Paul Cunningham
CADENCE DESIGN SYSTEMSAbout Paul Cunningham
Paul Cunningham is Senior Vice President and General Manager of the System Verification Group at Cadence Design Systems; he has served in this role since March 2021, and is 47 years old as of February 20, 2025 . He holds an M.A. and Ph.D. in computer science from the University of Cambridge and previously co-founded Azuro, Inc., which Cadence acquired in July 2011 . Under his leadership, Cadence’s hardware and verification businesses delivered record bookings, launched Palladium Z3 and Protium X3 with >2x capacity and ~1.5x speed vs prior generation, and established AI leadership at key competitive accounts; company-wide, Cadence delivered 13.5% revenue growth in fiscal 2024 and exited with a record $6.8B backlog .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Cadence Design Systems | SVP & GM, System Verification Group | Mar 2021–present | Grew System Verification business; record hardware bookings; launched Palladium Z3 and Protium X3; AI leadership at key accounts . |
| Cadence Design Systems | Corporate VP, System Verification Group | Jan 2018–Mar 2021 | Led System Verification Group; progressed to GM role . |
| Cadence Design Systems | Various leadership roles in R&D/System Verification | Aug 2011–Jan 2018 | Post-Azuro acquisition integration and leadership in verification . |
| Azuro, Inc. | Co-founder & CEO | Until Jul 2011 | Led clock concurrent optimization company; acquired by Cadence in Jul 2011 . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Azuro, Inc. | Co-founder & CEO | Pre-2011–Jul 2011 | Built and led optimization technology adopted by Cadence via acquisition . |
Fixed Compensation
Base Salary History
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary ($) | $450,000 | $475,000 | $475,000 |
Senior Executive Bonus Plan (SEBP) – Annual
| Metric | FY 2023 | FY 2024 |
|---|---|---|
| Base Salary ($) | $475,000 | $475,000 |
| Target Bonus (% of Base) | 100% | 100% |
| Target Bonus ($) | $475,000 | $475,000 |
| Actual Bonus Paid ($) | $594,990 | $496,452 |
SEBP Semi-Annual Payouts
| Metric | 1H 2023 | 2H 2023 | 1H 2024 | 2H 2024 |
|---|---|---|---|---|
| % of Target | 121.5% | 129.1% | 94.1% | 114.9% |
| Bonus ($) | $288,463 | $306,527 | $223,568 | $272,884 |
Performance Compensation
SEBP Performance Structure (FY 2024)
| Component | Metric | Weighting | Target | Actual | Payout Basis | Vesting/Timing |
|---|---|---|---|---|---|---|
| Company Performance Factor | Revenue | 45% | Not disclosed | Company delivered 13.5% revenue growth | Factor applied to bonus formula | Semi-annual payout |
| Company Performance Factor | Operating Margin | 55% | Not disclosed | Not disclosed | Factor applied to bonus formula | Semi-annual payout |
| Individual Performance Factor | Executive Leadership | 80% | Not disclosed | Cunningham achievements: record hardware bookings; AI leadership; launched Z3/X3 | Factor applied to bonus formula | Semi-annual payout |
| Individual Performance Factor | Cadence Culture Modifier | 20% | Not disclosed | Not disclosed | Factor applied to bonus formula | Semi-annual payout |
FY 2024 Equity Grants and Vesting Terms
| Award Type | Grant Date | Shares/Options | Per Share or Exercise Price ($) | Aggregate Grant-Date Fair Value ($) | Vesting Schedule |
|---|---|---|---|---|---|
| Incentive Stock Award (ISA) | 3/15/2024 | 9,605 shares | $298.44 | $2,866,516 | 3 years: 1/3 after 12 months; remaining in four equal semi-annual installments; subject to specified performance goals . |
| Stock Options | 3/15/2024 | 14,135 options | $298.44 | $1,473,202 | 4 years: 1/48th monthly vesting . |
