitor whether management’s actions are in the best interests of Adobe and its stockholders.

Our Board also believes that there may be advantages to having independent chairmen for matters such as communications and relations between our Board, the Chief Executive Officer and other senior management, and in assisting our Board in reaching consensus on particular strategies and policies. Dr. Geschke’s and Dr. Warnock’s past service as executive officers helps ensure our Board and management act with a common purpose, making them best positioned to act as a bridge between management and the Board. Having Chairmen separate from the Chief Executive Officer also allows the Chairmen to focus on assisting the Chief Executive Officer and senior management in seeking and adopting successful business strategies and risk management policies and in making successful choices in management succession. The Board also believes that it is advantageous to have Chairmen with extensive history and knowledge of Adobe, our corporate culture and the industries in which we compete, as is the case with Dr. Geschke and Dr. Warnock.

The Board’s Role in Risk Oversight

Risk assessment and oversight are an integral part of our governance and management processes. Our Board 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 meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks.

Our Board does not have a standing risk management committee, but rather 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 oversee our major 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 considers 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.

Table of Contents

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/corporate-responsibility/governance-policies-guidelines.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/corporate-responsibility/governance-policies-guidelines.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/corporate-responsibility/governance-policies-guidelines.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 2013.

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. The Code of Business Conduct includes an enforcement mechanism, and any waivers for directors or executive officers must be approved by our Board and disclosed in a Current Report on Form 8-K with the SEC. This Code of Business Conduct is publicly available on our website at http://www.adobe.com/corporate-responsibility/governance-policies-guidelines.html. There were no waivers of the Code of Business Conduct for any of our directors or executive officers during fiscal year 2013.

Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our common stock as of February 14, 2014 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

PRIMECAP Management Company	39,384,554	⁽⁴⁾	7.89%
225 South Lake Avenue, No. 400 Pasadena, CA 91101
The Bank of New York Mellon Corporation	30,068,939	⁽⁵⁾	6.02%
One Wall Street, 31st Floor New York, New York 10286
FMR LLC	26,699,532	⁽⁶⁾	5.35%
245 Summer Street Boston, MA 02210
ValueAct Capital Master Fund, L.P. and related entities	25,310,116	⁽⁷⁾	5.07%
435 Pacific Avenue, Fourth Floor San Francisco, California 94133
Shantanu Narayen	1,470,370	⁽⁸⁾	*
Mark Garrett	201,167	⁽⁹⁾	*
Matthew Thompson	71,583	⁽¹⁰⁾	*
David Wadhwani	64,505	⁽¹¹⁾	*
Bradley Rencher	109,968	⁽¹²⁾	*
Amy L. Banse	11,820		*
Kelly J. Barlow	—	⁽¹³⁾	*
Edward W. Barnholt	112,599	⁽¹⁴⁾	*
Robert K. Burgess	105,712	⁽¹⁵⁾	*
Frank A. Calderoni	6,820		*
Michael R. Cannon	151,341	⁽¹⁶⁾	*
James E. Daley	99,790	⁽¹⁷⁾	*
Laura B. Desmond	6,820		*
Charles M. Geschke	471,759	⁽¹⁸⁾	*
Daniel L. Rosensweig	44,156	⁽¹⁹⁾	*
Robert Sedgewick	184,153	⁽²⁰⁾	*
John E. Warnock	978,863	⁽²¹⁾	*
All directors and current executive officers as a group (23 persons)	4,348,131	⁽²²⁾	0.87%

_________________________


*	Less than 1%.


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

⁽²⁾

This table is based upon information supplied by executive officers, directors and principal stockholders. 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. Applicable percentages are based on 499,466,920 shares outstanding on February 14, 2014, adjusted as required by rules promulgated by the SEC.

Table of Contents


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

⁽⁴⁾

Includes 39,384,554 shares beneficially held by PRIMECAP Management Company (“PRIMECAP”) as of December 31, 2013, with sole dispositive power as to all shares and sole voting power as to 9,787,772 shares. Of those shares beneficially held by PRIMECAP, Vanguard-related entities have sole voting power over 28,800,270 shares. This information is based on a Schedule 13G/A filed with the SEC on February 14, 2014 by PRIMECAP and additional information provided by a representative of PRIMECAP on February 19, 2014.

⁽⁵⁾

Reflects the beneficial ownership of The Bank of New York Mellon Corporation as of December 31, 2013, with sole dispositive power as to 28,755,906 shares and shared dispositive power as to 145,118 shares, and with sole voting power as to 24,319,644 shares and shared voting power as to 70,256 shares. The shares reported are beneficially owned by the following direct or indirect subsidiaries of The Bank of New York Mellon Corporation: The Bank of New York Mellon, BNY Mellon, National Association, BNY Mellon Trust of Delaware, The Boston Company Asset Management LLC, The Dreyfus Corporation, Lockwood Advisors, Inc., Mellon Capital Management Corporation, Newton Capital Management Limited, Newton Investment Management Limited, Walter Scott & Partners Limited, BNY Mellon Wealth Management, Advisory Services, Inc., BNY Mellon Trust Company (Cayman) Limited, MBSC Securities Corporation, Pershing LLC, The Bank of New York Mellon Corporation, B.N.Y. Holdings (Delaware) Corporation, MAM (MA) Holding Trust, MBC Investments Corporation, BNY Mellon Investment Management (Jersey) Ltd., BNY Mellon Investment Management (Europe) Ltd., BNY Mellon Investment Management Europe Holdings Ltd., BNY Mellon International Asset Management Group Limited, Newton Management Limited, Pershing Group LLC, The Bank of New York Mellon SA/NV, BNY Mellon International Asset Management (Holdings) Limited, BNY Mellon International Asset Management (Holdings) No. 1 Limited, Mellon Canada Holding Company and BNY International Financing Corporation. The foregoing information is based on Amendment No. 2 to Schedule 13G filed by The Bank of New York Mellon corporation on January 28, 2014 reporting beneficial ownership as of December 31, 2013.

⁽⁶⁾

Based on information disclosed in a Schedule 13G/A filed by FMR LLC and Edward C. Johnson 3d on February 14, 2014. FMR LLC and Edward C. Johnson 3d, through their control of the subsidiaries of FMR LLC, have the sole power to dispose of or direct the disposition of all 26,699,532 shares and the sole power to vote or direct the voting of 1,707,480 of these shares. According to this Schedule 13G/A, Fidelity Management & Research Company, a wholly owned subsidiary of FMR LLC, beneficially owns 23,173,023 of these shares; Fidelity SelectCo, LLC, a wholly owned subsidiary of FMR LLC, beneficially owns 1,501,333 of these shares; Fidelity Management Trust Company, a wholly owned subsidiary of FMR LLC, beneficially owns 146,783 of these shares; Strategic Advisers, Inc., a wholly owned subsidiary of FMR LLC, beneficially owns 54,113 of these shares; Pyramis Global Advisors, LLC, a wholly owned subsidiary of FMR LLC, beneficially owns 866,900 of these shares; and Pyramis Global Advisors Trust Company, a wholly owned subsidiary of FMR LLC, beneficially owns 902,280 of these shares. Additionally, FIL Limited, an international entity in which FMR LLC holds a voting interest of more than 25% but less than 50%, beneficially owns 55,100 of these shares.

⁽⁷⁾

Reflects shared voting and dispositive power with respect to 25,310,116 shares (and sole voting and dispositive power with respect to 0 shares) for each of (a) ValueAct Capital Master Fund, L.P. (“ValueAct Master Fund”), (b) VA Partners I, LLC (“VA Partners I”), (c) ValueAct Capital Management, L.P. (“ValueAct Management L.P.”), (d) ValueAct Capital Management, LLC (“ValueAct Management LLC”), (e) ValueAct Holdings, L.P. (“ValueAct Holdings”) and (f) ValueAct Holdings GP, LLC (“ValueAct Holdings GP”) (collectively, “ValueAct”). ValueAct Master Fund is a limited partnership organized under the laws of the British Virgin Islands. VA Partners I is a Delaware limited liability company, the principal business of which is to serve as the General Partner to ValueAct Master Fund. ValueAct Management L.P. is a Delaware limited partnership which renders management services to ValueAct Master Fund. ValueAct Management LLC is a Delaware limited liability company, the principal business of which is to serve as the General Partner to ValueAct Management L.P. ValueAct Holdings is a Delaware limited partnership and is the sole owner of the limited partnership interests of ValueAct Management L.P. and the membership interests of ValueAct Management LLC and is the majority owner of the membership interest of VA Partners I. ValueAct Holdings GP is a Delaware limited liability company, the principal business of which is to serve as the General Partner to ValueAct Holdings. Shares reported as beneficially owned by ValueAct Master Fund are also reported as beneficially owned by: (i) ValueAct Management L.P. as the manager of each such investment partnership;

Table of Contents

(ii) ValueAct Management LLC, as General Partner of ValueAct Management L.P.; (iii) ValueAct Holdings, as the sole owner of the limited partnership interests of ValueAct Management L.P. and the membership interests of ValueAct Management LLC and as the majority owner of the membership interests of VA Partners I; and (iv) ValueAct Holdings GP, as General Partner of ValueAct Holdings. Shares reported as beneficially owned by ValueAct Master Fund are also reported as beneficially owned by VA Partners I, as General Partner of ValueAct Master Fund. VA Partners I, ValueAct Management L.P., ValueAct Management LLC, ValueAct Holdings and ValueAct Holdings GP also, directly or indirectly, may own interests in one or more than one of the partnerships from time to time. By reason of such relationship ValueAct Master Fund is reported as having shared power to vote or to direct the vote, and shared power to dispose or direct the disposition of, such shares of common stock, with VA Partners I (only with respect to ValueAct Master Fund), ValueAct Management L.P., ValueAct Management LLC, ValueAct Holdings and ValueAct Holdings GP. The foregoing information is based on Amendment No. 3 to Schedule 13D jointly filed by the ValueAct entities with the SEC on October 30, 2013 that reported beneficial ownership as of October 22, 2013, and additional information provided by a representative of ValueAct on February 20, 2014.


