Table of
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
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Splunk Inc. |
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Table of
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270 Brannan Street
San Francisco,
California 94107
NOTICE OF ANNUAL
MEETING OF STOCKHOLDERS
To Be Held at 3:30 p.m. Pacific Time
on June 8, 2017
TO THE STOCKHOLDERS OF SPLUNK
INC.:
The Annual Meeting of Stockholders of
Splunk Inc., a Delaware corporation (Splunk, we, or the Company), will be
held on June 8, 2017, at 3:30 p.m. Pacific
Time, at 139 Townsend Street, Suite 150, San
Francisco, California 94107, for the following purposes, as more fully described
in the accompanying proxy statement:
1.
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To elect three Class II directors
to serve until the 2020 annual meeting of stockholders or until their
successors are duly elected and qualified; |
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2.
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To ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for our fiscal year ending January 31, 2018; |
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3. |
To conduct an advisory vote to
approve the compensation of our named executive officers;
and |
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4. |
To transact such other business
as may properly come before the meeting or any adjournments or
postponements thereof. |
The Board of Directors of Splunk (the
Board) has fixed the close of business on April 13, 2017 as the record date
for the meeting. Only holders of our common stock as of the record date are
entitled to notice of and to vote at the meeting. Further information regarding
voting rights and the matters to be voted upon is presented in this proxy
statement.
On or about April 26, 2017, we mailed
to our stockholders a Notice of Internet Availability of Proxy Materials (the
Notice). The Notice provides instructions on how to vote online, by telephone,
or by mail and includes instructions on how to receive a paper copy of proxy
materials by mail if you choose. Instructions on how to access our proxy
statement and our fiscal 2017 Annual Report may be found in the Notice or on our
website at investors.splunk.com.
YOUR VOTE IS IMPORTANT. Whether or
not you plan to attend the Annual Meeting of Stockholders, we urge you to submit
your vote via the Internet, telephone or mail.
We appreciate your continued support of
Splunk.
Very truly yours,
Leonard R. Stein
Senior Vice
President, General Counsel and Secretary
San Francisco, California
April 26, 2017
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HOW TO CAST YOUR
VOTE Your vote is important to the
future of Splunk. If you are a registered stockholder, please vote your
shares as soon as possible by one of the following
methods: |
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www.proxyvote.com Vote by
Internet |
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1-800-690-6903 Vote by Telephone |
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Mail your signed proxy
card Vote by Mail |
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If you are a street name
stockholder (i.e., you hold your shares through a broker, bank or other
nominee), please vote your shares as soon as possible by following the
instructions from your broker, bank or other nominee.
See Other MattersQuestions and
Answers About the Proxy Materials and Our 2017 Annual Meeting for details
on voting requirements and additional information about the Annual
Meeting. |
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Table of
Contents
PROXY STATEMENT
SUMMARY
YOUR VOTE IS
IMPORTANT
This summary highlights information
contained within this proxy statement. You should read the entire proxy
statement carefully and consider all information before voting. Page references
are supplied to help you find further information in this proxy
statement.
VOTING MATTERS,
VOTE RECOMMENDATIONS AND RATIONALE
Voting Matter |
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Board Vote Recommendation |
Proposal 1:
Election of Class II Directors (page 8) |
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FOR EACH NOMINEE |
The Board and the Nominating and Corporate Governance
Committee believe that the director nominees possess the necessary
qualifications to provide effective oversight of the business and quality advice
to our management team. |
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Proposal 2: Ratification of
Appointment of Independent Registered Public Accounting Firm (page
23) |
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FOR |
The Board and the Audit Committee believe that the continued
retention of PricewaterhouseCoopers LLP for the fiscal year ending January
31, 2018 is in the best interests of the Company and its stockholders. As
a matter of good corporate governance, stockholders are being asked to
ratify the Audit Committees selection of the independent registered
public accounting firm. |
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Proposal 3:
Advisory Vote to Approve Named Executive Officer Compensation (page
26) |
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FOR |
Our executive compensation program demonstrates the
continuing evolution of our pay for performance philosophy, and reflects
feedback received from stockholder engagement. We currently hold our
Say-on-Pay vote annually. |
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FISCAL 2017 BUSINESS
HIGHLIGHTS
Fiscal 2017 was another year of solid
financial performance and execution, with top-line revenue and operating cash flow
(OCF) results as shown below. Our ongoing prioritization of customer success
and adoption led to continued revenue and OCF growth. In fiscal 2017, our
compensation plans emphasized revenue and OCF metrics in order to align our
compensation incentives with our business strategy of disciplined growth. Our
fiscal 2017 highlights include achievement of the following:
● |
Total revenues of $950.0 million,
representing an increase of $281.5 million, or 42%, over fiscal 2016;
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● |
Operating cash flow of $201.8
million, compared to $155.6 million in fiscal 2016;
and |
● |
Over 13,000 customers in more
than 110 countries at the end of fiscal 2017, compared to over 11,000
customers at the end of fiscal
2016. |
TOTAL REVENUES |
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OPERATING CASH FLOW |
$ IN MILLIONS FYE
JANUARY 31 |
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$ IN MILLIONS FYE
JANUARY 31 |
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See also Strategic Context and Fiscal
2017 Business Highlights within Compensation Discussion and Analysis on page 27 of
this proxy statement. Detailed information on our financial and operational
performance can be found in our fiscal 2017 Annual Report on Form
10-K.
Table of
Contents
STOCKHOLDER
ENGAGEMENT
We believe that effective corporate governance includes regular, constructive conversations with our stockholders, and we value our
stockholders continued interest and feedback. We are committed to maintaining an active dialogue to understand the priorities and
concerns of our stockholders on the topics of executive pay and corporate governance policies and practices. We believe that ongoing
engagement builds mutual trust and understanding with our stockholders. During the fall of 2016, as part of our annual stockholder
engagement program, we solicited the views of institutional investors representing approximately 82% of our issued and outstanding
shares and engaged in substantive discussions with investors representing approximately 53% of our outstanding shares. These
discussions were productive and informative, and have helped ensure that our Boards decisions are informed by stockholder objectives.
For additional information, see Corporate Governance at SplunkOther Governance Policies and PracticesStockholder Engagement on page 16 of this proxy statement and Executive CompensationCompensation Discussion and AnalysisExecutive SummaryStockholder Engagement and Our 2016 Say-on-Pay Vote on page 29 of this proxy statement.
CORPORATE
GOVERNANCE
We believe that good corporate
governance promotes the long-term interests of our stockholders, strengthens our
Board and management accountability and leads to better business performance.
For these reasons, we are committed to maintaining strong corporate governance
practices.
The Corporate Governance at Splunk
section beginning on page 8 describes our governance practices, which include
the following highlights:
✓100% Independent Committee
Members |
✓Stockholder Engagement
Program |
✓Lead Independent
Director |
✓Board Risk
Oversight |
✓Separate Chairman and CEO
roles |
✓Stock Ownership Guidelines
for Directors and Officers |
✓Majority Voting for
Directors with Resignation Policy |
✓Anti-Hedging and Pledging
Policy |
✓Annual Board Evaluation,
and Third Party Evaluation |
✓Periodic Review of
Committee Charters and Governance Policies |
✓Independent Directors Meet
Without Management Present |
✓Annual Say-on-Pay
Vote |
✓Board Continuing Education
Program |
✓Clawback
Policy |
✓Succession Planning
Process |
✓Code of Conduct for
Directors, Officers and Employees |
✓Proxy Access |
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2 |
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Table of
Contents
Director Nominees and
Other Directors
The following table provides summary information about each director nominee and other directors as of March 31, 2017. See pages 10
to 13 for more information.
|
Class |
Age |
Principal Occupation |
Director Since |
Current Term Expires |
Expiration of Term For
Which Nominated |
Audit Committee |
Compensation Committee |
Nominating and Corporate Governance Committee(1) |
2017 Director Nominees |
John Connors* |
II |
58 |
Managing
Partner, Ignition Partners |
2007 |
2017 |
2020 |
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Patricia Morrison* |
II |
57 |
EVP, Customer Support Services,
and CIO, Cardinal Health |
2013 |
2017 |
2020 |
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Stephen Newberry* |
II |
63 |
Chairman, Lam Research |
2013 |
2017 |
2020 |
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Continuing Directors |
Douglas Merritt |
III |
53 |
President and CEO,
Splunk |
2015 |
2018 |
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Graham Smith* |
III |
57 |
Former
CFO, salesforce.com |
2011 |
2018 |
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Godfrey Sullivan |
III |
63 |
Chairman, Splunk |
2008 |
2018 |
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Mark Carges* |
I |
55 |
Former CTO, eBay |
2014 |
2019 |
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David Hornik* |
I |
49 |
Partner, August Capital |
2004 |
2019 |
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Thomas Neustaetter* |
I |
65 |
Managing Director, JK&B Capital |
2010 |
2019 |
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Non-Continuing
Director |
Amy Chang* |
II |
40 |
CEO
and Founder, Accompany |
2015 |
2017 |
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* |
Independent
director |
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Chair |
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Member |
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Audit Committee Financial
Expert |
(1) |
Ms. Chang, a current director, is
not standing for re-election at the Annual
Meeting. |
Director
Dashboard
Table of Contents
EXECUTIVE
COMPENSATION HIGHLIGHTS
Our executive compensation program is
designed to attract, motivate and retain the key executives who drive our
success. Pay that reflects performance and aligns with the interests of
long-term stockholders is key to our compensation program design and decisions.
In fiscal 2017, we structured our executive compensation program to be heavily
weighted towards performance-based compensation by providing (a) short-term cash
bonuses designed to drive top-line growth and (b) long-term equity awards tied
to our revenue and OCF performance.
Our Executive Compensation
Practices
Our executive compensation policies and
practices reinforce our pay for performance philosophy and align with sound
governance principles. Listed below are highlights of our fiscal 2017
compensation policies and practices:
|
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What We Do |
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What We Dont Do |
✓Performance-based cash and equity
incentives
✓Clawback policy on cash and equity incentive
compensation
✓Stock ownership guidelines for executive officers and
directors
✓Caps on performance-based cash and equity incentive
compensation
✓100% independent directors on the Compensation
Committee
✓Independent compensation consultant engaged by the
Compensation Committee
✓Annual review and approval of our compensation
strategy
✓Significant portion of executive compensation at risk
based on corporate performance
✓Four-year equity award vesting periods
✓Limited and modest perquisites |
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✕No single trigger change of control
benefits
✕No post-termination retirement- or pension-type non-cash
benefits or perquisites for our executive officers that are not available
to our employees generally
✕No tax gross-ups for change of control
benefits
✕No short sales, hedging, or pledging of stock ownership
positions and transactions involving derivatives of our common
stock
✕No strict benchmarking of compensation to a specific
percentile of our peer group |
4 |
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Table of Contents
Our Fiscal 2017 Named Executive Officer
Pay
The charts below show the pay mix of
our CEO and other named executive officers (NEOs) and the components of their
pay for fiscal 2017. These charts illustrate the predominance of at-risk and
performance-based components in our regular executive compensation program. We
believe these components provide a compensation package that helps attract and
retain qualified individuals, links individual performance to Company
performance, focuses the efforts of our NEOs and other executive officers on the
achievement of both our short-term and long-term objectives and aligns the
interests of our executive officers with those of our stockholders.
* |
One of our NEOs, Susan St.
Ledger, joined the Company on May 2, 2016. Her base salary and cash bonus
amounts are prorated based on the number of days in fiscal 2017 during
which she was employed with us. Given the timing of Richard Campiones
start date of November 14, 2016, his fiscal 2017 compensation is excluded
above. |
Table of Contents
TABLE OF CONTENTS
Table of Contents
CORPORATE GOVERNANCE AT
SPLUNK
PROPOSAL 1:
ELECTION OF DIRECTORS
Our business affairs are managed
under the direction of our Board, which is currently composed of ten
members. Eight of our directors are independent within the meaning of the
independent director rules of The NASDAQ Stock Market. Our Board is
divided into three classes of directors. At each annual meeting of
stockholders, a class of directors will be elected for a three-year term
to succeed the same class whose term is then expiring. Each directors
term continues until the expiration of the term for which he or she is
elected and until the election and qualification of his or her successor,
or his or her earlier death, resignation, or removal.
Any increase or decrease in the
number of directors will be distributed among the three classes so that,
as nearly as possible, each class will consist of one-third of the total
number of directors. Amy Chang informed the Company on March 19, 2017
that, due to personal reasons, she is not standing for re-election at the
Annual Meeting and will no longer serve on the Board following the Annual
Meeting. Accordingly, Stephen Newberry was moved from Class III to Class
II in order to evenly distribute our directors amongst the three classes.
For all other purposes, Mr. Newberrys service on the Board is deemed to
have continued uninterrupted. The size of our Board will be decreased from
ten to nine as of the date of the Annual Meeting.
We maintain a majority voting policy
for the election of directors. This means that in order for a nominee to
be elected in an uncontested election, the number of votes cast For such
nominees election must exceed the number of votes cast Against that
nominees election. Broker non-votes and abstentions will have no effect
on the outcome of the election.
THE BOARD
RECOMMENDS A VOTE FOR EACH OF THE NOMINEES NAMED
BELOW. |
CONSIDERATIONS IN EVALUATING DIRECTOR
NOMINEES
The Nominating and Corporate Governance
Committee uses a variety of methods to identify and evaluate director nominees.
It considers potential new candidates recommended by its members, other Board
members, management and individual stockholders. It also uses the services of a
third-party search firm to help it identify, screen, interview and conduct
background investigations of potential director candidates. In evaluating
director candidates and considering incumbent directors for nomination to the
Board, the Nominating and Corporate Governance Committee expects certain minimum
qualifications and takes into consideration key factors, experiences,
qualifications and skills that are relevant to the Boards work and the
Companys strategy and strengthen the current Boards skills mix.
The Nominating and Corporate Governance
Committee requires the following minimum qualifications to be satisfied by any
nominee for a position on the Board:
Highest personal and professional
ethics & integrity |
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Proven achievement in nominees
field |
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Sound business
judgment |
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Complementary skills to those of
existing Board |
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Ability to assist management and
significantly contribute to our success |
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Understanding of fiduciary
duties |
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Commitment of time and
energy |
Key factors the Nominating and
Corporate Governance Committee considers when selecting directors and refreshing
the Board (in addition to the current size and composition of the Board and the
needs of the Board and its committees) include:
● |
Age
and Tenure While the Board does not have
term limits, the Board seeks to balance appropriate levels of director turnover.
New perspectives and new ideas are critical to a forward-looking and strategic
Board as is the ability to benefit from the valuable experience and familiarity
that longer-serving directors bring. The average tenure for our current
directors is approximately six years. |
● |
Diversity While the Board does not
have a specific diversity policy, in making determinations regarding nominations
of directors, the Nominating and Corporate Governance Committee considers
diversity of race, ethnicity, gender, age and cultural background. The Board
believes that diversity contributes to more effective decision-making and
ultimately to the success of our customers and stockholders. |
● |
Experience The Nominating and
Corporate Governance Committee strives for a Board that spans a range of
expertise and perspective in areas relevant to the Companys business, strategic
vision and operating and innovation environment. |
8 |
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Table of Contents
CORPORATE GOVERNANCE AT
SPLUNK |
● |
Full-time employment The Nominating and Corporate Governance Committee will
consider employment status and whether the director holds a current operating
role or is retired and has the commitment of time and energy necessary to
diligently carry out his or her fiduciary responsibilities. |
● |
Independence Having an independent Board is a core element of our
governance philosophy. Our Corporate Governance Guidelines provide that a
majority of our directors will be independent. |
The Nominating and Corporate Governance
Committee also considers and evaluates other factors it deems to be in our and
our stockholders best interests. The Nominating and Corporate Governance
Committee does not assign any particular weighting or priority to any of these
factors.
The Nominating and Corporate Governance
Committee reviews with the Board on an annual or more frequent basis the
director skills and experience qualifications that it believes are desirable to
be represented on the Board, considering current Board composition and Company
circumstances. The Nominating and Corporate Governance Committee believes that
it is critical for directors to have technology and product experience and to
have previously held significant leadership positions. Below is a summary of the
primary experiences, qualifications and skills that our directors bring to the
Board:
|
Technology & Product
(100%) All 10 directors are
experienced leaders in the technology sector focused on innovation and
collaboration, which allows them to provide valuable insight on
significant issues specific to the software and enterprise software
industries. |
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Financial
(50%) 5 of the directors have strong financial experience,
having spent a significant portion of their careers focused on finance or
as a C-level executive, with 3 of them previously having
served as chief financial officers. |
|
Leadership
(100%) All 10 directors have
held significant leadership positions, possess strong leadership qualities
and know the levers that drive change and growth, which equips them to
provide constructive insight to our management team. |
|
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Sales
(40%) 4 of the directors have sales experience, which is
relevant as the Company continues to expand its direct and indirect sales
organization, increase customer satisfaction and renewals by offering
support to ensure customer success and drive enterprise-wide adoption of
its offerings. |
|
International Operations &
Growth (90%) 9 of the directors have experience in the operational,
financial and strategic issues facing global companies, which brings
critical perspective to the Board as we continue to expand our
international operations. |
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Marketing
(40%) 4 of the directors have marketing experience and
expertise in brand building in rapidly-changing industries, which
contributes to the Companys ability to identify and develop new markets
for its offerings and expand into adjacent products, services and
technologies. |
|
Risk Management
(70%) 7 of the directors have experience in risk management and
oversight, which contributes to the Boards role in overseeing risk
management and understanding the most significant risks facing the
Company. |
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|
Information Security &
Privacy (30%) 3 of the directors have experience in information
security and privacy, which enhances the Boards oversight of
cybersecurity and understanding the implications of cyber risks as they
relate to the Company. |
In light of the individual
qualifications and experiences of each of our director nominees discussed below,
and the contributions that our nominees have made to our Board, our Board has
concluded that each of our director nominees should be re-elected. Biographies
of all of our directors are set forth below.
Table of Contents
CORPORATE GOVERNANCE AT
SPLUNK |
NOMINEES FOR DIRECTOR
|
|
John Connors has served as a member of our Board since 2007. Since
2005, Mr. Connors has been a managing partner at Ignition Partners, LLC, a
venture capital firm. Prior to joining Ignition Partners, Mr. Connors
served in various management positions at Microsoft Corporation, a
technology company, from 1989 to 2005, including most recently as Senior
Vice President and Chief Financial Officer from 1999 to 2005. Mr. Connors
has served as a member of the board of directors of NIKE, Inc., a
designer, marketer and distributor of authentic athletic footwear,
apparel, equipment and accessories, since 2005. Mr. Connors holds a B.A.
from the University of Montana.
Mr. Connors possesses specific
attributes that qualify him to serve as a director, including his
substantial experience as an investment professional in the business
software and services industry and his experience as an executive in the
software industry and as a member of the board of directors and audit and
finance committee of a Fortune 500 company. Mr. Connors also brings
historical knowledge of our business and continuity to the Board, as well
as accounting experience and financial expertise. |
John Connors
Lead Independent
Director
Managing Partner at
Ignition Partners
Director Since 2007
Splunk Committee(s): Audit Committee; Nominating and Corporate Governance
Committee |
|
|
Patricia Morrison
has served as a member of our Board
since 2013. Since 2009, Ms. Morrison has served as Executive Vice
President, Customer Support Services and Chief Information Officer at
Cardinal Health, Inc., a provider of healthcare services. Prior to joining
Cardinal Health, Ms. Morrison was Chief Executive Officer of Mainstay
Partners, a technology advisory firm, from 2008 to 2009, and Executive
Vice President and Chief Information Officer at Motorola, Inc., a
designer, manufacturer, marketer and seller of mobility products, from
2005 to 2008. Her previous experience also includes Chief Information
Officer of Office Depot, Inc. and senior-level information technology
positions at PepsiCo, Inc., The Quaker Oats Company, General Electric
Company and The Procter & Gamble Company. Ms. Morrison has served as a
member of the board of directors of Aramark, a global provider of food,
facilities and uniform services, since 2017. Ms. Morrison holds a B.A. and
B.S. from Miami University in Oxford, Ohio.
Ms. Morrison possesses specific
attributes that qualify her to serve as a director, including her
information technology expertise and professional experience as an
executive of other public companies. |
Patricia
Morrison
Independent
EVP,
Customer Support Services, and CIO of Cardinal Health
Director Since 2013
Splunk Committee(s): Audit Committee |
|
|
Stephen Newberry
has served as a member of our Board
since 2013. Mr. Newberry has been a director of Lam Research Corporation,
a supplier of wafer fabrication equipment and services, since 2005, and
has served as the chairman of the board of Lam Research since 2012. He
served as Lam Researchs Chief Executive Officer from 2005 through 2011,
President from 1998 to 2010, and Chief Operating Officer from 1997 to
2005. Prior to joining Lam Research, Mr. Newberry held various executive
positions at Applied Materials, Inc., a provider of manufacturing
solutions for the semiconductor, flat panel display and solar industries.
Mr. Newberry previously served on the board of directors of Nanometrics
Incorporated, a provider of process control metrology and inspection
systems, from 2011 to 2015. Mr. Newberry holds a B.S. from the United
States Naval Academy and is a graduate of the Program for Management
Development at Harvard Business School.
Mr. Newberry possesses specific
attributes that qualify him to serve as a director, including the
perspective and experience he brings as a former executive of global
technology companies. |
Stephen
Newberry
Independent
Chairman of Lam
Research
Director Since 2013
Splunk Committee(s): Compensation
Committee |
10 |
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Table of Contents
CORPORATE GOVERNANCE AT
SPLUNK |
CONTINUING
DIRECTORS
|
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Mark Carges has served as a member of our Board since 2014. He
previously served as the Chief Technology Officer of eBay Inc., an
e-commerce company, from September 2009 to September 2014. From September
2009 to November 2013, he also served as eBays Senior Vice President,
Global Products, Marketplaces. From September 2008 to September 2009, he
served as eBays Senior Vice President, Technology. From November 2005 to
May 2008, Mr. Carges served as Executive Vice President, Products and
General Manager of the Business Interaction Division of BEA Systems, Inc.,
a software company (acquired by Oracle Corporation). Mr. Carges previously
served on the board of directors of Rally Software Development Corp., a
provider of cloud-based solutions for managing software development
(acquired by CA Technologies), from 2011 to 2015. Mr. Carges holds a B.A.
from the University of California, Berkeley and an M.S. from New York
University.
