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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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[X]   Definitive Proxy Statement
[   ]   Definitive Additional Materials
[   ]   Soliciting Material Pursuant to §240.14a-12

  Splunk Inc.  
  (Name of Registrant as Specified In Its Charter)  
 
       
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 

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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 11, 2020

TO THE STOCKHOLDERS OF SPLUNK INC.:

The 2020 Annual Meeting of Stockholders (the “Annual Meeting”) of Splunk Inc., a Delaware corporation (“Splunk,” “we,” or the “Company”), will be held virtually via live audio webcast on June 11, 2020, at 3:30 p.m. Pacific Time , for the following purposes, as more fully described in the accompanying proxy statement:

1. To elect three Class II directors to serve until the 2023 annual meeting of stockholders or until their successors are duly elected and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending January 31, 2021;
3. To conduct an advisory vote to approve the compensation of our named executive officers; and
4. To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

The Board of Directors of Splunk (the “Board”) fixed the close of business on April 16, 2020 as the record date for the Annual Meeting. Only holders of our common stock as of the record date are entitled to notice of and to vote at the Annual Meeting. Further information regarding voting rights and the matters to be voted upon is presented in the accompanying proxy statement.

On or about April 28, 2020, 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 or e-mail copy of proxy materials if you choose. Instructions on how to access our proxy statement and our fiscal 2020 Annual Report may be found in the Notice or on our website at investors.splunk.com.

In light of evolving public health and safety considerations posed by the COVID-19 pandemic, the Annual Meeting this year will be a virtual-only meeting of stockholders. Stockholders will be able to attend and participate in the Annual Meeting, vote their shares electronically, submit questions, and examine a stockholder list during the live audio webcast of the Annual Meeting by visiting www.virtualshareholdermeeting.com/SPLK2020 and entering their control number. Stockholders may submit questions for the meeting in advance at www.proxyvote.com. We anticipate returning to an in-person meeting format in future years.

YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Annual Meeting online, we urge you to submit your vote now via the Internet, telephone, or mail .

We appreciate your continued support of Splunk.

Very truly yours,


Scott Morgan
Senior Vice President, Chief Legal Officer, Global Affairs and Secretary
San Francisco, California April 28, 2020

HOW TO CAST
YOUR VOTE
 
 
www.proxyvote.com
Vote by Internet
 


1-800-690-6903
Vote by Telephone

 


Mail your signed proxy card
Vote by Mail

 

Note for Street Name Holders:
If you hold your shares through a broker, bank or other nominee, you must instruct your nominee how to vote the shares held in your account. The nominee will give you a voting instruction form.

 

Your vote is important. Please vote your shares as soon as possible.

 
See “Other Matters—Questions and Answers About the Proxy Materials and Our 2020 Annual Meeting” for details on voting requirements and additional information about the Annual Meeting, including how to vote at the Annual Meeting.


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Proxy Statement Summary

Voting Matters, Vote Recommendations and Rationale

Voting Matter       Board Vote
Recommendation
Proposal 1: Election of Class II Directors FOR each nominee
     
The Board and the Nominating and Corporate Governance Committee believe that each of the nominees possesses the right skills, qualifications and experience to effectively oversee the Company’s long-term business strategy. > (page 10)
Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm FOR
     
The Board and the Audit Committee believe that the retention of PricewaterhouseCoopers LLP for the fiscal year ending January 31, 2021 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 Committee’s selection of the independent registered public accounting firm. > (page 36)
Proposal 3: Advisory Vote to Approve Named Executive Officer Compensation 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. > (page 41)

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.

Splunk 2020 Proxy Statement        1


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Proxy Statement Summary
 
 
 

Fiscal 2020 Business Highlights

Fiscal 2020 was a year of strong growth, financial performance and execution. Our ongoing prioritization of customer success and adoption led to continued top-line revenue growth. In fiscal 2020, our executive compensation plans emphasized revenue and non-GAAP operating margin metrics to align our compensation incentives with our business strategy of delivering growth with spending discipline and operating leverage, which we believe is consistent with the investment objectives of our stockholders. These are the financial metrics on which our investors focused in fiscal 2020, and we provided robust information and discussion regarding the results of these metrics each quarter during the fiscal year. Our fiscal 2020 business highlights include achievement of the following revenue and non-GAAP operating margin results and other important metrics:

Total revenue of $2.359 billion, up 31% year-over-year;
Non-GAAP operating margin of 14.2% (1) ;
Operating cash flow of negative $287.6 million with free cash flow of negative $388.8 million (1) ; and
Over 19,400 customers in more than 130 countries at the end of fiscal 2020, compared to over 17,500 customers at the end of fiscal 2019.
(1) To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP operating margin and free cash flow. For a full reconciliation between GAAP and non-GAAP operating margin and between net cash provided by operating activities and free cash flow, please see our Annual Report on Form 10-K for the year ended January 31, 2020.

Total Revenue Total Stockholder Return**
$ in Millions • FYE January 31 FYE January 31
 
 

 

 

 

*

Reflects the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).

**

The chart shows the total return on our common stock through the end of fiscal 2020, assuming an initial investment of $100 at the end of fiscal 2015.

See also “Executive Compensation—Compensation Discussion and Analysis—Executive Summary—Strategic Context and Fiscal 2020 Business Highlights” on page 42 of this proxy statement. Detailed information on our financial and operational performance can be found in our fiscal 2020 Annual Report on Form 10-K.

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Proxy Statement Summary
 
 
 

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 10 describes our governance practices, which include the following highlights:


100% Independent Committee Members
Independent Chair
Majority Voting for Directors with Resignation Policy
Annual Board and Committee Evaluation
Board Continuing Education Program
Proxy Access Bylaws
Director Change in Circumstances with Resignation Policy
Qualified Diverse Candidate Pool Policy
Board Risk Oversight
Periodic Review of Committee Charters and Governance Policies
Regular Meetings of Independent Directors Without Management Present
Formal CEO Evaluation Process
Clawback Policy
Annual Say-on-Pay Vote
Stockholder Engagement Program
Stock Ownership Guidelines for Directors and Officers
Anti-Hedging and Anti-Pledging Policy
Code of Conduct for Directors, Officers and Employees
Succession Planning Process

Stockholder Engagement

We believe that effective corporate governance includes regular, constructive conversations with our stockholders. We are committed to maintaining an active dialogue to understand the priorities and concerns of our stockholders and believe that ongoing engagement builds mutual trust and understanding with our stockholders. Stockholder engagement and feedback are critical components of our corporate governance practices and inform our decisions and programs.

Over the past several years, in response to stockholder feedback, and as part of our ongoing evaluation of best practices, the Board has incorporated enhancements to our executive compensation program and corporate governance practices such as those depicted in the timeline. In fiscal 2020, we solicited the views of institutional stockholders representing approximately 67% of our shares and engaged in substantive discussions with stockholders representing approximately 37% of our shares. These discussions have helped ensure that our Board’s decisions are informed by stockholder objectives.

For additional information, see “Corporate Governance at Splunk—Stockholder Engagement” on page 30 of this proxy statement and “Executive Compensation—Compensation Discussion and Analysis—Executive Summary—Stockholder Engagement and Our 2019 Say-on-Pay Vote” on page 44 of this proxy statement.

Splunk 2020 Proxy Statement        3


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Proxy Statement Summary
 
 
 

  

MARCH

 
Replaced revenue metric with annual recurring revenue in both our executive bonus plan and our PSU program to align our incentives with key drivers of stockholder value and reflect our transition to a renewable business model
Replaced non-GAAP operating margin metric with operating cash flow in our PSU program to reflect focus on disciplined execution of our business objectives during our transition to a renewable business model
APRIL
Enhanced proxy disclosures of Board succession planning, risk oversight and corporate sustainability
MARCH
Added stock price modifier to PSU program
APRIL
Enhanced proxy disclosures of director qualifications and skills, the role of diversity in our director nominations process, Board refreshment and corporate sustainability
SEPTEMBER
Updated stock ownership guidelines
MARCH
Replaced operating cash flow metric with non-GAAP operating margin in our PSU program to reflect increased strategic focus on a profitability measure
APRIL
Added collective director qualifications table to proxy
DECEMBER
Adopted director change in circumstances with resignation policy
Adopted qualified diverse candidate pool policy
MARCH
Implemented proxy access Bylaws
Increased proportion of PSUs in long-term equity compensation program for all executive officers
APRIL
Added proxy disclosure regarding Board and Committee self-evaluations and succession planning
FEBRUARY
Adopted clawback policy
MARCH
Introduced performance-based equity awards (“PSUs”) with revenue and operating cash flow metrics
APRIL
Significantly enhanced readability and presentation of proxy
SEPTEMBER
Launched formal stockholder engagement program
Adopted majority voting for directors with resignation policy
Adopted stock ownership guidelines

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Proxy Statement Summary
 
 
 

Director Nominees and Other Directors

Ensuring the Board is composed of directors who bring diverse viewpoints and perspectives, exhibit a variety of skills, experience, and backgrounds, and effectively represent the long-term interests of stockholders is a top priority of our Board and Nominating and Corporate Governance Committee. The Board believes periodic assessment of directors is integral to an effective governance structure and aims to strike a balance between ensuring that we retain directors with deep knowledge of the Company while adding directors who bring a fresh perspective. We have added three new directors since 2017, enhancing the Board’s breadth and depth of experience and diversity, while taking into account the Company’s evolving business model, the macro technology business environment and the changing governance landscape.

Current Board Overview

Director Independence       Tenure       Age       Gender Diversity

The following table provides summary information about each director nominee and other directors as of March 31, 2020. See pages 14 to 18 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
2020 Director Nominees
John Connors* II 61 Managing Partner, Ignition Partners 2007 2020 2023
Patricia Morrison* II 60 Former EVP, Customer Support Services, and CIO, Cardinal Health 2013 2020 2023
Stephen Newberry* II 66 Former Chairman, Lam Research 2013 2020 2023
Continuing Directors
Mark Carges* I 58 Former CTO, eBay 2014 2022
Elisa Steele* I 53 Independent Board Member 2017 2022
Sri Viswanath* I 44 CTO, Atlassian 2019 2022
Sara Baack* III 48 Chief Product Officer, Equinix 2017 2021
Douglas Merritt III 56 President and CEO, Splunk 2015 2021
Graham Smith* III 60 Chair, Splunk 2011 2021
* Independent director Chair Member Audit Committee Financial Expert

Splunk 2020 Proxy Statement        5


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Proxy Statement Summary
 
 
 

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. The Compensation Committee structures our executive compensation program to include significant performance attributes that are aligned with our business strategy and long-term stockholder value creation. The fiscal 2020 executive compensation program provided short-term cash bonuses designed to drive top-line growth and long-term equity awards designed to drive revenue, non-GAAP operating margin performance and future stock price performance. The following chart summarizes the evolution of our long-term equity compensation design in response to stockholder feedback and other considerations.

* Equity weightings are at the target performance level; the actual mix of equity will vary with performance unit award results.
** In fiscal 2017 only, long-term equity compensation for our CEO consisted of 25% RSUs and 75% PSUs.

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Proxy Statement Summary
 
 
 

Our Executive Compensation Practices

Our executive compensation policies and practices are designed to reinforce our pay for performance philosophy and align with sound governance principles. Listed below are highlights of our fiscal 2020 executive compensation policies and practices:

What We Do

What We Don’t Do

Performance-based cash and equity incentives
Caps on performance-based cash and equity incentive compensation
Annual review and approval of our executive compensation strategy
Significant portion of executive compensation at risk based on corporate performance
Clawback policy on cash and equity incentive compensation
Stock ownership guidelines for executive officers and directors
Four-year equity award vesting periods
Independent compensation consultant engaged by the Compensation Committee
100% independent directors on the Compensation Committee
Limited and modest perquisites
Formal CEO evaluation tied to compensation decisions
Ongoing engagement with our institutional stockholders regarding our compensation policies and practices
No “single trigger” change in control payments and benefits
No post-termination retirement or pension-type non-cash benefits or perquisites for our executive officers that are not generally available to our employees
No tax gross-ups for change in control related payments
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
           

Our Fiscal 2020 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 2020, specifically the base salary and cash bonus amounts earned and the grant date fair value of equity awards granted in fiscal 2020. These charts illustrate the predominance of at-risk and performance-based components in our regular executive compensation program. We believe these elements provide a compensation package that attracts and retains 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.