⁽⁸⁾	Consists of 258,737 shares held by the Narayen Family Trust, of which Mr. Narayen is a trustee, and 1,211,633 shares issuable upon exercise of outstanding options held by Mr. Narayen exercisable within 60 days of the date of this table.


⁽⁹⁾	Consists of 50,000 shares held by the Garrett Living Trust, of which Mr. Garrett is a trustee; 32,502 shares held by Mr. Garrett; and 118,665 shares issuable upon exercise of outstanding options held by Mr. Garrett exercisable within 60 days of the date of this table.


⁽¹⁰⁾	Includes 20,708 shares issuable upon exercise of outstanding options held by Mr. Thompson exercisable within 60 days of the date of this table.


⁽¹¹⁾	Includes 38,630 shares issuable upon exercise of outstanding options held by Mr. Wadhwani exercisable within 60 days of the date of this table.


⁽¹²⁾	Includes 67,787 shares issuable upon exercise of outstanding options held by Mr. Rencher exercisable within 60 days of the date of this table.


⁽¹³⁾	Mr. Barlow was appointed to our Board on December 4, 2012. As a partner of ValueAct Capital, Mr. Barlow may be deemed to be the beneficial owner of shares held by the ValueAct entities as described in footnote 7. Mr. Barlow disclaims beneficial ownership except to the extent of his pecuniary interest in each applicable ValueAct entity.


⁽¹⁴⁾	Consists of 25,124 shares held by a family trust, of which Mr. Barnholt is a trustee; and 87,475 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 Mr. Barnholt.


⁽¹⁵⁾	Consists of 48,504 shares held by the Burgess Family Trust, of which Mr. Burgess is a trustee; 1,620 shares, for which Mr. Burgess has shared voting and dispositive power, held in trust for the benefit of his children; and 55,588 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 Mr. Burgess.


⁽¹⁶⁾	Consists of 35,753 shares held by the Michael Cannon 2004 Trust, of which Mr. Cannon is a trustee; and 115,588 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 Mr. Cannon.


⁽¹⁷⁾	Includes 84,704 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 Mr. Daley.


⁽¹⁸⁾	Consists of 255,574 shares held by the Geschke Family Trust, of which Dr. Geschke is a trustee; and 216,185 shares issuable upon exercise of outstanding options held by Dr. Geschke exercisable within 60 days of the date of this table.


⁽¹⁹⁾	Consists of 38,568 shares held by The Rosensweig 2012 Irrevocable Children’s Trust, of which Mr.

Table of Contents

Rosensweig is a trustee and 5,588 shares issuable within 60 days of the date of this table upon vesting of restricted stock units held by Mr. Rosensweig.


⁽²⁰⁾	Includes 117,806 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. Sedgewick.


⁽²¹⁾	Consists of 768,123 shares held by the Warnock Family Trust, of which Dr. Warnock is a trustee; 16,088 shares held by Dr. Warnock; and 194,652 shares issuable upon vesting of restricted stock units or the exercise of outstanding options held by Dr. Warnock exercisable within 60 days of the date of this table.


⁽²²⁾	Includes 2,395,794 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 21.

Table of Contents

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 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 2013, no reporting person failed to file the forms required by Section 16(a) of the Exchange Act on a timely basis.

Table of Contents

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 29, 2013, including our 1997 Employee Stock Purchase Plan, 2003 Equity Incentive Plan, and 1994 Performance and Restricted Stock 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 our acquisitions of Macromedia, Inc. in December 2005, Omniture, Inc. in October 2009, Day Software Holding AG in October 2010, Demdex, Inc. in January 2011, EchoSign, Inc. in July 2011, Typekit, Inc. in September 2011, Auditude, Inc. in October 2011, Efficient Frontier, Inc. in January 2012, Behance, Inc. in December 2012 and Neolane in July 2013:



Plan Category	Number of securities to be issued upon exercise of outstanding options, performance shares and restricted stock units	Weighted-average exercise price of outstanding options, performance shares and restricted stock units⁽¹⁾	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	24,111,386⁽²⁾	$8.10	59,830,460⁽³⁾
Equity compensation plans not approved by Adobe’s stockholders⁽⁴⁾	3,764,504	$6.61	559,760
Total	27,875,890	$7.90	60,390,220

_________________________


⁽¹⁾	Weighted-average exercise prices include performance shares and RSUs, which do not have any exercise price and therefore drive down the reported average.


⁽²⁾	Includes 1,707,150 shares of common stock issuable pursuant to the terms of our 2013 Performance Share Program at maximum levels (200%) as of November 29, 2013. This number does not include 183,850 shares at maximum levels (200%) under our 2013 Performance Share Program that were forfeited due to participants’ departure from Adobe prior to the certification date.


⁽³⁾	Includes 15,786,145 shares that are reserved for issuance under the 1997 Employee Stock Purchase Plan as of November 29, 2013 and 44,044,315 shares that are reserved for issuance under the 2003 Equity Incentive Plan.


⁽⁴⁾	We assumed the outstanding stock awards, and in certain situations described below shares remaining available for future issuance, under various equity incentive plans maintained by companies we acquired, as follows:



Company	Date of Acquisition
Macromedia, Inc.	December 3, 2005
Omniture, Inc.	October 23, 2009
Day Software Holding AG	October 28, 2010
Demdex, Inc.	January 18, 2011
EchoSign, Inc.	July 15, 2011
Typekit, Inc.	September 28, 2011
Auditude, Inc.	October 18, 2011
Efficient Frontier, Inc.	January 13, 2012
Behance, Inc.	December 20, 2012
Neolane	July 22, 2013

As part of the assumption of the Macromedia plans, effective December 3, 2005, our Board adopted the Adobe Systems Incorporated 2005 Equity Incentive Assumption Plan (the “Assumption Plan”). The Assumption Plan

Table of Contents

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 of the assumed Macromedia plans (as described below). In connection with our assumption of the Omniture plans, on November 16, 2009, the Assumption Plan was amended by the Board 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 may grant 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 Macromedia before December 3, 2005, and Omniture before October 23, 2009, and their respective affiliates and subsidiaries).

Under the Assumption Plan, an aggregate of 559,760 shares of our common stock were reserved for issuance as of November 29, 2013. Such share reserve consists solely of the unused and converted share reserves and potential reversions to the share reserves with respect to certain Macromedia and Omniture plans (as described below). The share reserve is divided into Reserves A through E. As of November 29, 2013, the reserves were as follows:



Reserve⁽¹⁾	Shares of Common Stock, Including Unused Share Reserve and Reversions (#)	Acquired Plans from which Unused Share Reserve and Reversions Are Comprised	Last Day Stock Can Be Awarded from Reserve

B	94,124	Macromedia, Inc. 2002 Equity Incentive Plan	November 10, 2014
		Allaire Corporation 1997 Stock Incentive Plan
		Allaire Corporation 1998 Stock Incentive Plan
		Allaire Corporation 2000 Stock Incentive Plan
C	318,435	Omniture, Inc. 2006 Equity Incentive Plan	March 23, 2016
D	27,695	Omniture, Inc. 2007 Equity Incentive Plan	June 30, 2015
E	119,506	Omniture, Inc. 2008 Equity Incentive Plan	July 14, 2014

^{_________________________________________}


⁽¹⁾	Reserve A, which comprised shares from the Andromedia, Inc. 1999 Stock Plan acquired in connection with the Macromedia acquisition, expired on August 1, 2009.