Mr. Carges possesses specific
attributes that qualify him to serve as a director, including his
knowledge and experience in the software industry and professional
experience serving in leadership positions at various technology
companies. |
Mark Carges
Independent
Former CTO, eBay
Director Since 2014
Splunk Committee(s): Compensation
Committee |
|
|
David Hornik has served as a member of our Board since 2004. Since
2000, Mr. Hornik has been a partner at August Capital, a venture capital
firm. Prior to joining August Capital, Mr. Hornik was an intellectual
property and corporate attorney at the law firms of Venture Law Group and
Perkins Coie LLP, and a litigator at the law firm of Cravath, Swaine &
Moore LLP. Mr. Hornik holds an A.B. from Stanford University, an M.Phil
from Cambridge University and a J.D. from Harvard Law School.
Mr. Hornik possesses specific
attributes that qualify him to serve as a director, including his
substantial experience as an investment professional and as a director of
technology companies focusing on enterprise applications and
infrastructure software. Mr. Hornik also brings historical knowledge of
our business and continuity to the Board. |
David Hornik
Independent
Partner at August
Capital
Director Since 2004
Splunk Committee(s): Nominating and Corporate Governance
Committee |
|
|
Douglas
Merritt has served as our President,
CEO and a member of our Board since 2015. He served as our Senior Vice
President of Field Operations from 2014 to 2015. Prior to joining us, Mr.
Merritt served as Senior Vice President of Products and Solutions
Marketing at Cisco Systems, Inc., a networking company, from 2012 to 2014.
From 2011 to 2012, he served as Chief Executive Officer of Baynote, Inc.,
a behavioral personalization and marketing technology company. Previously,
Mr. Merritt served in a number of executive roles and as a member of the
extended Executive Board at SAP A.G., an enterprise software company, from
2005 to 2011. From 2001 to 2004, Mr. Merritt served as Group Vice
President and General Manager of the Human Capital Management Product
Division at PeopleSoft Inc. (acquired by Oracle Corporation), a software
company. He also co-founded and served as Chief Executive Officer of
Icarian, Inc. (since acquired by Workstream Corp.), a cloud-based company,
from 1996 to 2001. Mr. Merritt holds a B.S. from The University of the
Pacific in Stockton, California.
Mr. Merritt possesses specific
attributes that qualify him to serve as a director, including the
knowledge and perspective he brings through his experience as our former
Senior Vice President of Field Operations and his experience as a public
company executive and as a member of the board of directors of private
companies in the enterprise software industry. |
Douglas Merritt
President and CEO
of Splunk
Director Since 2015
Splunk Committee(s): None |
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CORPORATE GOVERNANCE AT
SPLUNK |
|
|
Thomas
Neustaetter has served as a member of
our Board since 2010. Since 1999, Mr. Neustaetter has been a Managing
Director at JK&B Capital, a venture capital firm. Prior to joining
JK&B Capital, Mr. Neustaetter was a partner at The Chatterjee Group,
an affiliate of Soros Fund Management, from 1996 to 1999. Mr. Neustaetter
holds a B.A. from the University of California, Berkeley and an M.B.A. and
M.S. from the University of California, Los Angeles.
Mr. Neustaetter possesses
specific attributes that qualify him to serve as a director, including his
financial expertise and his substantial experience as an investment
professional and as a director of software companies. |
Thomas
Neustaetter
Independent
Managing Director
at JK&B Capital
Director Since 2010
Splunk Committee(s): Compensation
Committee |
|
|
Graham Smith has served as a member of our Board since 2011. Mr.
Smith was Executive Vice President at salesforce.com, inc., a provider of
enterprise cloud computing software, in 2015. He also served as
salesforce.coms Executive Vice President, Finance from 2014 to 2015,
Executive Vice President and Chief Financial Officer from 2008 to 2014,
and Executive Vice President and Chief Financial Officer Designate from
2007 to 2008. Prior to joining salesforce.com, Mr. Smith served as Chief
Financial Officer at Advent Software Inc., a software company, from 2003
to 2007. Mr. Smith has served as a member of the board of directors of
Citrix Systems, Inc., an enterprise software company, MINDBODY, Inc., an
online wellness services marketplace, Xero, Inc., an online accounting
software company, and BlackLine, Inc., a provider of cloud-based solutions
for finance and accounting, since 2015. Mr. Smith holds a B.Sc. from
Bristol University in England and qualified as a chartered accountant in
England and Wales.
Mr. Smith possesses specific
attributes that qualify him to serve as a director, including his
financial expertise and professional experience as an executive of other
public software companies. |
Graham Smith
Independent
Former CFO of
salesforce.com
Director Since 2011
Splunk Committee(s): Audit Committee |
|
|
Godfrey
Sullivan has served as our
non-executive Chairman of the Board since 2015. Previously, he served as
our President, CEO and a member of our Board from 2008 to 2015, and as our
Chairman from 2011 to 2015. Prior to joining us, Mr. Sullivan was with
Hyperion Solutions Corporation, a performance management software company
acquired by Oracle Corporation, from 2001 to 2007, where he served in
various executive roles, most recently as President and Chief Executive
Officer, and as a member of the board of directors from 2004 until 2007.
Mr. Sullivan has served as a member of the board of directors of Citrix
Systems, Inc., an enterprise software company, since 2005. Mr. Sullivan
previously served on the board of directors of Informatica Corporation, a
data integration software provider, from 2008 to 2013. Mr. Sullivan holds
a B.B.A. from Baylor University.
Mr. Sullivan possesses specific
attributes that qualify him to serve as a director, including the
perspective and experience he brings as our former CEO and his experience
as an executive and as a member of the board of directors of other
companies in the enterprise software industry. Mr. Sullivan also brings
historical knowledge of our business, operational expertise and continuity
to the Board. |
Godfrey
Sullivan
Chairman of
Splunk
Director Since 2008
Splunk Committee(s): None |
12 |
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CORPORATE GOVERNANCE AT
SPLUNK |
NON-CONTINUING
DIRECTOR
|
|
Amy Chang has served as a member of our Board since 2015. Since
2013, Ms. Chang has been CEO and Founder of Accompany, Inc., a
relationship intelligence platform company. Prior to founding Accompany,
Ms. Chang was with Google Inc., an Internet services and products company,
from 2005 to 2012, most recently serving as Global Head of Product, Google
Ads Measurement and Reporting. Prior to joining Google, Ms. Chang held
product management and strategy positions at eBay Inc., an e-commerce
company, from 2003 to 2005. She also served as a consultant with McKinsey
& Company, specializing in semiconductors, software and services. Ms.
Chang previously served on the board of directors of Informatica
Corporation, a data integration software provider, from 2012 to 2015. Ms.
Chang holds a B.S. and an M.S. from Stanford University.
Ms. Chang possesses specific
attributes that qualify her to serve as a director, including her
expertise and experience in the software industry and professional
experience serving in leadership positions at various technology
companies. |
Amy Chang
Chief Executive
Officer and Founder of Accompany
Director Since 2015
Splunk Committee(s): Nominating and Corporate Governance
Committee |
DIRECTOR
INDEPENDENCE
Our common stock is listed on The
NASDAQ Global Select Market. Under the rules of The NASDAQ Stock Market,
independent directors must comprise a majority of a listed companys board of
directors, and subject to specified exceptions, all members of its audit,
compensation, and nominating and corporate governance committees must be
independent. Under those rules, a director is independent only if a companys
board of directors makes an affirmative determination that the director has no
material relationship with the company that would impair his or her
independence.
Our Board has undertaken a review of
the independence of each director. In making this determination, our Board
considered the relationships that each non-employee director has with us and all
other facts and circumstances that our Board deemed relevant in determining
their independence, including the beneficial ownership of our capital stock of
each non-employee director, as well as relationships that our directors may have
with our customers and vendors. Based on this review, our Board has determined
that Mses. Chang and Morrison and Messrs. Carges, Connors, Hornik, Neustaetter,
Newberry and Smith, representing eight of our ten directors, are independent
as that term is defined under the rules of The NASDAQ Stock Market for purposes
of serving on our Board and committees of our Board.
BOARDS ROLE AND
RESPONSIBILITIES
Risk
Oversight
Our Board recognizes the importance of
effective risk oversight in running a successful business and in fulfilling its
fiduciary responsibilities to the Company and its stockholders. Our Board is
responsible for ensuring that an appropriate culture of risk management exists
within the Company and for setting the right tone at the top, overseeing our
aggregate risk profile and focusing on how the Company addresses its most
significant risks.
Our Board exercises its risk oversight
responsibility both directly and through its three standing committees, each of
which is delegated specific risks and keeps our Board informed of its oversight
efforts through regular reports by the committee chairmen. Our management team
is responsible for the day-to-day management of
risks we face. In its risk oversight role, our Board has the responsibility to
satisfy itself that the risk management processes designed and implemented by
our management team are appropriate and functioning as designed. Our Board
believes that its current leadership structure, described in detail under Board
Structure and Processes on page 18, supports the risk oversight function of our
Board by providing for open communication between our management team and our
Board. In addition, independent directors chair the various committees involved
in assisting with risk oversight, and all directors are involved in the risk
oversight function.
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CORPORATE GOVERNANCE AT
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The following are the key oversight
responsibilities of our Board and its committees:
|
|
Board of
Directors |
|
|
Oversees Major
Risks |
|
●Strategic and
competitive
●Financial
●Brand and
reputational
●Legal and compliance
|
●Operational
●Data
protection
●Succession
planning |
|
Succession
Planning
The Board and management team recognize
the importance of continually developing our executive talent. Our management
team conducts an annual talent review process that includes succession plans for
our senior leadership positions. These succession plans are reviewed by our CEO,
and details on these succession plans, including potential successors of our
executive officers, are presented to the Board.
In addition, our Board annually reviews
a succession plan for the CEO position, using formal criteria to evaluate
potential successors and also interim candidates in the event of an emergency
situation. In conducting its evaluation, the Board considers organizational
needs, competitive challenges, leadership/management potential and development,
and emergency situations.
As part of our succession planning,
between November 2015 and November 2016, we promoted one member of our
management team and filled two vacant executive officer positions. On
November 19, 2015, Mr. Merritt became our
President and CEO, succeeding Mr. Sullivan, who retired after over seven years
as CEO. Mr. Sullivan continues to serve the Company as non-executive Chairman of
our Board. On May 2, 2016, Susan St. Ledger became our Senior Vice President,
Chief Revenue Officer, succeeding Mr. Merritt, who had continued to serve the
dual role of CEO and head of field operations following the CEO transition. On
November 14, 2016, Richard Campione became our Senior Vice President, Chief
Product Officer, succeeding Guido Schroeder, who departed the Company earlier in
the year. These transitions exemplify the Boards ongoing commitment to
cultivating and developing executive talent.
In addition to executive and management
succession, the Nominating and Corporate Governance Committee regularly oversees
and plans for director succession and refreshment of the Board to ensure a mix
of skills, experience, tenure and diversity, as described under Considerations
in Evaluating Director Nominees beginning on page 8.
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CORPORATE GOVERNANCE AT
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STOCKHOLDER
RECOMMENDATIONS, NOMINATIONS AND COMMUNICATIONS WITH THE BOARD
Stockholder
Recommendations
The Nominating and Corporate Governance
Committee will consider candidates for directors recommended by stockholders.
The Nominating and Corporate Governance Committee will evaluate such
recommendations in accordance with its charter, our Bylaws, our policies and
procedures for director candidates, as well as the nominee criteria described
above. This process is designed to ensure that the Board includes members with
diverse backgrounds, skills and experience, including appropriate financial and
other expertise relevant to our business. Stockholders holding at least one percent of our fully
diluted capitalization continuously for at least 12 months wishing to recommend
a candidate for nomination should contact our Corporate Secretary in writing.
Such recommendations must include the candidates name, home and business
contact information, detailed biographical data, relevant qualifications, a
statement of support by the recommending stockholder, evidence of the
recommending stockholders ownership of our stock and a signed letter from the
candidate confirming willingness to serve on our Board. The Nominating and
Corporate Governance Committee has discretion to decide which individuals to
recommend for nomination as directors.
Stockholder
Nominations
Our Bylaws permit stockholders to
nominate director candidates through proxy access for inclusion in our proxy
statement.
Proxy Access Process
1 |
|
2 |
|
3 |
a single stockholder, or group of up
to 20 stockholders (or 25 stockholders, if our annual revenues are greater
than $4 billion for the most recently completed fiscal year) 3% for 3 years owning three percent
outstanding stock for at least three consecutive years |
|
the individual or group may
submit up to
20% (if there are 10 or more
directors in office) or up to 25% (if
there are nine or fewer directors in office) of the directors then in
office, but in no case less than one
nominee |
|
stockholders and nominees who satisfy
the requirements specified by our Bylaws are included in the proxy
statement |
To be timely for our 2018 annual meeting
of stockholders, our Corporate Secretary must receive a stockholders notice of
a proxy access nomination at our principal executive offices:
● |
not earlier than November
27, 2017; and |
● |
not later than the close of business on
December 27, 2017. |
Advance Notice
Procedure
Our Bylaws also permit stockholders to
nominate directors for election at an annual meeting of stockholders. To
nominate a director, the stockholder must provide the information required by
our Bylaws. In addition, the stockholder must give timely notice to our
Corporate Secretary in accordance with our Bylaws, which, in general, require
that the notice be received by our Corporate Secretary within the time period
described under Other MattersStockholder Proposals for stockholder proposals
that are not intended to be included in our proxy statement.
Stockholder
Communications with the Board
We have a practice of regularly
engaging with stockholders to seek their feedback. Stockholders may also
communicate with the Board or with an individual member of the Board by writing
to the Board or to the particular member of the Board, and mailing the
correspondence to: c/o General Counsel, Splunk Inc., 270 Brannan Street, San
Francisco, California 94107. All such stockholder communications will be
reviewed initially by our General Counsel and, if appropriate, will be forwarded
to the appropriate member or members of the Board, or if none is specified, to
the Chairman of the Board. This process assists the Board in reviewing and
responding to stockholder communications in an appropriate manner. The General
Counsel reports regularly to the Nominating and Corporate Governance Committee
on all correspondence received that, in his opinion, involves functions of the
Board or its committees or that he otherwise determines merits Board
attention.
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CORPORATE GOVERNANCE AT
SPLUNK |
OTHER GOVERNANCE
POLICIES AND PRACTICES
Stockholder
Engagement
We believe that effective corporate
governance includes regular, constructive conversations with our stockholders, and we value
our stockholders continued interest and feedback. We are committed to maintaining an active
dialogue to understand the priorities and concerns of our stockholders on the
topics of executive pay and corporate governance policies and practices. We
believe that ongoing engagement builds mutual trust and understanding with our
stockholders.
ANNUAL STOCKHOLDER ENGAGEMENT CYCLE |
Summer |
Fall |
Winter |
Spring |
Our annual stockholder engagement
cycle begins with a review of the results of our most recent Annual
Meeting, together
with governance best practices and other developments. |
We engage with many of our major
stockholders and others who request meetings about topics of interest in
our governance and executive compensation programs along with other
updates at the
Company. We solicit feedback on issues that are important to our
stockholders. |
We communicate to the Board and its
committees the feedback received from stockholders and consider those
perspectives in upcoming governance or executive compensation discussions. |
We publish our proxy statement and
annual report to our stockholders. We reach out again to our major
stockholders to engage on important topics to be addressed at our Annual Meeting. We then hold our Annual
Meeting. |
During the fall of 2016, as part of our
annual stockholder engagement program, we solicited the views of institutional
investors representing approximately 82% of our issued and outstanding shares
and engaged in substantive discussions with investors representing approximately
53% of our outstanding shares. These discussions, which were led by our Vice
President, Associate General Counsel and our Vice President, Investor Relations,
covered a variety of topics, including feedback on our executive compensation
philosophy and program, our compensation actions for the past year, our 2016
Say-on-Pay vote, recent executive transitions, and the evolution of our
corporate governance program. In general, our investors have a long-term outlook
and understand that we are currently in a dynamic, high-growth phase and face a
talent war. We received positive feedback on our compensation program and were
encouraged to continue to emphasize strong alignment between compensation and
Company performance. See Executive CompensationCompensation Discussion and
AnalysisExecutive SummaryStockholder Engagement and Our 2016 Say-on-Pay Vote
for detailed feedback on our executive compensation program. In addition, while
our investors reacted favorably to our proxy statement disclosures, we received
additional suggestions for improvement. Based in part on this feedback, we added
new infographics to this proxy statement relating to director nominees and
qualifications, risk oversight and stockholder engagement and enhanced our
disclosures on director evaluations.
Code of Business
Conduct and Ethics
Our Board has adopted a Code of
Business Conduct and Ethics that applies to all of our employees (including our
officers) and directors. We also have an additional Code of Ethics for CEO and
Senior Financial Officers that applies to our CEO, Chief Financial Officer, and
other senior financial officers. The full text of our Code of Business Conduct
and Ethics is posted on the Investors portion of our website at
http://investors.splunk.com/governance.cfm. We will post amendments to our Code
of Business Conduct and Ethics or waivers of our Code of Business Conduct and
Ethics for directors and executive officers on the same website.
Splunk
Impact
We are committed to making a positive
impact for our stockholders and communities through initiatives such as
Splunk4Good and responsible corporate governance. We believe in the power of
data for positive change and that the power of Splunks technology can make the
world a better place. Making a positive impact also requires a strong
commitment to conduct our business in ways that are principled, transparent, and
accountable to stockholders. We believe doing so generates long-term value for
our business, our stockholders, and communities around the world.
16 |
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CORPORATE GOVERNANCE AT
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We place high ethical standards and
effective corporate governance at the center of the way we operate. In addition
to the corporate governance highlights summarized on page 2, in fiscal 2017, we
announced Splunk Pledge, our commitment to research, education and community
service. Through our Splunk4Good initiative, we committed to donate a minimum of
$100 million over a 10-year period in software
licenses, training, support and education to nonprofit organizations and
educational institutions around the globe to support academic research and
generate social impact. In addition, our employees receive paid time off to
volunteer at the nonprofit organizations of their choice through Splunk Pledge.
RELATED PARTY
TRANSACTIONS
Policies and
Procedures for Related Party Transactions
The Audit Committee of our Board has
the primary responsibility for reviewing and approving or ratifying transactions
with related parties.
We have adopted a formal written policy
providing that our executive officers, directors, nominees for election as
directors, beneficial owners of more than 5% of any class of our common stock,
and any member of the immediate family of any of the foregoing persons, are not
permitted to enter into a related party transaction with us without the prior
consent of our Audit Committee, subject to the exceptions described below. In
approving or rejecting any such proposal, our Audit Committee considers the
relevant facts and circumstances available and deemed relevant to our Audit
Committee, including, but not limited to, whether the transaction is on terms no
less favorable than terms generally available to an unaffiliated third party
under the same or similar circumstances, the extent of the related partys
interest in the transaction and their involvement in the transaction, if
any.
In the event we become aware of a
related party transaction that was not previously approved or ratified under the
policy, our Audit Committee will evaluate all options available, including
whether to ratify, amend, terminate, rescind or take other action as
appropriate.
Our Audit Committee has determined that
certain transactions do not require Audit Committee approval, including (a)
certain employment arrangements of executive officers, (b) director
compensation, (c) transactions with another company at which a related partys
only relationship is as an employee (excluding as an executive officer), (d)
transactions where a related partys interest arises only (i) from such persons
position as a director of another corporation or organization that is a party to
the transaction; (ii) from the direct or indirect ownership by such person and
all other related parties, in the aggregate, of less than a 10% equity interest
in another person which is a party to the transaction, or (iii) from both such
position and ownership, (e) transactions where a related partys interest arises
solely from the benefit of ownership of our common stock and all holders of our
common stock received the same benefit on a pro rata basis, (f) transactions
available to all employees generally, (g) any ordinary course sale transaction that does not exceed $1,000,000 where the related
person did not participate in the negotiations and where the transaction is
reviewed and confirmed by the legal department and controller prior to its
consummation, (h) any ordinary course purchase transaction that does not exceed
$1,000,000 that supports the Companys ongoing operations where the related
person did not participate in the negotiations and where the transaction is
reviewed and confirmed by the legal department and controller prior to its
consummation, (i), any ordinary course sale transaction with a related party
that is the beneficial owner of more than 5% of any class of our common stock
where the transaction is reviewed and confirmed by the legal department and
Controller prior to its consummation (j) any transaction made pursuant to an
existing approved agreement and (k) any other type of transaction that is
approved by our Audit Committee for inclusion in the policy. If a transaction
exceeds the greater of 5% of the recipients consolidated gross revenues for
that year and $200,000, it will not be deemed pre-approved under (c), (d), (g),
(h), (i), (j) and (k) above.
Since the beginning of our last fiscal
year, there were no other related person transactions, and there are not
currently any proposed related person transactions, that would require
disclosure under the Securities and Exchange Commission (SEC) rules, other
than as described below:
● |
The daughter of the Chairman of our Board, Hayley Sullivan, is
an Inside Sales Representative at Splunk. Her compensation is consistent
with the total compensation provided to other employees of the same level
with similar responsibilities. Ms. Sullivan was not hired by, nor does she
report to the Chairman of our Board, Godfrey Sullivan. The Audit Committee
reviewed the circumstances surrounding Ms. Sullivans employment and her
relationship to Mr. Sullivan and concluded that they are not material.
Accordingly, the Audit Committee approved Ms. Sullivans continued
employment and compensation. |
● |
Ms. Morrison, one of our
directors, is an executive officer of Cardinal Health, Inc., which is a
customer of ours. We have entered into ordinary course commercial dealings
with Cardinal Health, Inc. that we consider arms-length on terms that are
consistent with similar transactions with our other similarly situated
customers and vendors. We recognized approximately $1,600,000 in revenue
from Cardinal Health, Inc. in fiscal 2017. The Audit Committee has
determined that Ms. Morrison did not and does not have any direct or
indirect material interest in such transaction. |
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CORPORATE GOVERNANCE AT
SPLUNK |
Employment
Arrangements and Indemnification Agreements
We have entered into employment
arrangements with certain current and former executive officers. See Executive
CompensationCompensation TablesExecutive Employment Arrangements.
We have also entered into
indemnification agreements with certain directors and officers. The
indemnification agreements and our Certificate of Incorporation and Bylaws
require us to indemnify our directors and officers to the fullest extent
permitted by Delaware law.
BOARD STRUCTURE AND
PROCESSES
Leadership
Structure
Mr. Sullivan, our former Chief
Executive Officer, currently serves as non-executive Chairman of our Board. In
that role, he presides over meetings of the Board, presides over meetings of
stockholders, consults and advises the Board and its committees on the business
and affairs of the Company, acts as an advisor to Mr. Merritt on strategic
aspects of the CEO role and performs additional duties as the Board determines.