Splunk 2020 Proxy Statement        7


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Proxy Statement Summary
 
 
 

CEO

All Other NEOs*

* This chart excludes one-time cash payments made to Mr. Child and Mr. Conte. See “Executive Compensation—Compensation Discussion and Analysis— Other Compensation Policies and Information—One-Time Transition Bonuses” on page 58 of this proxy statement for details on the one-time cash payments made to Mr. Child and Mr. Conte. If the one-time cash payments made to Mr. Child and Mr. Conte were to be included, the pay mix would be 62% performance-based.

In addition, the chart below illustrates the short-term and long-term timeframe over which the various components of the NEOs’ fiscal 2020 compensation are earned and paid and serve to continue to retain and incentivize our NEOs.

FYE January 31

            2020             2021             2022            2023
BASE SALARY
Paid throughout fiscal 2020
 
CASH BONUS
Fiscal 2020 annual cash bonus
(50% of target bonus paid in September 2019, and full fiscal 2020 achievement determined and paid in March 2020)
 
LONG-TERM EQUITY COMPENSATION (RSUs)
Fiscal 2020 awards granted in March 2019
(25% vested in March 2020, remaining 75% vest quarterly thereafter over next three years)
 
       
 
LONG-TERM EQUITY COMPENSATION (PSUs)
Fiscal 2020 awards granted in March 2019
(25% of earned corporate PSUs vested in March 2020, remaining 75% of earned corporate PSUs vest quarterly thereafter over next three years)
 
       
 
(stock price PSUs eligible to be earned and to vest beginning in June 2021 on a quarterly basis through the end of the four-year vesting period of the corporate PSUs or March 2023)
 

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Table of Contents

PROXY STATEMENT SUMMARY       1
CORPORATE GOVERNANCE AT SPLUNK 10
 Proposal 1:   Election of Directors 10
Board Composition 10
Board’s Role and Responsibilities 20
Board Effectiveness 22
Board Meetings and Committees 24
Non-Employee Director Compensation 26
Stockholder Engagement 30
Corporate Sustainability Highlights 31
Other Governance Policies and Practices 34
AUDIT COMMITTEE MATTERS 36
 Proposal 2:  Ratification of Appointment of Independent Registered Public Accounting Firm 36
Report of the Audit Committee   37
Fees Paid to the Independent Registered Public Accounting Firm 38
Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm 38
OUR EXECUTIVE OFFICERS 39
EXECUTIVE COMPENSATION 41
 Proposal 3:  Advisory Vote to Approve Named Executive Officer Compensation 41
Compensation Discussion and Analysis 42
Executive Summary 42
Discussion of Our Fiscal 2020 Executive Compensation Program 45
Other Compensation Policies and Information 58
Compensation Committee Report 62
Compensation Tables 63
Summary Compensation Table 63
Grants of Plan-Based Awards for Fiscal 2020 65
Outstanding Equity Awards at Fiscal 2020 Year-End 67
Option Exercises and Stock Vested in Fiscal 2020 68
Pension Benefits and Nonqualified Deferred Compensation 68
Executive Employment Arrangements 69
Equity Acceleration Death Benefit 71
Potential Payments Upon Termination or Upon Termination In Connection With a Change in Control 72
CEO Pay Ratio 73
Equity Compensation Plan Information 74
STOCK OWNERSHIP INFORMATION 75
Security Ownership of Certain Beneficial Owners and Management 75
OTHER MATTERS 77
Questions and Answers about the Proxy Materials and Our 2020 Annual Meeting 77
Stockholder Proposals 81
Fiscal 2020 Annual Report and SEC Filings 82

Splunk 2020 Proxy Statement        9


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Corporate Governance at Splunk

Election of Directors
The Board recommends a vote “ FOR ” each of the nominees named below.

Our business affairs are managed under the direction of our Board, which is currently composed of nine 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 director’s 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.

In an uncontested election, directors are elected by a majority vote. This means that in order for a nominee to be elected in an uncontested election, the number of votes cast “For” such nominee’s election must exceed the number of votes cast “Against” that nominee’s election. Broker non-votes and abstentions will have no effect on the outcome of such election. In addition to the majority vote standard for director elections, we have a director resignation policy described in “Other Matters–Questions and Answers about the Proxy Materials and our 2020 Annual Meeting” on page 77.

In light of the individual qualifications and experiences of each of our director nominees, and the contributions that our nominees have made to our Board, our Board has recommended that each of our director nominees be elected by our stockholders. Biographies of all our directors are set forth below under “Nominees for Director” and “Continuing Directors.”

Board Composition

Considerations in Evaluating Director Nominees

Our Board follows an annual director nomination process that promotes thoughtful and in-depth review of overall Board composition and director nominees throughout the year. At the beginning of the process, the Nominating and Corporate Governance Committee reviews current Board composition and any specific characteristics desired for future director candidates. In its review of incumbent director candidates, the Nominating and Corporate Governance Committee evaluates any changes in circumstances that may impact their candidacy and considers information from the Board evaluation process. Upon a recommendation from the Nominating and Corporate Governance Committee, the Board considers and approves the nomination of director candidates for election at the annual meeting of the stockholders. See “Board Refreshment and Succession Planning” below for a discussion of the director search and selection process.

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 Board’s work and the Company’s strategy and strengthens the current Board’s skills mix.

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Corporate Governance at Splunk
 
 
 

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 Proven achievement in nominee’s field Sound business judgment Complementary skills to those of existing Board Ability to assist management and significantly contribute to our success Understanding of fiduciary duties 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 establish appropriate levels of director turnover. New perspectives and new ideas are critical to a forward-looking and strategic Board, as are the benefits of the valuable experience and familiarity that longer-serving directors bring.    
Diversity – Our Corporate Governance Guidelines reflect our commitment to Board diversity, by explicitly stating the Board’s commitment to include qualified diverse candidates (including gender, race and ethnicity) in the pool from which nominees are considered. We believe that the judgment and perspective offered by a diverse board of directors improves the quality of decision making and enhances the Company’s business performance. We also believe such diversity can help the Board respond more effectively to the varying needs of our customers, stockholders, workforce and other stakeholders.

Experience – The Nominating and Corporate Governance Committee strives for a Board that spans a range of expertise and perspective in areas relevant to the Company’s business, strategic vision and operating and innovation environment.

Full-time employment/Directorships – The Nominating and Corporate Governance Committee takes into consideration employment status and whether the director holds a current operating role or is retired, and number of other public company boards on which the director serves to evaluate whether the nominee can commit the 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 as defined under The Nasdaq Stock Market rules.

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 pre-assign any 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. The Board and the Nominating and Corporate Governance Committee believe that the collective experiences and qualifications of the directors allow the Board to best fulfill its responsibilities to the long-term interest of our stockholders.

Splunk 2020 Proxy Statement      11


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Corporate Governance at Splunk
 
 
 

Below is a summary of the primary experience, qualifications and skills that our directors bring to the Board:

Capability       Description       Number of directors
with the capability
Technology infrastructure Deep insight in technology infrastructure, business prioritization and customer drivers
Scaling a SaaS business Experience growing successful SaaS companies, reaching scale and maturity
Investment Experience creating long term value through investment, acquisitions, and growth strategies
CEO experience Expertise shaping strategy, performance, prioritization, and scale leadership
Modern technologist Deep knowledge in technology architecture, risk, and innovation including transitioning from on-premises to cloud
Sales Experience building global sales capability for cloud services and enterprise software
Marketing Marketing and brand-building capability in rapidly changing industries, including new markets and expansion into adjacencies
Key customer segment insight Depth of insight into current and potential target markets and geographies
Finance Financial expert with expertise in financial strategy, accounting, reporting
People and compensation Expertise in aligning company culture, performance, reward and talent with strategy
Governance, risk and compliance Experience in public company corporate governance and creating long term sustainable value
Strong capability       Moderate capability

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Corporate Governance at Splunk
 
 
 

Board Refreshment and Succession Planning

The Nominating and Corporate Governance Committee, together with our Board, practices a long-term approach to Board refreshment. With the assistance of an independent search firm, the Nominating and Corporate Governance Committee focuses on identifying, considering and evaluating potential Board candidates with the goal of evolving the composition of our Board in line with the strategic needs of the Company. As the Company innovates, implements new technologies and enters new markets, its business model may require directors with new or different skill sets. Our succession planning process takes the Company’s evolution into account to ensure the Board remains a strategic asset capable of addressing the risks, trends, and opportunities that the Company will face in the future.

As part of the succession planning process, and in line with its multi-year view of anticipated director departures and leadership changes, the Nominating and Corporate Governance Committee, together with the Board, discusses the Board’s future composition needs. This discussion includes the desired skills and attributes of successors for long-tenured directors as well as successors for our Chair and committee chairs. It also takes into account the current and long-term needs of our business and the skills composition of our Board and our committees.

The following describes the Company’s selection process for new directors:

Source Candidate Pool from

Independent Search Firm
Stockholders
Independent Directors
Our Management Team

In-Depth Review

by the Nominating and Corporate Governance Committee

Consider skills mix and needs
Consider diversity screen qualifications
Review independence and potential conflicts

Meeting with Candidate

Chair
CEO
CFO
CLO
Chair of each committee
Opportunity for other directors to meet, especially if experienced in relevant area
Recommend Selected Candidate for Appointment to our Board Review and Appointment by full Board
           
     
Select Director
3 new directors since 2017

Splunk 2020 Proxy Statement      13


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Corporate Governance at Splunk
 
 
 

Nominees for Director

John Connors

Independent
Managing Partner at Ignition Partners

Age 61

Director Since  2007

Splunk Committee(s):
Audit Committee

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.
Mr. Connors brings the following primary experiences, qualifications and skills to the Board:
                   
Scaling a
SaaS business
Investment Modern
technologist
Key customer
segment
insight
Finance Governance,
risk and compliance
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.

Patricia Morrison

Independent
Former EVP, Customer Support Services, and CIO of Cardinal Health

Age 60

Director Since  2013

Splunk Committee(s):
Audit Committee; Nominating and Corporate Governance Committee

Ms. Morrison possesses specific attributes that qualify her to serve as a director, including her information technology expertise and professional experience as an executive and as a member of the board of directors of other public companies.
Ms. Morrison brings the following primary experiences, qualifications and skills to the Board:
               
Technology
infrastructure
Modern
technologist
Key customer
segment
insight
People and
compensation
Governance,
risk and compliance
Patricia Morrison has served as a member of our Board since 2013. Ms. Morrison was Executive Vice President, Customer Support Services and Chief Information Officer at Cardinal Health, Inc., a provider of healthcare services, from 2009 to 2018. 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 Baxter International Inc., a global medical products company, since 2019. Ms. Morrison previously served as a member of the board of directors of Aramark, a global provider of food, facilities and uniform services, from 2017 to 2019. Ms. Morrison holds a B.A. and B.S. from Miami University in Oxford, Ohio.
 
 
 
 
 


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Stephen Newberry

Independent
Former Chairman of Lam Research

Age 66

Director Since  2013

Splunk Committee(s):
Compensation Committee

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.
Mr. Newberry brings the following primary experiences, qualifications and skills to the Board:
                 
Scaling a
SaaS business
CEO
experience
Sales Marketing Key customer
segment
insight
People and
compensation
Governance,
risk and compliance
Stephen Newberry has served as a member of our Board since 2013. Mr. Newberry served as a director of Lam Research Corporation, a supplier of wafer fabrication equipment and services, from 2005 to 2019, and served as the Chairman of the board of Lam Research from 2012 to 2019. He served as Lam Research’s Chief Executive Officer from 2005 to 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.
 