The Assumption Plan limits the number of shares that may be issued from Reserve B in the form of stock purchase rights, stock bonuses, restricted stock units, performance shares, or performance units to 100,000 shares of our common stock. For each award granted under Reserves C, D or E, the applicable reserve will be reduced by one share of common stock for each stock option or stock appreciation right, and by 1.77 shares of common stock for all other awards. If an award for any reason expires, terminates or is canceled without having been exercised or settled in full, or if shares of stock acquired pursuant to an award are forfeited or repurchased by us, those shares will be added back to the applicable reserve in the amount corresponding to the original reduction and will again be available for issuance under the Assumption Plan.

Our Board may terminate or amend the Assumption Plan at any time subject to applicable rules. In the event of a sale of substantially all of our voting stock, a merger involving us, the sale of substantially all of our assets, or a liquidation or dissolution of us, stock awards covered by the Assumption Plan may be assumed or substituted by a successor entity. In the event that a successor entity elects not to assume or substitute for such stock awards, the stock awards will become fully vested.

In addition to the Assumption Plan, as of the fiscal year ended November 29, 2013, we maintained equity compensation plans covering stock awards that were assumed by us as follows: eight plans in connection with the Macromedia acquisition; nine plans in connection with the Omniture acquisition; two plans in connection with the Day Software acquisition; one plan in connection with the Demdex acquisition; two plans in connection with the EchoSign acquisition; one plan in connection with the Typekit acquisition; two plans in connection with the Auditude acquisition; one plan and one non-plan stock option agreement in connection with the Efficient Frontier acquisition; one plan in connection with the Behance acquisition; and two plans in connection with the Neolane acquisition, in each case under which stock awards had been granted by these predecessor entities that remained outstanding at the time of the Macromedia, Omniture, Day Software, Demdex, EchoSign, Typekit, Auditude, Efficient Frontier, Behance and Neolane acquisitions, respectively. The “Equity compensation plans not approved by Adobe’s stockholders” row

Table of Contents

in the “Equity Compensation Plan Information” table above shows aggregated share reserve information for these plans and awards. Other than through 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 2013 Annual Report on Form 10-K in the notes to Consolidated Financial Statements at Note 12, “Stock-based Compensation” for further information regarding our equity compensation plans and awards.

Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides information regarding our executive compensation programs during fiscal year 2013 for the following executive officers of Adobe:


•	Shantanu Narayen, President and Chief Executive Officer


•	Mark Garrett, Executive Vice President and Chief Financial Officer


•	Matthew Thompson, Executive Vice President, Worldwide Field Operations


•	David Wadhwani, Senior Vice President and General Manager, Digital Media


•	Bradley Rencher, Senior Vice President and General Manager, Digital Marketing

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 2013. It also provides an overview of our executive compensation philosophy, including our principal compensation policies and practices. Finally, it analyzes how and why the Executive Compensation Committee of our Board arrived at the material compensation decisions for our executive officers, including our NEOs, in fiscal year 2013.

Executive Summary

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 customer focus for Adobe. Our executive compensation programs play a fundamental role in creating this environment by rewarding our senior management, including our NEOs, for the successful execution of our short- and long-term business objectives.

Business and Compensation Highlights

In fiscal year 2013 our executive officers successfully executed on the promise of a vital transformation of our business model. With the continued growth of Creative Cloud, a subscription-based offering that reimagines the creative process for our customers, Adobe’s leadership team is driving a shift in our core business toward subscription revenue that is recognized over time, increasing the predictability of our revenues and financial results. Creative Cloud is a comprehensive offering of our Creative Suite desktop applications combined with creative services and community features that together are redefining the content creation process, enabling Adobe to reach a broader customer base by lowering the cost of entry and providing frequent product and feature enhancements as soon as they become available. At the same time, our NEOs have continued to invest in the high-growth Digital Marketing area—including our strategic acquisitions of Omniture, Day Software, Efficient Frontier and Neolane—building a business that has quickly become a leader in Digital Marketing. In the midst of navigating these transformations successfully and at a pace that exceeded the Board’s expectations, our NEOs have continued to deliver strong financial results and achieve target financial milestones. For the fiscal year ended November 29, 2013:


•	Adobe added 1.1 million paid Creative Cloud subscriptions, exiting the fiscal year with over 1.4 million paid subscriptions;


•	Our Creative Annualized Recurring Revenue (“ARR”) grew to $768 million, and our total Digital Media ARR grew to $911 million;


•	Adobe Marketing Cloud revenue achieved 26 percent year-over-year growth and achieved revenue of more than $1 billion;


•	We exited the fiscal year with record deferred revenue of $829 million and unbilled deferred revenue backlog of approximately $1.0 billion, as discussed in our 2013 Annual Report on Form 10-K;


•	Adobe achieved revenue of $4.06 billion and generated $1.15 billion in cash flow from operations during the fiscal year;

Table of Contents


•	Adobe repurchased 21.6 million shares during the fiscal year, returning approximately $1 billion of cash to stockholders; and


•	Adobe’s stock price increased approximately 64% during the fiscal year, reaching all-time highs at year end.

During the fiscal year, our executive officers also exceeded expectations in their achievement of key strategic performance objectives established by the Executive Compensation Committee for fiscal year 2013 and other corporate initiatives. These achievements included:


•	shipping over 500 new and enhanced features to our Creative Cloud members in fiscal year 2013, delivering immediate value and innovation to our community;


•	offering the most comprehensive set of marketing solutions available for chief marketing officers, chief revenue officers, advertising agencies, publishing executives and digital marketers;


•	executing a strategic business acquisition of Neolane and successfully integrating Neolane’s offering into our Adobe Marketing Cloud, resulting in the launch of our Adobe Campaign solution;


•	sustained growth in our emerging Digital Publishing Suite, Adobe EchoSign and Adobe Primetime businesses;


•	increasing awareness of Adobe’s leadership in Digital Marketing through social media engagements and brand campaigns, including our successful “Click Baby Click” ad campaign in the U.S.;

•

continued emphasis on key corporate social responsibility objectives as Adobe continues to impact our community, including exiting the year with 70% of Adobe’s global office space having obtained LEED Certified status, reaching over 30,000 youth through the Adobe Youth Voices program, and serving in the community through our employees, who contributed thousands of hours volunteering through pro bono initiatives and Adobe-sponsored programs; and


•	executing upon key people objectives specific to internal hiring and growth, key talent integration and retention, and transforming Adobe’s performance management approach.

Consistent with these results, the Executive Compensation Committee determined that, based on strong ARR in our Digital Media business and new business bookings (“NBB”) in our Digital Marketing business, as well as achievement of key customer advocacy objectives, the annual cash incentive awards for our NEOs were paid out at 116% of their target award opportunity (for more discussion of cash awards, see section captioned “Cash Incentives” below). Because our Performance Share Program transitioned to a three-year performance period in fiscal year 2013, those awards will not be eligible to be earned or vest until the beginning of 2016. Accordingly, no performance shares were earned this year.

Our executive compensation programs are designed to 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. As a practical matter, because approximately 85% of our CEO’s target compensation in fiscal year 2013 was comprised of equity awards (and approximately 77% for our other NEOs as a group), this means that, unless we achieve our financial and other performance objectives each year and over the long-term, our executive officers will not realize the potential value of their annual and long-term incentive compensation. Further, because Adobe common stock underlies our equity-based compensation awards, the immediate value of these awards is wholly subject to fluctuations in our stock price, strongly aligning the interests of our executive officers with our stockholders.

Response to 2013 Say-on-Pay Vote

Adobe and the Executive Compensation Committee value the input of our stockholders on our executive compensation programs. We regularly communicate with our stockholders to better understand their opinions on our business strategy and objectives, as well as to gather feedback regarding other matters of investor interest such as executive compensation. Throughout 2013 we engaged in a focused outreach effort to many of our institutional stockholders to solicit their feedback on our pay programs, including the changes we made for fiscal year 2013 as well as potential changes for fiscal year 2014. The Executive Compensation Committee carefully considers this feedback

Table of Contents

as part of its annual review of our executive compensation programs for our NEOs. Stockholders are invited to express their views to the Executive Compensation Committee as described under the heading “Communications with the Board” in the “Board of Directors and Corporate Governance” section of this proxy statement. Finally, the advisory vote on the compensation of our NEOs contained in Proposal 4 of this proxy statement provides stockholders with an opportunity to communicate their views on our executive compensation policies and practices. In April 2013, we held an advisory vote on the compensation of our NEOs and over 80% of votes received approved our executive pay programs for our 2012 fiscal year. While we strive to further improve our future say-on-pay results, this outcome marked a significant improvement from the advisory votes on our compensation programs from previous years. When we reached out to several of our key stockholders to discuss our executive compensation programs, both before and after our 2013 Annual Meeting, we learned that the improvement in our fiscal year 2012 say-on-pay result was driven in large part by the changes made to our fiscal year 2013 pay programs. Those changes included: (1) lengthening the performance period under our Performance Share Program to three years; (2) basing our Performance Share Program on a single objective metric—relative total stockholder return (“TSR”)—to more closely align 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 corporate growth strategy.