Our Board believes that its leadership structure appropriately and effectively
allocates authority, responsibility, and oversight between our management team
and the members of our Board. It gives primary responsibility for the
operational leadership and strategic direction of the Company to our CEO, while
the Chairman facilitates our Boards independent oversight of management,
promotes communication between management and our Board, engages with
stockholders, and leads our Boards consideration of key governance matters. The
Nominating and Corporate Governance Committee periodically reviews the Boards
leadership structure and when appropriate, recommends changes to the Boards
leadership structure, taking into consideration the needs of the Board and the
Company at such time.
Lead Independent
Director
Our Board has appointed Mr. Connors to
serve as our Lead Independent Director. As Lead Independent Director, Mr.
Connors presides over periodic meetings of our independent directors outside the
presence of our management team, serves as a liaison between our management team
and the independent directors and facilitates the process for the Boards
self-evaluation. In addition, the Lead Independent Director may have other
responsibilities, including presiding at Board meetings in the absence of the
Chairman, being available, when appropriate, for consultation and direct
communication with our stockholders, facilitating communication between the
independent directors, the Chairman and the CEO, assisting the Board in
fulfilling its oversight responsibilities in Company strategy, risk oversight
and succession planning, and performing such additional duties as the Board
determines.
Board Evaluations,
Effectiveness and Education
It is important that the Board and its
committees perform effectively and in the best interests of the Company and its
stockholders. Each year, the Nominating and Corporate Governance Committee
oversees the Board and committee evaluation process. The Nominating and
Corporate Governance Committee considers the format and framework for the
process. The evaluation process generally takes one of two forms: an internal
assessment led by the Lead Independent Director or an assessment using the
services of an independent third-party consultant. In either instance, the
purpose of the evaluation is to focus on areas in which the Board or the
committees believe contributions can be made going forward to increase the
effectiveness of the Board or the committees.
An internal assessment begins with the
Nominating and Corporate Governance Committee initiating the annual board
evaluation process and setting a timeline. It utilizes a written questionnaire
covering Board, committee, self and peer performance. The Lead Independent
Director then interviews each director to obtain his or her assessment of the
effectiveness of the Board and committees, as well as director performance and
Board dynamics, summarizes these individual assessments for discussion with the
Board and committees, and then leads a discussion with the Nominating and
Corporate Governance Committee and the Board. The Board then takes such further
action as it deems appropriate.
For fiscal 2017, the Nominating and
Corporate Governance Committee used a third-party consultant, experienced in
corporate governance matters, to assist with the Board and committee evaluation
process. Directors were interviewed by the independent third party and gave
specific feedback on individual directors, committees and the Board in general.
Directors responded to questions designed to elicit information to be used in
improving Board and committee effectiveness. The independent third party
synthesized the results and comments received during such interviews. At a
subsequent Board meeting, the Lead Independent Director, in conjunction with the
independent third-party consultant, presented the findings to the Nominating and
Corporate Governance Committee and the Board, followed by review and discussion
by the full Board.
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CORPORATE GOVERNANCE AT
SPLUNK |
The Company encourages directors to
participate in continuing education programs focused on the Companys business
and industry, committee roles and responsibilities and legal and ethical
responsibilities of directors, and the Company reimburses directors for their
expenses associated with this participation. We provide membership in the
National Association of Corporate Directors to all Board members. We also
encourage our directors to attend Splunk events such as our annual users
conference (.conf) and our annual sales kickoff (SKO) and take virtual Splunk
education classes. Continuing director education is also provided during Board meetings and other Board discussions as part of
the formal meetings and may include internally developed materials and
presentations as well as programs presented by third parties.
Executive Sessions
As part of each regularly scheduled
Board meeting, the outside directors meet without our management team or the
other directors. The Lead Independent Director leads such
discussions.
BOARD MEETINGS AND
COMMITTEES
During our fiscal year ended January
31, 2017, the Board held five meetings, and no director attended fewer than 75%
of the total number of meetings of the Board and the committees of which such
director was a member.
Although we do not have a formal policy
regarding attendance by members of our Board at annual meetings of stockholders,
we encourage directors to attend. Messrs. Carges, Connors, Hornik, Merritt,
Neustaetter, Newberry and Sullivan, and Mses. Chang and Morrison attended our
2016 Annual Meeting.
Our Board has an Audit Committee, a
Compensation Committee, and a Nominating and Corporate Governance Committee,
each of which has the composition and responsibilities described below. Members
serve on these committees until their resignation or until otherwise determined
by our Board.
Audit Committee
|
|
John Connors, Chair
The current members of our Audit
Committee are Messrs. Connors and Smith and Ms. Morrison. Mr. Smith will
be chair of the Audit Committee effective immediately after the Annual
Meeting. Our Board has determined that each of the members of our Audit
Committee satisfies the requirements for independence and financial
literacy under the rules and regulations of The NASDAQ Stock Market and
the SEC. Our Board has also determined that both Messrs. Connors and Smith
are financial experts as contemplated by the rules of the SEC implementing
Section 407 of the Sarbanes Oxley Act of 2002. The Audit Committee held
eight meetings during the fiscal year ended January 31,
2017. |
Our Audit Committee oversees our
accounting and financial reporting process and the audit of our financial
statements, and assists our Board in monitoring our financial systems and our
legal and regulatory compliance. Our Audit Committee is responsible for, among
other things:
● |
appointing, compensating and
overseeing the work of our independent auditors, including resolving
disagreements between our management team and the independent registered
public accounting firm regarding financial reporting; |
● |
approving engagements of the
independent registered public accounting firm to render any audit or
permissible non-audit services; |
● |
reviewing the qualifications and
independence of the independent registered public accounting
firm; |
● |
reviewing our financial
statements and related disclosures and reviewing our critical accounting
policies and practices; |
● |
reviewing the adequacy and
effectiveness of our internal control over financial
reporting; |
● |
establishing procedures for the
receipt, retention and treatment of accounting and auditing related
complaints and concerns; |
● |
preparing the audit committee
report required by SEC rules to be included in our annual proxy
statement; |
● |
reviewing and discussing with our
management team and the independent registered public accounting firm the
results of our annual audit, our quarterly financial statements and our
publicly filed reports; and |
● |
reviewing and maintaining the
related person transaction policy to ensure compliance with applicable law
and that any proposed related person transactions are disclosed as
required. |
The Audit Committee operates under a
written charter that was adopted by our Board and satisfies the applicable
standards of the SEC and The NASDAQ Stock Market. A copy of the Audit Committee
Charter is available on our investor website at
http://investors.splunk.com/governance.cfm.
Table of
Contents
CORPORATE GOVERNANCE AT
SPLUNK |
Compensation Committee
|
|
Stephen Newberry,
Chair
The current members of our
Compensation Committee are Messrs. Carges, Neustaetter and Newberry. Our
Board has determined that each of the members of our Compensation
Committee is independent within the meaning of the independent director
requirements of The NASDAQ Stock Market. Our Board has also determined
that the composition of our Compensation Committee meets the requirements
for independence under, and the functioning of our Compensation Committee
complies with, any applicable requirements of The NASDAQ Stock Market and
SEC rules and regulations, as well as Section 162(m) of the Internal
Revenue Code of 1986, as amended. The Compensation Committee held six
meetings during the fiscal year ended January 31,
2017. |
Our Compensation Committee oversees our
compensation policies, plans and programs. Our Compensation Committee is
responsible for, among other things:
● |
annually reviewing and approving
the primary components of compensation for our CEO and other executive
officers; |
● |
reviewing and approving
compensation and corporate goals and objectives relevant to the
compensation for our CEO and other executive officers; |
● |
evaluating the performance of our
CEO and other executive officers in light of established goals and
objectives; |
● |
periodically evaluating the
competitiveness of the compensation of our CEO and other executive
officers and our overall compensation plans; |
● |
providing oversight of our
overall compensation plans and of our 401(k) plan; |
● |
reviewing and discussing with our
management team the risks arising from our compensation policies and
practices for all employees that are reasonably likely to have a material
adverse effect on us; |
● |
evaluating and making
recommendations regarding director compensation; and |
● |
administering our equity
compensation plans for our employees and
directors. |
The Compensation Committee operates
under a written charter that was adopted by our Board and satisfies the
applicable standards of the SEC and The NASDAQ Stock Market. A copy of the
Compensation Committee Charter is available on our investor website at
http://investors.splunk.com/ governance.cfm.
The Compensation Committee has
delegated certain day-to-day administrative and ministerial functions to our
officers under our equity compensation plans.
Compensation Committee Interlocks
and Insider Participation. None of Messrs.
Carges, Neustaetter or Newberry, who serves or has served during the past fiscal
year as a member of our Compensation Committee, is an officer or employee of our
Company. None of our executive officers currently serves, or in the past fiscal
year has served, as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving on our Board or
Compensation Committee.
Nominating and Corporate Governance
Committee
|
|
John Connors, Chair
The current members of our
Nominating and Corporate Governance Committee are Messrs. Connors and
Hornik and Ms. Chang. Ms. Chang is not standing for re-election at the
Annual Meeting and will no longer serve on the Nominating and Corporate
Governance Committee following the Annual Meeting. Our Board has
determined that each of the members of our Nominating and Corporate
Governance Committee is independent within the meaning of the independent
director requirements of The NASDAQ Stock Market. The Nominating and
Corporate Governance Committee held three meetings during the fiscal year
ended January 31, 2017. |
Our Nominating and Corporate Governance
Committee oversees and assists our Board in reviewing and recommending corporate
governance policies and nominees for election to our Board and its committees.
The Nominating and Corporate Governance Committee is responsible for, among
other things:
● |
recommending desired
qualifications for Board and committee membership and conducting searches
for potential members of our Board; |
● |
evaluating and making
recommendations regarding the organization and governance of our Board and
its committees and changes to our Certificate of Incorporation and Bylaws
and stockholder communications; |
● |
reviewing succession planning for
our CEO and other executive officers and evaluating potential
successors; |
● |
assessing the performance of
board members and making recommendations regarding committee and chair
assignments and composition and the size of our Board and its
committees; |
● |
evaluating and making
recommendations regarding the creation of additional committees or the
change in mandate or dissolution of committees; |
● |
reviewing and making
recommendations with regard to our Corporate Governance Guidelines and
compliance with laws and regulations; and |
● |
reviewing and approving conflicts
of interest of our directors and corporate officers, other than related
person transactions reviewed by the Audit
Committee. |
The Nominating and Corporate Governance
Committee operates under a written charter that was adopted by our Board and
satisfies the applicable standards of the SEC and The NASDAQ Stock Market. A
copy of the Nominating and Corporate Governance Committee Charter is available
on our investor website at
http://investors.splunk.com/governance.cfm.
20 |
|
Table of
Contents
CORPORATE GOVERNANCE AT
SPLUNK |
NON-EMPLOYEE DIRECTOR
COMPENSATION
Our non-employee director compensation
program is designed to attract, retain and reward qualified directors and align
the financial interests of the non-employee directors with those of our
stockholders. Pursuant to this program, each member of our Board who is not our
employee will receive the following cash and equity compensation for Board
services. We also reimburse our non-employee directors for expenses incurred in
connection with attending Board and committee meetings, assisting with other
Company business, such as meeting with potential officer and director
candidates, as well as continuing director education.
Cash
Compensation
During fiscal 2017 and through the
Annual Meeting, non-employee directors are entitled to receive the following
cash compensation for their services:
● |
$40,000 per year for service as a Board member; |
● |
$20,000 per year for service as chair of the Audit Committee or
the Compensation Committee; |
● |
$10,000 per year for service as a member of the Audit Committee
or the Compensation Committee; |
● |
$10,000 per year for service as chair of the Nominating and
Corporate Governance Committee; |
● |
$5,000 per year for service as a member of the Nominating and
Corporate Governance Committee; |
● |
$20,000 per year for service as Lead Independent Director; and
|
● |
$30,000 per year for service as non-executive Chairman of the
Board. |
All cash payments to non-employee
directors are paid quarterly in arrears.
Equity
Compensation
Initial Award. Each non-employee director who first joins our Board
automatically will be granted a RSU award having an award value of $350,000 on
the date on which such person becomes a non-employee director (unless otherwise
determined by the Board), whether through
election by our stockholders or appointment by our Board to fill a vacancy. An
employee director who ceases to be an employee but remains a director will not
receive this initial RSU award. An initial RSU award will vest as to one-third
of the shares subject to the award on each of the first three anniversaries of
the grant date, subject to continued service as a member of our Board through
each such vesting date.
Annual Award. Each then-serving non-employee director automatically will
be granted an RSU award having an award value of $250,000 on the date of each
annual meeting of stockholders. If a non-employee directors commencement date
is other than the date of an annual meeting of stockholders, such non-employee
director may be granted, on such non-employee directors commencement date, an
annual award having an award value prorated based on the number of days between
such directors commencement date and the next annual meeting of stockholders.
Annual RSU awards will vest on the earlier of (i) the first anniversary of the
grant date or (ii) the day prior to our next annual meeting of stockholders, in
both cases subject to continued service as a Board member through the vesting
date.
Discretionary Award. In addition, our Board may grant a non-employee director a
discretionary supplemental award at any time and for any reason. No such awards
were granted in fiscal 2017.
Change in Control. Under the terms of our 2012 Equity Incentive Plan, if the
Company experiences a change in control and our non-employee director equity
awards are not assumed or substituted, those awards will accelerate and become
fully vested. If those awards are assumed or substituted and the director
subsequently is terminated or resigns at the request of the acquiring company,
those awards will accelerate and become fully vested.
Fiscal 2017
Compensation
The following table sets forth
information regarding total compensation, in accordance with our outside
director compensation program, for each person who served as a non-employee
director during the year ended January 31, 2017:
Director Name |
|
Fees Earned or Paid in Cash ($) |
|
Stock Awards ($)(1)(2) |
|
Total ($) |
Mark Carges |
|
$50,000 |
|
$249,966 |
|
$299,966 |
Amy Chang(3) |
|
$45,000 |
|
$249,966 |
|
$294,966 |
John Connors |
|
$90,000 |
|
$249,966 |
|
$339,966 |
David Hornik |
|
$45,000 |
|
$249,966 |
|
$294,966 |
Patricia Morrison |
|
$50,000 |
|
$249,966 |
|
$299,966 |
Thomas Neustaetter |
|
$50,000 |
|
$249,966 |
|
$299,966 |
Stephen Newberry |
|
$60,000 |
|
$249,966 |
|
$309,966 |
Graham Smith |
|
$50,000 |
|
$249,966 |
|
$299,966 |
Godfrey Sullivan |
|
$70,000 |
|
$249,966 |
|
$319,966 |
(1) |
The amounts reported in this
column reflect the aggregate grant date fair value of the RSUs granted to
our non-employee directors during fiscal 2017 as computed in accordance
with Financial Accounting Standards Board Accounting Standards
Codification Topic 718 (ASC Topic 718). These amounts do not necessarily
correspond to the actual value recognized by the non-employee directors.
The assumptions used in the valuation of these awards are consistent with
the valuation methodologies specified in the notes to our consolidated
financial statements included in our Annual Report on Form 10-K for the
fiscal year ended January 31, 2017. |
Table of
Contents
CORPORATE GOVERNANCE AT
SPLUNK |
(2) |
Each non-employee director was
granted an award of 4,236 RSUs on June 9, 2016 with a grant date fair
value of $249,966. All RSUs subject to each award will vest on the earlier
of (i) the one-year anniversary of the grant date or (ii) the day prior to
the next annual meeting of stockholders, subject to the directors
continued service through such date. |
(3) |
Ms. Chang is not standing for
re-election at the Annual Meeting. |
As of January 31, 2017, each individual
who served as a non-employee director during fiscal 2017 held the following
aggregate number of stock awards and stock options:
Director Name |
Aggregate Number of Stock Awards Outstanding as
of January 31, 2017 |
|
|
Aggregate Number of Stock Options Outstanding as
of January 31, 2017 |
|
Mark Carges |
5,889 |
|
|
|
|
Amy
Chang |
7,525 |
|
|
|
|
John Connors |
4,236 |
|
|
|
|
David Hornik |
4,236 |
|
|
|
|
Patricia Morrison |
4,236 |
|
|
|
|
Thomas Neustaetter |
4,236 |
|
|
|
|
Stephen Newberry |
4,236 |
|
|
|
|
Graham Smith |
4,236 |
|
|
|
|
Godfrey Sullivan |
82,986 |
(1) |
|
912,515 |
(1) |
(1) |
Mr. Sullivan served as CEO of the
Company prior to his transition from executive officer to non-executive
Chairman of the Board in fiscal 2016 and received stock and option awards
in his capacity as CEO. The above amount consists of 4,236 RSUs granted to
Mr. Sullivan in his capacity as non-executive Chairman of the Board. The
remaining RSUs and options were granted to Mr. Sullivan in connection with
his prior service as CEO. |
The Compensation Committee has the
primary responsibility for reviewing the compensation paid to non-employee
directors and making recommendations for adjustments, as appropriate, to the
full Board. Following a market assessment and analysis in early fiscal 2018 by
the Compensation Committees independent compensation consultant, Radford, an
Aon Hewitt Company, our Board approved increases of $10,000 per year for service
as a non-employee director, Lead Independent Director and non-executive Chairman
of the Board, in each case effective as of the date of the Annual Meeting. No
changes were made to the equity compensation of our directors. The Board made
these changes in order to continue to attract, retain and reward qualified
directors, consistent with market practices.
Stock Ownership
Guidelines
Our Board believes that our directors
and executive officers should hold a meaningful financial stake in the Company
in order to further align their interests with those of our stockholders.
Therefore, our Board has adopted stock ownership guidelines. Under the
guidelines, each non-employee director must own the lesser of (i) Company stock
with a value of three times the annual cash retainer for board service or (ii)
2,500 shares. Our non-employee directors are required to achieve these ownership
levels within five years of the later of September 9, 2014 (the date our stock
ownership guidelines were adopted) or such directors appointment or election
date as applicable.
As of the end of fiscal 2017, all of
our directors have met and exceeded these guidelines.
See Executive
CompensationCompensation Discussion and AnalysisOther Compensation Policies
and InformationStock Ownership Guidelines for information about the guidelines
applicable to our executive officers.
22 |
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Table of Contents
AUDIT COMMITTEE
MATTERS
PROPOSAL 2:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Audit Committee of the Board has
appointed PricewaterhouseCoopers LLP (PwC), independent registered
public accountants, to audit our financial statements for the fiscal year
ending January 31, 2018. During our fiscal year ended January 31, 2017,
PwC served as our independent registered public accounting
firm.
Notwithstanding its selection and
even if our stockholders ratify the selection, our Audit Committee, in its
discretion, may appoint another independent registered public accounting
firm at any time during the year if the Audit Committee believes that such
a change would be in the best interests of Splunk and its stockholders. At
the Annual Meeting, the stockholders are being asked to ratify the
appointment of PwC as our independent registered public accounting firm
for the fiscal year ending January 31, 2018. Our Audit Committee is
submitting the selection of PwC to our stockholders because we value our
stockholders views on our independent registered public accounting firm
and as a matter of good corporate governance. Representatives of PwC will
be present at the Annual Meeting, and they will have an opportunity to
make statements and will be available to respond to appropriate questions
from stockholders.
If the stockholders do not ratify
the appointment of PwC, the Board or Audit Committee may reconsider the
appointment.
THE BOARD
RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM. |
REPORT OF THE AUDIT
COMMITTEE
The Audit Committee is a committee of
the Board comprised solely of independent directors, as required by the listing
standards of The NASDAQ Stock Market and rules of the SEC. The Audit Committee
operates under a written charter approved by the Board, which is available on
our investor website at http://investors.splunk.com/governance.cfm. The
composition of the Audit Committee, the attributes of its members and the
responsibilities of the Audit Committee, as reflected in its charter, are
intended to comply with applicable requirements for corporate audit committees.
The Audit Committee reviews and assesses the adequacy of its charter and the
Audit Committees performance on an annual basis.
The Audit Committee consists of three
members: John Connors, Patricia Morrison and Graham Smith. Messrs. Connors and
Smith are financial experts as defined under SEC rules and regulations. With
respect to the Companys financial reporting process, the management of the
Company is responsible for (1) establishing and maintaining internal controls
and (2) preparing the Companys consolidated financial statements. PwC is
responsible for auditing these financial statements. It is the responsibility of
the Audit Committee to oversee these activities. It is not the responsibility of
the Audit Committee to prepare or certify the Companys financial statements or
guarantee the audits or reports of PwC. These are the fundamental
responsibilities of management and PwC. In the performance of its oversight
function, the Audit Committee has:
● |
reviewed and discussed the
audited financial statements with management and PwC; |
● |
discussed with PwC the matters
required to be discussed by the statement on Auditing Standards No. 1301,
Communications with Audit Committees, issued by the Public Company
Accounting Oversight Board; and |
● |
received the written disclosures
and the letter from PwC required by applicable requirements of the Public
Company Accounting Oversight Board regarding PwCs communications with the
Audit Committee concerning independence, and has discussed with PwC its
independence. |
Based on the Audit Committees review
and discussions with management and PwC, the Audit Committee recommended to the
Board that the audited financial statements be included in the Annual Report on
Form 10-K for the fiscal year ended January 31, 2017 for filing with the
SEC.
Respectfully submitted by the members
of the Audit Committee of the Board:
John Connors (Chair)
Patricia
Morrison
Graham Smith
Table of Contents
FEES PAID TO THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The following table presents fees for
professional audit services and other services rendered to us by PwC for the
fiscal years ended January 31, 2016 and 2017.
|
|
2016 |
|
2017 |
|
Audit Fees(1) |
|
$1,946,212 |
|
$2,117,908 |
|
Audit-Related Fees(2) |
|
160,787 |
|
253,000 |
|
Tax Fees(3) |
|
497,733 |
|
213,222 |
|
All
Other Fees(4) |
|
2,471 |
|
2,970 |
|
Total: |
|
$2,607,203 |
|
$2,587,100 |
|
(1) |
Audit fees consist of fees for
professional services provided in connection with the integrated audit of
our annual financial statements, managements report on internal controls,
the review of our quarterly consolidated financial statements, and audit
services that are normally provided by independent registered public
accounting firms in connection with statutory and regulatory filings or
engagements for those fiscal years, such as statutory audits. |
(2) |
Audit-related fees primarily
consist of professional services provided in connection with acquisition
due diligence for the fiscal year ended January 31, 2016 and consultations
concerning financial accounting and reporting standards for the fiscal
year ended January 31, 2017. |
(3) |
Tax fees consist of fees billed
for tax compliance, consultation and planning services. These services
include mergers and acquisitions tax compliance for the fiscal year ended January 31,
2016. |
(4) |
All other fees billed for the
fiscal years ended January 31, 2016 and January 31, 2017 were related to
fees for access to online accounting and tax research
software. |
AUDIT COMMITTEE POLICY ON PRE-APPROVAL
OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Consistent with requirements of the SEC
and the Public Company Accounting Oversight Board (PCAOB), regarding auditor
independence, our Audit Committee is responsible for the appointment,
compensation and oversight of the work of our independent registered public
accounting firm. In recognition of this responsibility, our Audit Committee has
established a policy for the pre-approval of all audit and permissible non-audit
services provided by the independent registered public accounting firm. These
services may include audit services, audit-related services, tax services and
other services.