Continuing Directors

Mark Carges

Independent
Former CTO of eBay

Age 58

Director Since  2014

Splunk Committee(s):
Compensation Committee

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.
Mr. Carges brings the following primary experiences, qualifications and skills to the Board:
                   
Technology
infrastructure
Scaling a
SaaS business
Modern
technologist
Key customer
segment
insight
People and
compensation
Governance,
risk and compliance
Mark Carges has served as a member of our Board since 2014. Mr. Carges 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 eBay’s Senior Vice President, Global Products, Marketplaces. From September 2008 to September 2009, he served as eBay’s 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 has served as a member of the board of directors of Veeva Systems Inc., a provider of industry cloud solutions for the global life sciences industry, since 2017. 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.


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Elisa Steele

Independent
Independent Board Member

Age 53

Director Since  2017

Splunk Committee(s):
Compensation Committee

Ms. Steele possesses specific attributes that qualify her to serve as a director, including her knowledge and experience in the software industry and professional experience as an executive of various technology companies.

Ms. Steele brings the following primary experiences, qualifications and skills to the Board:

                         
Scaling
a SaaS
business
CEO
experience
Modern
technologist
Sales Marketing Key
customer
segment
insight
People and
compensation
Governance,
risk and
compliance

Elisa Steele has served as a member of our Board since 2017. Ms. Steele previously served as Chief Executive Officer of Namely, Inc., a financial and human capital management software company, from 2018 to 2019. Prior to joining Namely, Ms. Steele served as Chief Executive Officer and President of Jive Software, Inc., a collaboration software company (acquired by Aurea Software, Inc.), from 2015 to 2017. From 2014 to 2015, she served in various executive positions at Jive Software, including President; Executive Vice President, Strategy and Chief Marketing Officer; and Executive Vice President, Marketing and Products. Prior to joining Jive Software, Ms. Steele served as Chief Marketing Officer and Corporate Vice President, Consumer Apps & Services at Microsoft Corporation, a worldwide provider of software, services and solutions, and Chief Marketing Officer of Skype, an Internet communications company, from 2012 to 2014. Ms. Steele also has held executive leadership positions at Yahoo! Inc. and NetApp, Inc. Ms. Steele has served as a member of the board of directors of Cornerstone OnDemand, Inc., a learning and human capital management software company, since 2018. Ms. Steele holds a B.S. from the University of New Hampshire and an M.B.A. from San Francisco State University.


Sri Viswanath

Independent
CTO of Atlassian

Age 44

Director Since  2019

Splunk Committee(s):
Nominating and Corporate Governance Committee

Mr. Viswanath possesses specific attributes that qualify him to serve as a director, including his product and engineering expertise, his knowledge and experience in the software industry and professional experience serving in leadership positions at other public companies.

Mr. Viswanath brings the following primary experiences, qualifications and skills to the Board:

               
Technology
infrastructure
Scaling a SaaS
business
Modern
technologist
Key customer
segment insight
People and
compensation
Sri Viswanath has served as a member of our board of directors since 2019. Since 2016, Mr. Viswanath has served as Chief Technology Officer at Atlassian Corporation Plc, a provider of team collaboration and productivity software. Prior to joining Atlassian, Mr. Viswanath served as Senior Vice President of Engineering and Operations from April 2013 to October 2014 and Chief Technology Officer from October 2014 to January 2016 at Groupon, Inc., an e-commerce company. From 2012 to 2013, he served as Vice President of Research and Development for mobile computing at VMware, Inc., a provider of cloud and virtualization software and services. His previous experience also includes senior-level product positions at Glam Media, Inc. and Ning Inc. (acquired by Glam Media). He began his career in engineering roles at Sun Microsystems, Inc. Mr. Viswanath previously served on the board of directors of SendGrid, Inc., a provider of a cloud-based customer communication platform (acquired by Twilio Inc.), from 2017 to 2019. Mr. Viswanath holds a B.E. from Bangalore University, and a M.S. from each of Clemson University and Stanford University.


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Sara Baack

Independent
Chief Product Officer of Equinix

Age 48

Director Since  2017

Splunk Committee(s):
Nominating and Corporate Governance Committee

Ms. Baack possesses specific attributes that qualify her to serve as a director, including her knowledge and experience in the information technology services industry and professional experience serving in leadership positions at other public companies.

Ms. Baack brings the following primary experiences, qualifications and skills to the Board:

               
Technology
infrastructure
Scaling a SaaS
business
Investment Modern
technologist
Sales
 
Marketing Key customer
segment insight
Finance Governance, risk and
compliance
Sara Baack has served as a member of our Board since 2017. Since April 2019, Ms. Baack has served as Chief Product Officer of Equinix, Inc., a global interconnection and data center company. Previously, she was Equinix’s Chief Marketing Officer from 2012 to April 2019. Prior to joining Equinix, Ms. Baack served in various executive positions at Level 3 Communications Inc., a provider of integrated communications services, most recently as Senior Vice President, Voice Services from 2007 to 2012 and in other leadership positions in the company from 2000 to 2007. Prior to Level 3, she worked in financial services investing private equity for PaineWebber Capital (since acquired by UBS Group AG). Ms. Baack holds a B.A. from Rice University and an M.B.A. from Harvard Business School.

Douglas Merritt

President and CEO of Splunk

Age 56

Director Since  2015

Splunk Committee(s):
None

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 CEO and 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.
Mr. Merritt brings the following primary experiences, qualifications and skills to the Board:
                   
Technology
infrastructure
Scaling a SaaS
business
Investment CEO experience Modern
technologist
Sales
 
Marketing Key customer
segment insight
Finance People and
compensation
Governance, risk
and compliance
Douglas Merritt has served as our President, CEO and a member of our Board since 2015. Mr. Merritt served as our Senior Vice President of Field Operations from 2014 to 2015. Prior to joining us, he 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., a software company (acquired by Oracle Corporation). He also co-founded and served as Chief Executive Officer of Icarian, Inc., a cloud-based company (since acquired by Workstream Corp.), from 1996 to 2001. Mr. Merritt holds a B.S. from The University of the Pacific in Stockton, California.


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Graham Smith

Independent
Chair of Splunk

Age 60

Director Since  2011

Splunk Committee(s):
Audit Committee

Mr. Smith possesses specific attributes that qualify him to serve as a director, including his financial expertise and professional experience as an executive and as a member of the board of directors of other public software companies.
Mr. Smith brings the following primary experiences, qualifications and skills to the Board:
                   
Scaling a
SaaS business
Investment Modern
technologist
Key customer
segment insight
Finance Governance,
risk and compliance

Graham Smith has served as a member of our Board since 2011 and Chair since 2019. Mr. Smith was Executive Vice President at salesforce.com, inc., a provider of enterprise cloud computing software, in 2015. Previously he was salesforce’s 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, Mr. Smith served as Chief Financial Officer at Advent Software Inc., a portfolio accounting software company, from 2003 to 2007. Mr. Smith has served as a member of the board of directors of BlackLine, Inc., a provider of cloud-based solutions for finance and accounting since 2015, and Slack Technologies, Inc., a provider of cloud-based professional collaboration tools, since 2018. Mr. Smith previously served on the board of directors of Citrix Systems, Inc., an enterprise software company, from 2015 to 2018, MINDBODY, Inc., a cloud-based wellness services marketplace (acquired by Vista Equity Partners), from 2015 to 2019, and Xero Limited, an online accounting software company, from 2015 to 2020. Mr. Smith holds a B.Sc. from Bristol University in England and qualified as a chartered accountant in England and Wales.


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 company’s board of directors, and subject to specified limited 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 company’s 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. Baack, Morrison and Steele, and Messrs. Carges, Connors, Newberry, Smith and Viswanath, representing eight of our nine 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. In addition, our Board determined that Messrs. Neustaetter and Sullivan, who each served as a director until his retirement in June 2019, were each independent during fiscal 2020.

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Stockholder Recommendations

The Nominating and Corporate Governance Committee will consider candidates for directors recommended by stockholders holding at least one percent of our fully diluted capitalization continuously for at least 12 months. 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 meeting the applicable requirements that wish to recommend a candidate for nomination should contact our Corporate Secretary or our Legal Department in writing. Such recommendations must include the candidate’s name, home and business contact information, detailed biographical data, relevant qualifications, a statement of support by the recommending stockholder, evidence of the recommending stockholder’s 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. We did not receive any stockholder recommendations in 2019.

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) owning
3% outstanding stock for at
least
3 years consecutively

    

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 2021 annual meeting of stockholders, our Corporate Secretary must receive a stockholder’s notice of a proxy access nomination at our principal executive offices:

not earlier than November 29, 2020; and
not later than the close of business on December 29, 2020.

Advance Notice Procedures

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 Matters—Stockholder Proposals” for stockholder proposals that are not intended to be included in our proxy statement.

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Board’s Role and Responsibilities

Stockholders elect the Board to oversee our management team and to serve stockholders’ long-term interests. In exercising their fiduciary duties, the Board represents and acts in the interests of our stockholders and is committed to strong corporate governance. The Board is deeply involved in the Company’s strategic planning process, risk oversight, human capital management, succession planning and selecting and evaluating the performance of our CEO.

Long-Term Strategic Planning

Our Board recognizes the importance of assuring that our overall business strategy is designed to create long-term, sustainable value for our stockholders. As a result, our Board maintains an active oversight role in helping our management team formulate, plan and implement the Company’s strategy. The Board and our management team routinely discuss the execution of our long-term strategic plans, the status of key initiatives and the key opportunities and risks facing the Company. At least annually, the Board participates in an in-depth review of the Company’s overall strategy with our management team. The Board and our management team discuss the industry and competitive landscapes, and short- and long-term plans and priorities. In addition to our business strategy, the Board reviews the Company’s financial plan for the upcoming year, which is aligned to the Company’s long-term strategic plans and priorities.

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 assuring that an appropriate culture of risk management exists within the Company and for setting the right “tone at the top,” overseeing our risk management programs and practices, which includes areas such as strategic risks, including risks related to product, go-to-market and sales strategies, competitive risks, financial risks, brand and reputation risks, legal, compliance and geo-political risks, operational risks and cybersecurity and technology 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 chairs. Our management team is responsible for the day-to-day management of risks we face and members of our management team engage with the Board and its three standing committees regularly regarding such risks. Throughout the year, our Board and each committee spend a portion of their time reviewing and discussing specific risk topics.

Our Board, together with the Audit Committee and the Compensation Committee, has been actively engaged with our management team in monitoring the severe market developments and other effects of the COVID-19 pandemic, and our management team is in regular communication with the Board about the assessment and management of the significant risks to the Company, our employees, our customers and other stakeholders.

In addition, those employees representing certain core business functions also regularly engage with the Board and its committees. For example, some of these functions include:

Our Chief Information Security Officer (“CISO”) provides periodic updates to the Audit Committee on cybersecurity and other risks relevant to our information technology environment. The Board and the Audit Committee also receive updates about the results of periodic exercises and response readiness assessments led by our CISO and outside advisors who provide a third-party independent assessment of our cyber risk management program and our internal response preparedness.
Reporting to the Audit Committee, our internal audit function provides objective audit, investigative, and advisory services aimed at providing assurance to our management team and the Board that the Company is anticipating, identifying, assessing, and appropriately prioritizing and mitigating risks.

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Representatives from our Legal Department update our Board regularly on material legal, compliance, governance and geo-political matters.
Our Strategy and Corporate Development team, along with others, assists the Board in its governance of strategic acquisitions and investments and assessments of the competitive landscape.

Our Board believes that its current leadership structure, described in detail under “Board Effectiveness” on page 22, 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.