Our Fiscal Year 2014 Compensation Programs

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. 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.

We believe our executive compensation program has 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.

In addition to taking stockholder feedback into account, the Executive Compensation Committee evaluated our compensation philosophy in light of our long-term objectives, competitive issues we face in the marketplace, and compensation trends identified by Compensia, Inc., the Committee’s independent compensation consultant. Taking these considerations together, and in order to continue to motivate our executives to drive Adobe’s long-term strategic priorities and build stockholder value, the Committee determined not to make significant changes to our executive cash bonus plan or equity compensation programs for fiscal year 2014. These programs were designed to align with our three-year operating plan and the multi-year growth strategy of our Digital Media and Digital Marketing businesses as our executives guide Adobe through a significant business transformation. The Committee believes it is important to maintain consistency in our compensation programs for executives in the midst of this transformation. For fiscal year 2014, the Committee increased the percentage of of Mr. Narayen’s total direct compensation (TDC) opportunity comprised of equity awards to approximately 90%, further aligning Mr. Narayen’s economic interests with those of Adobe’s stockholders.

We believe continuing to emphasize our transition to recurring revenue and the company’s long-term stock performance will (1) keep our executive officers’ interests aligned with those of our stockholders, and (2) motivate our management to drive Adobe’s ongoing business model transformation for our Creative business from perpetual licenses to a subscription-based cloud offering, as well as focusing our investment in the areas of Digital Media and Digital Marketing.

In order to more closely align the long-term interest of our NEOs with those of our stockholders, the Board amended Adobe’s stock ownership guidelines for our executive officers, increasing the holding requirement from 25% of net shares acquired to 50% of net shares acquired. The Board also amended the two-year holding period to now require that threshold ownership levels be maintained indefinitely, as long as the individual remains an executive officer of Adobe. For more information, see the section below captioned “Ownership Guidelines and Policies—Stock Ownership Guidelines.”

These decisions included input from a representative of one of the company’s 5% stockholders who serves as a director and member of our Executive Compensation Committee, bringing a key stockholder voice into our

Table of Contents

executive compensation process and enabling us to better align the incentives of our NEOs with our stockholders’ long-term interests.

Additional information regarding our fiscal year 2014 executive compensation programs is available in our Current Report on Form 8-K filed with the SEC on January 29, 2014.

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

Executive Compensation Committee

The Executive Compensation Committee (the “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 2013, 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 remains solely responsible for making the final decisions on compensation for our executive officers, including our NEOs.

Executive Compensation Consultant

Since 2008, the Executive Compensation Committee has engaged Compensia, Inc. to advise it on executive compensation matters due to 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 2013:


•	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;


•	conducted a comprehensive review of the total compensation arrangements for all of our executive officers;


•	provided advice on our executive officers’ compensation;


•	provided advice on stock ownership guidelines for executive officers and directors;


•	assisted with executive equity program design, including analysis of equity mix and target grant levels;


•	assisted with design changes for our fiscal year 2014 equity program and Executive Annual Incentive Plan;


•	provided updates on NASDAQ listing standards, Say-on-Pay results, and Dodd-Frank regulatory developments;


•	conducted a comprehensive review of compensation paid to the Board and provided recommendations to the Committee and the Board regarding future director pay structure;


•	updated the Committee on emerging trends/best practices in the area of executive and board compensation; and


•	reviewed the Compensation Discussion and Analysis for inclusion in the 2013 proxy statement.

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 People Resources department regarding Adobe’s broad-based equity compensation design for all employees (as approved by

Table of Contents

the Committee), Compensia does not provide any other services to Adobe. Adobe pays for the cost for Compensia’s services.

Management

Our People Resources, 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 2013 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 2013 compensation package.

Comparative Framework

Adobe 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.

Peer Group

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, using the Committee’s criteria (described in the table below), provides recommendations on the composition of our “peer group.” Based on the factors described in the table below and management’s input, for fiscal year 2013, Compensia recommended, and the Committee approved, adding Broadcom Corporation and removing eBay, Inc. from our peer group.

Peer Group for Fiscal Year 2013

General Description	Criteria Considered	Peer Group List

High-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 revenues within 0.5x to 2.0x of Adobe’s and market capitalization within 0.3x to 3.0x of Adobe’s, and at least three of the following criteria: (i) global multi-faceted software/internet company; (ii) profit margin within 0.5x to 2.0x of Adobe’s; (iii) number of employees within 0.5x to 2.0x of Adobe’s; (iv) company names Adobe as peer; and (v) shareholder advisory firm names company as Adobe’s peer	Activision Blizzard, Inc. Autodesk, Inc. BMC Software, Inc. Broadcom Corporation CA, Inc. Citrix Systems Inc. Electronic Arts Inc. Intuit, Inc. Juniper Networks, Inc. NetApp, Inc. NVIDIA Corporation Salesforce.com, inc. Symantec Corporation VMWare, Inc. Yahoo! Inc.

Compensia then prepares a compensation analysis compiled from both executive compensation surveys and data gathered from publicly available information for our peer group companies. As this reported compensation data may be up to two fiscal years old (that is, it may reflect decisions made by peer companies 24 months before the Committee is making its decisions), Compensia adjusts the cash compensation data to bring it to presumed levels that

Table of Contents

our peer companies will be awarding for the coming year. For fiscal year 2013, Compensia adjusted the cash compensation data using an annualized factor of 3% based on industry surveys and market projection. 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, based on direct, quantitative comparisons of pay levels.

Elements of Compensation

Our executive compensation programs include base salary, an annual cash incentive opportunity, equity incentive awards and employee benefits, as well as potential benefits in connection with a change of control. The percentage of performance-based compensation, or “at-risk” pay, for Adobe’s management and other employees 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, reinforcing the alignment of our executives’ interests with those of our stockholders. When results do not meet our expectations, our NEOs receive compensation that is below our target levels and may be below market in comparison to our peer group. Similarly, 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 vest over multiple years while also aligning employee interests with stockholder interests.	ü	ü	ü
Employee Benefits and Perquisites	Benefits programs for all Adobe employees provide protection for health, welfare and retirement.	ü
Change of Control Benefits	Change of control benefits in the form of severance and accelerated vesting provide some certainty to executives so that they can remain focused on business operations and transactions that are in the best interests of our stockholders.	ü

Competitive Positioning

The fiscal year 2013 target total direct compensation, or TDC, for our NEOs was set by the Committee based predominantly on competitive pay practices, as reflected in the peer group data, with additional adjustments made based on an individual NEO’s importance to Adobe, tenure, company and individual performance, anticipated future contributions, internal pay equity and historical pay levels, as well as the level of an NEO’s unvested equity awards and incentives that we believed were necessary to enable us to retain the NEO in light of potential competing offers from other companies. We 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 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 foresee what the competitive compensation positioning for each role will be for the coming fiscal year.

Table of Contents

Pay Mix

In setting the mix among the different elements of executive compensation, we do not target specific allocations, but generally weight target TDC more heavily toward performance-based compensation, both cash and equity. In determining base salary, cash incentive opportunity and equity incentives, the total target cash compensation opportunity (base salary and cash incentive opportunity) was weighted less than the total target equity compensation opportunity, to increase alignment with our stockholders’ interests. The target compensation mix for our Chief Executive Officer and the average compensation mix for the other NEOs at target is illustrated in the following table:

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

^{_______________________________________________________________________________________________________}


⁽¹⁾	The mechanism for calculating the target equity award values is described in detail below under “Equity Incentives—Equity Compensation Mix.” The amounts shown for our other NEOs presents their average target pay mix.

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.

Base Salary

For fiscal year 2013, 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 determined to moderately increase the base salaries of our NEOs as shown in the table below. The moderate increases were based on performance as well as Compensia’s survey of comparable salaries at our peer companies. Moreover, the Committee had made no changes to the NEOs’ base salaries in our 2012 fiscal year, so the majority of our NEOs’ salaries had not been raised for two years. Mr. Thompson’s increase additionally reflects his promotion to Executive Vice President at the outset of our 2013 fiscal year.

Table of Contents

Fiscal Years 2012 and 2013 Base Salaries

Name	2012 Salary ($)	Increase (%)	2013 Salary⁽¹⁾($)

Shantanu Narayen	900,000	6	950,000
Mark Garrett	575,000	9	625,000
Matthew Thompson	525,000	14	600,000
David Wadhwani	475,000	11	525,000
Bradley Rencher ⁽²⁾	—	—	500,000

_________________________


⁽¹⁾	The salaries for 2013 shown in the table above were effective as of February 2013. Actual base salaries earned during the fiscal year are shown below in the “Fiscal Year 2013 Executive Bonus Plan Target Cash Incentives” table.