Before engagement of the independent
registered public accounting firm for the next years audit, the independent
registered public accounting firm submits a description of services expected to
be rendered during that year to the Audit Committee for approval.
The Audit Committee pre-approves
particular services or categories of services on a case-by-case basis. The fees
are budgeted, and the Audit Committee requires the independent registered public
accounting firm and our management team to report actual fees versus budgeted
fees periodically throughout the year by category of service. During the year,
circumstances may arise when it may become necessary to engage the independent
registered public accounting firm for additional services not contemplated in
the original pre-approval. In those instances, the services must be pre-approved
by the Audit Committee before the independent registered public accounting firm
is engaged.
24 |
|
Table of Contents
OUR EXECUTIVE
OFFICERS
The following table identifies certain
information about our executive officers as of March 31, 2017. Executive
officers are appointed by the Board to hold office until their successors are
elected and qualified.
Name |
|
Age |
|
Position(s) |
Douglas Merritt |
|
53 |
|
President, CEO and Director |
Richard Campione |
|
53 |
|
Senior Vice President, Chief Product Officer |
David Conte |
|
51 |
|
Senior Vice President and Chief Financial
Officer |
Susan St. Ledger |
|
52 |
|
Senior Vice President, Chief Revenue Officer |
Leonard Stein |
|
61 |
|
Senior Vice President, General Counsel and
Secretary |
Douglas Merritt has served as our President, CEO and a member of our Board
since 2015. He served as our Senior Vice President of Field Operations from 2014
to 2015. Prior to joining us, Mr. Merritt served as Senior Vice President of
Products and Solutions Marketing at Cisco Systems, Inc., a networking company,
from 2012 to 2014. From 2011 to 2012, he served as Chief Executive Officer of
Baynote, Inc., a behavioral personalization and marketing technology company.
Previously, Mr. Merritt served in a number of executive roles and as a member of
the extended Executive Board at SAP A.G., from 2005 to 2011. From 2001 to 2004,
Mr. Merritt served as Group Vice President and General Manager of the Human
Capital Management Product Division at PeopleSoft Inc. (acquired by Oracle
Corporation). He also co-founded and served as Chief Executive Officer of
Icarian, Inc. (since acquired by Workstream Corp.), a cloud-based company, from
1996 to 2001. Mr. Merritt holds a B.S. from The University of the Pacific in
Stockton, California.
Richard Campione has served as our Senior Vice President, Chief Product
Officer since 2016. Prior to joining us, Mr. Campione served as President and
CEO at Findly LLC, a provider of talent acquisition SaaS solutions, from 2015 to
2016. From 2013 to 2014, Mr. Campione served as President, Cloud and Business
Intelligence Division at ServiceSource International, Inc., a SaaS and managed
service provider, and in late 2014 served as an advisor to ServiceSource. Mr.
Campione was an advisor and consultant at Campione Consulting from 2011 to 2015.
In 2012, Mr. Campione served as SVP, Engineering and SaaS Operations at C3
Solutions Inc., a logistics software company. Previously, Mr. Campione held
executive management positions at SAP A.G., an enterprise software company, and
also had an extensive tenure with Siebel Systems, Inc. (acquired by Oracle
Corporation), a customer relationship management software company. Mr. Campione
previously served on the board of directors of ServiceSource from 2012 to 2016.
Mr. Campione holds two B.S. degrees and an M.S. from the Massachusetts Institute
of Technology.
David Conte has served as our Senior Vice President and Chief Financial
Officer since 2011. Prior to joining us, Mr. Conte served as Chief Financial
Officer at IronKey, Inc., an internet security and privacy company, from 2009 to
2011. From 2007 to 2009, Mr. Conte was engaged in various personal investing
activities. Previously, Mr. Conte served as Chief Financial Officer of Opsware,
Inc., a software company, from 2006 until 2007 when Opsware was acquired by
Hewlett-Packard Company. He also served as Opswares Vice President of Finance
from 2003 to 2006 and as Corporate Controller from 1999 to 2003. Mr. Conte began
his career at Ernst & Young LLP. Mr. Conte holds a B.A. from the University
of California, Santa Barbara.
Susan St. Ledger has served as our Senior Vice President, Chief Revenue
Officer since 2016. Prior to joining us, Ms. St. Ledger served as Chief Revenue
Officer, Marketing Cloud at salesforce. com, a provider of enterprise cloud
computing software, from 2012 to 2016. In 2012, Ms. St. Ledger served as
President at Buddy Media, a social media marketing platform that was acquired by
salesforce.com. Previously, Ms. St. Ledger served in a variety of senior sales
management roles at salesforce.com and Sun Microsystems, a provider of network
computing infrastructure solutions. Ms. St. Ledger holds a B.S. degree from the
University of Scranton.
Leonard Stein has served as our Senior Vice President, General Counsel and
Secretary since 2011. Prior to joining us, Mr. Stein served as a board advisor
to two private companies and as an independent consultant from 2010 to 2011.
From 2004 to 2010, Mr. Stein served in various executive positions including
President and Chief Legal Officer at Jackson Family Enterprises, Inc., a luxury
wine maker. Mr. Stein served as Chief Legal Officer and Chief Compliance Officer
at Overture Services, Inc., an Internet commercial search services company, from
2003 until it was acquired by Yahoo! Inc., in 2003. Mr. Stein holds a B.A. from
Yale College, an M.A. from Yale University Graduate School and a J.D. from
Harvard Law School.
Table of Contents
EXECUTIVE
COMPENSATION
PROPOSAL 3:
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
As required by SEC rules, we are
asking stockholders to approve, on an advisory or non-binding basis, the
compensation of our named executive officers as disclosed in the
Compensation Discussion and Analysis section beginning on page 27, the
compensation tables and the related narratives appearing in this proxy
statement. This proposal, commonly known as a Say-on-Pay proposal, gives
our stockholders the opportunity to express their views on our named
executive officers compensation as a whole. This vote is not intended to
address any specific item of compensation or any specific named executive
officer, but rather the overall compensation of all of our named executive
officers and the philosophy, policies and practices described in this
proxy statement. We currently hold our Say-on-Pay vote every
year.
The Say-on-Pay vote is advisory, and
therefore is not binding on us, our Compensation Committee or our Board.
The Say-on-Pay vote will, however, provide information to us regarding
investor sentiment about our executive compensation philosophy, policies
and practices, which the Compensation Committee will be able to consider
when determining executive compensation for the remainder of the current
fiscal year and beyond. Our Board and our Compensation Committee value the
opinions of our stockholders. To the extent there is any significant vote
against the named executive officer compensation as disclosed in this
proxy statement, we will endeavor to communicate with stockholders to
better understand the concerns that influenced the vote and consider our
stockholders concerns. The Compensation Committee will evaluate whether
any actions are necessary to address those concerns.
We believe that our executive
compensation program is effective in achieving the Companys objectives
of:
●Recruiting, incentivizing and retaining highly qualified
executive officers who possess the skills and leadership necessary to grow
our business;
●Rewarding our executive officers for achieving or
exceeding our strategic and financial goals, and individual performance
goals;
●Aligning the interests of our executive officers with
those of our stockholders;
●Reflecting our long-term strategy, which includes a
financial strategy of disciplined investing for our future
growth;
●Promoting a healthy approach to risk and sensitivity to
underperformance as well as outperformance; and
●Providing compensation packages that are competitive,
reasonable and fair relative to peers and the overall market.
Accordingly, we ask our stockholders
to vote FOR the following resolution at the Annual Meeting:
RESOLVED, that the stockholders
approve, on an advisory basis, the compensation paid to the named
executive officers, as disclosed in the proxy statement for the 2017
Annual Meeting pursuant to the compensation disclosure rules of the SEC,
including the compensation discussion and analysis, compensation tables
and narrative discussion, and other related disclosure.
THE BOARD
RECOMMENDS A VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF OUR NAMED
EXECUTIVE OFFICER COMPENSATION. |
26 |
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Table of Contents
COMPENSATION
DISCUSSION AND ANALYSIS
EXECUTIVE SUMMARY
Our executive compensation program is
designed to attract, motivate and retain the key executives who drive our
success. Pay that reflects performance and aligns with the interests of
long-term stockholders is key to our compensation program design and decisions.
In fiscal 2017, we structured our executive compensation program to be heavily weighted towards performance-based
compensation by providing short-term cash bonuses designed to drive top-line
growth and long-term equity awards tied to our revenue and operating cash flow
(OCF) performance.
Strategic Context and
Fiscal 2017 Business Highlights
We provide innovative software
solutions that enable organizations to gain real-time operational intelligence
by harnessing the value of their data. Our offerings address large and diverse
data sets commonly referred to as big data and are specifically tailored for
machine data.
We believe the market for products that
provide operational intelligence presents a substantial opportunity as data
grows in volume and diversity, creating new risks, opportunities and challenges
for organizations. Since our inception, we have invested a substantial amount of
resources developing our offerings to address this market, specifically with
respect to machine data. We believe the market for operational intelligence
utilizing machine data is relatively new and we are in the early stages of
capitalizing on this growing market opportunity.
Our goal is to make Splunk the standard
platform for delivering operational intelligence and real-time business insights
from machine data. Achieving this goal depends on our continued discipline to
drive top-line growth at larger scale and significantly invest in our business
in order to build scale and increase market share. Revenue growth is a key
measure of our success. Our fiscal 2017 executive compensation program was
designed to incentivize our executive officers to drive performance in
accordance with this growth strategy.
Fiscal 2017 was another year of solid
financial performance and execution, with top-line revenue and OCF results as
shown below. Our ongoing prioritization of customer success and adoption
led to continued revenue and OCF growth. In
fiscal 2017, our compensation plans emphasized revenue and OCF metrics in order
to align our compensation incentives with our business strategy of disciplined
growth. We continue to focus on capturing our large and growing market
opportunity, which requires that we continue to invest in our business.
Accordingly, we are not focused on GAAP earnings-based financial metrics at this
stage in our Companys maturity because we believe that a short-term focus on
GAAP profitability would impede our long-term ability to capitalize on our
market opportunity.
Our fiscal 2017 highlights include
achievement of the following:
● |
Total revenues of $950.0 million,
representing an increase of $281.5 million, or 42%, over fiscal
2016; |
● |
Operating cash flow of $201.8
million, compared to $155.6 million in fiscal 2016; and |
● |
Over 13,000 customers in more
than 110 countries at the end of fiscal 2017, compared to over 11,000
customers at the end of fiscal 2016. |
Table of Contents
TOTAL REVENUES |
$ IN MILLIONS ● FYE
JANUARY 31 |
|
OPERATING CASH FLOW |
$ IN MILLIONS ● FYE
JANUARY 31 |
|
During fiscal 2017 we successfully executed several executive officer transitions,
including hiring a new chief revenue officer and chief product officer. As we near $1 billion in revenues, we have
attracted and retained an executive management team of seasoned and accomplished leaders in order to drive top-line growth
at larger scale, focus on executing on our market opportunity and lead us through our next phase of growth.
Executive Compensation
Practices
Our executive compensation program is
significantly weighted towards compensating our executives based on Company
performance with an emphasis on continued revenue growth and investment for
increased market share. To that end, our executive compensation policies and practices are designed to reinforce our pay for
performance philosophy and align with sound governance principles. The following
chart summarizes these policies and practices:
|
|
|
What We Do |
|
What We Dont Do |
✓Performance-based cash and equity
incentives
✓Clawback policy on cash and equity incentive
compensation
✓Stock ownership guidelines for executive officers and
directors
✓Caps on performance-based cash and equity incentive
compensation
✓100% independent directors on the Compensation
Committee
✓Independent compensation consultant engaged by the
Compensation Committee
✓Annual review and approval of our compensation
strategy
✓Significant portion of executive compensation at risk
based on corporate performance
✓Four-year equity award vesting periods
✓Limited and modest perquisites |
|
✕No single trigger change of control
benefits
✕No post-termination retirement- or pension-type non-cash
benefits or perquisites for our executive officers that are not available
to our employees generally
✕No tax gross-ups for change of control
benefits
✕No short sales, hedging, or pledging of stock ownership
positions and transactions involving derivatives of our common
stock
✕No strict benchmarking of compensation to a specific
percentile of our peer group |
28 |
|
Table of Contents
Fiscal 2017 CEO Pay and
Promotion Equity Awards
In late fiscal 2016, Douglas Merritt was
promoted as our President and CEO from his prior role as our senior vice
president for field operations. His CEO compensation, including his promotion
equity awards, became effective in fiscal 2017. In structuring his compensation
as CEO, the Compensation Committee, with the assistance of its independent
compensation consultant, Radford, an Aon Hewitt Company, conducted a
comprehensive review of pay structures for both external and internal CEO
successors.
Based upon this review, the Compensation
Committee determined that Mr. Merritts fiscal 2017 compensation should more
closely reflect a promotion package rather than the higher compensation that would have
been required to recruit an external CEO candidate. The Compensation Committee also
determined that it was important to establish a compensation package for Mr.
Merritt that was appropriate for the promotion of an internal candidate at a
high-growth technology company possessing Mr. Merritts extensive experience and
record of delivering results, with an annual compensation structure consistent
with our pay for performance philosophy and weighted significantly in favor of
performance-based compensation. In considering the compensation package for Mr.
Merritt, the Compensation Committee was mindful of the competition for talented
executives in the technology sector and the substantial effort, focus and
commitment required to achieve the Companys strategic business goals. The
Compensation Committee also took into account strong fourth quarter and fiscal
2016 results, a successful CEO transition and Mr. Merritts dual role as head of
field operations when determining his final promotion equity awards
package.
Stockholder Engagement
and Our 2016 Say-on-Pay Vote
We value our stockholders continued
interest and feedback. We are committed to maintaining an active dialogue to
understand the priorities and concerns of our stockholders on the topics of
executive pay and corporate governance policies and practices. We believe that
ongoing engagement builds mutual trust and understanding with our stockholders.
During the fall of 2016, as part of our
annual stockholder engagement program, we solicited the views of institutional
investors representing approximately 82% of our issued and outstanding shares
and engaged in substantive discussions with investors representing approximately
53% of our outstanding shares. In the course of
these discussions, we received valuable feedback on our executive compensation
program and practices. We also discussed with investors the reasons for their
support of or opposition to of our 2016 Say-on-Pay resolution, which was
supported by approximately 89% of the votes cast at our 2016 Annual Meeting. The
key feedback from our stockholders related to our executive compensation program
and our responses are shown in the chart below. See Corporate Governance at
SplunkOther Governance Policies and PracticesStockholder Engagement on page
16 of this proxy statement for more information on our stockholder engagement
program.
Area of Focus |
What We Heard from
Investors |
How We Responded |
Performance
Metrics |
●Tie metrics to business strategy
●Align metrics to industry and Companys
maturity
●Total shareholder return (TSR), whether absolute or
relative, may not be an appropriate metric at this point in the Companys
maturity
●Use different metrics in short- and long-term
plans |
●Used revenues and OCF metrics in fiscal 2017 PSU program
to drive strategic focus on disciplined top-line growth
●Changed PSU metrics to revenues and non-GAAP operating
margin in fiscal 2018 PSU program to reflect increased strategic focus on
a profitability measure
●Considered other metrics but determined not appropriate
at this stage in our Companys maturity or given focus on continued
revenue growth and investment for increased market
share |
Quantum of CEO and NEO
Pay |
●Quantum of pay generally reasonable given ongoing talent
war and executive transitions |
●Continued to assess executive compensation in the
context of our business strategy as well as against market practices in
consultation with independent compensation consultant
●Continued incremental evolution in executive
compensation program as our Company matures |
Disclosure |
●Include more infographics and tables
●Frame business model and strategy thoughtfully and tie
to performance metrics |
●2017 CD&A includes new infographics and
tables
●Executive summary discloses more about business strategy
and relationship to performance metrics |
Peer Group |
●Peer group should evolve with maturity |
●Peer group criteria and membership changes each year to
reflect our higher revenue and/or market
cap |
Table of Contents
Recent Fiscal 2018
Compensation Decisions
In March 2017, the Compensation Committee
conducted its annual executive compensation review and made fiscal 2018
compensation decisions for our NEOs. In making these decisions, the Compensation
Committee considered, among other factors, pay levels of our NEOs relative to
peers and the overall market, performance of each NEO, the continued talent war
for experienced leadership in our industry and the feedback from our
stockholders as discussed above. The Compensation Committee decided to increase
the base salaries of NEOs by 0% to 8% of their fiscal 2017 base salaries. The
Compensation Committee decided to increase the NEOs target annual cash bonus
percentage by 0% to 10%. The mix of fiscal 2018 equity
awards for all continuing NEOs, including our CEO, is 60% PSUs and 40% RSUs.
This mix is consistent with that of fiscal 2017 equity awards, other than for
our CEO promotion grants, whose mix was reallocated for fiscal 2018 in order to
align with that of the other NEOs. In response to stockholder feedback to
consider performance metrics that tie to our business strategy and align with
the Companys maturity, the Compensation Committee introduced non-GAAP operating
margin as a new metric for the fiscal 2018 PSUs, replacing operating cash flow.
The Compensation Committee maintained revenue as the other fiscal 2018 PSU
metric, consistent with our focus on continued top-line growth. The following
chart summarizes the transition in long-term equity compensation design in
response to stockholder feedback and other considerations.
Long-term equity
compensation evolution* |
2016 |
► |
2017 |
► |
2018 |
RSUs =
50%
|
|
RSUs =
40%** |
|
RSUs =
40% |
|
|
PSUs = 60%**
Payout range:
0-200%
Performance metrics: revenues and operating cash flow percentage
relative to revenue growth rate |
|
PSUs = 60%
Payout range:
0-200%
Performance metrics: revenues and non-GAAP operating
margin |
PSUs = 50%
Payout range:
0-200%
Performance metrics: revenues and operating cash flow percentage
relative to revenue growth
rate |
* |
Equity weightings are at the target
performance level; the actual mix of equity will vary with performance
unit award results. |
** |
The fiscal 2017 long-term equity
compensation for our CEO consisted of 25% RSUs and 75%
PSUs. |
COMPENSATION COMMITTEE
REPORT
The Compensation Committee of the Board
has reviewed and discussed the Compensation Discussion and Analysis required by
Item 402(b) of Regulation S-K with management and, based on such review and
discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy
statement.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Stephen Newberry
(Chair)
Mark Carges
Thomas Neustaetter
DISCUSSION OF OUR FISCAL
2017 EXECUTIVE COMPENSATION PROGRAM
Our executive compensation program is
designed to attract, motivate and retain the key executives who drive our
success. This section provides an overview of our executive compensation
philosophy, the overall objectives of our executive compensation program and
each component of our executive compensation program. In addition, we explain
how and why the Compensation Committee arrived at the specific compensation
policies and decisions involving our executive officers during fiscal 2017 and
how our executive compensation program reflects our business
strategy.
Our NEOs for fiscal 2017 are:
● |
Douglas Merritt, our President, CEO and
member of the Board; |
● |
Richard Campione, our Senior Vice President,
Chief Product Officer; |
● |
David Conte, our Senior Vice President and
Chief Financial Officer; |
● |
Steven Sommer, our retiring Senior Vice
President, Marketing and our former Chief Marketing Officer; |
● |
Susan St. Ledger, our Senior Vice President,
Chief Revenue Officer; and |
● |
Leonard Stein, our Senior Vice President,
General Counsel and Secretary. |
30 |
|
Table of Contents
Philosophy and
Objectives
Overview. We operate in a highly competitive business environment within the
rapidly evolving and extremely competitive big data market. To successfully
compete and grow our business in this dynamic environment, we need to
successfully recruit, incentivize and retain talented and seasoned technology
leaders. Our success critically depends on the skill, acumen and motivation of
our executives and employees to rapidly execute at the highest level. To that
end, our executive compensation program is driven by a pay for performance
philosophy and is designed to attract highly qualified executive officers,
motivate them to create long-term value for our stockholders and reward them
based on overall Company and individual performance and results. We strive to
keep our programs aligned with our business strategy and focused on what we
believe to be key to our short- and long-term successgrowth, execution,
innovation and disruption.
Our Compensation Program, Like Our
Business, Is Dynamic. Our business continues
to grow rapidly, requiring intense focus and dedication from our executives and
other employees. We regularly adjust our executive compensation program to match
the maturity, size, scale and growth of our business. We operate in an industry
that is highly competitive and rapidly evolving, and in which the market for
skilled and highly motivated executive management and personnel is fiercely
competitive. Because our ability to compete and succeed in this dynamic
environment is directly correlated to our ability to recruit, incentivize and
retain talented and seasoned technology leaders, we expect to continue to adjust
our approach to executive compensation to respond to our needs and market
conditions.
Our Current Objectives.
The current objectives of our executive
compensation program are to:
● |
Recruit, incentivize and retain highly
qualified executive officers who possess the skills and leadership
necessary to grow our business; |
● |
Reward our executive officers for achieving
or exceeding our strategic and financial goals, and individual performance
goals; |
● |
Align the interests of our executive officers
with those of our stockholders; |
● |
Reflect our long-term strategy, which
includes a financial strategy of disciplined investing for our future
growth; |
● |
Promote a healthy approach to risk and be
sensitive to underperformance as well as outperformance; and |
● |
Provide compensation packages that are
competitive, reasonable and fair relative to peers and the overall
market. |
Intense Competition For Talent; How
Weve Responded. We actively compete with
many other companies in seeking to attract and retain a skilled management team.
This is particularly prevalent in our San Francisco headquarters and the greater
Bay Area and Silicon Valley technology markets, where there are a large number
of rapidly expanding technology companies intensely competing for highly
qualified candidates. In addition, the success and prominence of our business in
the emerging big data market is increasingly attracting the attention of
competitors and other companies. This has caused us to increase our focus on retaining employees, including
executives, as we are seen as a company with experienced employee talent that
has successfully and rapidly scaled our technology businesses.
We have responded to this intense
competition for talent by implementing compensation practices designed to
motivate our executive officers to pursue our corporate objectives while
incentivizing them to create long-term value for our stockholders. Our executive
compensation program combines short- and long-term components, including salary,
cash bonuses and equity. While finding the proper mix of incentives that
attracts, motivates and retains each executive officer is challenging and often
goes beyond compensation, we believe that we have been able to achieve the
proper mix and periodically assess our assumptions in order to continue to
incentivize each executive officer in a manner consistent with our stockholders
interests.