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, compliance and geo-political
• Operational • Data protection and cybersecurity • Succession planning • Culture

       
     
AUDIT COMMITTEE
Primary Risk Oversight


Risk management framework
Financial statements, financial reporting and internal controls
Data protection and cybersecurity
Legal and compliance
     COMPENSATION COMMITTEE
Primary Risk Oversight


Employee compensation policies and practices
Non-executive director compensation policies and practices
Human capital management
CEO and management succession planning
     NOMINATING & CORPORATE GOVERNANCE COMMITTEE
Primary Risk Oversight


Governance framework
Board effectiveness
Board succession planning
Conflicts of interest and compliance
ESG activities, programs and public disclosure

MANAGEMENT
Identification, assessment, and mitigation of risks

Leadership Development and Management Succession Planning

The Board and management team recognize the importance of continuously developing our executive talent. The Compensation Committee periodically reviews the performance reviews and succession planning for our management team and reports its findings and recommendations to the Board, works with the Board in evaluating potential successors to management positions and confers with the CEO to encourage our management team’s employee development programs. The Compensation Committee also periodically reviews a succession plan for the CEO position, using formal criteria to evaluate potential successors. In conducting its evaluation, the Compensation Committee considers organizational needs, competitive challenges, leadership/ management potential and development, and emergency situations.

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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 “Board Composition—Board Refreshment and Succession Planning” beginning on page 13.

CEO Evaluation Process

Our Board conducts an annual CEO evaluation process, consisting of both a performance review and a compensation analysis. For fiscal 2020, the performance evaluation component was led by our Chair of the Board and the chair of the Compensation Committee and included an assessment of the CEO’s performance in light of set objectives, 360 feedback evaluations provided by individuals who substantively interact with the CEO, and a detailed CEO self-assessment. Separately, the Compensation Committee’s independent compensation consultant conducted a market analysis to assess alignment of CEO compensation with competitive market practices and provided its findings to the Compensation Committee. Once all the relevant performance data had been collected, our Chair and the chair of the Compensation Committee prepared and presented their evaluation on CEO performance to the Board. The Compensation Committee then met in executive session to discuss the CEO performance evaluation results and CEO compensation. After reviewing all the collected data regarding performance, the Compensation Committee made its decision regarding CEO compensation for fiscal 2020. Our CEO abstained from participating in all discussions of the Compensation Committee and Board related to the final determination of his compensation.

Board Effectiveness

Leadership Structure

Mr. Smith, one of the Company’s independent directors, currently serves as Chair of our Board. The Chair presides over meetings of the Board, presides over meetings of stockholders, works with our management team to prepare agendas for meetings of the Board, serves as a liaison between our management team and the directors, 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 Chair facilitates our Board’s independent oversight of our management team, promotes communication between our management team and our Board, engages with stockholders, when appropriate, and leads our Board’s consideration of key governance matters.

Our Corporate Governance Guidelines require an independent director to serve as Lead Independent Director if the Chair is not an independent director. As the current Chair is an independent director, we do not currently have a Lead Independent Director. With the appointment of Mr. Smith, Mr. Connors stepped down as Lead Independent Director, effective March 21, 2019, and continues to serve as a member of our Board and Chair of the Audit Committee.

The Nominating and Corporate Governance Committee periodically reviews the Board’s leadership structure and when appropriate, recommends changes to the Board’s leadership structure, taking into consideration the needs of the Board and the Company at such time.

Executive Sessions

The non-employee, independent members of our Board and all committees of the Board generally meet in executive session without our management team present during their regularly scheduled board and committee meetings. For as long as we have an independent Chair, the Chair will preside over these meetings.

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Board Evaluations

Each year, the Nominating and Corporate Governance Committee reviews the format and framework of the Board and committee evaluation process and oversees the process itself.

The evaluation process has historically taken one of two forms: an internal assessment led by the Lead Independent Director (when we have a Lead Independent Director) or an assessment using the services of an independent 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. While this formal evaluation is conducted on an annual basis, directors share perspectives, feedback and suggestions year-round.

For fiscal 2020, as with fiscal 2019, fiscal 2018 and fiscal 2017, the Nominating and Corporate Governance Committee used an independent consultant, experienced in corporate governance matters, to assist with the Board and committee evaluation process. Using a combination of online surveys and interviews by the consultant, directors provided feedback on individual directors, committees and the Board in general. The topics covered included, among other things, Board and committee processes, Board composition and expertise and other matters designed to elicit information to be used in improving Board and committee operation, performance and capability. In addition, certain members of our management team completed an online survey regarding Board performance and were interviewed by the consultant and gave specific feedback on Board dynamics and interactions with our management team. The consultant also attended Board and committee meetings to observe Board dynamics and effectiveness.

The consultant synthesized the results and comments received during the interviews. At subsequent meetings, the consultant presented the findings to the Nominating and Corporate Governance Committee and the Board, followed by review and discussion by the full Board. The consultant also held sessions with our management team and each director individually to communicate feedback on key strengths and opportunities for greater contribution and development.

Over the past few years, the evaluation process has led to a broader scope of topics covered in Board meetings and improvements in Board process. These improvements include changes relating to the preparation and distribution of Board materials, adjustments to the timing and location of Board and committee meetings, holding a directors’ education day, participating in an annual in-depth review of the Company’s overall strategy with our management team and a more fluid discussion of anticipated future director skills. The Board and management team also developed a shared understanding on Board dynamics and agreed on areas of focus for improved performance. The process has also informed Board and committee composition and leadership roles, which includes evolution of the director skills and experience qualifications criteria to meet the current and anticipated needs of the business. Results of the process, including review of contributions and performance of each director, are used by the Nominating and Corporate Governance Committee when considering whether to nominate the director for re-election to the Board.

Director Onboarding and Continuing Education

As part of our onboarding process, all new directors participate in an orientation program which familiarizes them with the Company’s business, operations, strategies and corporate governance practices, and assists them in developing Company and industry knowledge to optimize their service on the Board. Our onboarding process also includes meetings with members of our management team to accelerate their effectiveness to engage fully in deliberations of our Board.

The Company encourages directors to participate in continuing education programs focused on the Company’s business and industry, committee roles and responsibilities and legal and ethical responsibilities of directors. 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 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.

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Board Meetings and Committees

During our fiscal year ended January 31, 2020, the Board held seven 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. Mses. Baack, Morrison and Steele, and Messrs. Carges, Merritt, Neustaetter, Newberry, Smith and Viswanath attended our 2019 annual meeting of stockholders. 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
Our 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/corporate-governance.
    

The current members of our Audit Committee are Messrs. Connors and Smith and Ms. Morrison. 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 Securities and Exchange Commission (“SEC”) applicable to Audit Committee members. Our Board has also determined that both Messrs. Connors and Smith are audit committee financial experts as contemplated by the rules of the SEC implementing Section 407 of the Sarbanes Oxley Act of 2002. The Audit Committee held twelve meetings during the fiscal year ended January 31, 2020.

Our Audit Committee oversees our accounting and financial reporting processes 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 and any other required communications described in applicable accounting standards, including critical audit matters;
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, internal accounting controls or auditing matters, the prompt internal reporting of violations of the Code of Business Conduct and Ethics (the “Code”) that could have a significant impact on our financial statements, and procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
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;
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;
overseeing the internal audit function;
overseeing compliance with the Code;
overseeing the adequacy and effectiveness of the Company’s enterprise risk management framework; and
reviewing our cybersecurity and other information technology risks, controls and procedures.

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Compensation Committee

Stephen Newberry
Chair
Our 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/corporate-governance.
    

The current members of our Compensation Committee are Messrs. Carges and Newberry and Ms. Steele. Our Board has determined that each of the members of our Compensation Committee is independent within the meaning of the independence 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. The Compensation Committee held seven meetings during the fiscal year ended January 31, 2020.

Our Compensation Committee oversees our compensation policies, plans and programs. Our Compensation Committee is responsible for, among other things:

reviewing our policies, strategies and progress related to human capital management, including matters relating to talent management and development, talent acquisition, employee engagement, and diversity and inclusion;
reviewing periodically the succession planning for our CEO and other executive officers;
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 to determine if there is a reasonable likelihood of a material adverse effect on us;
evaluating and making recommendations regarding director compensation; and
administering our equity compensation plans for our employees and directors.
Our Compensation Committee has delegated certain day-to-day administrative and ministerial functions to our officers under our equity compensation plans and our 401(k) plan.

Compensation Committee Interlocks and Insider Participation. None of Messrs. Carges or Newberry or Ms. Steele, 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.


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Nominating and Corporate Governance Committee

Patricia Morrison
Chair
Our 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/corporate-governance.
    

The current members of our Nominating and Corporate Governance Committee are Mses. Baack and Morrison and Mr. Viswanath. Our Board has determined that each of the members of our Nominating and Corporate Governance Committee is independent within the meaning of the independence requirements of The Nasdaq Stock Market. Mr. Neustaetter, who served on the Nominating and Corporate Governance Committee until June 2019, was independent during his service. The Nominating and Corporate Governance Committee held four meetings during the fiscal year ended January 31, 2020.

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, Bylaws, the Code and stockholder communications;
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;
reviewing and approving conflicts of interest of our directors and corporate officers, other than related person transactions reviewed by the Audit Committee;
providing oversight of our stockholder engagement program; and
overseeing and reviewing our environmental, social and governance (“ESG”) activities, programs and public disclosure.

Non-Employee Director Compensation

Our non-employee director compensation program is designed to attract, retain and reward qualified non-employee 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 receives the cash and equity compensation for Board service described below. 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.

This program was developed shortly following our initial public offering in consultation with our Compensation Committee’s independent compensation consultant at the time, Radford, an Aon Hewitt Company (“Radford”). Radford provided director compensation program design considerations, proposed alternative program designs for consideration, and presented competitive non-employee director compensation data and analyses including compensation data from our then-current peer group. Our Compensation Committee and Board considered and discussed these program design considerations, alternatives and data and analyses. Upon our Compensation Committee’s recommendation, our Board adopted our non-employee director compensation program, consistent with Radford’s recommendations, which we believe provides our non-employee directors with reasonable and appropriate compensation that is commensurate with the services they provide and competitive with compensation paid by our peers to their non-employee directors.


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Our Compensation Committee has the primary responsibility for reviewing the compensation paid to our non-employee directors and making recommendations for adjustments, as appropriate, to the full Board. The Compensation Committee undertakes an annual review of the type and form of compensation paid to our non-employee directors, which includes a market assessment and analysis by its independent compensation consultant. As part of this analysis, the independent compensation consultant reviews non-employee director compensation trends and data from companies comprising the same executive compensation peer group used by the Compensation Committee in connection with its review of executive compensation. In early fiscal 2020, our Board reviewed a market assessment and analysis prepared by Compensia, Inc. (“Compensia”), the Compensation Committee’s independent compensation consultant, and approved the following increases effective as of March 21, 2019: $10,000 per year for service as non-executive Chair of the Board, $5,000 per year for service as chair of the Audit Committee, and $2,500 per year for service as chair of the Nominating and Corporate Governance Committee. No changes were made to the equity compensation of non-employee directors. The Board made these changes in order to continue to attract, retain and reward qualified non-employee directors, consistent with market practices and the demands placed on our Board.

Among the Highlights of Our Program:

Periodic market assessments and analyses by the Compensation Committee’s independent compensation consultants; most recently completed assessment in fiscal 2020 indicated non-employee director total compensation was slightly above the peer median.
Equity makes up a meaningful portion of the non-employee directors’ overall compensation mix to align interests with stockholders.
Reasonable cash retainers for leadership roles and committee membership to recognize additional time commitment.
Stock ownership guidelines of the lesser of five times the annual Board membership cash retainer and 4,000 shares supports alignment with stockholders’ interests.
No short sales, hedging, or pledging of stock ownership positions and transactions involving derivates of our common stock.
No additional fees are paid for Board meeting attendance.