⁽²⁾	Mr. Rencher was not a NEO in fiscal year 2012.

Cash Incentives

Annual Cash Incentive Plan

At the outset of 2013, the Committee approved the Fiscal Year 2013 Executive Annual Incentive Plan (the “Executive Bonus Plan”), which operates under the terms of a stockholder-approved 2011 Executive Cash Performance Bonus Plan (Master Bonus Plan), to provide cash compensation opportunities to our NEOs based on the company’s achievement of pre-established performance goals. The Committee set threshold, target and maximum performance levels for these goals that were based on our Board-approved operating plan for fiscal year 2013 (the “Operating Plan”).

Plan Design and Target Annual Incentive Opportunity

The Committee set the target annual cash incentive opportunity for fiscal year 2013 (expressed as a percentage of base salary earned during the year) for each NEO early in our 2013 fiscal year. In setting the target levels, the Committee considered each NEO’s fiscal year 2013 target total cash opportunity against the peer group data provided by Compensia and internal pay equity. The Committee set Mr. Narayen’s cash incentive target for fiscal year 2013 at the same percentage as his target opportunity in fiscal year 2012, resulting in a modest increase to the dollar value of the target on account of his salary increase described above. With regard to internal pay equity, the Committee believes that the target annual cash incentive opportunity should make up a larger portion of an NEO’s target TDC and total target cash compensation as the executive’s level of responsibility increases.

At the outset of our 2013 fiscal year, the Committee overhauled the Executive Bonus Plan, aligning our NEOs’ cash bonus incentives with the company’s strategic priorities of driving annualized recurring revenue (“ARR”) growth in Digital Media and new business bookings (“NBB”) in Digital Marketing in order to build significant recurring revenue streams as we continue to transition our business towards subscriptions and cloud-based services, such as Creative Cloud and Adobe Marketing Cloud. Under the redesigned plan, portions of the cash opportunity for each NEO are also tied to a customer advocacy objective and an individual goal component tailored to each executive, including in appropriate circumstances, objectives related to profitability.

The Committee determined that, for purposes of earning any award in fiscal year 2013 under the Executive Bonus Plan for fiscal year 2013, we must have achieved a threshold “GAAP Revenue” goal of 85% of the GAAP Revenue set forth in the Operating Plan. If the threshold goal was not achieved, none of the participants in the Executive Bonus Plan would be eligible to earn any annual cash incentive award.

If we achieved the GAAP Revenue threshold, each participant would be eligible to earn a maximum benefit of 200% of such participant’s bonus target. The Committee may then exercise its discretion to reduce each participants bonus based on the company and individual factors described below.

Table of Contents

Actual awards earned by each participant (which are a reduction from the maximum award funded once the GAAP Revenue Threshold is met) are based on a formula with the company’s achievement of its performance goals (referred to as the Corporate Result) weighted at 75% of the participant’s target award, and achievement of the participant’s individual goals weighted at 25% of the participant’s target award.

Corporate Result

The Corporate Result percentage is based on the Final Business Units Achievement (weighted at 80%) and the Customer Advocacy Achievement (weighted at 20%). The Preliminary Business Units Achievement is comprised of ARR and NBB achievement, based on the following formula:

Preliminary Business Units Achievement = (ARR Payout Percentage * 50%) + (NBB Payout Percentage * 50%)

The payout percentages for Adobe’s Digital Media ARR and Digital Marketing NBB are based upon the company’s percentage of achievement with respect to the fiscal year targets as set forth in the Operating Plan. A detailed list of payout percentages based on ARR and NBB achievement is included in Exhibit 10.5 to our Current Report on Form 8-K filed with the SEC on January 28, 2013.

In finalizing the Business Units Achievement percentage, the Committee may make a discretionary adjustment (not to exceed 20% in either direction) to the Preliminary Business Units Achievement percentage based on the Committee’s assessment of the company’s qualitative performance for the Performance Period.

The Committee determines the Customer Advocacy Achievement based on a number of customer advocacy objectives designed to improve the end-to-end experience of Adobe’s customers. If the Final Business Units Achievement is at or below 100%, then the maximum percentage of the Customer Advocacy Achievement permitted will be 100%. If the Final Business Units Achievement is above 100%, then the maximum percentage of the Customer Advocacy Achievement permitted will be equal to the Final Business Units Achievement, up to a maximum of 200%.

Once the Committee determines the Customer Advocacy Achievement, the Corporate Result is determined based on the following formula:

Corporate Result = (Final Business Units Achievement * 80%) + (Customer Advocacy Achievement * 20%)

Individual Goals

As noted above, each NEO’s achievement of individual goals constitutes 25% of the NEO’s target award opportunity under the Executive Bonus Plan. Each participant’s individual goal achievement percentage is capped at the Final Business Units Achievement (no more than 200%). These 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 2013 and the Committee reviewed the achievement of such individual goals for each NEO to determine the NEO’s individual goals percentage. For our CEO, these individual goals in fiscal 2013 included driving the strategic direction of the company. For our other NEOs, the individual goals in fiscal 2013 were specifically tailored to the functions led by each NEO and aligned to the achievement of our overall Operating Plan, as shown in the table below:



Executive Officer		Individual Goal

Mark Garrett		Drive profitability and process improvements
Matthew Thompson		Improve sales productivity
David Wadhwani		Innovate in Digital Media
Bradley Rencher		Drive Digital Marketing business

Fiscal Year 2013 Payouts

At the time the corporate and individual goals were set for fiscal year 2013, the Committee believed that the Executive Bonus Plan goals were achievable, but only with significant effort.

In fiscal year 2013 we exceeded our GAAP Revenue threshold level, and our business generated ARR at a rate significantly ahead of expectations at 114% of the Operating Plan target, driven primarily by overachievement in

Table of Contents

Creative Cloud adoption. This resulted in an ARR payout percentage of 175% under the Executive Bonus Plan. In our Digital Marketing business, NBB performance was slightly below our Operating Plan target at 95%, resulting in an NBB payout percentage of 82%. These results yielded a Preliminary Business Units Achievement percentage of 128.5% based on the matrix set forth in our 2013 Executive Bonus Plan. As described above, the Committee has discretion to adjust the Preliminary Business Units Achievement percentage up to 20% in either direction. In determining the fiscal year 2013 payouts the Committee chose to exercise this discretion, adjusting the percentage downward and resulting in a Final Business Units Achievement of 121.5%. The Committee made this discretionary adjustment primarily due to the fact that the company did not achieve certain profitability goals for the year. The Committee then certified the Customer Advocacy Achievement at 85% of the goal, weighing successes in customer immersion programs and measurable progress in resolving a number of high-priority initiatives against certain issues related to cloud services and attacks on our network initially detected in September 2013. Based on these percentages, the Corporate Result for fiscal year 2013 under our Executive Bonus Plan was 114.2%.

The Committee monitored each NEO’s progress toward their individual goals on a periodic basis during the year and measured total achievement at year end. The Committee determined that our NEOs successfully drove the accelerated transformation of our business model to emphasize recurring revenue through ARR in our Digital Media business and NBB in our Digital Marketing business, which generated growth and value for the company’s stockholders. In assessing each NEO’s individual goals achievement at the maximum percentage of 121.5% (equal to the Final Business Units Achievement percentage), the Committee focused on the strength of our Corporate Result and the NEOs’ key roles in driving that result.

Based on a Corporate Result of 114.2% (accounting for 75% of each NEO’s bonus opportunity) and an individual goals achievement percentage of 121.5% for each NEO (accounting for the remaining 25% of the bonus opportunity), the actual payout percentage for each NEO under our 2013 Executive Bonus Plan was 116%. This resulted in the Committee awarding the cash bonuses shown in the following table:

Fiscal Year 2013 Executive Bonus Plan Target Cash Incentives

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

Shantanu Narayen	941,667	150	1,412,500	116	1,638,500
Mark Garrett	616,667	100	616,667	116	715,334
Matthew Thompson	587,500	100	587,500	116	681,500
David Wadhwani	516,667	85	439,167	116	509,434
Bradley Rencher	491,667	85	417,917	116	484,784

_________________________


⁽¹⁾	Actual base salary earned during fiscal year 2013 shown.


⁽²⁾	Target cash incentive amount is calculated based on base salary amounts earned during the fiscal year at 100% payout.

Other Cash Incentives

The Committee retains authority to pay additional discretionary bonuses outside the Executive Bonus Plan but declined to grant any such awards in fiscal year 2013.

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 stock price growth and the achievement of key operational goals. By having a significant percentage of our NEOs’

Table of Contents

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 take actions that will benefit Adobe and its stockholders in the long term.