Role of Compensation
Committee
Pursuant to its charter, the Compensation
Committee is primarily responsible for establishing, approving and adjusting
compensation arrangements for our NEOs, including our CEO, and for reviewing and
approving corporate goals and objectives relevant to these compensation
arrangements, evaluating executive performance and considering factors related
to the performance of the Company, including accomplishment of the Companys
long-term business and financial goals. For additional information about the
Compensation Committee, see Corporate Governance at SplunkBoard Meetings and
CommitteesCompensation Committee in this proxy statement.
Compensation decisions for our executive
officers are made by the Compensation Committee, with input from its independent
compensation consultant, Radford, as well as from our CEO and our management
team (except with respect to their own compensation). The Compensation Committee
reviews the cash and equity compensation of our executive officers with the goal
of ensuring that our executive officers are properly incentivized and makes
adjustments as necessary.
The Compensation Committee considers
compensation data from our peer group as one of several factors that inform its
judgment of appropriate parameters for target compensation levels. The
Compensation Committee generally seeks to provide total targeted direct
compensation that is competitive and, dependent on Company performance and other
factors including those set forth below, may pay above, at, or below median
levels of our peer group. The Compensation Committee does not strictly benchmark
compensation to a specific percentile of our peer group, nor does it apply a
formula or assign relative weights to performance measures. Rather, it makes
compensation decisions after consideration of many factors,
including:
● |
The performance and experience of each
executive officer; |
● |
The scope and strategic impact of the
executive officers responsibilities; |
● |
Our past business performance and future
expectations; |
● |
Our long-term goals and
strategies; |
● |
The performance of our executive team as a
whole; |
● |
For each executive officer, other than our
CEO, the evaluation and recommendation of our
CEO; |
Table of Contents
● |
The difficulty and cost of replacing
high-performing leaders with in-demand skills; |
● |
The past compensation levels of each
individual; |
● |
The relative compensation among our executive
officers; and |
● |
The competitiveness of compensation relative
to our peer group. |
Role of
Management
The Compensation Committee works with
members of our management team, including our CEO and our human resources,
finance and legal professionals (except with respect to their own compensation).
Typically, our CEO and management team provide the Compensation Committee with
information on corporate and individual performance and its perspective and
recommendations on compensation matters. Our CEO makes recommendations to the
Compensation Committee regarding compensation matters, including the
compensation of our other NEOs. While the Compensation Committee solicits and
reviews our CEOs recommendations and proposals with respect to
compensation-related matters, it uses these recommendations and proposals as one
of many factors in making compensation decisions, and those decisions do not
necessarily follow the CEOs recommendations.
Role of Compensation
Consultant
The Compensation Committee has the
authority to retain the services and obtain the advice of external advisors,
including compensation consultants, legal counsel or other advisors to assist in
the evaluation of executive officer compensation. The Compensation Committee has
engaged Radford to review our executive compensation policies and practices, to
conduct an executive compensation market analysis and to review our equity
practices to help ensure alignment with market practices. For fiscal 2017,
Radford reviewed and advised on all principal aspects of our executive
compensation program, including:
● |
Assisting in developing a peer group of
publicly traded companies to be used to help assess executive
compensation; |
● |
Assisting in assuring a competitive
compensation framework and consistent executive compensation assessment
practices relevant to a comparable public company at our
stage; |
● |
Meeting regularly with the Compensation
Committee to review all elements of executive compensation, including the
competitiveness of our executive compensation program against those of our
peer companies and the design of our PSU program; and |
● |
Assisting in the risk assessment of our
compensation program. |
In connection with the CEO transition,
Radford assisted in the review of compensation structures for both external and
internal CEO successors. Our management team also accessed the Radford survey
database to gather reference points for non-executive compensation
decisions.
Based on the consideration of the factors
specified in the rules of the SEC, the Compensation Committee does not believe
that its relationship with Radford and the work of Radford on behalf of the
Compensation Committee and our management team has raised any conflict of
interest. The Compensation Committee reviews these factors on an annual basis
and, as part of the Compensation Committees determination of Radfords
independence, receives written confirmation from
Radford addressing these factors and stating its belief that it remains an
independent compensation consultant to the Compensation Committee.
Peer Group
Considerations
The Compensation Committee reviews market
data of companies that we believe are comparable to us. With Radfords
assistance, the Compensation Committee determined our peer group for fiscal 2017
compensation decisions, which consists of publicly traded software and software
services companies that generally had revenues between $250 million and $1.5
billion, generally had experienced positive, high year-over-year revenue growth,
and/or had a market capitalization between $2 billion and $20 billion. The
Compensation Committee referred to compensation data from this peer group when
making fiscal 2017 base salary, cash bonus and equity award decisions for our
executive officers. The following is a list of the public companies that
comprised our fiscal 2017 peer group (four of which, LinkedIn, NetSuite, Qlik
Technologies and SolarWinds, were subsequently acquired):
Aspen Technology |
Guidewire Software |
Qlik Technologies |
Ultimate
Software |
athenahealth |
LinkedIn |
ServiceNow |
Veeva Systems |
FireEye |
NetSuite |
SolarWinds |
Workday |
Fortinet |
Palo Alto Networks |
Tableau Software |
Zillow |
|
Pandora Media |
Twitter |
|
For fiscal 2017, the Compensation
Committee removed Cornerstone OnDemand and Yelp from the peer group used in
fiscal 2016 because their market capitalization was below the range, and added
Twitter and Zillow as additional peers based on the criteria described above.
The remainder of the peer group is unchanged.
Components of
Compensation Program and Fiscal 2017 Compensation
Our executive compensation program
consists of the following primary components:
● |
base salary; |
● |
cash bonuses; |
● |
long-term equity compensation;
and |
● |
severance and change in control-related
benefits. |
We also provide our employees, including
our NEOs and other executive officers, with comprehensive employee benefit
programs such as medical, dental and vision insurance, a 401(k) plan, life and
disability insurance, flexible spending accounts, an employee stock purchase
plan and other plans and programs made available to eligible
employees.
We believe these elements provide a
compensation package that helps attract and retain qualified individuals, links
individual performance to Company performance, focuses the efforts of our NEOS
and other executive officers on the achievement of both our short-term and
long-term objectives and aligns the interests of our executive officers with
those of our stockholders. The charts below show the pay mix of our CEO and
other NEOs for fiscal 2017.
32 |
|
Table of Contents
CEO |
|
|
ALL OTHER NEOs* |
|
* |
One of our NEOs, Susan St.
Ledger, joined the Company on May 2, 2016. Her base salary and cash bonus
amounts are prorated based on the number of days in fiscal 2017 during
which she was employed with us. Given the timing of Richard Campiones
start date of November 14, 2016, his fiscal 2017 compensation is excluded
above. |
Base
Salaries
We pay base salaries to our NEOs to
compensate them for their services and provide predictable income. The salaries
typically reflect each NEOs experience, skills, knowledge and responsibilities,
although competitive market conditions also play a role in setting salary
levels. We do not apply specific formulas to determine changes in salaries.
Instead, the salaries of our NEOs are reviewed on an annual basis by our CEO
(other than his own salary, which is reviewed and determined by the Compensation
Committee) and the Compensation Committee, based on their experience setting
salary levels and in determining compensation for senior executives.
Fiscal 2017 Base
Salaries
The Compensation Committee determined the
fiscal 2017 base salary of each of our NEOs after considering market practice
survey data of our peer group provided by Radford and the recommendations of Mr.
Merritt, other than with respect to his own base salary. At the beginning of
fiscal 2017, the Compensation Committee adjusted the base salaries for Messrs.
Conte, Sommer and Stein to be competitive with market conditions and to
recognize each individuals outstanding performance. In addition, Mr. Merritts
base salary increase reflects his promotion to CEO from senior vice president of
field operations.
The table below sets forth the annual base
salaries for our NEOs for fiscal 2017.
NEO |
|
Base Salary |
|
Percentage Increase from Fiscal 2016
Base Salary |
Douglas Merritt |
|
$450,000 |
|
38.5% |
Richard
Campione(1) |
|
$400,000 |
|
N/A |
David Conte |
|
$360,000 |
|
9.1% |
Steven Sommer |
|
$330,000 |
|
13.8% |
Susan St.
Ledger(1) |
|
$400,000 |
|
N/A |
Leonard Stein |
|
$330,000 |
|
15.8% |
(1) |
Mr. Campione and Ms. St. Ledger
joined the Company on November 14, 2016 and May 2, 2016, respectively. The
base salaries shown above are on an annualized
basis. |
Cash
Bonuses
A key compensation objective is to have a
significant portion of each NEOs compensation tied to Company performance. To
help accomplish this objective, we provide for annual performance-based cash
bonus opportunities for our NEOs, based on achievement against corporate
performance objectives established at the beginning of the fiscal
year.
Table of Contents
At the beginning of fiscal 2017, our Board
approved our fiscal 2017 operating plan, which included performance objectives
that the Compensation Committee and Mr. Merritt used to design our NEOs cash
bonus opportunity for fiscal 2017. Under our executive bonus plan, the
Compensation Committee considered a number of factors in determining the
performance objectives applicable to our NEOs cash bonus opportunities and
determined that, as in prior years, revenue-related objectives for our NEOs
continued to be appropriate and aligned to the Companys growth strategy. The
Compensation Committee, in an effort to continue to motivate Mr. Merritt and our
other NEOs to further grow and develop our business, established performance
objectives for fiscal 2017 that it considered aggressive and attainable only
with focused effort and execution by our NEOs. These performance objectives were
designed to drive increased revenues, which the Compensation Committee felt
would increase stockholder value consistent with our overall growth
strategy.
Fiscal 2017 Target Cash Bonus
As in prior years, the target annual cash
bonus opportunities for our NEOs were generally expressed as a percentage of
their respective base salaries. At the beginning of fiscal 2017, the
Compensation Committee decided to maintain the percentages for our incumbent
NEOs target bonus opportunities, except that Mr. Merritts target bonus had
been lowered to reflect the change in his role from a sales executive to CEO in
the fourth quarter of fiscal 2016. Although each incumbent NEOs target bonus as
a percentage of base salary remained the same or decreased in fiscal 2017, the
base salary increases described above increased the cash amount of the target
bonus opportunities for each of our incumbent NEOs. The table below shows the
target bonus amount for each NEO as a percentage of base salary and as a
corresponding cash amount:
NEO |
|
Fiscal 2017 Target Bonus as a
Percentage of Salary |
|
Fiscal 2017 Target Bonus as
a Cash Amount |
|
Change from Fiscal 2016
Target Cash Bonus Amount |
Douglas Merritt |
|
100% |
|
$450,000 |
|
25.9% |
Richard
Campione(1) |
|
70% |
|
$280,000 |
|
N/A |
David Conte |
|
70% |
|
$252,000 |
|
9.1% |
Steven Sommer |
|
70% |
|
$231,000 |
|
13.8% |
Susan St.
Ledger(2) |
|
119% |
|
$475,000 |
|
N/A |
Leonard Stein |
|
60% |
|
$198,000 |
|
15.8% |
(1) |
Mr. Campione joined the Company on November 14, 2016.
The target amounts shown above are on an annualized basis. |
(2) |
Ms. St. Ledger joined the Company on May 2, 2016. The
target amounts shown above are on an annualized basis. Ms. St. Ledgers
total target bonus is comprised of two components: (a) $400,000, or 100%
of her annualized base salary, which was based on achievement of the
bookings target and subject to proration based on the number of days
during fiscal 2017 Ms. St. Ledger was employed by the Company, and (b)
$75,000, or 19% of her base salary, was based on achievement of individual
qualitative performance measures, as discussed below, and was not subject
to proration. |
The target levels for the performance
measures described below were set to be aggressive, yet achievable with diligent
effort. As a result, the accelerator multiples, as set forth below, were significant, increasingly challenging and
would yield above-target bonus payments based on the extent to which performance
exceeded the target, with a cap of 200% for our non-sales executive NEOs and a
cap of 300% for our sales executive NEO. Ms. St. Ledgers target bonus
opportunity was higher than the target bonus opportunities of our other NEOs due
to the strong link between her job responsibilities and our sales quota
achievement. This arrangement is consistent with market data, the incentive
compensation opportunities for the top sales executives at our peer group
companies and our growth strategy.
Our Non-Sales Executive
NEOs. The target bonus opportunities for
Messrs. Merritt, Campione, Conte, Sommer and Stein were based entirely on
achievement of target revenues. The chart below outlines the bonus payout
multiples relative to the target bonus opportunity, based on revenue
achievement.
|
|
Fiscal 2017 Revenues (in
millions) |
|
Bonus Payout Multiple
Relative to Target |
Max |
|
$989 or more |
|
200% |
|
|
$976 |
|
170% |
|
|
$963 |
|
135% |
|
|
$949 |
|
105% |
|
|
$936 |
|
102% |
Target |
|
$880 |
|
100% |
|
|
$854 |
|
75% |
Threshold |
|
$836 |
|
50% |
|
|
Less than $836 |
|
0% |
Our Sales Executive NEO. The fiscal 2017 target bonus opportunity for Ms. St. Ledger
was primarily based on achievement of target bookings measured for the period
during which she worked at the Company in fiscal 2017, i.e., the fiscal second
through fourth quarters 2017. In addition, a portion of her target bonus
opportunity was based on achievement of individual qualitative performance
measures, as discussed further below. The bookings target for our sales
executive is not disclosed because we believe disclosure would be competitively
harmful, as it would give our competitors insight into our strategic and
financial planning process. The chart below presents certain tiers of the bonus
payout multiples based on the percentage attainment of the bookings
target.
Percentage Attainment of
Target |
|
Bonus Payout Multiple Relative to
Target |
127.6% or more |
|
300% |
123.0% |
|
270% |
117.0% |
|
230% |
112.4% |
|
200% |
109.4% |
|
135% |
106.3% |
|
102% |
100% |
|
100% |
97.0% |
|
75% |
95.0% |
|
50% |
Less than 95.0% |
|
0% |
34 |
|
Table of
Contents
A portion of Ms. St. Ledgers fiscal
2017 target bonus was based on achievement of individual qualitative performance
measures designed to measure how well she transitioned into her role as Chief
Revenue Officer and accelerated the Companys sales success. Such measures
included an increase in the number of customers, deployment of programs that
result in broad adoption of the Companys products and services, an increase in
revenue from outside the United States, continued increase in high quality
partner velocity and contribution, and Ms. St. Ledgers ability to successfully
complete other projects and assignments that Mr. Merritt assigned. To determine
the achievement of Ms. St. Ledgers individual qualitative performance measures,
at the end of our fiscal year, Mr. Merritt reviewed these measures in totality
and made an initial assessment and recommendation to our Compensation Committee,
which had the final authority to approve payments.
Fiscal 2017 Cash Bonus
Payments
Our Non-Sales Executive
NEOs. After the mid-point of fiscal 2017, the
Compensation Committee, with input from our management team, reviewed our
financial performance against the revenue target set forth in the individual
compensation arrangements with Messrs. Merritt, Conte, Sommer and Stein, and
determined that we achieved our semi-annual revenues target. Accordingly, the
Compensation Committee approved semi-annual bonus payments of 50% of each of
these NEOs fiscal 2017 annual target bonus payments. Mr. Campione had not yet
joined the Company and therefore did not receive a semi-annual bonus payment.
After the conclusion of fiscal 2017, the Compensation Committee evaluated our
performance against the revenue target. The Compensation Committee, with input
from our management team, concluded that we had achieved revenues of $950.0
million, which represented a 42% increase from our fiscal 2016 revenue. In
accordance with the payment accelerators under each NEOs cash bonus
arrangement, the Compensation Committee approved a bonus payment to each of
Messrs. Merritt, Conte, Sommer and Stein in an amount that resulted in total
fiscal 2017 bonus payments for each incumbent NEO equaling 106.7% of their
respective target bonus amount. The Compensation Committee approved a bonus
payment to Mr. Campione in a prorated amount that resulted in a total fiscal
2017 bonus payment equaling 106.7% of his prorated target bonus amount, based on
the number of days Mr. Campione was employed by the Company.
Our Sales Executive
NEO. After the mid-point of fiscal 2017, our
Compensation Committee, with input from our management team, reviewed our
financial performance against the bookings target set forth in the compensation
arrangement with Ms. St. Ledger, and determined that we achieved our semi-annual
bookings target. Accordingly, the Compensation Committee approved a semi-annual
bonus payment of Ms. St. Ledgers fiscal 2017 annual bookings-based target bonus
prorated based on the number of days in the first half of fiscal 2017 Ms. St.
Ledger was employed by the Company. After the conclusion of fiscal 2017, the
Compensation Committee evaluated our performance against the bookings target and
determined that we achieved approximately 102% of the target for the fiscal
second through fourth quarters 2017. The Compensation Committee approved
a bonus payment to Ms. St. Ledger in an amount
that resulted in a total fiscal 2017 bonus payment equaling 100.7% of her
prorated bookings-based target bonus amount. The Compensation Committee also
evaluated Ms. St. Ledgers achievement of the individual qualitative performance
measures previously set for her, and determined that she met those
objectives.
The chart below summarizes the target
and total cash bonuses paid to our NEOs for fiscal 2017:
NEO |
|
Fiscal 2017 Target
Cash Bonus ($) |
|
|
Fiscal 2017 Cash Bonus Paid ($) |
|
Douglas Merritt |
|
$450,000 |
|
|
$480,150 |
|
Richard Campione |
|
$280,000 |
(1) |
|
$64,663 |
(1) |
David Conte |
|
$252,000 |
|
|
$268,884 |
|
Steven Sommer |
|
$231,000 |
|
|
$246,477 |
|
Susan St. Ledger |
|
$475,000 |
(2) |
|
$378,479 |
(2) |
Leonard Stein |
|
$198,000 |
|
|
$211,266 |
|
(1) |
Mr. Campione joined the Company
on November 14, 2016. The target amount shown above is on an annualized
basis. The total paid amount shown above is the actual paid amount
prorated based on the number of days in fiscal 2017 during which Mr.
Campione was employed with us. |
(2) |
Ms. St. Ledger joined the Company
on May 2, 2016. The target amount shown above is on an annualized basis,
$400,000 of which was bookings-based and $75,000 of which was based on
qualitative measures. The total paid amount shown above is the actual paid
amount, with the bookings-based portion prorated based on the number of
days in fiscal 2017 during Ms. St. Ledger was employed with us. Of such
total amount paid, $303,479 is bookings-based and $75,000 is based on
achievement of qualitative measures. |
Long-Term Equity
Compensation
Our corporate culture encourages a
long-term focus by our executive officers, including our NEOs, as well as all
our other employees. In keeping with this culture, our executive compensation
program includes stock-based awards, the value of which depends on our stock
performance and other performance measures, to achieve strong long-term
performance.
These stock-based awards consist of
time-based RSUs and performance-based PSUs granted to our executive officers.
RSUs offer predictable value delivery to our executive officers while promoting
alignment of their interests with the long-term interests of our stockholders in
a manner consistent with peer company compensation practices. PSUs further align
our executive officers pay to our Companys financial performance based on
specific financial performance metrics. Together, RSUs and PSUs are important
tools to motivate and retain our highly sought after executive officers since
the value of the awards is delivered to our executive officers over a four-year
period subject to continued service. Going forward, we may introduce other forms
of equity awards to our executive officers, including our NEOs, to continue
strong alignment of their interests with the interests of our
stockholders.
Table of
Contents
The Compensation Committee, in
consultation with our CEO (other than with respect to himself), determines the
size, mix, material terms and metrics (in the case of PSUs) of equity awards
granted to our executive officers, taking into account the role and
responsibility of each executive officer, competitive factors including
competition for technology executives, peer group data provided by Radford, the
size and value of long-term equity compensation already held by each executive
officer and the vested percentage, the total target cash compensation
opportunity for each executive officer, individual performance and retention
objectives.
Fiscal 2017 Equity
Awards
In March 2016, the Compensation
Committee granted a promotion equity award package of RSUs and PSUs to Mr.
Merritt totaling 155,000 shares (75% PSUs and 25% RSUs), which included 130,000
shares from his promotion offer letter and 25,000 shares in recognition of
strong fourth quarter and fiscal 2016 results, a successful CEO transition and Mr. Merritts continued dual role as both
CEO and head of field operations. Also in March 2016, the Compensation Committee
granted RSUs and PSUs to each of our other incumbent NEOs, Messrs. Conte, Sommer
and Stein, after reviewing the equity compensation for such NEOs to assess
whether each NEO was properly incentivized and rewarded. Ms. St. Ledger was
granted new hire RSUs and PSUs in connection with her hiring in May 2016. In
addition to the factors described above, the goal of attracting Ms. St. Ledger
to the Company from one of the largest software companies in the Bay Area in a
highly competitive environment factored heavily into the determination of the
amounts of her new hire awards. Mr. Campione was granted RSUs in connection with
his hiring in November 2016. Given the timing of Mr. Campiones start date, Mr.
Campione did not receive any fiscal 2017 PSUs. Each of these decisions was made
in consultation with Radford. Details relating to the RSUs and PSUs granted to
each NEO in fiscal 2017, including the number of PSUs earned, are shown
below.
NEO |
|
Nature of Fiscal 2017 Equity Awards |
|
Percentage of Fiscal 2017 Equity Awards as
RSUs |
|
Fiscal 2017 RSUs (number of shares) |
|
Percentage of Fiscal 2017 Equity Awards as
PSUs |
|
Fiscal 2017 Target PSUs (number
of shares) |
|
Fiscal 2017 Earned PSUs (number
of shares) |
Douglas Merritt |
|
Promotion |
|
25% |
|
38,750 |
|
75% |
|
116,250 |
|
103,636 |
Richard Campione |
|
New Hire |
|
100% |
|
100,000 |
|
0% |
|
0 |
|
0 |
David Conte |
|
Annual Refresh |
|
40% |
|
36,000 |
|
60% |
|
54,000 |
|
48,141 |
Steven Sommer |
|
Annual Refresh |
|
40% |
|
22,000 |
|
60% |
|
33,000 |
|
29,419 |
Susan St. Ledger |
|
New Hire |
|
40% |
|
68,000 |
|
60% |
|
102,000 |
|
90,933 |
Leonard Stein |
|
Annual Refresh |
|
40% |
|
22,000 |
|
60% |
|
33,000 |
|
29,419 |
The RSUs granted to Mr. Merritt vest
over four years with 30% vesting on March 10, 2017, and 70% vesting quarterly
thereafter over the remaining three years, subject to Mr. Merritts continued
service with us. The RSUs granted to the other NEOs vest over four years with
25% vesting approximately one year after the grant date, and 75% vesting
quarterly thereafter over the remaining three
years, subject to the NEOs continued service with us. Mr. Merritts RSUs vest
in an additional 5% on the initial vesting date as compared to the other NEOs
because the vesting of his award was measured from his actual promotion
effective date, which was approximately four months before the grant
date.