Cash Compensation

Our non-employee directors are entitled to receive the following cash compensation for their services:

$50,000 per year for service as a Board member;
$25,000 per year for service as chair of the Audit Committee;
$20,000 per year for service as chair of the Compensation Committee;
$10,000 per year for service as a member of the Audit Committee or the Compensation Committee;
$12,500 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;
$30,000 per year for service as Lead Independent Director; and
$50,000 per year for service as non-executive Chair of the Board.

All cash payments to our non-employee directors are paid quarterly in arrears.

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Equity Compensation

Initial Award. Each non-employee director who first joins our Board automatically will be granted an initial 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 director’s commencement date is other than the date of an annual meeting of stockholders, such non-employee director may be granted, on such non-employee director’s commencement date, an annual award having an award value prorated based on the number of days between such director’s commencement date and the next annual meeting of stockholders. Grants of annual RSU awards will vest as to one-fourth of the shares subject to the award on September 10, December 10, March 10 and June 10 (or our next annual meeting of stockholders if earlier), subject to continued service as a member of our Board through each such vesting date.

Discretionary Award. In addition, our Board may grant a non-employee director a discretionary supplemental equity award at any time and for any reason. No such awards were granted in fiscal 2020.

Change in Control. Under the terms of our 2012 Equity Incentive Plan, as amended (the “2012 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.

Death. Under the terms of our 2012 Plan, if a non-employee director dies, 100% of such non-employee director’s outstanding equity awards will immediately vest (or 50% in the event he or she has been in service with us for less than a year.)

Fiscal 2020 Director Compensation

The following table sets forth information regarding total compensation, in accordance with our non-employee director compensation program, for each person who served as a non-employee director during the year ended January 31, 2020.

Director Name      Fees Earned or
Paid in Cash

($) (1)
      Stock
Awards
($) (2)(3)
     Total
($)
Sara Baack 55,000 230,923 285,923
Mark Carges 60,000 230,923 290,923
John Connors 78,441 230,923 309,364
Patricia Morrison 70,779 230,923 301,702
Thomas Neustaetter 20,326 (4)   20,326
Stephen Newberry 70,000 230,923 300,923
Graham Smith 104,494 230,923 335,417
Elisa Steele 60,000 230,923 290,923
Godfrey Sullivan 23,984 (4)   23,984
Sri Viswanath 47,584 (5)   643,302 (6)   690,886
(1)   Effective as of March 21, 2019, we paid $25,000 per year for service as chair of the Audit Committee (an increase of $5,000 per year); $12,500 per year for service as chair of the Nominating and Corporate Governance Committee (an increase of $2,500 per year); and $50,000 for service as non-executive Chair of the Board (an increase of $10,000 per year). The Board and committee fees

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for our non-employee directors were prorated based on the number of days in fiscal 2020 during which the current compensation program was in effect. On March 21, 2019, Mr. Smith became non-executive Chair of the Board, replacing Mr. Sullivan; Mr. Connors became chair of the Audit Committee, replacing Mr. Smith; Ms. Morrison became chair of the Nominating and Corporate Governance Committee, replacing Mr. Connors; and Mr. Viswanath joined our Board and became a member of the Nominating and Corporate Governance Committee. The Board and committee fees were prorated based on the number of days each director served in his or her respective roles.
(2)   The amounts reported in this column reflect the aggregate grant date fair value of the RSUs granted to our non-employee directors during fiscal 2020 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, 2020.
(3)   Other than Messrs. Neustaetter and Sullivan, each non-employee director was granted an award of 1,953 RSUs on June 13, 2019, with a grant date fair value of $230,923. Twenty-five percent of the RSUs vest on each of September 10, 2019, December 10, 2019, March 10, 2020 and June 10, 2020 (or the next annual meeting of stockholders if earlier), subject to the director’s continued service through such date.
(4)   Messrs. Neustaetter and Sullivan resigned from our Board effective immediately following our 2019 annual meeting of stockholders on June 13, 2019, and their Board and committee fees were prorated based on the number of days they served as a director or committee member, respectively.
(5)   Mr. Viswanath was appointed to our Board effective March 21, 2019, and his Board and committee fees were prorated based on the number of days he served as a director or committee member, respectively.
(6)   Mr. Viswanath was granted an initial award of 2,642 RSUs on March 21, 2019, with a grant date fair value of $349,986, one-third of these RSUs will vest each year over three years following the date of grant, subject to his continued service as a director through each such date. Mr. Viswanath was granted an additional prorated annual award of 471 RSUs on March 21, 2019 with a grant date fair value of $62,393. The RSUs subject to this award vested on June 13, 2019.

As of January 31, 2020, each individual who served as a non-employee director during fiscal 2020 held the following aggregate number of shares subject to outstanding RSUs:

Director Name      Aggregate Number
of Stock Awards
Outstanding as of
January 31, 2020
Sara Baack 2,709
Mark Carges 977
John Connors 977
Patricia Morrison 977
Thomas Neustaetter (1)
Stephen Newberry 977
Graham Smith 977
Elisa Steele 2,709
Godfrey Sullivan (1)
Sri Viswanath 3,619
(1)  

Messrs. Neustaetter and Sullivan each served as a director until June 13, 2019.


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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. To promote this belief, our Board adopted stock ownership guidelines requiring our non-employee directors to achieve certain stock ownership levels within five years of the later of September 13, 2018 or such non-employee director’s appointment or election date, as applicable. The current stock ownership guidelines are set forth below:

Each non-employee director must own the lesser of (i) Company stock with a value of five times the annual cash retainer for Board service and (ii) 4,000 shares.

As of the end of fiscal 2020, all of our directors met, exceeded, or are on track to meet, these guidelines based on their current rate of stock accumulations in the time frames set out in the guidelines.

See “Executive Compensation—Compensation Discussion and Analysis—Other Compensation Policies and Information—Stock Ownership Guidelines” for information about the guidelines applicable to our executive officers.

Stockholder Engagement

We believe that effective corporate governance includes regular, constructive conversations with our stockholders on a broad range of governance and business topics, including business strategy and execution, Board refreshment, executive compensation practices, risk oversight, sustainability, culture and human capital management. Stockholders provide valuable insights into emerging issues and feedback on our related programs. We believe that ongoing engagement builds mutual trust and understanding with our stockholders and is essential to our long-term success.

In fiscal 2020, we solicited the views of institutional stockholders representing approximately 67% of our shares and engaged in substantive discussions with stockholders representing approximately 37% of our shares. Feedback was provided to relevant committees and the full Board.

In general, our stockholders have a long-term outlook and understand that we are currently in a dynamic, high-growth phase and have historically faced a talent war. We received positive feedback on our compensation and corporate governance practices. See “Executive Compensation—Compensation Discussion and Analysis—Executive Summary—Stockholder Engagement and Our 2019 Say-on-Pay Vote” for stockholder feedback on our executive compensation program.

Annual Stockholder Engagement Cycle


SUMMER
We review the results of the annual meeting, together with governance trends and best practices, and regulatory developments. We start preparing our agenda for engagement in the fall.

FALL
We speak with our major stockholders and others who request meetings about significant governance and executive compensation changes, corporate sustainability updates, and other developments at the Company. We solicit feedback on topics that are important to them.

SPRING
We publish our proxy statement and annual report to our stockholders. We reach out to our major stockholders and speak with those wanting to engage about important topics to be addressed at our annual meeting. Stockholders vote on election of directors, executive compensation, ratification of our auditors, and such other matters as may arise at our annual meeting.

WINTER
We communicate to the Board and its committees any feedback received and consider those perspectives in upcoming governance and executive compensation discussions. We consider disclosure enhancements.


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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 Corporate Secretary, Splunk Inc., 270 Brannan Street, San Francisco, California 94107. All such stockholder communications will be reviewed initially by our Corporate Secretary or the Legal Department and, if appropriate, will be forwarded to the appropriate member or members of the Board, or if none is specified, to the Chair of the Board. This process assists the Board in reviewing and responding to stockholder communications in an appropriate manner. The Corporate Secretary or Legal Department 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.

Corporate Sustainability Highlights

The Board believes operating sustainably benefits the Company’s many different stakeholders and drives long-term value creation. We believe in the power of data to drive positive change and the power of Splunk’s technology to make the world a better place. We work to conduct our business in ways that are principled, transparent and accountable to stockholders and other stakeholders. We focus our efforts where we can have the most positive impact on our business and society and are committed to managing the risks and opportunities that arise from sustainability issues. The Nominating and Corporate Governance Committee oversees our ESG activities and programs. During fiscal 2020, we engaged an independent consultant and commenced a materiality assessment to determine the ESG issues that matter most to our business and our stakeholders. The outcomes of this assessment will further inform our future direction and priorities.

WORKFORCE AND DIVERSITY

Human capital management, including diversity and inclusion, is a key driver of our success. We seek to hire and retain our employees through competitive compensation and benefits package and our unique values-driven culture. We invest in our talent by providing our employees with training, mentoring, and career development opportunities. All of which enables us to hire and retain talented, high-performing employees.
A diverse and inclusive Splunk helps us achieve our mission of bringing data to every question, decision and action to drive great outcomes for our company, our communities and each other.
We rolled out a number of initiatives to better support the needs of all employees and their families, including programs that provide up to twenty weeks U.S. paid parental leave benefits, as well as comprehensive fertility and family forming benefits.
We are focused on hiring, retaining and promoting diverse leaders through the organization at all levels. Currently, 36.4% of our management team, which is comprised of our CEO and extended e-staff, are women.
We are committed to reporting our workforce demographics annually.
Our #MillionDataPoints video campaign shines a spotlight on the unique “data points” each Splunk employee brings to the team every day.
Our Employee Resource Groups continued to grow in fiscal 2020 from six to nine, adding Pilipinx, Natives and NeuroDiversity to Pride@Splunk, Womxn+@Splunk, Veterans@Splunk, Somos@Splunk, BEAMS@Splunk (Black Employees & Mentors) and Disabled=True@Splunk, and help us drive change at the grassroots level and offer our employees support, mentoring and networking opportunities.
We believe in great leadership and learning and invest heavily in development for all our employees. Employees take advantage of live courses, leadership programs, online training, product training, sales training, technical training, mentor programs, team building events, seminars, conferences, lectures, university programs, peer-to-peer and manager-led training and other learning opportunities across the Company.
Splunk is regularly recognized as an employer of choice in the technology industry, and within the various locations that we operate. Splunk was selected by Fortune as one of the 2019 Best Workplaces for Women, Best Workplaces for Parents, Best Workplaces for Millennials and Best Workplaces for Diversity.

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COMMUNITY

Splunk for Good transforms the connective power of data into a strategic asset for nonprofits, universities, organizations and people working to do good in the world. Through our expertise, tools, training and personalized support, we help simplify, demystify and utilize data to drive action for good. With close to 6,000 global employees, we also empower our employees to drive positive impact in their communities. Through our employee giving and volunteering platform, Splunk provides every employee with three days of paid time per year to volunteer in their local communities. In fiscal 2017, we committed to donate more than $100 million over a 10-year period in software licenses, training, support and education to nonprofit, workforce training and higher education organizations making a difference to society through our Splunk Pledge program.

In fiscal 2020, we advanced these efforts in a variety of ways:

We launched a $50 million Splunk Ventures Social Impact Fund focused on accelerating growth of companies that are using data to drive positive social impact, workforce development, equality and sustainability. As our first investment, we closed funding in Zonehaven Inc., a cloud-based analytics application designed to help communities improve evacuations and reduce wildfire risk with data.
We increased our total contribution to nearly $46.4 million in software and services through our Splunk Pledge program.
We expanded our workforce training programs to include a total of more than 11,400 program participants. Through expanded partnerships in the United States, United Kingdom, and Australia, more than 10,000 veterans, spouses, and currently serving military members have now registered for free training through our SplunkWork+ community in fiscal 2020.
Through high-value partnerships with organizations such as Per Scholas, NPower, WithYouWithMe Academy and Year Up, we have continued to expand access to diverse youth and military veterans with free access to the Company’s extensive education resources, and position them for promising new career opportunities with our growing ecosystem of partners, customers, and users.
Nearly 61% of employees participated in charitable giving and volunteer activities around the world. This extensive activity benefited more than 2,088 nonprofit organizations globally through commitments of time and financial support.