Equity Compensation Mix

Each year, the Committee, with input from management, our Chief Executive Officer, legal counsel and Compensia, determines the mix of annual equity incentive awards. For fiscal year 2013, the mix of equity incentive awards to our NEOs consisted of 50% performance shares 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 $37.88 per share, the 30-day average of our stock price as of January 15, 2013, 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, was then rounded up to the nearest 5,000 shares and split equally between performance shares and time-based RSUs.

Fiscal Year 2013 Mix of Annual Equity Incentive Awards

Type of Equity/Fiscal Year 2013 Award Value Allocation Percentage	Description	Objectives/Dilutive Effect	Vesting⁽¹⁾

Performance Shares (50%)	Stock-settled awards subject to performance- and time-based vesting conditions; three-year performance period determines the total number of shares eligible to be 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	Performance shares vest upon the certification of performance results following the third anniversary of the grant date

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 two years⁽²⁾

_________________________

⁽¹⁾

Our NEOs’ equity awards are also subject to certain acceleration provisions as described below under “Severance and Change of Control Compensation” below and “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2013—Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2013 Table—Effect of Retirement, Death and Disability on Equity Compensation Awards.”


⁽²⁾	As we transitioned to a three-year performance period under our 2013 Performance Share Program, annual RSU awards to our senior executives for fiscal year 2013 were structured to vest over a two-year period. For fiscal year 2014 awards, annual RSU grants will vest over a three-year period.

Table of Contents

Target Value and Award Determination

For fiscal year 2013, the Committee, with input from Compensia, 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 desired peer group positioning, internal pay equity, individual performance of executives, employee retention and the other factors for determining compensation discussed under “Elements of Compensation” 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 set Mr. Narayen’s target equity opportunity for fiscal year 2013 at exactly the same number of shares as his target opportunity in fiscal year 2012, as disclosed in our Summary Compensation Table. For our other NEOs, the Committee: decreased the target value for Mr. Garrett on account of the one-time retention award granted to Mr. Garrett during fiscal year 2012, as shown on the Summary Compensation Table; increased the target value for Mr. Thompson on account of his promotion to Executive Vice President and leadership in driving sales during the company’s transition to a recurring revenue model; and increased the target value for Mr. Wadhwani on account of his leadership in delivering on the promise of Creative Cloud to Adobe’s customers and driving a fundamental transformation of our Digital Media business. As with cash incentives, 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, and the resulting number of performance shares (target, maximum and earned) and RSUs granted to each of our NEOs at the outset of fiscal year 2013.

Equity Awards Granted by the Committee at the outset of Fiscal Year 2013

	Performance Share Program
Name	Target Award (#)	Maximum Award (#)	Actual Achievement (#)⁽¹⁾	RSUs Award(s) (#)	Total Target Value of Equity Award ($)⁽²⁾

Shantanu Narayen	157,500	315,000	—	157,500	$11,910,000
Mark Garrett	35,000	70,000	—	35,000	$2,500,000
Matthew Thompson	55,000	110,000	—	55,000	$4,000,000
David Wadhwani	47,500	95,000	—	47,500	$3,500,000
Bradley Rencher	40,000	80,000	—	40,000	$3,000,000

_________________________


⁽¹⁾	Achievement of performance shares granted in 2013 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.”

2013 Performance Share Program

The Committee established a Performance Share Program for fiscal year 2013 (the “2013 Program”), which was subject to the terms of our Adobe Systems Incorporated 2003 Equity Incentive Plan (the “2003 Plan”).

Total Stockholder Return: A Single Performance Goal

Based on stockholder feedback regarding our previous programs, the Committee made fundamental changes to our 2013 Program to better link our NEOs’ target TDC to the longer-term performance of the company. The 2013 Program eliminated the use of qualitative performance objectives, with 100% of the shares to be earned based on a single objective financial measure—relative TSR—over a three-year performance period. All performance share awards will vest upon the Committee’s certification of results, which will occur following the expiration of the three-year performance period. 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

Table of Contents

following the end of the three-year performance period. Moreover, the economics 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 its investors.

Under the 2013 Program, the participants can earn between 0% and 200% (the payout cap under our program) of the target amount of performance shares. The cumulative 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, 2012 during the course of the three-year 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.

Because our 2013 Program is based on a three-year performance period (whereas performance periods under our previous performance share programs were one year), none of the performance shares will be earnable until the performance period closes at the outset of our 2016 fiscal year.

For more information on performance shares granted during fiscal year 2013, see the “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2013” table and accompanying narrative.

2013 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 2013, as we transitioned to the three-year Performance Share Program described above, these time-based, stock-settled RSUs were subject to vesting at a rate of 50% per year on each of the first two anniversaries of the grant date, subject to the NEO’s continued service to Adobe. For fiscal year 2014, our time-based RSUs will vest 1/3 per year over three years to provide additional retention incentives. We anticipate that in future years we will continue to grant RSU awards to our NEOs that vest over a three-year period. 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 2013.

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 value of our stock on those awards at the end of our fiscal year.

Given that approximately 80 percent of our CEO’s and other NEOs’ target pay is equity based, we consider it especially important to focus on realizable pay when evaluating pay for performance. If stock options awarded in previous years were “out of the money,” they could expire without any realized value or dilutive effect to the company. In addition, decreases in our stock price could cause other stock-based awards to have realizable values that are less than was targeted at the time of grant.

As the table below 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 fiscal years 2011, 2012 and 2013:

Table of Contents

CEO Target and Realizable TDC vs. Indexed TSR

Target TDC: Target TDC is calculated using (1) our CEO’s target base salary as disclosed in the “Fiscal Years 2012 and 2013 Base Salaries” table (or, in the case of fiscal year 2011, in our definitive proxy statement dated March 1, 2013), (2) cash bonus targets, which are based on a percentage of target base salary, and (3) equity award target values, as disclosed in the “Summary Compensation Table” using grant date fair value. No target value for All Other Compensation is included.

Realizable TDC: Realizable TDC is calculated using (1) our CEO’s actual earned base salary, (2) cash bonus and all other non-equity compensation as disclosed in the “Summary Compensation Table,” (3) equity award values of all restricted stock units and performance shares granted in each year multiplied by the stock price on the last day of fiscal year 2013 of $56.78, and (4) in the case of stock options, the paper value of all vested and unvested awards granted in each year calculated by subtracting the exercise price from the stock price on the last day of fiscal year 2013 of $56.78.

Indexed TSR: Indexed TSR is calculated by taking the stock price on the last day of fiscal years 2011, 2012, and 2013 of $27.11, $34.61 and $56.78 respectively, and dividing each by the stock price on the last day of fiscal year 2010 of $29.14.

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”). The 401(k) Plan provides for a matching contribution by Adobe of 50% of the first 6% of the employee’s eligible compensation up to a maximum matching cash contribution of $7,650 for the 2013 plan year. We also provide a “true-up” for participants who did not receive their maximum matching contribution during a 401(k) Plan year as a result of meeting their contribution limits early in the year. Adobe makes a matching contribution to help attract and retain employees and to provide an additional incentive for our employees to save for their retirement in a tax-advantaged manner.

We also maintain an unfunded, nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for our executives and our Board. The Deferred Compensation Plan allows certain executives, including our NEOs, the ability to defer receipt of income to a later date, which may be an attractive tax planning opportunity. We offer this Deferred Compensation Plan to remain attractive to current and potential NEOs in a highly competitive market for executive talent. 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. No NEOs participated in or had an accrued balance under the Deferred Compensation Plan in fiscal year 2013.

Table of Contents

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. We offer our executives at the director level and above, including our NEOs, an annual physical exam paid for by us. We believe that the good health of our executives is important to our business.

In addition, we maintain a limited membership in a Marquis Jet Card Program. Our policy related to this program, adopted to allow for efficient travel by the participating executive officers, allows our Chief Executive Officer the use of a private jet for business travel only. A limited number of other executive officers and employees may accompany our Chief Executive Officer only if required for business purposes, and none of our executives or employees are permitted to use our private jet program for personal or other non-business-related travel. Our policy allows family members to accompany a participating executive during business travel only if additional costs for the family members are paid for by the executive officer. Our participating executives complied with this policy at all times during fiscal year 2013.

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;


•	medical and dependent care flexible spending account; and


•	short- and long-term disability, accidental death and dismemberment.

We believe these benefits are consistent with benefits provided by companies with which we compete for executive-level talent.

Granting Guidelines for Equity Compensation

Adobe maintains written equity grant guidelines setting forth our grant practices and procedures for all equity awards, as described below under “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2013—Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2013 Table—Granting Guidelines for Equity Compensation.”