| SEBP (Cash) | FY 2024 | Target $475,000 | — | Actual $496,452 | Semi-annual payouts based on Company and Individual performance factors . |
Equity Ownership & Alignment
Beneficial Ownership (Record Date March 10, 2025)
| Holder | Shares | % of Outstanding |
|---|---|---|
| Paul Cunningham | 102,223 | Less than 1% |
ESPP Participation (Shares Purchased Since Inception to Jan 30, 2024)
| Name | ESPP Shares Purchased |
|---|---|
| Paul Cunningham | 4,710 |
Outstanding Equity Awards at FY 2024 Year-End (Paul Cunningham)
| Option Awards | Exercisable (#) | Unexercisable (#) | Exercise Price ($) | Expiration Date |
|---|---|---|---|---|
| Stock Options | 14,689 | 639 | 138.02 | 2/25/2028 |
| Stock Options | 13,688 | 6,223 | 142.50 | 3/15/2029 |
| Stock Options | 8,061 | 10,365 | 202.94 | 3/15/2030 |
| Stock Options | 2,650 | 11,485 | 298.44 | 3/15/2031 |
| Stock Awards | Unvested Shares (#) | Market Value ($) |
|---|---|---|
| Service-based RSUs | 2,216 | $665,819 |
| Service-based RSUs | 6,262 | $1,881,481 |
| 2024 ISA (3/15/2024) | 9,605 | $2,885,918 |
| Equity Incentive Plan Awards (PSUs/LTP) | Unearned Shares (#) | Payout Value ($) |
|---|---|---|
| Long-term performance awards | 110,941 | $33,333,333 |
Option Exercises and Stock Vested in FY 2024
| Metric | Value |
|---|---|
| Options Exercised (#) | — |
| Value Realized on Option Exercise ($) | — |
| Stock Awards Vested (#) | 55,230 |
| Value Realized on Vesting ($) | $16,381,435 |
Ownership Policies and Compliance
- Anti-hedging/anti-pledging: Cadence prohibits hedging transactions, short-sales, pledges, or depositing Cadence stock in margin accounts for directors and executive officers; trading requires pre-clearance by the General Counsel or designee .
- Stock ownership guidelines: Executives must own shares equal to at least their annual base salary (CEO: 3x salary) within five years; Cadence states all executive officers are in compliance .
- Section 16(a) compliance: All required reports were timely filed in fiscal 2024 except an inadvertent late Form 4 for a director; no issues disclosed for Cunningham .
Employment Terms
Executive Severance Plan – Termination Without Cause or Constructive Termination Not in Connection with a Change in Control (as of Dec 31, 2024)
| Component | Amount ($) |
|---|---|
| Transition Period Salary | 24,000 |
| Lump Sum Payment 1 | 475,000 |
| Lump Sum Payment 2 | 356,250 |
| Company-Paid COBRA Premiums | 45,841 |
| Vesting of Stock Options | 1,346,440 |
| Vesting of Restricted Stock Awards | 14,740,231 |
| Pre-Tax Total | 17,132,502 |
Note: Under the Executive Severance Plan, Cunningham would be eligible for severance following termination without “cause,” but not for constructive termination unless in connection with a “change in control” .
Termination in Connection with a Change in Control (within 3 months prior to or 13 months following)
| Component | Amount ($) |
|---|---|
| Transition Period Salary | 24,000 |
| Lump Sum Payment 1 | 712,500 |
| Lump Sum Payment 2 | 534,375 |
| Company-Paid COBRA Premiums | 45,841 |
| Vesting of Stock Options | 2,120,779 |
| Vesting of Restricted Stock Awards | 16,433,359 |
| Pre-Tax Total | 19,870,854 |
Death or Permanent Disability (as of Dec 31, 2024)
| Component | Permanent Disability ($) | Death ($) |
|---|---|---|
| COBRA Premiums | 45,841 | — |
| Vesting of Stock Options | 1,346,440 | 1,346,440 |
| Vesting of Restricted Stock Awards | 10,784,690 | 10,784,690 |
| Pre-Tax Total | 12,176,971 | 12,131,130 |
Clawback and Other Governance Terms
- Clawback policy: Mandatory recovery of erroneously awarded incentive compensation from current and former executive officers if Cadence is required to prepare an accounting restatement (Rule 10D-1); historical clawback applies to pre-Oct 2, 2023 awards .