As the COVID-19 pandemic continues to affect the world, we are focused on helping individuals and organizations track the pandemic and respond with a data-driven approach. As one example, Splunk for Good recently developed interactive COVID-19 visualizations for public use.

Splunk for Good’s contributions help to power the work of nonprofit organizations of all sizes, working in areas such as disaster response and humanitarian assistance, counter-human trafficking, hunger prevention, and sustainable development around the globe. Our contributions to hundreds of universities, community colleges, and workforce training partners globally are providing thousands of students with access to emerging careers in technology, and driving research in areas such as sustainable farming, healthcare analytics, and the industrial internet of things.


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COMPLIANCE AND ETHICS

Our culture of integrity starts with our Code and our compliance program, which includes risk assessment, development of policies and procedures, training, auditing and monitoring, and investigations and remediation of potential compliance matters.

The Code applies to directors and all employees, including our executive officers. The Code is reviewed on an annual basis for any changes to law or policy and updated as appropriate. Changes to the Code are reviewed and approved by the Nominating and Corporate Governance Committee.
New employees are required to complete training on the Code, and all employees complete supplemental Code training and a compliance certification each year. In fiscal 2020, as in previous years, course completion was 100%.
In addition, regular in-person and online trainings address the compliance risks of specific roles and business functions, while various additional guidance helps ensure awareness of our policies and our expectations for ethical behavior and a safe work environment where we treat others with respect and do not tolerate harassment or discrimination.
Our management team is focused on fostering a culture of trust so that employees at every level feel comfortable speaking up about concerns. All complaints and concerns regarding possible violations of, or non-compliance with, our Code, a corporate policy or a law or regulation, or retaliatory acts against anyone who makes such a complaint or assists in the investigation of such a complaint, may be made by phone or web reporting using our confidential hotline at splunk.ethicspoint.com. Reports may be made anonymously.
To read the full text of our Code, please go to: http://investors.splunk.com/corporate-governance. We will post amendments to our Code or waivers of our Code for directors and executive officers on the same website.

DATA PRIVACY, SECURITY AND COMPLIANCE

We are focused on maintaining appropriate data governance and systems so we can maintain the trust of our customers and other stakeholders, which is fundamental to our business success.

We have a dedicated CISO within our Chief Technology Officer’s organization who is responsible for overseeing the Company’s information security practices and programs and a dedicated Data Protection Officer (“DPO”) within our Chief Legal Officer’s organization who is responsible for overseeing compliance with the legal requirements related to the collection and use of data at Splunk.
We have a transparent website privacy policy describing the Company’s data collection, use, sharing and retention practices and internal data protection principles we abide by globally to standardize our data collection practices.
We provide annual data protection and security training to all employees, supplemented with periodic, targeted data protection and security training as needed.
We have self-certified to the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks with the U.S. Department of Commerce.
We offer contractual commitments that allow our customers to meet the privacy protections in the European Union’s General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”).
We maintain industry standard certifications for cloud security and are assessed annually by third party auditors to verify our compliance with our cloud security certifications.

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Other Governance Policies and Practices

Related Party and Other 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 related parties, which includes 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, other than certain standing pre-approved transactions under the policy, without the prior consent of our Audit Committee.

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 party’s 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.

From time to time, we engage in ordinary course commercial transactions with other entities whose officers or directors are also directors of the Company, whose directors are officers of the Company, or whose officers or directors are immediate family members of an officer or director of the Company. Such transactions are conducted on an arm’s-length basis and our related parties do not have a material interest in such transactions. The Audit Committee has adopted standing pre-approvals under the policy for these and certain other transactions that do not create or involve a direct or indirect material interest.

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 SEC rules, other than as described below:

Hayley Sullivan, the daughter of the former Chair of our Board, Godfrey 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 Mr. Sullivan. The Audit Committee reviewed and approved Ms. Sullivan’s continued employment and compensation. Mr. Sullivan is no longer affiliated with the Company as an officer or director.
Jacob Stein, the son of our former Senior Vice President, Global Affairs, Leonard Stein, is a Data Specialist, Strategic Insights at Splunk. His compensation is consistent with the total compensation provided to other employees of the same level with similar responsibilities. Mr. J. Stein was not hired by, nor does he report to Mr. L. Stein. The Audit Committee reviewed and approved Mr. J. Stein’s employment and compensation.

Employment Arrangements and Indemnification Agreements

We have entered into employment arrangements with certain current executive officers. See “Executive Compensation—Compensation Tables—Executive 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.

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Anti-Hedging and Anti-Pledging Policy; Stock Trading Practices

We maintain an Insider Trading Policy that, among other things, prohibits our officers, directors and employees from trading during quarterly and special blackout periods. We also prohibit all employees and directors, certain partners with access to confidential information and third parties identified from time to time by our Insider Trading Compliance Officer from engaging in short sales, hedging, swaps, exchange funds and similar transactions designed to decrease the risks associated with holding the Company’s securities, as well as pledging the Company’s securities as collateral for loans and transactions involving derivative securities relating to our common stock. None of the Company’s subsidiaries have publicly traded equity securities. Our Insider Trading Policy requires all directors, the CEO, Section 16 officers and employees identified by the Insider Trading Compliance Officer to obtain written pre-clearance from the Insider Trading Compliance Officer or his or her designee prior to buying, selling, or engaging in any other transaction in the Company’s securities.

Further, we have adopted Rule 10b5-1 Trading Plan Guidelines that permit our directors and certain employees 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.

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Audit Committee Matters

Ratification of Appointment of Independent Registered Public Accounting Firm
The Board recommends a vote “ FOR ” the Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for the fiscal year ending January 31, 2021.

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, 2021. During our fiscal year ended January 31, 2020, 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, 2021. 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 will reconsider the appointment.

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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/corporate-governance. 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 Committee’s performance on an annual basis.

The Audit Committee consists of three members: John Connors, Patricia Morrison and Graham Smith. Messrs. Connors and Smith are “audit committee financial experts” as defined under SEC rules and regulations. With respect to the Company’s financial reporting process, the management of the Company is responsible for (1) establishing and maintaining internal controls and (2) preparing the Company’s 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 Company’s 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 applicable requirements of 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 PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC its independence.

Based on the Audit Committee’s 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, 2020 for filing with the SEC.

Respectfully submitted by the members of the Audit Committee of the Board:

John Connors (Chair)
Patricia Morrison
Graham Smith

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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, 2019 and 2020. All fees were pre-approved by the Audit Committee in accordance with the policy described below.

      2019
($)
      2020
($)
Audit Fees (1) 3,767,946 4,011,196
Audit-Related Fees
Tax Fees (2) 523,318 852,659
All Other Fees (3) 3,870 3,870
Total: 4,295,134 4,867,725
(1)

Audit fees consist of fees for professional services provided in connection with the integrated audit of our annual financial statements, management’s 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)

Tax fees consist of fees billed for tax compliance, consultation and planning services. The increase in tax fees for the fiscal year ended January 31, 2020 was primarily related to U.S. tax reform and transfer pricing services.

(3)

All other fees billed for the fiscal years ended January 31, 2019 and January 31, 2020 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 year’s 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.

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Our Executive Officers

The following table identifies certain information about our executive officers as of March 31, 2020. Executive officers are appointed by the Board to hold office until their successors are elected and qualified.

Name       Age       Position(s)
Douglas Merritt 56 President, CEO and Director
Jason Child 51 Senior Vice President and Chief Financial Officer
Scott Morgan 49 Senior Vice President, Chief Legal Officer, Global Affairs and Secretary
Susan St. Ledger 55 President, Worldwide Field Operations
Timothy Tully 42 Senior Vice President, Chief Technology Officer

Douglas Merritt has served as our President, CEO and a member of our Board since 2015. Mr. Merritt served as our Senior Vice President of Field Operations from 2014 to 2015. Prior to joining us, he 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., a software company (acquired by Oracle Corporation). He also co-founded and served as Chief Executive Officer of Icarian, Inc., a cloud-based company (since acquired by Workstream Corp.), from 1996 to 2001. Mr. Merritt holds a B.S. from The University of the Pacific in Stockton, California.

Jason Child has served as our Senior Vice President and Chief Financial Officer since 2019. Prior to joining us, Mr. Child served as Chief Financial Officer at Opendoor Labs Inc., an online real estate marketplace, from 2017 to 2019. From 2015 to 2016, Mr. Child was Chief Financial Officer at AliphCom, Inc. (d/b/a Jawbone), a consumer technology and wearable products company. Mr. Child served as Chief Financial Officer at Groupon, Inc., an e-commerce company, from 2010 to 2015. Previously, he spent over 11 years leading various global finance teams at Amazon.com, Inc., an e-commerce and cloud computing company. Mr. Child began his career at Arthur Andersen LLP. He holds a B.A. from the University of Washington.

Scott Morgan has served as our Senior Vice President, Chief Legal Officer since 2019 and our Secretary since 2018. Mr. Morgan has also led our Global Affairs organizations since 2020. Prior to this role, Mr. Morgan served as our General Counsel from 2017 to 2019, as our Vice President, Associate General Counsel from 2014 to 2017 and as our Associate General Counsel from 2012 to 2014. He also served as our Assistant Secretary from 2012 to 2018. Prior to joining us, Mr. Morgan served as legal counsel at Autodesk, Inc., a design software and services company and Tellabs, Inc., a provider of access networks solutions. Mr. Morgan began his career as an associate at Morrison & Foerster LLP and at Thoits, Love, Hershberger & McClean LLP. Mr. Morgan holds a B.A. from the University of California, Berkeley and a J.D. from the University of California, Hastings College of the Law.

Susan St. Ledger has served as our President, Worldwide Field Operations since 2017. Prior to this role, Ms. St. Ledger served as our Senior Vice President, Chief Revenue Officer from 2016 to 2017. Prior to joining us, Ms. St. Ledger served as Chief Revenue Officer, Marketing Cloud at salesforce.com, inc., 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. Previously, Ms. St. Ledger served in a variety of senior sales management roles at salesforce and Sun Microsystems, Inc., a provider of network computing infrastructure solutions. Ms. St. Ledger holds a B.S. degree from the University of Scranton.

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Our Executive Officers
 
 
 

Timothy Tully has served as our Senior Vice President, Chief Technology Officer since 2018. Prior to this role, Mr. Tully served as our Chief Technology Officer in 2017. Prior to joining us, Mr. Tully served in various roles at Yahoo! Inc., a digital information discovery company, from 2003 to 2017, including most recently as Vice President, Engineering from 2014 to 2017 and before that in engineering leadership roles including Distinguished Engineer and Chief Data Architect. Mr. Tully began his career as a Member of Technical Staff on the JavaSoft team at Sun Microsystems, Inc., a provider of network computing infrastructure solutions, and also spent time at several startup companies. Mr. Tully holds an M.S. from Carnegie Mellon University and a B.S. from the University of California, Davis.

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Executive Compensation

Advisory Vote to Approve Named Executive Officer Compensation
The Board recommends a vote FOR the Approval, on an Advisory Basis, of our Named Executive Officer Compensation.

As required by SEC rules, we are asking our stockholders to approve, on an advisory, non-binding basis, the compensation of our named executive officers as disclosed in the “Compensation Discussion and Analysis” section beginning on page 42, 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 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 engage 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 Company’s objectives of:

Recruiting, incentivizing and retaining highly qualified executive officers who possess the skills and leadership necessary to grow our business;
Directly linking short-term rewards for our executive officers with achieving or exceeding our strategic and financial goals, and individual performance goals;
Providing meaningful long-term incentives to align 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, the overall market and performance.

