MNKD 2018 Proxy Statement

For 2017, the corporate goals were based on achievement of certain operational goals. Because we were still in the process of supporting the launch of our first product, the use of traditional performance standards, such as profit levels and return on equity, were not appropriate in our evaluation of executive officer performance. Our bonus plan is funded based on the achievement of overall corporate goals, based on a careful review by the Compensation Committee of the accomplishments of the Company during the previous year. For 2017, there were four corporate objectives, as follows: • Achieve Afrezza sales commitment • Complete/progress on identified Afrezza clinical development studies and regulatory filings (e.g., label enhancement studies, pediatric study, long-term safety study) • Secure targeted business development opportunities (e.g., in-licensing, out-licensing, partnering, international expansion) • Bolster the financial and operational stability of MannKind Corporation (e.g., financial controls, financing options, analyst coverage) In February 2018, the Board determined that these objectives were achieved at the level of 90%; accordingly, 90% of the target bonus opportunity for each executive officer was paid as a discretionary bonus for 2017. Each eligible position, including the executive officers, is assigned a target bonus opportunity expressed as a percentage of base salary, which reflects market competitive levels. Target bonus opportunities are generally positioned at the 50th percentile of the market. The target bonuses for the executive officers for 2017 were as follows: Mr. Castagna, 60%; Mr. Binder, 50%; Mr. Tross, 50%; Mr. Thomson, 50%; Mr. Kocinsky, 50%; Mr. McCauley, 50%; Ms. Alinaya, 30%; and Ms. Barton, 25%. Payments of target bonuses are not guaranteed and are subject to funding and corporate and individual performance. Long-Term Incentives In order to provide a significant retention incentive and to ensure a strong link to the long-term interests of stockholders, we provide a portion of our total compensation in the form of equity compensation — specifically, stock options (both performance-based and time-based vesting types) and restricted stock units. Executive officers, as well as all full-time employees, are eligible to receive awards. Based on market data and in consultation with our external compensation consultant, the Company has developed equity guidelines that target the annual long term incentive award at 200% of base salary for the CEO and at 100% of median salary for all other named executive officers. This percentage can be modified at the discretion of the Compensation Committee for a range of reasons, including but not limited to, company performance, individual employee performance, financial position of the company, number of shares available for grant under the equity incentive plan, the volatility of the stock price, and similar factors. For 2017, the equity value delivered to all of the named executive officers was less than the established equity targets noted above. Equity compensation is typically delivered in stock options, which have no intrinsic value unless the stock price appreciates. Awards of restricted stock units foster equity ownership and encourage retention. We target equity compensation at the median of the competitive market. The awards are made at the discretion of the Compensation Committee, after taking into consideration the grant guidelines. Equity awards are granted under the 2013 Plan, which is administered by the Compensation Committee pursuant to a delegation of concurrent authority by our Board of Directors. Our policy with regard to the timing of grants of equity compensation is to issue equity awards in connection with an employee’s hire date or promotion date as well as in connection with an annual grant of equity awards that generally occurs in May of each year. All employee grants are approved by the Compensation Committee at its regularly scheduled quarterly meeting with the grant date on or after the approval date. The 51