- No tax gross-ups: Cadence did not provide tax gross-ups to executive officers, including change-in-control contexts .
- Perquisites: Cadence did not provide material perquisites to executive officers .
Compensation Structure
Multi-Year Compensation (Summary Compensation Table)
| Year | Salary ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan ($) | All Other Compensation ($) | Total ($) |
|---|---|---|---|---|---|---|
| 2022 | 450,000 | 7,461,699 | 975,070 | 661,438 | 10,036 | 9,558,243 |
| 2023 | 475,000 | 2,541,824 | 1,307,264 | 594,990 | 11,222 | 4,930,300 |
| 2024 | 475,000 | 2,886,516 | 1,473,202 | 496,452 | 11,946 | 5,323,116 |
2024 “All Other Compensation” Breakdown (Paul Cunningham)
| Item | Amount ($) |
|---|---|
| 401(k) Matching Contributions | 10,350 |
| Term Life Insurance Premiums | 1,596 |
Performance & Track Record
- FY2024 achievements: Took System Verification to new revenue levels; record hardware bookings; launched Palladium Z3 and Protium X3 with >2x capacity and ~1.5x speed vs prior generation; AI leadership at competitive accounts .
- FY2023 achievements: System Verification business crossed ~$1B revenue milestone; record year in hardware with significant customer expansions .
- Company-wide performance: FY2024 revenue growth of 13.5% and record $6.8B backlog .
Compensation Committee Analysis
- Independent consultant: Semler Brossy advised on peer groups, competitive assessments, and compensation practices; Compensation Committee affirmed independence and no conflicts .
- Risk mitigation: Balanced mix of short-term and long-term incentives; trading policy pre-clearance; clawback policy; capped bonuses; ethics considerations in performance assessments .
- Say-on-pay: ~90% approval at 2024 Annual Meeting; ~91% average support over past five years; no program changes in response to the 2024 vote .
Equity Ownership & Alignment (Policies)
- Anti-hedging and anti-pledging policies applicable to executives; short sales and pledges generally prohibited .
- Stock ownership guidelines: Executives must own shares at least equal to their base salary within five years; all executive officers in compliance .
Employment Terms (Additional Notes)
- Executive Severance Plan: For Cunningham, severance applies for termination without “cause”; constructive termination benefits require a change in control, indicating a double-trigger structure for enhanced benefits .
- Life insurance: Benefits-eligible U.S. employees receive life insurance up to the lesser of 2x target cash compensation or $2,000,000; as of Dec 31, 2023, coverage for Cunningham was $1,900,000 .
Investment Implications
- Retention and alignment: Large outstanding and unearned equity (e.g., 110,941 unearned performance shares; $33.33M payout value) and structured vesting (ISAs semi-annually; options monthly) create strong retention incentives and ongoing alignment with shareholder returns .
- Limited selling pressure from pledging/hedging: Company policies prohibit pledging and hedging, reducing potential forced selling or hedge-related trading dynamics for executives .
- Change-in-control economics: Double-trigger change-in-control protections with substantial accelerated vesting suggest meaningful economic security; however, base cash severance multiples are measured as lump sums (e.g., $712,500 and $534,375) rather than outsized cash-only multiples, keeping focus on equity alignment .
- Pay-for-performance: SEBP structure ties payouts to revenue and operating margin, with strong individual leadership criteria; Cunningham’s 2024 bonus outcomes reflect both company performance and execution in System Verification and hardware .