Ownership Guidelines and Policies

Stock Ownership Guidelines

As part of our overall corporate governance and compensation practices, in 2003, our Board adopted stock ownership guidelines for our executive officers and directors, which the Committee reviews periodically. The Board amended the guidelines in December 2013 for our executive officers to require that threshold ownership levels be maintained indefinitely, as long as the individual remains an executive officer of Adobe. These guidelines are designed to align our executive officers’ interests with our stockholders’ long-term interests by promoting long-term share ownership, which reduces the incentive for excessive short-term risk taking. The Committee reviews quarterly reports of the stock activity of our executive officers and directors. As of November 29, 2013, each of our NEOs was in compliance with the applicable guidelines. The guidelines currently state that the executives in the following positions should hold 50% of the net shares acquired from Adobe unless, following the sale of such shares, the total number of Adobe shares held by that executive equals or exceeds the following amounts:

Table of Contents



Position		Shares (#)

Chief Executive Officer		150,000
President, Executive Vice President or Chief Financial Officer		50,000
Senior Vice President		25,000

For purposes of these guidelines, an “acquired share” includes shares of vested restricted stock, shares of stock issued from RSUs, performance shares and performance units, and shares issued upon the exercise of vested options. “Net shares acquired” means acquired shares remaining after deducting acquired shares sold to cover the exercise price and withheld taxes, and excluding shares acquired through our Employee Stock Purchase Plan. Shares that count toward the minimum share ownership include shares owned outright or beneficially owned, shares acquired through the 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.

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 2013 and all directors and officers were in compliance with the guidelines during fiscal year 2013.

Hedging Policy

Our policies explicitly prohibit any employee, including our NEOs, from “hedging” their ownership by engaging in short sales or trading in any derivatives involving Adobe securities.

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.

Severance and Change of Control Compensation

Each of our NEOs is, or could be, an eligible participant in our Executive Severance Plan for Prior Participants in the Event of a Change of Control (the “Prior Participant Change of Control Plan”), which provides for severance payments and fully accelerated vesting of outstanding equity awards to our NEOs and other members of senior management upon an involuntary termination of employment upon or following a qualifying change of control. The Prior Participant Change of Control Plan replaces the former executive change of control severance plan (the “Former Plan”), which expired in December 2011, for all employees who were eligible under the Former Plan upon its expiration, on substantially the same terms as the Former Plan. We also adopted a change of control severance plan for members of senior management who were not eligible under the Former Plan upon its expiration, but all of our NEOs were eligible and therefore would be covered by the Prior Participant Change of Control Plan. 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. We 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. We further believe that the two plans ensure stability and will enable our executives to maintain a balanced perspective in making overall business decisions during a potentially uncertain period. Severance payments and benefits under both plans are provided only upon a qualifying termination of employment upon or following a change of control so that an acquirer that wishes to retain our management team during a transition period or over the long term will have an opportunity to do so.

We have also entered into a Retention Agreement with Mr. Narayen (unchanged since December 2010), 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—Chief Executive Officer Retention Agreement.”

Table of Contents

The two change of control plans and the individual 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 all of these arrangements, benefits would be reduced if doing so would result in a better after-tax economic position for the affected executive. We 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 Committee approved the Prior Participant Change of Control Plan effective as of December 13, 2011 upon the automatic expiration of the Former Plan on December 12, 2011. The Prior Participant Change of Control Plan will expire on December 13, 2014.

Additional details regarding our Prior Participant Change of Control Plan, the Former Plan, and the individual Retention Agreement with Mr. Narayen, including estimates of amounts payable in specified circumstances as of the last day of fiscal year 2013, 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.

Tax Considerations and Compensation Recovery Policies

Tax Deductibility

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 the corporation’s Chief Executive Officer and the three other most highly compensated executive officers as of the end of any fiscal year, other than the Chief Financial Officer. However, certain types of performance-based compensation are excluded from the $1 million deduction limit if specific requirements are met. The Committee considers the impact of Section 162(m) when designing our executive compensation program and structured our Executive Bonus Plan, stock plans and performance share programs so that a number of awards would be granted under these plans and programs in a manner that complies with the requirements imposed by Section 162(m). Tax deductibility is not the primary factor used by the Committee in setting compensation, however, and corporate objectives may not necessarily align with the requirements for full deductibility under Section 162(m). In addition, the Committee from time to time has granted and may continue to grant awards, such as time-based RSU awards and one-time discretionary cash awards under which payments may 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.

Compensation Recovery Policies

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 Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or incentive-based or equity-based compensation they receive. In addition, we will comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and anticipate that we will adopt a compensation recovery policy once final regulations on the subject have been adopted. Our fiscal year 2014 compensation plans explicitly provide for any such required recovery.

Table of Contents

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 29, 2013 and in this proxy statement.

Respectfully submitted,

EXECUTIVE COMPENSATION COMMITTEE

Daniel Rosensweig, Chair

Amy Banse

Kelly Barlow

Edward Barnholt

Robert Sedgewick

_________________________

The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of Adobe under the Securities Act of 1933 or the Securities Exchange Act of 1934, except our Annual Report on Form 10-K for the fiscal year ended November 29, 2013, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Table of Contents

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information regarding the compensation for services performed during fiscal years 2013, 2012 and 2011 awarded to, paid to or earned by the NEOs, which include (i) our Chief Executive Officer, (ii) our Chief Financial Officer and (iii) our three other most highly compensated executive officers, as determined by reference to total compensation for fiscal year 2013, who were serving as executive officers at the end of fiscal year 2013.



Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards⁽¹⁾ ($)	Option Awards⁽²⁾ ($)	Non-Equity Incentive Plan Compensation⁽³⁾ ($)	All Other Compensation ⁽⁴⁾ ($)	Total ($)

Shantanu Narayen	2013	941,667	—	13,148,100	—	1,638,500	19,211	15,747,478
President and Chief Executive Officer	2012	893,182	227,761⁽⁵⁾	9,749,250	—	1,112,011	30,747	12,012,951
President and Chief Executive Officer	2011	896,434	—	6,295,550	2,403,773	1,198,980	30,373	10,825,110
Mark Garrett	2013	616,667	—	2,921,800	—	715,334	8,967	4,262,768
Executive Vice President and Chief Financial Officer	2012	570,644	97,009⁽⁵⁾	11,440,000⁽⁶⁾	—	473,635	7,782	12,589,070
Executive Vice President and Chief Financial Officer	2011	568,844	—	2,007,770	777,691	608,663	9,180	3,972,148
Matthew Thompson	2013	587,500	—	4,591,400	—	681,500	33,372	5,893,772
Executive Vice President, Worldwide Field Operations	2012	521,023	88,574⁽⁵⁾	3,868,750	—	432,449	29,427	4,940,223
Executive Vice President, Worldwide Field Operations	2011	519,042	—	1,803,590	680,480	555,375	27,992	3,586,479
David Wadhwani	2013	516,667	—	3,965,300	—	509,434	8,685	5,000,086
Senior Vice President, Digital Media	2012	471,402	60,104⁽⁵⁾	3,404,500	—	293,447	8,967	4,238,420
Senior Vice President, Digital Media	2011	457,605	—	1,803,590	680,480	364,116	8,312	3,314,103
Bradley Rencher ⁽⁷⁾	2013	491,667	—	3,339,200	—	484,784	9,119	4,324,770
Senior Vice President, Digital Marketing

___________________


⁽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 of performance shares, assuming the probable outcome of related performance conditions at target levels, and RSUs. Pursuant to SEC rules, the amounts shown disregard the impact of estimated forfeitures.


⁽²⁾	No option awards were granted in fiscal years 2012 or 2013 pursuant to the Committee’s actions to eliminate the use of stock options for all employees.

Prior year 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 of stock options, in accordance with applicable accounting guidance related to stock-based compensation. Pursuant to SEC rules, the amounts shown disregard the impact of estimated forfeitures related to service-based vesting conditions. No stock options reflected in this table were forfeited by any of our NEOs. For additional information on the valuation assumptions, see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2011 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements at Note 12, “Stock-based Compensation.”


⁽³⁾	These amounts consist solely of amounts earned under our Executive Bonus Plans, each of which is a cash bonus plan adopted under our Master Bonus Plan. Amounts earned under the Executive Bonus Plan are payable in the subsequent fiscal year.

Table of Contents

⁽⁴⁾

These amounts for fiscal year 2013 include matching contributions under Adobe’s 401(k) Plan (including an additional matching contribution made by Adobe early in the applicable 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 an executive physical for Messrs. Narayen, Garrett, Wadhwani and Rencher. In addition, for Messrs. Narayen and Thompson, they include the taxable value of the sales club trip for Mr. Narayen and for Mr. Thompson and his spouse ($9,473 for Mr. Narayen and $25,551 for Mr. Thompson).


⁽⁵⁾	One-time bonus awarded by the Committee in an amount equal to 17% of each NEO’s Target Cash Incentive under the 2012 Executive Bonus Plan.