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 2020 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.”

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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. We structure our executive compensation program to include significant performance metrics that are aligned with our business strategy and long-term stockholder value creation. The fiscal 2020 executive compensation program provided short-term cash bonuses designed to drive top-line growth and long-term equity awards designed to drive revenue, non-GAAP operating margin performance and stock price performance.

Strategic Context and Fiscal 2020 Business Highlights

We provide innovative software solutions that ingest data from different sources including systems, devices and interactions, and turn that data into meaningful business insights across the organization. Our Data-to-Everything platform enables users to investigate, monitor, analyze and act on data regardless of format or source. Our mission is to make data accessible, usable and valuable to everyone in an organization. Our customers leverage our offerings for various use cases, including infrastructure and operations management, security and compliance, software development and IT operations, applications management and business analytics, and to provide insights into data generated by IoT and industrial data, among many others.

We believe the market for products that deliver real-time business insights from data 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. Our goal is to make Splunk the standard platform for delivering real-time business insights from data.

In fiscal 2020, achieving our goal depended 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. Our fiscal 2020 executive compensation program was designed to incentivize our executive officers to drive performance in accordance with this growth strategy.

Fiscal 2020 was another year of strong growth, financial performance and execution. Our ongoing prioritization of customer success and adoption led to continued top-line revenue growth. In fiscal 2020, our executive compensation plans emphasized revenue and non-GAAP operating margin metrics to align our compensation incentives with our business strategy of delivering growth with spending discipline and operating leverage, which we believe is consistent with the investment objectives of our stockholders. These are the financial metrics on which our investors focused in fiscal 2020, and we provided robust information and discussion regarding the results of these metrics each quarter during the fiscal year. We continue to focus on capturing our large and growing market opportunity. This requires that we continue to invest in our business. Accordingly, in fiscal 2020 our executive compensation plans balanced growth and margin in support of our long-term market opportunity.

Our fiscal 2020 business highlights include achievement of the following revenue and non-GAAP operating margin results and other important metrics:

Total revenue of $2.359 billion, up 31% year-over-year;
Non-GAAP operating margin of 14.2% (1) ;
Operating cash flow of negative $287.6 million with free cash flow of negative $388.8 million (1) ; and
Over 19,400 customers in more than 130 countries at the end of fiscal 2020, compared to over 17,500 customers at the end of fiscal 2019.

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(1) To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP operating margin and free cash flow. For a full reconciliation between GAAP and non-GAAP operating margin and between net cash provided by operating activities and free cash flow, please see our Annual Report on Form 10-K for the year ended January 31, 2020.

Total Revenue Total Stockholder Return**
$ in Millions • FYE January 31 FYE January 31
 
 

 

 

 

*

Reflects the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).

**

The chart below shows the total return on our common stock through the end of fiscal 2020, assuming an initial investment of $100 at the end of fiscal 2015.

We believe our executive compensation program structure incentivized our NEOs to drive towards the Company’s strong growth, financial performance and execution for fiscal 2020. In addition, we believe our NEOs’ compensation for fiscal 2020 appropriately reflected and rewarded their collective contributions to our performance. We have attracted and retained an executive management team of seasoned and accomplished leaders focused on executing on our market opportunity and leading us through our next phase of growth.

Executive Compensation Practices

Our executive compensation policies and practices are designed to reinforce our pay for performance philosophy and align with sound governance principles. The following chart highlights our fiscal 2020 executive compensation policies and practices:

What We Do

What We Don’t Do

         
Performance-based cash and equity incentives
Caps on performance-based cash and equity incentive compensation
Annual review and approval of our executive compensation strategy
Significant portion of executive compensation at risk based on corporate performance
Clawback policy on cash and equity incentive compensation
Stock ownership guidelines for executive officers and directors
Four-year equity award vesting periods
Independent compensation consultant engaged by the Compensation Committee
100% independent directors on the Compensation Committee
Limited and modest perquisites
Formal CEO evaluation tied to compensation decisions
Ongoing engagement with our institutional stockholders regarding our compensation policies and practices
         
No “single trigger” change in control payments and benefits
No post-termination retirement or pension-type non-cash benefits or perquisites for our executive officers that are not generally available to our employees
No tax gross-ups for change in control related payments
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
           

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Stockholder Engagement and Our 2019 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 and believe that ongoing engagement builds mutual trust and understanding with our stockholders.

In fiscal 2020, we solicited the views of institutional stockholders representing approximately 67% of our shares and engaged in substantive discussions with stockholders representing approximately 37% of our shares. In the course of these discussions, we received valuable feedback on our executive compensation program, policies and practices as described in the chart below. We discussed with these stockholders the reasons for their support of, and for a small percentage their opposition to, our 2019 Say-on-Pay resolution, which was approved by approximately 94% of the votes cast at our 2019 annual meeting of stockholders. Stockholders generally viewed the evolution of our executive compensation program as consistent with what we previously communicated in our outreach over the past several years and consistent with our strategy and pay for performance philosophy. Based on input from stockholders in fiscal 2019, the Compensation Committee determined that the fiscal 2020 executive compensation program was consistent with our philosophy, policies and practices. 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 Splunk—Stockholder Engagement” on page 30 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
and Performance Period
Consider performance metrics that tie to our business strategy and are appropriate given our business model transition
Consider additional metrics in the short-term bonus plan
Performance period reasonable but as Company matures and growth rates moderate, consider longer performance period for performance-based equity awards
Changed to annual recurring revenue metric in fiscal 2021 short-term bonus plan and PSU program to align our incentives with key drivers of stockholder value and reflect our transition to a renewable business model as our revenue mix continues to go from sales of perpetual licenses to sales of term licenses and cloud subscriptions
Changed to operating cash flow metric in fiscal 2021 PSU program to reflect focus on disciplined execution of our business objectives during our transition to a renewable business model
Considered other metrics but determined not appropriate at this stage in our maturity and the focus on continued investment for scale, growth and innovation
Continued to include a multi-year stock price performance metric in fiscal 2021 PSU program for long-term stock price performance that exceeds index performance to further align the interests of our NEOs and stockholders
Assessed performance period length and confirmed that one year continues to be appropriate in light of our growth trajectory and that the component of PSU program that rewards multi-year stock price performance adds further incentive over a longer timeframe
Quantum of CEO and
NEO Pay
Amount of pay generally reasonable given talent war and executive transitions
Mix of short- and long-term incentives, as well as proportion of performance- and time-based equity awards, is appropriate
Continued to assess executive compensation in the context of our business strategy and our strong performance, as well as against market practices in consultation with independent compensation consultant

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Fiscal 2020 Named Executive Officer Updates

During fiscal 2020, we internally promoted an executive officer and welcomed a new Chief Financial Officer, each as described below.

Scott Morgan was promoted to Senior Vice President, Chief Legal Officer in March 2019. He previously served as our General Counsel and Secretary. In his current role, Mr. Morgan leads the legal function and global affairs initiatives at the Company.
Jason Child joined the Company as Senior Vice President and Chief Financial Officer and an executive officer in May 2019. He has more than 25 years of experience leading high growth companies and scaling global finance functions. In his current role, Mr. Child leads and is responsible for the finance function at the Company.

Discussion of Our Fiscal 2020 Executive Compensation Program

We align our executive compensation program with our business strategy and focus on what we believe to be key to our success—growth, execution, innovation and disruption. This section provides an overview of the philosophy, objectives and components of our executive compensation program. In addition, we explain how and why the Compensation Committee arrived at the specific compensation policies and decisions for our executive officers during fiscal 2020.

Our NEOs for fiscal 2020 are:

Douglas Merritt, our President, CEO and member of the Board;
Jason Child, our Senior Vice President and Chief Financial Officer;
David Conte, our former Senior Vice President, Finance and our former Senior Vice President and Chief Financial Officer (1) ;
Scott Morgan, our Senior Vice President, Chief Legal Officer, Global Affairs and Secretary;
Susan St. Ledger, our President, Worldwide Field Operations; and
Timothy Tully, our Senior Vice President, Chief Technology Officer.

(1) Mr. Conte resigned as Chief Financial Officer in May 2019 in connection with Mr. Child’s appointment, and continued his employment as our Senior Vice President, Finance until he retired from the Company effective as of October 1, 2019.

Philosophy and Objectives

Our “Pay for Performance” Philosophy. 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 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 shaped by our “pay for performance” philosophy and is designed to attract and retain qualified individuals, link individual performance to Company performance, focus the efforts of our NEOs and other executive officers on the achievement of both our short-term and long-term objectives and align the interests of our executive officers with those of our stockholders.

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;
Directly link short-term rewards for our executive officers with achieving or exceeding our strategic and financial goals, and individual performance goals;

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Provide meaningful long term incentives to 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, the overall market and performance.

Intense Competition For Talent; How We’ve Responded . We actively compete with other companies in seeking to attract and retain a skilled executive 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 our executives, as we are seen as a company with experienced employee talent that has successfully and rapidly scaled our technology business.

We have responded to this intense competition for talent by implementing compensation practices designed to motivate our employees, including 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-term and long-term components, including salary, cash bonuses, and equity awards. While challenging to do, we believe we have found the proper mix of incentives that attracts, motivates and retains each executive officer.

We regularly review and, if appropriate, adjust our executive compensation program to match the maturity, size, scale and growth of our business. 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 as they evolve.

Compensation Process

Role of Compensation Committee

Pursuant to its charter, the Compensation Committee is responsible for annually reviewing and approving compensation arrangements for our executive officers, including our CEO, 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 Company’s long-term business and financial goals. For additional information about the Compensation Committee, see “Corporate Governance at Splunk—Board Meetings and Committees—Compensation Committee” in this proxy statement.

In making executive compensation decisions, the Compensation Committee seeks the assistance of its independent compensation consultant as well as 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 to properly incentivize and reward them for their performance.

The Compensation Committee considers compensation data from our peer group as one of several factors that inform its judgment of appropriate parameters for compensation levels. 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 weightings to specific compensation elements. The Compensation Committee believes that over-reliance on benchmarking can result in compensation that is unrelated to the value delivered by our executive officers because compensation benchmarking does not take into account the specific performance of the executive officers, the relative size, growth, and performance of the Company, or any unique circumstances or strategic considerations of the Company.

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Executive Compensation
 
 
 

The Compensation Committee 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 officer’s responsibilities;
Our past business performance and future expectations;
Our long-term goals and strategies;
The performance of our executive team as a whole;
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 consults with members of our management team, including our CEO and our human resources, finance and legal professionals (except with respect to their own compensation) when making compensation decisions. Typically, our CEO and other members of our management team provide the Compensation Committee with information on corporate and individual performance and their perspective and recommendations on compensation matters. Our CEO makes recommendations to the Compensation Committee regarding compensation matters, including the compensation of our other executive officers. The Compensation Committee uses these recommendations as one of several factors in making compensation decisions, and those decisions do not necessarily follow the CEO’s 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. For fiscal 2020, the Compensation Committee engaged Compensia 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 competitive market practices. Compensia reviewed and advised on all principal aspects of our executive compensation program for fiscal 2020, 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 programs.

In addition, Compensia provided a market analysis and input to the Compensation Committee in connection with Mr. Child’s hiring and Mr. Morgan’s promotion in order to promote alignment between their new roles and the competitive market for executives in similarly situated roles.

Based on the consideration of the factors specified in the rules of the SEC and the listing standards of The NASDAQ Stock Market, the Compensation Committee does not believe that its relationship with Compensia and the work of Compensia 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. As part of the Compensation Committee’s determination of Compensia’s independence, it received written confirmation from Compensia addressing these factors and supporting the independence determination.