36 |
|
Table of
Contents
Below is a summary of the primary
features of the fiscal 2017 PSUs, along with the rationale for our approach. Our
fiscal 2017 PSU program structure is substantially the same as our inaugural
fiscal 2016 PSU program, but with an increase in the percentage of PSUs granted
relative to RSUs from 50% PSUs and 50% RSUs in
fiscal 2016 to 60% PSUs and 40% RSUs in fiscal 2017 for annual refresh awards as
shown above. The decision to increase the proportion of PSUs was made in part
due to stockholder feedback and our focus on long-term performance-based
compensation.
PSU Feature |
|
Our Approach |
|
Our Rationale |
Performance
Metrics |
|
●Two equally weighted metrics50% based on revenues and
50% based on operating cash flow percentage relative to revenue growth
rate |
|
●Motivate and incentivize our
executives to drive top-line growth in our business while maintaining
fiscal discipline to generate positive cash flow to sustain and grow our
Company
●Use of revenues as both a PSU
metric and a cash bonus plan metric further underscores the importance of top-line growth to our overall strategy and our investors
expectations
●Use of operating cash flow as a
PSU metric reflects disciplined execution of our business
objectives
●Belief that our strategy of
investing in our business for growth is appropriate given the significant
market opportunity available to us
●As our business matures and
financial results become more predictable, we intend to consider different
and longer-term metrics that continue to align with our stockholders
interests |
Performance
Targets |
|
●Revenues target set based on growth expectations at the
beginning of fiscal 2017 for fiscal 2017
●Operating cash flow percentage set based on expectations
for such metric and mapped against revenue growth |
|
●Align the interests of our
executives with those of our stockholders through performance targets that
correlate with the steep trajectory of our top-line growth and operating
performance based on growth expectations
●Minimum and maximum targets
appropriately reward our executives for under or over-achievement of these
targets |
Performance
Period |
|
●One-year performance period, fiscal 2017
●PSUs will not fully vest until approximately four years
after date of grant, thus placing PSUs at-risk for a prolonged
period |
|
●Steep trajectory of our top-line
growth makes longer term measurements difficult
●High volatility and sensitivity
of our stock price to factors unrelated to Company
performance
●Our historical financial
outperformance
●Risk of setting inappropriate
targets that may not align with our stockholders interests if we were to
project more than one year in advance |
Vesting
Schedule |
|
●25% of earned PSUs vested shortly following the end of
the performance period and approval of the Companys fiscal 2017 audited
financial statements, except for any earned PSUs held by Mr. Merritt,
vested 30% due to his awards being granted approximately four months after
his actual promotion effective date
●Remainder will vest quarterly over the next three years,
so long as the executive continues to be a service provider through each
vesting date |
|
●Time-based vesting schedule for
75% of earned PSUs, or 70% in the case of Mr. Merritt, provides additional
long-term retention incentives |
For the PSUs, the target number of
shares represents the number of shares eligible to be earned and subsequently
vest upon achievement of target performance on both the revenues metric and the
operating cash flow percentage relative to revenue growth rate metric for fiscal
2017. Each metric is weighted equally. In fiscal 2017, we achieved revenues of
$950.0 million, representing a 42% growth rate from our fiscal 2016 revenues
achievement, and operating cash flow of $201.8 million, or 21.2% of revenues.
Based on such achievement, and in accordance with the payout multiples outlined
below, the Compensation Committee determined that 89.15% of each NEOs target
PSUs was earned.
Table of
Contents
The chart below outlines the revenues
metric payout multiples relative to target.
|
|
Fiscal 2017 Revenues (in
millions) |
|
Payout Multiple Relative to
Target |
Max |
|
$989 or more |
|
200% |
|
|
$976 |
|
170% |
|
|
$963 |
|
135% |
|
|
$949 |
|
105% |
|
|
$936 |
|
102% |
Target |
|
$880 |
|
100% |
|
|
$854 |
|
75% |
Threshold |
|
$836 |
|
50% |
|
|
Less than $836 |
|
0% |
The chart below outlines the operating
cash flow metric payout multiples relative to target.
|
|
Fiscal 2017 Operating Cash Flow
Percentage of Revenue |
|
|
|
Fiscal 2017 Revenue Growth
Rate |
|
Payout Multiple Relative to
Target |
Max |
|
24.5% |
|
and |
|
48% |
|
200% |
Target |
|
23% |
|
and |
|
32% |
|
100% |
Threshold |
|
21% |
|
and |
|
25% |
|
50% |
|
|
Less than 21% |
|
or |
|
Less than 25% |
|
0% |
Severance and
Change in Control-Related Benefits
Our offer letters with our NEOs provide
certain protections in the event of their termination of employment under
specified circumstances, including following a change in control of our Company.
We believe that these protections serve our retention objectives by helping our
NEOs maintain continued focus and dedication to their responsibilities to
maximize stockholder value, including in the event of a transaction that could
result in a change in control of our Company. The terms of these letters and
amendments were determined after review by the Compensation Committee and our
Board of our retention goals for each executive. The material terms of these
benefits as of January 31, 2017 are described below.
Triggering Event(s) |
|
Benefits |
Three months after signing of a
definitive agreement that ultimately results in a change of control or 12
months after a change in control
AND
Employment is terminated without
cause or NEO resigns for good reason |
|
●A lump sum payment equal to 12 months of NEOs
then-current base salary (18 months, in the case of our CEO), plus a
pro-rated portion of NEOs annual target bonus for the year of termination
(18 months of annual target bonus plus a pro-rated portion of annual
target bonus for the year of termination, in the case of our
CEO);
●Payment by us for up to 12 months of COBRA premiums to
continue health insurance coverage for NEO and eligible dependents (18
months, in the case of our CEO), or a lump sum payment of $24,000
($36,000, in the case of our CEO) if paying for COBRA premiums would
result in an excise tax to us;
●100% accelerated vesting of NEOs outstanding equity
awards; and
●Six-month post-termination exercise period for NEOs
outstanding options;
In each case subject to NEO
timely signing a release of claims. |
Employment is terminated without
cause (other than in connection with a change in control) |
|
●A lump sum payment equal to six months of NEOs
then-current base salary (12 months, in the case of our CEO), plus a
pro-rated portion of NEOs annual target bonus for the year of
termination;
●Payment by us for up to six months of COBRA premiums to
continue health insurance coverage for NEO and eligible dependents (12
months, in the case of our CEO), or a lump sum payment of $12,000
($24,000, in the case of our CEO) if paying for COBRA premiums would
result in an excise tax to us;
●Six months accelerated vesting of NEOs outstanding
equity awards (12 months, in the case of our CEO); and
●Six-month post-termination exercise period for NEOs
outstanding options;
In each case subject to NEO
timely signing a release of claims. |
OTHER COMPENSATION POLICIES AND
INFORMATION
Employee Benefits and
Perquisites
We provide employee benefits to all
eligible employees in the United States, including our NEOs, which the
Compensation Committee believes are reasonable and consistent with its overall
compensation objective to better enable us to attract and retain employees.
These benefits include medical, dental and vision insurance, a 401(k) plan, life
and disability insurance, flexible spending accounts, an employee stock purchase
plan and other plans and programs.
We have special long-term disability
coverage for our executive officers, including our NEOs, who are eligible for
disability coverage until approximately age 66 if they cannot return to their
occupation. We pay for spousal travel expenses and tax gross-ups associated with
certain of our NEOs attendance at our annual sales achievement
event.
38 |
|
Table of
Contents
Stock Ownership Guidelines
Our Board believes that our directors
and executive officers should hold a meaningful financial stake in the Company
in order to further align their interests with those of our stockholders.
Therefore, our Board has adopted stock ownership guidelines. Under the
guidelines, our officers who report directly to the CEO are required to achieve
these ownership levels within five years of the later of September 9, 2014 (the
date our stock ownership guidelines were adopted) or such executive officers
hire, appointment to a position with a higher ownership requirement, or election
date, as applicable, at the following levels:
● |
Our CEO must own the lesser of (i) Company stock with a value
of five times his or her annual base salary or (ii) 30,000 shares;
and |
● |
Each executive officer must
own the lesser of (i) Company stock with a value of his or her annual base
salary or (ii) 8,000 shares. |
The salary multiples above are
consistent with current market practices, and the alternative share number
thresholds are intended to provide our officers with certainty as to whether the
guidelines are met, regardless of our then-current stock price.
As of the end of fiscal 2017, all of
our NEOs have met and exceeded, or are on track to meet and exceed, these
guidelines at their current rate of stock accumulations in the time frames set
out in the guidelines.
See Corporate Governance at
SplunkNon-Employee Director CompensationStock Ownership Guidelines for
information about the guidelines applicable to our directors.
Clawback Policy
We have a Clawback Policy pursuant to
which we may seek the recovery of cash performance-based incentive compensation
paid by the Company as well as performance-based equity awards, including PSUs.
The Clawback Policy applies to our CEO and to all officers who report directly
to the CEO, including our NEOs. The Clawback Policy provides that if (i) the
Company restates its financial statements as a result of a material error; (ii)
the amount of cash incentive compensation or performance-based equity
compensation that was paid or is payable based on achievement of specific
financial results paid to a participant would have been less if the financial
statements had been correct; (iii) no more than two years have elapsed since the
original filing date of the financial statements upon which the incentive
compensation was determined; and (iv) the Compensation Committee unanimously
concludes, in its sole discretion, that fraud or intentional misconduct by such
participant caused the material error and it would be in the best interests of
the Company to seek from such participant recovery of the excess compensation,
then the Compensation Committee may, in its sole discretion, seek from such
participant repayment to the Company.
Stock Trading Practices; Hedging and
Pledging Policy
We maintain an Insider Trading Policy
that, among other things, prohibits our officers, including our NEOs, directors
and employees from trading during quarterly and special blackout periods.
We prohibit short sales, hedging and similar
transactions designed to decrease the risks associated with holding the
Companys securities, as well as pledging the Companys securities as collateral
for loans and transactions involving derivative securities relating to our
common stock. Our Insider Trading Policy also requires that all directors and
all officers who report directly to the CEO, including our NEOs, pre-clear with
our legal department any proposed open market transactions.
Further, we have adopted Rule 10b5-1
Trading Plan Guidelines that permit our directors and certain employees,
including our NEOs, to adopt Rule 10b5-1 trading plans (10b5-1 plans). Under
our 10b5-1 Trading Plan Guidelines, 10b5-1 plans may only be adopted or modified
during an open trading window under our Insider Trading Policy and only when
such individual does not otherwise possess material nonpublic information about
the Company. The first trade under a 10b5-1 plan may not occur until the
completion of the next quarterly blackout period following the adoption or
modification of the 10b5-1 plan, as applicable.
Impact of Accounting and Tax
Requirements on Compensation
Deductibility of
Executive Compensation
Generally, Section 162(m) of the
Internal Revenue Code of 1986, as amended, disallows a tax deduction to any
publicly-held corporation for any remuneration in excess of $1 million paid in
any taxable year to its chief executive officer and to certain other highly
compensated officers. Remuneration in excess of $1 million may be deducted if,
among other things, it qualifies as performance-based compensation within the
meaning of Section 162(m).
We have not previously taken the
deductibility limit imposed by Section 162(m) into consideration in setting
compensation for our NEOs and do not currently have any immediate plans to do
so. The Compensation Committee may, in its judgment, authorize compensation
payments that do not comply with an exemption from the deductibility limit when
it believes that such payments are appropriate to attract and retain executive
talent. The Compensation Committee intends to continue to compensate our NEOs in
a manner consistent with the best interests of the Company and our
stockholders.
Taxation of
Parachute Payments and Deferred Compensation
We do not provide our NEOs with a
gross-up or other reimbursement payment for any tax liability that he or she
might owe as a result of the application of Sections 280G, 4999, or 409A of the
Code. Sections 280G and 4999 of the Code provide that executive officers and
directors who hold significant equity interests and certain other service
providers may be subject to an excise tax if they receive payments or benefits
in connection with a change in control that exceeds certain prescribed limits,
and that the company, or a successor, may forfeit a deduction on the amounts
subject to this additional tax. Section 409A also imposes additional significant
taxes on the individual in the event that an executive officer, director or
other service provider receives deferred compensation that does not meet
certain requirements of Section 409A of the Code.
Table of
Contents
Accounting for
Stock-Based Compensation
We follow ASC Topic 718 for our
stock-based awards. ASC Topic 718 requires companies to measure the compensation
expense for all share-based payment awards made to employees and directors,
including stock options, restricted stock unit awards and performance units,
based on the grant date fair value of these awards. This calculation is
performed for accounting purposes and reported in the compensation tables below.
ASC Topic 718 also requires companies to recognize the compensation cost of
their stock-based compensation awards in their income statements over the period
that an NEO is required to render service in exchange for the option or other
award.
For performance units, stock-based
compensation expense recognized may be adjusted over the performance period
based on interim estimates of performance against pre-set objectives.
Compensation Risk Assessment
The Compensation Committee, with the
assistance of Radford, assesses and considers potential risks when reviewing and
approving our compensation policies and practices for our executive officers and
our employees. We have designed our compensation programs, including our
incentive compensation plans, with features to address potential risks while
rewarding employees for achieving financial and strategic objectives through
prudent business judgment and appropriate risk taking. Based upon its
assessment, the Compensation Committee believes that any risks arising from our
compensation programs do not create disproportionate incentives for our
employees to take risks that could have a material adverse effect on us in the
future.
COMPENSATION TABLES
Summary Compensation Table
The following table summarizes the
compensation that we paid to or was earned by each of our NEOs for the fiscal
years ended January 31, 2017, 2016 and 2015.
Name and Principal Position |
|
Fiscal Year |
|
Salary ($) |
|
|
Stock Awards ($)(1) |
|
|
Option Awards ($) |
|
Non-Equity Incentive
Plan Compensation ($) |
|
|
All
Other Compensation ($) |
|
|
Total ($) |
Douglas
Merritt(2) |
|
2017 |
|
450,000 |
|
|
7,145,500 |
|
|
|
|
480,150 |
|
|
38,545 |
(3) |
|
8,114,195 |
President, CEO |
|
2016 |
|
325,000 |
|
|
2,473,200 |
|
|
|
|
738,526 |
|
|
36,952 |
(4) |
|
3,573,678 |
and
Director |
|
2015 |
|
227,803 |
(5) |
|
6,477,000 |
|
|
|
|
559,465 |
(5) |
|
5,000 |
(6) |
|
7,041,465 |
Richard Campione |
|
2017 |
|
86,364 |
(7) |
|
5,627,000 |
|
|
|
|
64,663 |
(7) |
|
|
|
|
5,778,027 |
Senior Vice President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Product Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Conte |
|
2017 |
|
360,000 |
|
|
4,214,700 |
|
|
|
|
268,884 |
|
|
5,000 |
(8) |
|
4,848,584 |
Senior Vice President
and |
|
2016 |
|
330,000 |
|
|
3,091,500 |
|
|
|
|
462,000 |
|
|
6,000 |
(9) |
|
3,889,500 |
Chief Financial
Officer |
|
2015 |
|
315,000 |
|
|
|
(10) |
|
|
|
418,509 |
|
|
5,000 |
(6) |
|
738,509 |
Steven Sommer |
|
2017 |
|
321,250 |
|
|
2,575,650 |
|
|
|
|
246,477 |
|
|
5,000 |
(8) |
|
3,148,377 |
Senior Vice President, Marketing
and |
|
2016 |
|
290,000 |
|
|
2,473,200 |
|
|
|
|
406,000 |
|
|
6,000 |
(9) |
|
3,175,200 |
Former Chief Marketing
Officer |
|
2015 |
|
270,000 |
|
|
|
(10) |
|
|
|
358,722 |
|
|
5,000 |
(6) |
|
633,722 |
Susan St. Ledger |
|
2017 |
|
300,000 |
(11) |
|
10,123,500 |
|
|
|
|
378,479 |
(11) |
|
11,554 |
(3) |
|
10,813,533 |
Senior Vice
President, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Revenue Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leonard Stein |
|
2017 |
|
330,000 |
|
|
2,575,650 |
|
|
|
|
211,266 |
|
|
5,000 |
(8) |
|
3,121,916 |
Senior Vice President, |
|
2016 |
|
285,000 |
|
|
2,473,200 |
|
|
|
|
342,000 |
|
|
6,000 |
(9) |
|
3,106,200 |
General Counsel and Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The amounts reported in the Stock
Awards column reflects the aggregate grant date fair value of the RSUs
granted to our NEOs in fiscal 2017, fiscal 2016 and fiscal 2015 and the
PSUs granted to our NEOs in fiscal 2017 and fiscal 2016, as computed in
accordance with ASC Topic 718. The estimated fair value of PSUs is
calculated based on the probable outcome of the performance measures for
the applicable performance period as of the date on which the PSUs are
granted for accounting purposes. This estimated fair value for PSUs is
different from (and lower than) the maximum value of PSUs set forth below.
These amounts do not necessarily correspond to the actual value recognized
by our NEOs. The assumptions used in the valuation of these awards are
consistent with the valuation methodologies specified in the notes to our
consolidated financial statements included in our Annual Report on Form
10-K for the fiscal year ended January 31,
2017. |
40 |
|
Table of
Contents
Assuming the highest level of
performance is achieved under the applicable performance measures for the fiscal
2017 PSUs, the maximum possible value of the fiscal 2017 PSUs using the fair
value of our common stock on the date that such awards were granted for
accounting purposes is presented below:
|
Name |
Maximum Value of Fiscal 2017 PSUs (as of Grant Date for
Accounting Purposes) ($) |
|
Douglas Merritt |
10,718,250 |
|
Richard Campione |
|
|
David Conte |
5,057,640 |
|
Steven Sommer |
3,090,780 |
|
Susan St. Ledger |
12,148,200 |
|
Leonard Stein |
3,090,780 |
(2) |
Mr. Merritt was appointed
President and CEO, effective as of November 19, 2015. Through fiscal 2016,
Mr. Merritt continued to receive his pre-CEO transition compensation as
our former Senior Vice President, Field Operations; it was not until
fiscal 2017, two months after his appointment, that he began receiving his
CEO compensation package. |
(3) |
For Mr.
Merritt, this amount represents $24,676 in tax gross-ups and $6,922 in
spousal travel expenses, each associated with attendance at our annual
sales achievement event; a discretionary contribution of $5,000 to Mr.
Merritts 401(k) plan account, which contribution was made to all eligible
participants; and a premium payment of $1,947 for long-term disability
benefits. For Ms. St. Ledger, this amount represents $6,057 in tax
gross-ups associated with attendance at our annual sales achievement
event; a discretionary contribution of $5,000 to Ms. St. Ledgers 401(k)
plan account, which contribution was made to all eligible participants;
and a premium payment of $497 for long-term disability
benefits. |
(4) |
This
amount represents $22,399 in tax gross-ups and $6,606 in spousal travel
expenses, each associated with attendance at our annual sales achievement
event; a discretionary contribution of $6,000 to Mr. Merritts 401(k) plan
account, which contribution was made to all eligible participants; and a
premium payment of $1,947 for long-term disability benefits. |
(5) |
Mr.
Merritt joined the Company on May 7, 2014. The salary and non-equity
incentive plan compensation amounts for Mr. Merritt are prorated based on
the number of days in fiscal 2015 during which he was employed with
us. |
(6) |
For
fiscal 2015, we made a discretionary contribution to the 401(k) plan
accounts of all eligible participants in the amount of $5,000
each. |
(7) |
Mr.
Campione joined the Company on November 14, 2016. The salary and
non-equity incentive plan compensation amounts for Mr. Campione are
prorated based on the number of days in fiscal 2017 during which he was
employed with us. |
(8) |
For
fiscal 2017, we made a discretionary contribution to the 401(k) plan
accounts of all eligible participants in the amount of $5,000
each. |
(9) |
For
fiscal 2016, we made a discretionary contribution to the 401(k) plan
accounts of all eligible participants in the amount of $6,000
each. |
(10) |
Fiscal
2015 served as a transition year in our shift towards making all equity
compensation decisions at the beginning of each fiscal year rather than at
the end, which aligned the timing with that of our cash compensation
decisions. Other than with respect to Mr. Merritt who received equity
awards in connection with his hiring in fiscal 2015, we did not grant any
equity awards to our executive officers in fiscal 2015. |
(11) |
Ms. St.
Ledger joined the Company on May 2, 2016. The salary and non-equity
incentive plan compensation amounts for Ms. St. Ledger are prorated based
on the number of days in fiscal 2017 during which she was employed with
us. |
Table of
Contents
Grants of Plan-Based Awards for Fiscal
2017
The following table presents, for each
of our NEOs, information concerning grants of plan-based awards made during
fiscal 2017. This information supplements the information about these awards set
forth in the Summary Compensation Table.
|
|
|
|
Estimated Future Payouts
Under Non-Equity Incentive Plan Awards(1) |
|
Estimated Future Payouts Under Equity Incentive
Plan Awards(2) |
|
All Other Stock Awards: Number
of Shares or Units (#)(3) |
|
Grant Date Fair Value of
Stock Awards ($)(4) |
Name |
|
Grant Date |
|
Threshold ($) |
|
Target ($) |
|
Maximum ($) |
|
Threshold (#) |
|
Target (#) |
|
Maximum (#) |
|
|
Douglas Merritt |
|
|
|
225,000 |
|
450,000 |
|
900,000 |
|
|
|
|
|
|
|
|
|
|
RSUs |
|
3/10/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
38,750 |
|
1,786,375 |
PSUs |
|
3/10/2016 |
|
|
|
|
|
|
|
58,125 |
|
116,250 |
|
232,500 |
|
|
|
5,359,125 |
Richard Campione |
|
|
|
140,000 |
|
280,000 |
|
560,000 |
|
|
|
|
|
|
|
|
|
|
RSUs |
|
12/7/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
5,627,000 |
David Conte |
|
|
|
126,000 |
|
252,000 |
|
504,000 |
|
|
|
|
|
|
|
|
|
|
RSUs |
|
3/9/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
36,000 |
|
1,685,880 |
PSUs |
|
3/9/2016 |
|
|
|
|
|
|
|
27,000 |
|
54,000 |
|
108,000 |
|
|
|
2,528,820 |
Steven Sommer |
|
|
|
115,500 |
|
231,000 |
|
462,000 |
|
|
|
|
|
|
|
|
|
|
RSUs |
|
3/9/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
22,000 |
|
1,030,260 |
PSUs |
|
3/9/2016 |
|
|
|
|
|
|
|
16,500 |
|
33,000 |
|
66,000 |
|
|
|
1,545,390 |
Susan St. Ledger |
|
|
|
200,000 |
|
400,000 |
|
1,200,000 |
|
|
|
|
|
|
|
|
|
|
RSUs |
|
6/8/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
68,000 |
|
4,049,400 |
PSUs |
|
6/8/2016 |
|
|
|
|
|
|
|
51,000 |
|
102,000 |
|
204,000 |
|
|
|
6,074,100 |
Leonard Stein |
|
|
|
99,000 |
|
198,000 |
|
396,000 |
|
|
|
|
|
|
|
|
|
|
RSUs |
|
3/9/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
22,000 |
|
1,030,260 |
PSUs |
|
3/9/2016 |
|
|
|
|
|
|
|
16,500 |
|
33,000 |
|
66,000 |
|
|
|
1,545,390 |
(1) |
Amounts in the Estimated Future
Payouts Under Non-Equity Incentive Plan Awards columns relate to cash
incentive compensation opportunities under each NEOs individual
compensation arrangement. Payments under these plans are subject to a
threshold limitation based on achieving at least 95% of the target
corporate performance objective. Target payment amounts assume achievement
of 100% of the target corporate performance objective. Payments to Messrs.