⁽⁶⁾	Includes a one-time retention award of 225,000 RSUs, which had a $7.0 million target value at the time of grant by the Committee. This one-time retention award was granted by the Committee on August 16, 2012 in response to Mr. Garrett receiving a competitive offer for his services.


⁽⁷⁾	Mr. Rencher was not a named executive officer in fiscal years 2012 and 2011.

Table of Contents

Grants of Plan-Based Awards in Fiscal Year 2013

The following table shows all plan-based awards granted to the NEOs during fiscal year 2013. The equity awards granted in fiscal year 2013 identified in the table below are also reported in “Outstanding Equity Awards at 2013 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	All Other Option Awards: Number of Securities Underlying	Exercise or Base Price of Option	Grant Date Fair Value of Stock and Option
Name	Grant Date	Threshold ($)	Target ($)	Maximum ($)	Threshold (% of target)		Target (#)	Maximum (#)	Units⁽³⁾ (#)	Options (#)	Awards ($/Share)	Awards⁽⁴⁾ ($)

Shantanu Narayen	—	—	1,412,500	2,825,000	—		—	—	—	—	—	—
	1/24/2013	—	—	—	37.5	%	157,500	315,000	—	—	—	7,147,350⁽⁵⁾
	1/24/2013	—	—	—	—		—	—	157,500	—	—	6,000,750
Mark Garrett	—	—	616,667	1,233,334	—		—	—	—	—	—	—
	1/24/2013	—	—	—	37.5%		35,000	70,000	—	—	—	1,588,300⁽⁵⁾
	1/24/2013	—	—	—	—		—	—	35,000	—	—	1,333,500
Matthew Thompson	—	—	587,500	1,175,000	—		—	—	—	—	—	—
	1/24/2013	—	—	—	37.5	%	55,000	110,000	—	—	—	2,495,900⁽⁵⁾
	1/24/2013	—	—	—	—		—	—	55,000	—	—	2,095,500
David Wadhwani	—	—	439,167	878,333	—		—	—	—	—	—	—
	1/24/2013	—	—	—	37.5%		47,500	95,000	—	—	—	2,155,550⁽⁵⁾
	1/24/2013	—	—	—	—		—	—	47,500	—	—	1,809,750
Bradley Rencher	—	—	417,917	835,834	—		—	—	—	—	—	—
	1/24/2013	—	—	—	37.5	%	40,000	80,000	—	—	—	1,815,200⁽⁵⁾
	1/24/2013	—	—	—	—		—	—	40,000	—	—	1,524,000

_________________________

⁽¹⁾

These columns represent awards granted under our Executive Bonus Plan for performance in fiscal year 2013. These columns show the awards that were possible at the threshold, target and maximum levels of performance. Minimum performance under the Executive Bonus Plan could have resulted in a threshold amount equal to $0. Actual cash incentive awards earned in fiscal year 2013 by the NEOs under the Executive Bonus 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 2013 Performance Share Program, which was adopted under our 2003 Plan. These columns show the awards that were possible at the threshold, target and maximum levels of performance. The percentage in the threshold column indicates the percentage of the target number of shares to be earned if a threshold performance metric is achieved. If the company does not achieve the threshold performance metric, zero shares will be earned. Because our 2013 Program is based on a three-year performance period, none of the performance shares will be earnable until the performance period closes at the outset of our 2016 fiscal year. See “Equity Awards Granted by the Committee at the outset of Fiscal Year 2013” 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 of each equity award. For additional information on the

Table of Contents

valuation assumptions, see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2013 Annual Report on Form 10-K and the Notes to Consolidated Financial Statements at Note 12, “Stock-based Compensation.”


⁽⁵⁾	The grant date fair value included in this column for awards granted under our 2013 Performance Share Program is based on the target award amount listed in this table, as this amount was estimated to be the probable outcome of the performance conditions associated with these grants determined as of the grant date, excluding the effect of estimated forfeitures.

Narrative Summary to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal Year 2013 Table

The material terms of the NEOs’ annual compensation, including base salaries, the Executive Bonus Plan (which is a cash plan adopted under our Master Bonus Plan), the 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 below 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 2013 non-equity incentive awards were granted pursuant to the Executive Bonus Plan, with amounts earned based on the achievement of certain financial and customer advocacy targets as well as individual performance goals 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 2013 performance share awards will be settled in stock, subject to the terms of our 2013 Performance Share Program. Actual awards earned under the 2013 Performance Share Program will be determined based on the results achieved during the three-year performance period, as certified by the Committee at the outset of our 2016 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 2013 vest over two years with 50% vesting on each anniversary of the grant 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 2013.

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 effective grant date for our annual equity awards granted to our employees, including the NEOs, is January 24 of each year, or the first trading day thereafter, 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 (subject to compliance with Section 162(m), as deemed advisable by the Committee), unless the performance share program for the applicable fiscal year has not yet been adopted (in which case the performance share award and any accompanying RSU award will be granted when the program is adopted); and

•

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, unless the Performance Share Program for the applicable fiscal year has not yet been adopted (in which case the performance share award and any accompanying RSU award will be granted when the program is adopted).

Table of Contents

Because the grant dates are pre-established, the timing of the release of material nonpublic information does not affect the grant dates for equity awards, and Adobe does not time the release of material nonpublic 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 the authority to approve stock option, performance share and RSU awards to non-executive officer employees in accordance with the granting guidelines described above. 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 (in some instances for awards outside the United States) 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.

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 prior to fiscal year 2013 (which were subject to time-based vesting following the certification of one-year performance goals) 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 pro-rated target award based on the number of months of service provided during the performance period, for which the vesting will be accelerated by an amount equal to the percentage amount scheduled to vest on the next annual vesting date for each award. For our performance share awards granted prior to fiscal year 2013, if a recipient’s employment is terminated due to death or disability after certification of the performance goals, the recipient will receive accelerated vesting of the actual award equal to the percentage amount scheduled to vest on the next annual vesting date for each award. The terms and conditions of our performance share awards granted in fiscal year 2013 (which vest upon the certification of the performance goals, if achieved, following the end of a three-year performance period) 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 pro-rated target award based on the number of months of service provided during the performance period.

Table of Contents

Outstanding Equity Awards at 2013 Fiscal Year End

The following table sets forth information regarding outstanding equity awards as of November 29, 2013, for each NEO. All vesting is contingent upon continued employment with Adobe. 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 29, 2013, which was $56.78 per share.



	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⁽²⁾ (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

Shantanu Narayen	387,000	—	34.64	1/24/2015	—	—	—	—
	268,000	—	34.64	1/24/2015	—	—	—	—
	201,300	—	19.93	1/26/2016	—	—	—	—
	277,916	12,084⁽³⁾	34.16	1/25/2017	—	—	—	—
	—	—	—	—	23,750⁽⁴⁾	1,348,525	—	—
	192,666	79,334⁽⁵⁾	34.03	1/24/2018	—	—	—	—
	—	—	—	—	47,000⁽⁶⁾	2,668,660	—	—
	—	—	—	—	39,433⁽⁷⁾	2,239,006	—	—
	—	—	—	—	118,125⁽⁸⁾	6,707,138	—	—
	—	—	—	—	121,800⁽⁹⁾	6,915,804	—	—
	—	—	—	—	157,500⁽¹⁰⁾	8,942,850	—	—
	—	—	—	—	—	—	315,000	17,885,700
Mark Garrett	46,957	2,043⁽³⁾	34.16	1/25/2017	—	—	—	—
	—	—	—	—	4,250⁽⁴⁾	241,315	—	—
	—	—	—	—	12,500⁽¹¹⁾	709,750	—	—
	62,332	25,668⁽⁵⁾	34.03	1/24/2018	—	—	—	—
	—	—	—	—	15,000⁽⁶⁾	851,700	—	—
	—	—	—	—	12,566⁽⁷⁾	713,497	—	—
	—	—	—	—	46,875⁽⁸⁾	2,661,563	—	—
	—	—	—	—	48,332⁽⁹⁾	2,744,291	—	—
	—	—	—	—	168,750⁽¹²⁾	9,581,625	—	—
	—	—	—	—	35,000⁽¹⁰⁾	1,987,300	—	—
	—	—	—	—	—	—	70,000	3,974,600
Matthew Thompson	4,479	1,793⁽³⁾	34.16	1/25/2017	—	—	—	—
	—	—	—	—	3,750⁽⁴⁾	212,925	—	—
	—	—	—	—	12,500⁽¹¹⁾	709,750	—	—
	8,020	22,460⁽⁵⁾	34.03	1/24/2018	—	—	—	—
	—	—	—	—	13,500⁽⁶⁾	766,530	—	—
	—	—	—	—	11,266⁽⁷⁾	639,683	—	—
	—	—	—	—	46,875⁽⁸⁾	2,661,563	—