Merritt, Campione, Conte, Sommer and Stein under these plans are subject
to a maximum payment of 200% based on achievement of 112% or more of the
target corporate performance objective. Bookings-based payments to Ms. St.
Ledger were capped at a maximum of 300% for achievement of 127.6% or
greater of target corporate performance objective. The actual amounts paid
to our NEOs are set forth in the Summary Compensation Table above, and
the calculation of the actual amounts paid is discussed more fully in
Compensation Discussion and AnalysisDiscussion of Our Fiscal 2017
Executive Compensation ProgramComponents of Compensation Program and
Fiscal 2017 Compensation Cash Bonuses above. |
(2) |
Amounts
in the Estimated Future Payouts Under Equity Incentive Plan Awards
columns relate to estimated payouts of the fiscal 2017 PSUs. The amounts
shown in the Threshold column reflect the number of shares if the minimum
revenues metric and operating cash flow metric are met, and are 50% of the
amounts shown under the Target column. The amounts shown in the Target
column reflect the number of shares if the revenues metric and operating
cash flow metric are at target. The amounts shown in the Maximum column
reflect the number of shares if the maximum revenues metric and operating
cash flow metric are met or exceeded, and are 200% of the amounts shown
under the Target column. The PSUs vest over four years, subject to
continued service to us. For Mr. Merritt, 30% of the PSUs vested on March
29, 2017 (due to his awards being granted approximately four months after
his actual promotion effective date) and 5.83% vest quarterly thereafter,
beginning on June 10, 2017, over the remaining three years. For
Messrs. Conte, Sommer and Stein, one-fourth of the PSUs vest on March 29,
2017 and 1/16th vest quarterly thereafter, beginning on June 10, 2017,
over the remaining three years. For Ms. St. Ledger, one-fourth of the PSUs
vest on June 10, 2017 and 1/16th vest quarterly thereafter, beginning on
September 10, 2017, over the remaining three years. |
(3) |
The RSUs
vest over four years, with one-fourth of the RSUs vesting one year
following the vesting commencement date and 1/16th vesting quarterly
thereafter over the remaining three years, subject to continued service to
us. |
(4) |
The
amounts reported in this column reflect the aggregate grant date fair
value of the RSUs and PSUs granted to our NEOs in fiscal 2017 as computed
in accordance with ASC Topic 718. The estimated fair value of PSUs was
calculated based on the probable outcome of the performance measures for
the fiscal 2017 performance period as of the date on which the PSUs were
granted for accounting purposes. These amounts do not necessarily
correspond to the actual value recognized by NEOs. The assumptions used in
the valuation of these awards are consistent with the valuation
methodologies specified in the notes to our consolidated financial
statements included in our Annual Report on Form 10-K for the fiscal year
ended January 31, 2017. |
42 |
|
Table of
Contents
Outstanding Equity Awards at Fiscal
2017 Year-End
The following table sets forth
information concerning outstanding equity awards held by our NEOs as of January
31, 2017.
|
|
|
|
Option Awards |
|
Stock Awards |
Name |
|
Vesting Commencement Date |
|
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 ($)(1) |
|
Equity Incentive Plan
Awards: Number of Unearned Shares, Units or Other
Rights That Have Not Vested (#) |
|
|
Equity Incentive Plan
Awards: Market or Payout Value of Unearned Shares, Units
or Other Rights That Have
Not Vested ($)(1) |
|
Douglas Merritt |
|
06/10/2014 |
|
|
|
|
|
|
|
|
|
|
56,250 |
(2) |
|
3,254,625 |
|
|
|
|
|
|
|
|
03/10/2015 |
|
|
|
|
|
|
|
|
|
|
11,250 |
(2) |
|
650,925 |
|
|
|
|
|
|
|
|
03/10/2015 |
|
|
|
|
|
|
|
|
|
|
20,250 |
(3) |
|
1,171,665 |
|
|
|
|
|
|
|
|
03/10/2016 |
|
|
|
|
|
|
|
|
|
|
38,750 |
(2) |
|
2,242,075 |
|
|
|
|
|
|
|
|
03/10/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,636 |
(4) |
|
5,996,379 |
|
Richard Campione |
|
12/10/2016 |
|
|
|
|
|
|
|
|
|
|
100,000 |
(2) |
|
5,786,000 |
|
|
|
|
|
|
David Conte |
|
12/15/2011 |
|
12,206 |
(5) |
|
|
|
4.82 |
|
12/14/2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
12/10/2013 |
|
|
|
|
|
|
|
|
|
|
20,000 |
(2) |
|
1,157,200 |
|
|
|
|
|
|
|
|
03/10/2015 |
|
|
|
|
|
|
|
|
|
|
14,063 |
(2) |
|
813,685 |
|
|
|
|
|
|
|
|
03/10/2015 |
|
|
|
|
|
|
|
|
|
|
25,313 |
(3) |
|
1,464,610 |
|
|
|
|
|
|
|
|
03/10/2016 |
|
|
|
|
|
|
|
|
|
|
36,000 |
(2) |
|
2,082,960 |
|
|
|
|
|
|
|
|
03/10/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,141 |
(4) |
|
2,785,438 |
|
Steven Sommer |
|
12/10/2013 |
|
|
|
|
|
|
|
|
|
|
20,000 |
(2) |
|
1,157,200 |
|
|
|
|
|
|
|
|
03/10/2015 |
|
|
|
|
|
|
|
|
|
|
11,250 |
(2) |
|
650,925 |
|
|
|
|
|
|
|
|
03/10/2015 |
|
|
|
|
|
|
|
|
|
|
20,250 |
(3) |
|
1,171,665 |
|
|
|
|
|
|
|
|
03/10/2016 |
|
|
|
|
|
|
|
|
|
|
22,000 |
(2) |
|
1,272,920 |
|
|
|
|
|
|
|
|
03/10/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,419 |
(4) |
|
1,702,183 |
|
Susan St. Ledger |
|
06/10/2016 |
|
|
|
|
|
|
|
|
|
|
68,000 |
(2) |
|
3,934,480 |
|
|
|
|
|
|
|
|
06/10/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,933 |
(4) |
|
5,261,383 |
|
Leonard Stein |
|
12/10/2013 |
|
|
|
|
|
|
|
|
|
|
13,750 |
(2) |
|
795,575 |
|
|
|
|
|
|
|
|
03/10/2015 |
|
|
|
|
|
|
|
|
|
|
11,250 |
(2) |
|
650,925 |
|
|
|
|
|
|
|
|
03/10/2015 |
|
|
|
|
|
|
|
|
|
|
20,250 |
(3) |
|
1,171,665 |
|
|
|
|
|
|
|
|
03/10/2016 |
|
|
|
|
|
|
|
|
|
|
22,000 |
(2) |
|
1,272,920 |
|
|
|
|
|
|
|
|
03/10/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,419 |
(4) |
|
1,702,183 |
|
(1) |
Market Value is calculated based on the closing price of our common
stock on The NASDAQ Global Select Market on January 31, 2017 (the last
trading day of our fiscal year), which was $57.86. |
(2) |
The
RSUs vest over four years, with one-fourth of the RSUs vesting one year
following the vesting commencement date and 1/16th vesting quarterly
thereafter over the remaining three years, subject to continued service to
us. |
(3) |
Earned in connection with achievement of 180% of the target
performance measures with respect to the fiscal 2016 PSU performance
period; one-fourth vesting on March 30, 2016 and 1/16th vesting quarterly
thereafter, beginning on June 10, 2016, over the remaining three years,
subject to continued service to us. |
(4) |
On
March 29, 2017, 89.15% of each NEOs target fiscal 2017 PSUs were deemed
earned based upon our fiscal 2017 financial results. Actual award amounts
earned were 103,636, 48,141, 29,419, 29,419 and 90,933 shares for each of
Messrs. Merritt, Conte, Sommer, Stein and Ms. St. Ledger,
respectively. The
PSUs vest over four years, subject to continued service to us. For Mr.
Merritt, 30% of the PSUs vested on March 29, 2017 and 5.83% vest quarterly
thereafter, beginning on June 10, 2017, over the remaining three years.
For Messrs. Conte, Sommer and Stein, one-fourth of the PSUs vested on
March 29, 2017 and 1/16th vest quarterly thereafter, beginning on June 10,
2017, over the remaining three years. For Ms. St. Ledger, one-fourth of
the PSUs vest on June 10, 2017 and 1/16th vest quarterly thereafter,
beginning on September 10, 2017, over the remaining three
years. |
(5) |
The stock option is fully vested
and immediately exercisable. |
Table of
Contents
Option Exercises and Stock Vested in
Fiscal 2017
The following table sets forth the
number of shares acquired and the value realized upon the exercise of stock
options and the vesting of RSUs during fiscal 2017 by each of our
NEOs.
|
|
Option Awards |
|
Stock Awards |
|
Name |
|
Number of Shares Acquired on Exercise (#) |
|
Value Realized on Exercise ($) |
|
Number of Shares Acquired on Vesting (#) |
|
Value Realized on Vesting ($)(1) |
|
Douglas Merritt |
|
|
|
|
|
62,000 |
|
3,321,540 |
|
Richard Campione |
|
|
|
|
|
|
|
|
|
David Conte |
|
|
|
|
|
60,624 |
|
3,229,485 |
|
Steven Sommer |
|
|
|
|
|
59,500 |
|
3,184,890 |
|
Susan St. Ledger |
|
|
|
|
|
|
|
|
|
Leonard Stein |
|
|
|
|
|
48,250 |
|
2,569,968 |
|
(1) |
The value realized on vesting is
calculated by multiplying the number of shares of stock by the market
value of the underlying shares on each vesting
date. |
Pension Benefits and Nonqualified
Deferred Compensation
We do not provide a pension plan for
our employees, and none of our NEOs participated in a nonqualified deferred
compensation plan during fiscal 2017.
Executive Employment
Arrangements
The initial terms and conditions of
employment for each of our named executive officers are set forth in written
executive employment offer letters. The letters for Messrs. Merritt, Conte,
Sommer and Stein were negotiated on our behalf by Mr. Sullivan, our then CEO.
The letters for Mr. Campione and Ms. St. Ledger were negotiated on our behalf by
Mr. Merritt. All of the employment offer letters were negotiated with the
oversight and approval of our Board or Compensation Committee. Each of the
employment offer letters with our NEOs sets forth the terms and conditions of
such executives employment with us and provides for severance and change in
control benefits, as described above under Compensation Discussion and
AnalysisDiscussion of Our Fiscal 2017 Executive Compensation ProgramComponents
of Compensation Program and Fiscal 2017 CompensationSeverance and Change in
Control-Related Benefits.
Douglas
Merritt
We entered into an initial employment
offer letter dated April 7, 2014 with Mr. Merritt, our former Senior Vice
President, Field Operations. We subsequently entered into a revised employment
offer letter dated November 16, 2015 with Mr. Merritt in connection with his
appointment as our President and CEO. This letter supersedes the terms of his
original employment offer letter. Mr. Merritts current base salary for fiscal
2018 is $475,000 and his annual target cash bonus is 100% of his base
salary.
Richard
Campione
We entered into an employment offer letter
dated October 12, 2016 with Mr. Campione, our Senior Vice President, Chief
Product Officer. Mr. Campiones current base salary for fiscal 2018 is $400,000
and his annual target cash bonus is 70% of his base salary.
David
Conte
We entered into an initial employment
offer letter dated June 30, 2011 with Mr. Conte, our Senior Vice President and
Chief Financial Officer. We subsequently entered into a revised employment offer
letter dated January 11, 2012 with Mr. Conte. This letter supersedes the terms
of his original employment offer letter. Mr. Contes current base salary for
fiscal 2018 is $385,000 and his annual target cash bonus is 80% of his base
salary.
Steven
Sommer
We entered into an initial employment
offer letter dated June 4, 2008 with Mr. Sommer, our Senior Vice President,
Marketing and former Chief Marketing Officer. We subsequently entered into a
revised employment offer letter dated January 19, 2012 with Mr. Sommer. We
subsequently entered into a transition letter agreement dated July 27, 2016 with
Mr. Sommer in connection with his retirement as an executive officer and
employee of the Company. This letter supersedes the terms of his revised
employment offer letter and provides that Mr. Sommer will continue to receive his then
current salary through September 15, 2017 and remained eligible to participate
in the Companys Executive Bonus Plan until February 1, 2017. Mr. Sommers
existing equity grants will continue to vest so long as he continues to provide
services to the Company.
Susan St.
Ledger
We entered into an employment offer letter
dated March 3, 2016 with Ms. St. Ledger, our Senior Vice President, Chief
Revenue Officer. Ms. St. Ledgers current base salary for fiscal 2018 is
$420,000 and her annual target cash bonus is 100% of her base salary.
44 |
|
Table of
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Leonard
Stein
We entered into an initial employment
offer letter dated March 28, 2011 with Mr. Stein, our Senior Vice President, General
Counsel and Secretary. We subsequently entered into a revised employment offer letter dated January 11, 2012 with Mr. Stein.
This letter supersedes the terms of his original employment offer letter. Mr.
Steins current base salary for fiscal 2018 is $355,000 and his annual target
cash bonus is 60% of his base salary.
Potential Payments Upon Termination or
Upon Termination In Connection With a Change in Control
The following table provides
information concerning the estimated payments and benefits that would be
provided in the circumstances described below, assuming that the triggering
event took place on January 31, 2017.
NEO |
Termination Without Cause ($) |
|
Termination Without Cause or Resignation for Good
Reason in Connection with a Change in
Control ($)(1) |
|
Douglas Merritt |
|
|
|
|
Severance
payment(2) |
900,000 |
|
1,350,000 |
|
Continued health
coverage |
25,746 |
|
38,620 |
|
Accelerated
vesting(3) |
6,892,978 |
|
13,315,669 |
|
Total: |
7,818,724 |
|
14,704,289 |
|
Richard Campione |
|
|
|
|
Severance
payment(2) |
340,000 |
|
680,000 |
|
Continued health
coverage |
12,873 |
|
25,746 |
|
Accelerated
vesting(3) |
|
|
5,786,000 |
|
Total: |
352,873 |
|
6,491,746 |
|
David Conte |
|
|
|
|
Severance
payment(2) |
306,000 |
|
612,000 |
|
Continued health
coverage |
12,873 |
|
25,746 |
|
Accelerated
vesting(3) |
2,606,246 |
|
8,303,894 |
|
Total: |
2,925,119 |
|
8,941,640 |
|
Steven Sommer |
|
|
|
|
Severance
payment(2) |
280,500 |
|
561,000 |
|
Continued health
coverage |
7,933 |
|
15,867 |
|
Accelerated
vesting(3) |
1,913,314 |
|
5,954,893 |
|
Total: |
2,201,747 |
|
6,531,760 |
|
Susan St. Ledger |
|
|
|
|
Severance
payment(2) |
437,500 |
|
875,000 |
|
Continued health
coverage |
4,095 |
|
8,189 |
|
Accelerated
vesting(3) |
2,298,951 |
|
9,195,863 |
|
Total: |
2,740,546 |
|
10,079,052 |
|
Leonard Stein |
|
|
|
|
Severance
payment(2) |
264,000 |
|
528,000 |
|
Continued health
coverage |
12,873 |
|
25,746 |
|
Accelerated
vesting(3) |
1,732,502 |
|
5,593,268 |
|
Total: |
2,009,375 |
|
6,147,014 |
|
(1) |
A
qualifying termination of employment is considered in connection with a
change in control if such termination occurs within the period commencing
three months before and ending 12 months after a change in
control. |
(2) |
This
represents the sum of each NEOs base salary plus target bonus amounts, in
each case, as was in effect as of January 31, 2017. |
(3) |
For purposes of valuing
accelerated vesting, the values indicated in the table are calculated as
follows: (i) with respect to stock options, as the aggregate difference
between the fair market value of a share of our common stock underlying
the option on January 31, 2017 (the last trading day of our fiscal year)
and the exercise price of the applicable option, multiplied by the number
of unvested shares accelerated, (ii) with respect to RSUs, as the fair
market value of a share of our common stock on January 31, 2017 multiplied
by the number of unvested RSUs accelerated, and (iii) with respect to
PSUs, as the fair market value of a share of our common stock on January
31, 2017 multiplied by the earned amounts of the fiscal 2017 PSUs (89.15%
of each NEOs target fiscal 2017 PSUs) as deemed earned on March 29,
2017. |
Table of
Contents
Equity Compensation Plan
Information
The following table provides
information as of January 31, 2017 with respect to the shares of our common
stock that may be issued under our existing equity compensation plans.
Plan Category |
(a) Number of Securities to be Issued
Upon Exercise of Outstanding Options, Warrants
and Rights |
|
(b) Weighted Average Exercise Price of
Outstanding Options, Warrants and
Rights ($)(2) |
|
(c) Number of Securities Remaining Available for
Future Issuance Under Equity Compensation Plans (Excluding
Securities Reflected in Column (a)) |
|
Equity compensation plans approved by
stockholders(1) |
15,982,308 |
|
4.67 |
|
19,523,986 |
|
Equity compensation plans not approved by
stockholders |
|
|
|
|
|
|
Total |
15,982,308 |
|
4.67 |
|
19,523,986 |
|
(1) |
Includes the following plans: 2012 Equity Incentive Plan (2012
Plan), 2003 Equity Incentive Plan and 2012 Employee Stock Purchase Plan
(2012 ESPP). Our 2012 Plan provides that on the first day of each fiscal
year, the number of shares authorized for issuance under the 2012 Plan is
automatically increased by a number equal to the least of (i) ten million
(10,000,000) shares of common stock, (ii) five percent (5%) of the
aggregate number of shares of common stock outstanding on the last day of
the immediately preceding fiscal year, or (iii) such number of shares of
common stock that may be determined by our Board. Our 2012 ESPP provides
that on the first day of each fiscal year, the number of shares authorized
for issuance under the 2012 ESPP is automatically increased by a number
equal to the least of (i) four million (4,000,000) shares of common stock,
(ii) two percent (2%) of the aggregate number of outstanding shares of
common stock on the last day of the immediately preceding fiscal year, or
(iii) an amount determined by our Board or any committee designated by the
Board to administer the 2012 ESPP. |
(2) |
Does not include shares issuable
upon vesting of outstanding RSU awards, which have no exercise
price. |
46 |
|
Table of Contents
STOCK OWNERSHIP
INFORMATION
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain
information with respect to the beneficial ownership of our common stock at
March 31, 2017 for:
● |
each person or group of affiliated persons
known by us to be the beneficial owner of more than 5% of our common
stock; |
● |
each of our named executive
officers; |
● |
each of our directors; and |
● |
all of our executive officers and directors
as a group. |
The information provided in the table
is based on our records, information filed with the SEC, and information
provided to us. For our 5% stockholders, to the extent we did not have more
recent information, we relied upon such stockholders most recent filing with
the SEC pursuant to Section 13(g) of the Exchange Act as noted below. We have
determined beneficial ownership in accordance with the rules of the SEC, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Except as indicated by the footnotes below, we believe, based on information furnished
to us, that the persons and entities named in the table below have sole voting
and sole investment power with respect to all shares of common stock that they
beneficially owned, subject to applicable community property laws.
Applicable percentage ownership is
based on 138,334,075 shares of common stock outstanding at March 31, 2017. In
computing the number of shares of common stock beneficially owned by a person or
entity and the percentage ownership of such person or entity, we deemed to be
outstanding all shares of common stock subject to shares held by the person that
are currently exercisable or exercisable (or issuable upon vesting of RSUs)
within 60 days of March 31, 2017. However, we did not deem such shares
outstanding for the purpose of computing the percentage ownership of any other
person.
Unless otherwise indicated in their
respective footnote, the address of each beneficial owner listed in the table
below is c/o Splunk Inc., 270 Brannan Street, San Francisco, California 94107.
|
|
Number of Shares |
|
Percent of Shares Outstanding |
5% Stockholders: |
|
|
|
|
T.
Rowe Price Associates, Inc.(1) |
|
12,732,080 |
|
9.2% |
Jennison Associates LLC(2) |
|
11,806,045 |
|
8.5% |
The
Vanguard Group, Inc.(3) |
|
10,320,941 |
|
7.5% |
Sands Capital Management, LLC(4) |
|
10,086,257 |
|
7.3% |
Columbia Threadneedle Investments(5) |
|
6,933,659 |
|
5.0% |
Named Executive Officers and
Directors: |
|
|
|
|
Douglas Merritt |
|
39,609 |
|
* |
Richard Campione |
|
|
|
* |
David Conte(6) |
|
81,742 |
|
* |
Steven Sommer |
|
75,279 |
|
* |
Susan St. Ledger |
|
431 |
|
* |
Leonard Stein |
|
18,024 |
|
* |
Mark Carges |
|
9,396 |
|
* |
Amy Chang(7) |
|
7,724 |
|
* |
John Connors |
|
102,234 |
|
* |
David Hornik |
|
12,740 |
|
* |
Patricia Morrison |
|
20,873 |
|
* |
Thomas Neustaetter |
|
8,179 |
|
* |
Stephen Newberry |
|
26,171 |
|
* |
Graham Smith |
|
56,740 |
|
* |
Godfrey Sullivan(8) |
|
1,606,735 |
|
1.2% |
All executive officers and directors as a group (14
persons)(9) |
|
1,990,598 |
|
1.43% |
* |
Represents beneficial ownership of less than
one percent (1%). |
Table of Contents
STOCK OWNERSHIP
INFORMATION |
(1) |
As of December 31, 2016, the
reporting date of T. Rowe Price Associates, Inc.s most recent filing with
the SEC pursuant to Section 13(g) of the Exchange Act filed on February 7,
2017, T. Rowe Price Associates, Inc. (Price Associates), in its capacity
as an investment adviser, has sole voting power with respect to 4,330,425
shares and sole dispositive power with respect to 12,732,080 shares
reported as beneficially owned. Securities are beneficially owned by
clients of Price Associates. The address for Price Associates is 100 E.
Pratt Street, Baltimore, MD 21202. |
(2) |
As of December 31, 2016, the
reporting date of Jennison Associates LLCs most recent filing with the
SEC pursuant to Section 13(g) of the Exchange Act filed on February 3,
2017, Jennison Associates LLC (Jennison), in its capacity as investment
adviser to several investment companies, insurance separate accounts and
institutional clients (Managed Portfolios), has sole voting power with
respect to 6,845,008 shares and shared dispositive power with respect to
11,806,045 shares reported as beneficially owned. Prudential Financial,
Inc. (Prudential) indirectly owns 100% of the equity interests of
Jennison, and as a result, Prudential may be deemed to have the power to
exercise or to direct the exercise of the voting and/or dispositive power
that Jennison may have with respect to the shares held by the Managed
Portfolios. Jennison does not file jointly with Prudential and, as such,
shares of our common stock reported on Jennisons Schedule 13G, as
amended, may be included in the shares reported in the Schedule 13G, as
amended, filed by Prudential. The address for Jennison is 466 Lexington
Avenue, New York, NY 10017. Prudential also filed a Schedule 13G, as
amended, with the SEC on January 24, 2017, in which it disclosed
beneficial ownership of 11,817,774 shares of our common stock. The address
for Prudential is 751 Broad Street, Newark, NJ 07102. |
(3) |
As of December 31, 2016, the
reporting date of The Vanguard Groups most recent filing with the SEC
pursuant to Section 13(g) of the Exchange Act filed on February 9, 2017,
The Vanguard Group, Inc. (Vanguard), in its capacity as an investment
advisor, has sole voting power with respect to 106,701 shares, shared
voting power with respect to 23,640 shares, sole dispositive power with
respect to 10,187,100 shares, and shared dispositive power with respect to
133,841 shares reported as beneficially owned. Vanguard Fiduciary Trust
Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of
70,501 shares as a result of its serving as investment manager of
collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard is the beneficial owner of 99,540 shares as a
result of its serving as investment manager of Australian investment
offerings. The address for Vanguard is 100 Vanguard Blvd., Malvern, PA
19355. |
(4) |
As of December 31, 2016, the
reporting date of Sands Capital Management, LLCs most recent filing with
the SEC pursuant to Section 13(g) of the Exchange Act filed on February
14, 2016, Sands Capital Management, LLC (Sands), in its capacity as an
investment adviser, has sole voting power with respect to 7,520,817 shares
and sole dispositive power with respect to 10,086,257 shares reported as
beneficially owned. Securities are beneficially owned by clients of Sands.
Sands clients include pension plans, endowments, foundations,
corporations, mutual funds, charities, state and municipal government
entities, Taft-Hartley plans, private investment funds, families and
individuals, among other types. The address for Sands is 1000 Wilson
Blvd., Suite 3000, Arlington, VA 22209. |
(5) |
As of December 31, 2016, the
reporting date of Ameriprise Financial, Inc.s most recent filing with the
SEC pursuant to Section 13(g) of the Exchange Act filed on February 10,
2017, Ameriprise Financial, Inc. (Ameriprise), in its capacity as a
parent holding company, has shared voting power with respect to 6,080,670
shares and shared dispositive power with respect to 6,933,659 shares
reported as beneficially owned. Ameriprise, as a parent company of
Columbia Threadneedle Investments, also known as Columbia Management
Investment Advisors, LLC (Columbia), may be deemed to beneficially own
the shares reported by Columbia. Columbia, in its capacity as an
investment advisor, has shared voting power with respect to 6,080,670
shares and shared dispositive power with respect to 6,933,659 shares
reported as beneficially owned. Each of Ameriprise and Columbia disclaim
beneficial ownership of any shares reported on their Form 13G. The address
for Ameriprise is 145 Ameriprise Financial Center, Minneapolis, MN 55474.
The address for Columbia is 225 Franklin St., Boston, MA
02110. |
(6) |
Consists of (i) 69,536 shares
held of record by Mr. Conte; and (ii) 12,206 shares exercisable within 60
days of March 31, 2017, all of which are fully vested within 60 days of
March 31, 2017. |
(7) |
Ms. Chang is not standing for
re-election at the Annual Meeting. |
(8) |
Consists of (i) 744,220 shares
held of record by Mr. Sullivan; (ii) 100,000 shares held of record by the
Godfrey and Suzanne Sullivan Revocable Trust dated December 5, 2000 for
which Mr. Sullivan serves as a trustee; and (iii) 762,515 shares
exercisable within 60 days of March 31, 2017, all of which are fully
vested. |
(9) |
Includes (i) 1,215,877 shares
beneficially owned by our executive officers and directors; and (ii)
774,721 shares exercisable within 60 days of March 31, 2017, all of which
are fully vested. |
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities
Exchange Act of 1934, as amended, requires that our executive officers and
directors, and persons who own more than 10% of our common stock, file reports
of ownership and changes of ownership with the SEC. Such directors, executive
officers and 10% stockholders are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file.
SEC regulations require us to identify
in this proxy statement anyone who filed a required report late during the most
recent fiscal year. Based on our review of forms we received, or written
representations from reporting persons stating that they were not required to
file these forms, we believe that during fiscal 2017, all Section 16(a) filing
requirements were satisfied on a timely basis.
48 |
|
Table of Contents
OTHER
MATTERS
QUESTIONS AND ANSWERS
ABOUT THE PROXY MATERIALS AND OUR 2017 ANNUAL MEETING
The information provided in the
question and answer format below is for your convenience only and is merely a
summary of the information contained in this proxy statement. You should read
this entire proxy statement carefully.
What matters am I voting
on?
You will be voting on:
● |
the election of three Class II directors to
hold office until the 2020 annual meeting of stockholders or until their
successors are duly elected and qualified; |
● |
a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for the fiscal year ending January 31, 2018; |
● |
an advisory vote to approve the compensation
of our named executive officers, as described in this proxy statement;
and |
● |
any other business that may properly come
before the meeting. |
How does the Board
recommend I vote on these proposals?
The Board recommends a vote:
● |
FOR the nominees for election as Class II
directors; |
● |
FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for the fiscal year ending January 31, 2018; and |
● |
FOR approval, on an advisory basis, of our
named executive officer compensation. |
Who is entitled to
vote?
Holders of our common stock as of the
close of business on April 13, 2017 (the Record Date), may vote at the Annual
Meeting. As of the Record Date, we had 138,339,818 shares of common stock
outstanding. In deciding all matters at the Annual Meeting, each stockholder
will be entitled to one vote for each share of common stock held on the Record
Date. We do not have cumulative voting rights for the election of
directors.
Registered
Stockholders. If your shares are registered
directly in your name with our transfer agent, you are considered the
stockholder of record with respect to those shares, and the Notice was provided
to you directly by us. As the stockholder of record, you have the right to grant your voting proxy directly to the
individuals listed on the proxy card or to vote in person at the Annual
Meeting.
Street Name
Stockholders. If your shares are held in a
stock brokerage account or by a bank or other nominee, you are considered the
beneficial owner of shares held in street name, or a street name stockholder,
and the Notice was forwarded to you by your broker, bank or other nominee, who
is considered the stockholder of record with respect to those shares. As the
beneficial owner, you have the right to direct your broker, bank or other
nominee on how to vote your shares. Beneficial owners are also invited to attend
the Annual Meeting. However, since beneficial owners are not the stockholders of
record, you may not vote your shares in person at the Annual Meeting unless you
follow your brokers, banks or other nominees procedures for obtaining a legal
proxy. If you request a printed copy of the proxy materials by mail, your
broker, bank or other nominee will provide a voting instruction card for you to
use to direct your broker, bank or other nominee how to vote your
shares.
How do I vote?
If you are a registered stockholder,
you may:
● |
instruct the proxy holder or holders on how
to vote your shares by using the Internet voting site or the toll-free
telephone number listed on the Notice, 24 hours a day, seven days a week,
until 11:59 p.m. Eastern Time on June 7, 2017 (have your proxy card in
hand when you call or visit the website); |
● |
instruct the proxy holder or holders on how
to vote your shares by completing and mailing your proxy card to the
address indicated on your proxy card (if you received printed proxy
materials), which must be received by the time of the Annual Meeting;
or |
● |
vote by written ballot in person at the
Annual Meeting. |
If you are a street name stockholder,
you will receive instructions from your broker, bank or other nominee. The
instructions from your broker, bank or other nominee will indicate if the
various methods by which you may vote, including whether Internet or telephone
voting, are available.
Table of Contents
Can I change or revoke my
vote?
Yes. Subject to any rules your broker,
bank or other nominee may have, you can change your vote or revoke your proxy
before the Annual Meeting.
If you are a registered stockholder,
you may change your vote by:
● |
entering a new vote via Internet or by
telephone by 11:59 p.m. Eastern Time on June 7, 2017; |
● |
returning a later-dated proxy card which must
be received by the time of the Annual Meeting; or |
● |
completing a written ballot in person at the
Annual Meeting. |
If you are a registered stockholder,
you may revoke your proxy by providing our Corporate Secretary with a written
notice of revocation prior to your shares being voted at the Annual Meeting.
Such written notice of revocation should be hand delivered to Splunks Corporate
Secretary or mailed to and received by Splunk Inc. prior to the Annual Meeting
at 270 Brannan Street, San Francisco, California 94107, Attention: Corporate
Secretary.
If you are a street name stockholder,
you may change your vote by:
● |
submitting new voting instructions to your
broker, bank or other nominee pursuant to instructions provided by such
broker, bank or other nominee; or |
● |
completing a written ballot at the Annual
Meeting; provided you have obtained a legal proxy from your broker, bank
or other nominee giving you the right to vote the
shares. |
If you are a street name stockholder,
you must contact your broker, bank or other nominee that holds your shares to
find out how to revoke your proxy.
What is the effect of giving a
proxy?
Proxies are solicited by and on behalf
of our Board. The persons named in the proxy have been designated as proxy
holders. When proxies are properly dated, executed and returned, the shares
represented by such proxies will be voted at the Annual Meeting in accordance
with the instructions of the stockholder. If no specific instructions are given,
however, the shares will be voted in accordance with the recommendations of our
Board as described above. If any matter not described in the proxy statement is
properly presented at the Annual Meeting, the proxy holders will use their own
judgment to determine how to vote your shares. If the Annual Meeting is
adjourned, the proxy holders can vote your shares on the new meeting date as
well, unless you have properly revoked your proxy, as described
above.
Why did I receive a notice regarding
the availability of proxy materials on the Internet instead of a full set of
proxy materials?
In accordance with the rules of the
SEC, we have elected to furnish our proxy materials, including this proxy
statement and our annual report to our stockholders, primarily via the Internet.
On or about April 26, 2017, we mailed to our stockholders the Notice that
contains instructions on how to access our proxy materials on the Internet, how
to vote at the Annual Meeting, and how to request printed copies of the proxy
materials and annual report. Stockholders may request to receive all future
proxy materials in printed form by mail or electronically by e-mail by following
the instructions contained in the Notice. We encourage stockholders to take
advantage of the availability of the proxy materials on the Internet to help
reduce the environmental impact of our annual meetings and keep our Annual
Meeting process efficient.
What is a quorum?
A quorum is the minimum number of
shares required to be present at the Annual Meeting for the meeting to be
properly held under our Bylaws and Delaware law. The presence, in person or by
proxy, of a majority of all issued and outstanding shares of common stock
entitled to vote at the meeting will constitute a quorum at the meeting. A proxy
submitted by a stockholder may indicate that all or a portion of the shares
represented by the proxy are not being voted (stockholder withholding) with
respect to a particular matter. Similarly, a broker may not be permitted to vote
stock (broker non-vote) held in street name on a particular matter in the
absence of instructions from the beneficial owner of the stock. See How may my
brokerage firm or other intermediary vote my shares if I fail to provide timely
directions? below. The shares subject to a proxy that are not being voted on a
particular matter because of either stockholder withholding or broker non-vote
will count for purposes of determining the presence of a quorum. Abstentions are
also counted in the determination of a quorum.
How many votes are needed for approval
of each matter?
● |
Proposal 1: Each director nominee will be
elected by a vote of the majority of the votes cast. A majority of the
votes cast means the number of votes cast For such nominees election
exceeds the number of votes cast Against that nominee. You may vote
For, Against, or Abstain with respect to each director nominee.
Broker non-votes and abstentions will have no effect on the outcome of the
election. |
50 |
|
Table of Contents
● |
Proposal 2: The ratification of the appointment of
PricewaterhouseCoopers LLP must receive the affirmative vote of at least a
majority of the shares present in person or by proxy at the meeting and
entitled to vote thereon to be approved. You may vote For, Against, or
Abstain with respect to this proposal. Abstentions are considered votes
cast and thus will have the same effect as a vote Against the proposal.
Broker non-votes, if any, will have no effect on the outcome of this
proposal. |
● |
Proposal 3: The advisory vote to approve the compensation of our
named executive officers must receive the affirmative vote of at least a
majority of the shares present in person or by proxy at the meeting and
entitled to vote thereon to be approved. You may vote For, Against, or
Abstain with respect to this proposal. Abstentions are considered votes
cast and thus will have the same effect as votes Against the proposal.
Broker non-votes will have no effect on the outcome of the vote. Because
this vote is advisory only, it will not be binding on us or on our
Board. |
What happens if a
director nominee who is duly nominated does not receive a majority
vote?
The Board nominates for election or
re-election as director only candidates who have tendered, in advance of such
nomination, an irrevocable, conditional resignation that will be effective only
upon both (i) the failure to receive the required vote at the next annual
meeting of stockholders at which they face re-election and (ii) the Boards
acceptance of such resignation. In an uncontested election, the Board, after
taking into consideration the recommendation of the Nominating and Corporate
Governance Committee, will determine whether or not to accept the pretendered
resignation of any nominee for director who receives a greater number of votes
Against such nominees election than votes For such nominees election. In
the event of a contested election, the director nominees who receive the largest
number of votes cast For their election will be elected as
directors.
How are proxies solicited
for the Annual Meeting?
The Board is soliciting proxies for use
at the Annual Meeting. All expenses associated with this solicitation will be
borne by us. We will reimburse brokers or other nominees for reasonable expenses
that they incur in sending these proxy materials to you, if a broker or other
nominee holds your shares.
How may my brokerage firm
or other intermediary vote my shares if I fail to provide timely
directions?
Brokerage firms and other
intermediaries holding shares in street name for their customers are generally
required to vote such shares in the manner directed by their customers. In the
absence of timely directions, your broker will have discretion to vote your
shares on our sole routine matterthe proposal to ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting firm.
Your broker will not have discretion to vote on the other matters submitted for
a vote absent direction from you as they are non-routine matters.
Is my vote
confidential?
Proxy instructions, ballots, and voting
tabulations that identify individual stockholders are handled in a manner that
protects your voting privacy. Your vote will not be disclosed either within
Splunk or to third parties, except as necessary to meet applicable legal
requirements, to allow for the tabulation of votes and certification of the
vote, or to facilitate a successful proxy solicitation.
Where can I find the
voting results of the Annual Meeting?
We will disclose voting results on a
Current Report on Form 8-K to be filed with the SEC within four business days
after the Annual Meeting. If final voting results are not available to us in
time to include them in such Current Report on Form 8-K, we will file a Current
Report on Form 8-K to publish preliminary results and will provide the final
results in an amendment to the Current Report on Form 8-K as soon as final
results become available.
I share an address with
another stockholder, and we received multiple copies of the proxy materials. How
may we obtain a single copy of the proxy materials?
Stockholders who share an address and
receive multiple copies of our proxy materials can request to receive a single
copy in the future. To receive a single copy of the Notice and, if applicable,
the proxy materials, stockholders may contact us as follows:
Splunk Inc.
Attention: Investor Relations
270 Brannan Street
San Francisco,
California 94107
(415) 848-8400
Stockholders who hold shares in street
name may contact their brokerage firm, bank, broker-dealer or other similar
organization to request information about householding.
Table of Contents
STOCKHOLDER
PROPOSALS
Stockholders may present proper
proposals for inclusion in our proxy statement and for consideration at the next
annual meeting of stockholders by submitting their proposals in writing to our
Corporate Secretary in a timely manner. For a stockholder proposal to be
considered for inclusion in our proxy statement for our 2018 annual meeting of
stockholders, our Corporate Secretary must receive the written proposal at our
principal executive offices not later than December 27, 2017. In addition,
stockholder proposals must comply with the requirements of Rule 14a-8 regarding
the inclusion of stockholder proposals in company-sponsored proxy materials.
Proposals should be addressed to:
Splunk Inc.
Attention: Corporate Secretary
270 Brannan Street
San Francisco,
California 94107
Our Bylaws also establish an advance
notice procedure for stockholders who wish to present a proposal before an
annual meeting of stockholders but do not intend for the proposal to be included
in our proxy statement. Our Bylaws provide that the only business that may be
conducted at an annual meeting is business that is (i) specified in our proxy
materials with respect to such meeting, (ii) otherwise properly brought before
the meeting by or at the direction of our Board, or (iii) properly brought
before the meeting by a stockholder of record
entitled to vote at the annual meeting who has delivered timely written notice
to our Corporate Secretary, which notice must contain the information specified
in our Bylaws. To be timely for our 2018 annual meeting of stockholders, our
Corporate Secretary must receive the written notice at our principal executive
offices:
● |
not earlier than February 10, 2018;
and |
● |
not later than the close of business on March
12, 2018. |
If a stockholder who has notified us of
his or her intention to present a proposal at an annual meeting does not appear
to present his or her proposal at such meeting, we are not required to present
the proposal for a vote at such meeting.
Availability of
Bylaws
A copy of our Bylaws may be obtained by
accessing our filings on the SECs website at www.sec.gov or on our investor
website at http://investors.splunk.com/governance.cfm. You may also contact our
Corporate Secretary at our principal executive offices for a copy of the
relevant Bylaw provisions regarding the requirements for making stockholder
proposals and nominating director candidates.
FISCAL 2017 ANNUAL REPORT
AND SEC FILINGS
Our financial statements for the fiscal
year ended January 31, 2017 are included in our Annual Report on Form 10-K,
which was filed with the SEC and which we will make available to stockholders at
the same time as this proxy statement. Our annual report and this proxy
statement are posted on our website at www.splunk.com and are available from the
SEC at its website at www.sec.gov. You may also obtain a copy of our annual
report without charge by sending a written request to Investor Relations, Splunk
Inc., 270 Brannan Street, San Francisco, California 94107.
* * *
The Board does not know of any other
matters to be presented at the Annual Meeting. If any additional matters are
properly presented at the Annual Meeting, the persons named in the enclosed
proxy card will have discretion to vote shares they represent in accordance with
their own judgment on such matters.
It is important that your shares be
represented at the Annual Meeting, regardless of the number of shares that you
hold. You are, therefore, urged to vote by telephone or by using the Internet as
instructed on the enclosed proxy card or execute and return, at your earliest
convenience, the enclosed proxy card in the envelope that has also been
provided.
|
THE
BOARD OF DIRECTORS San
Francisco, California April 26, 2017 |
52 |
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Table of
Contents
SPLUNK INC.
270 BRANNAN
STREET
SAN FRANCISCO, CA 94107
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet
to transmit your voting instructions and for electronic delivery of information
up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow the
instructions to obtain your records and to create an electronic voting
instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY
MATERIALS
If you would like to reduce the
costs incurred by our company in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for electronic delivery,
please follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access proxy materials
electronically in future years.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone
telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time
the day before the cut-off date or meeting date. Have your proxy card in hand
when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS: |
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E28939-P89299 |
KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION
ONLY |
THIS PROXY CARD IS VALID
ONLY WHEN SIGNED AND DATED. |
SPLUNK INC.
The Board of
Directors recommends you vote FOR
the following: |
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1. |
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To elect three Class II
directors: |
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Nominees: |
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For |
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Against |
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Abstain |
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1a. |
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John Connors |
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☐ |
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☐ |
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☐ |
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1b. |
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Patricia Morrison |
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☐ |
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☐ |
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☐ |
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1c. |
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Stephen Newberry |
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☐ |
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☐ |
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☐ |
The Board of
Directors recommends you vote FOR proposals 2 and 3. |
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For |
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Against |
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Abstain |
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2. |
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To ratify the appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting
firm for our fiscal year ending January 31, 2018. |
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☐ |
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☐ |
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☐ |
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3. |
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To approve, on an advisory basis, the
compensation of our named executive officers, as described in the proxy
statement. |
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☐ |
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☐ |
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☐ |
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NOTE:
To
transact such other business as may properly come before the meeting or
any adjournments or postponements thereof. |
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Please sign exactly as your name(s)
appear(s) hereon. When signing as attorney, executor, administrator, or other
fiduciary, please give full title as such. Joint owners should each sign
personally. All holders must sign. If a corporation or partnership, please sign
in full corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX] |
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Date |
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Signature (Joint Owners) |
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Date |
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Table of
Contents
ANNUAL MEETING OF STOCKHOLDERS
OF
SPLUNK INC.
June 8, 2017
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available
at www.proxyvote.com.
Please sign, date and mail
your
proxy card in the envelope provided as soon as
possible.
SPLUNK INC.
Annual Meeting of Stockholders
June 8, 2017 3:30 p.m. Pacific
Time
This proxy is solicited by the Board of Directors
The undersigned hereby appoints Douglas
S. Merritt and David F. Conte, as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse side of this ballot, all of the shares of common stock of SPLUNK
INC. held of record by the undersigned at the close of business on April 13,
2017 at the Annual Meeting of Stockholders to be held at 3:30 p.m. Pacific Time
on June 8, 2017, at 139 Townsend Street, Suite 150, San Francisco, CA 94107, and
any adjournment thereof.
This proxy, when properly executed,
will be voted in the manner directed herein. If no such direction is made, this
proxy will be voted "FOR ALL NOMINEES" in Proposal 1, and "FOR" Proposal 2 and
Proposal 3.
Continued and to be signed on reverse
side
This regulatory filing also includes additional resources:
splk_courtesy-pdf.pdf
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