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Peer Group

The Compensation Committee reviews market data of companies that we believe are comparable to us. With Compensia’s assistance, the Compensation Committee developed a peer group for use when making its fiscal 2020 compensation decisions, which consisted of publicly traded software and software services companies headquartered in the U.S. that generally had revenue between 0.33x and 3.0x Splunk’s revenue, generally had experienced strong year-over-year revenue growth, and/or had a market capitalization between 0.33x and 3.0x Splunk’s market capitalization. The Compensation Committee referred to compensation data from this peer group when making fiscal 2020 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 2020 peer group:

Akamai Technologies
ANSYS
Arista Networks
Autodesk
Fortinet
      Guidewire Software
Palo Alto Networks
Red Hat
ServiceNow
Square
     SS&C Technologies Holdings
Tableau Software
The Ultimate Software Group
Twitter
Veeva Systems
      Verisign
Workday
Zillow Group

For fiscal 2020, the Compensation Committee removed athenahealth and CoStar Group from the peer group used in fiscal 2019 because these companies were not deemed to be sufficiently relevant comparables, and added Square as an additional peer based on the criteria described above. The remainder of the peer group was unchanged.

Components of Compensation Program and Fiscal 2020 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 payments and benefits.

We also provide our 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 our eligible employees.

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We believe these elements provide a compensation package that attracts and retains 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 and the components of their pay for fiscal 2020, specifically the base salary and cash bonus amounts earned and the grant date fair value of equity awards granted in fiscal 2020.

CEO

All Other NEOs*

* This chart excludes one-time cash payments made to Mr. Child and Mr. Conte. See “Executive Compensation—Compensation Discussion and Analysis— Other Compensation Policies and Information—One-Time Transition Bonuses” on page 58 of this proxy statement for details on the one-time cash payments made to Mr. Child and Mr. Conte. If the one-time cash payments made to Mr. Child and Mr. Conte were to be included, the pay mix would be 62% performance-based.

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In addition, the chart below illustrates the short-term and long-term timeframe over which the various components of the NEOs’ fiscal 2020 compensation are earned and paid and serve to continue to retain and incentivize our NEOs.

FYE January 31

            2020             2021             2022            2023
BASE SALARY
Paid throughout fiscal 2020
 
CASH BONUS
Fiscal 2020 annual cash bonus
(50% of target bonus paid in September 2019, and full fiscal 2020 achievement determined and paid in March 2020)
 
LONG-TERM EQUITY COMPENSATION (RSUs)
Fiscal 2020 awards granted in March 2019
(25% vested in March 2020, remaining 75% vest quarterly thereafter over next three years)
 
       
 
LONG-TERM EQUITY COMPENSATION (PSUs)
Fiscal 2020 awards granted in March 2019
(25% of earned corporate PSUs vested in March 2020, remaining 75% of earned corporate PSUs vest quarterly thereafter over next three years)
 
       
 
(stock price PSUs eligible to be earned and to vest beginning in June 2021 on a quarterly basis through the end of the four-year vesting period of the corporate PSUs or March 2023)
 

Base Salaries

We pay base salaries to our NEOs to compensate them for their services and provide predictable income. The salaries typically reflect each NEO’s experience, skills, knowledge and responsibilities, although market data also plays 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 the Compensation Committee based on our compensation philosophy and objectives.

FISCAL 2020 BASE SALARIES

The Compensation Committee determined the fiscal 2020 base salary of each of our NEOs after considering market practice survey data of our peer group provided by Compensia, the recommendations of our CEO, other than with respect to his own base salary, and other factors described in “Compensation Process—Role of Compensation Committee” above. At the beginning of fiscal 2020, the Compensation Committee adjusted the base salaries for Messrs. Merritt, Morgan and Tully, and Ms. St. Ledger to reflect the foregoing and each individual’s responsibilities and performance. In addition, Mr. Morgan’s base salary increase reflects his promotion to Senior Vice President, Chief Legal Officer from General Counsel.

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The table below sets forth the annual base salaries for our NEOs for fiscal 2020.

NEO       Base
Salary
     Percentage Increase from
Fiscal 2019 Base Salary
Douglas Merritt $ 675,000 4%
Jason Child (1) $ 460,000 N/A
David Conte (2) $ 445,000 0%
Scott Morgan $ 375,000 6%
Susan St. Ledger $ 475,000 3%
Timothy Tully $ 420,000 5%
(1) Mr. Child joined the Company on May 6, 2019. The base salary shown above is on an annualized basis.
(2) Mr. Conte retired from the Company effective as of October 1, 2019. The base salary shown above is on an annualized basis.

Cash Bonuses

A key objective of our compensation philosophy is to tie a significant portion of each NEO’s compensation to our performance. To help accomplish this objective, we provide annual performance-based cash bonus opportunities for our NEOs, which are earned based on our achievement against corporate performance objectives established at the beginning of the fiscal year.

At the beginning of fiscal 2020, our Board approved our fiscal 2020 operating plan, which included performance objectives that the Compensation Committee and our CEO used to design our NEOs’ cash bonus opportunity for fiscal 2020. For purposes of our executive bonus plan, the Compensation Committee considered a number of factors in selecting the performance objectives applicable to our NEOs’ annual cash bonus opportunities and determined that, as in prior years, revenue-related objectives continued to be of critical importance and aligned to the Company’s growth strategy.

FISCAL 2020 TARGET ANNUAL CASH BONUS OPPORTUNITIES

As in prior years, the target annual cash bonus opportunities for our NEOs were expressed as a percentage of their respective base salaries. At the beginning of fiscal 2020, the Compensation Committee decided to maintain the percentages for all continuing NEOs’ target bonus opportunities. Due to the base salary increases described above, the dollar amount of the target bonus opportunities increased for each of our continuing NEOs, other than Mr. Conte, whose base salary did not increase. The table below shows the target annual cash bonus opportunity for each NEO as a percentage of his or her base salary and as a corresponding dollar amount:

NEO       Fiscal 2020 Target
Bonus as a Percentage
of Salary
      Fiscal 2020
Target Bonus
as a Dollar
Amount
       Change from Fiscal
2019 Target Bonus as a
Percentage of Salary
Douglas Merritt 125% $843,750 0%
Jason Child (1) 75% $345,000 N/A
David Conte 80% $356,000 0%
Scott Morgan 60% $225,000 0%
Susan St. Ledger 100% $475,000 0%
Timothy Tully 70% $294,000 0%
(1) Mr. Child joined the Company on May 6, 2019. The target amounts shown above are on an annualized basis.

As described below, the target levels for the performance objectives were set to be aggressive, yet achievable with focused effort and execution. Fiscal 2020 bonuses were capped at 200% of target for our non-sales executive NEOs and at 300% of target for Ms. St. Ledger, our senior sales executive. Ms. St. Ledger’s maximum annual cash bonus opportunity was higher than that of our other NEOs given the strong link between her job responsibilities and our sales quota achievement.

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FISCAL 2020 PERFORMANCE OBJECTIVES

For purposes of the executive bonus plan, the Compensation Committee selected revenue (as determined under GAAP) and, in the case of Ms. St. Ledger, bookings as represented by a different metric, total contract value (“TCV”), as the performance objectives for fiscal 2020. The Compensation Committee, to motivate Mr. Merritt and our other NEOs to continue to grow and develop our business, established target levels for the revenue and TCV performance objectives for fiscal 2020 that it considered aggressive, yet achievable with focused effort and execution by our NEOs, and that reflected a rigorous increase in top-line growth relative to our prior fiscal year revenue and TCV achievement. For example, our fiscal 2020 revenue target reflected an increase of 30% over our fiscal 2019 revenue results, and maximum achievement required an increase of 36% or more over our fiscal 2019 revenue results. These performance objectives were selected and designed to drive increased revenue and TCV, which the Compensation Committee believed would increase stockholder value consistent with our overall growth strategy.

Our Non-Sales Executive NEOs. The target annual cash bonus opportunities for Messrs. Merritt, Child, Conte, Morgan and Tully were based on our revenue performance. The following chart presents the tiers of the bonus payout multiples relative to the target bonus opportunity based on revenue achievement (with linear interpolation in between tiers).

      Fiscal 2020
Revenue (in
millions)
      Bonus Payout Multiple
Relative to Target
Max $2,450 or more 200 %
$2,425 165 %
$2,400 130 %
$2,375 110 %
Target $2,350 100 %
$2,280 75 %
Threshold $2,233 50 %
Less than $2,233 0 %

Our Sales Executive NEO. The fiscal 2020 target annual cash bonus opportunity for Ms. St. Ledger was based entirely on our TCV performance. We are not disclosing the target level for this performance objective because we believe disclosure would be competitively harmful, as it would give our competitors insight into our strategic and financial planning process. The following chart presents certain tiers of the bonus payout multiples based on the percentage attainment of the TCV target (with linear interpolation in between tiers).

Percentage Attainment of Target       Bonus Payout Multiple
Relative to Target
110% or more 300%
108% 260%
107% 240%
105% 200%
103% 140%
101% 105%
100% 100%
97% 75%
95% 50%
Less than 95% 0%

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FISCAL 2020 CASH BONUS PAYMENTS

Our Non-Sales Executive NEOs. Following our second quarter of fiscal 2020, our Compensation Committee reviewed our financial performance against the revenue target applicable to the target annual cash bonus opportunities of Messrs. Merritt, Child, Conte, Morgan and Tully. The Compensation Committee determined that we were on track to achieve or exceed our annual revenue target. Accordingly, the Compensation Committee approved semi-annual bonus payments of 50% of each of these NEO’s fiscal 2020 target annual cash bonus opportunity, with Mr. Child’s amount prorated based on the number of days in the first half of 2019 Mr. Child was employed with us. After the conclusion of fiscal 2020, the Compensation Committee again evaluated our performance against the revenue target for the full year. The Compensation Committee determined that we had achieved revenue of $2.359 billion, which represented a 31% increase from our fiscal 2019 revenue. In accordance with the payout multiples established under the executive bonus plan, the Compensation Committee approved a bonus payment to each of Messrs. Merritt, Child, Morgan and Tully in an amount that resulted in total fiscal 2020 bonus payments for each equaling 103.6% of his respective fiscal 2020 target annual cash bonus opportunity.

Our Sales Executive NEO. Following our second quarter of fiscal 2020, our Compensation Committee reviewed our financial performance and determined that we were on track to achieve our annual TCV target. Accordingly, the Compensation Committee approved a semi-annual bonus payment of 50% of Ms. St. Ledger’s fiscal 2020 target annual cash bonus opportunity. After the conclusion of fiscal 2020, the Compensation Committee evaluated our performance against the TCV target for the full year and determined that we achieved approximately 103.6% of the TCV target. In accordance with the payout multiples established under the executive bonus plan, the Compensation Committee approved a bonus payment to Ms. St. Ledger in an amount that resulted in a total fiscal 2020 bonus payment equaling 164.3% of her target annual cash bonus opportunity.

The following chart summarizes the target and actual total cash bonus payments made to our NEOs for fiscal 2020:

NEO       Fiscal 2020 Target
Cash Bonus
($)
      Fiscal 2020 Cash
Bonus Paid
($)
Douglas Merritt 843,750 874,125
Jason Child (1) 345,000 265,372
David Conte (2) 356,000 178,000
Scott Morgan 225,000 233,100
Susan St. Ledger 475,000 780,425
Timothy Tully 294,000 304,584
(1) Mr. Child joined the Company on May 6, 2019. 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 2020 during which Mr. Child was employed with us.
(2) Mr. Conte retired from the Company effective as of October 1, 2019. Following his retirement and his execution of an effective release of claims, Mr. Conte received payment of 100% of his target bonus for fiscal 2020, reduced by amounts of fiscal 2020 bonus previously paid to him. Mr. Conte was not eligible for cash bonus payments above target for fiscal 2020 performance under our executive bonus plan or pursuant to the transition services agreement, as described further under “Compensation Tables—Executive Employment Arrangements” below.

Long-Term Equity Compensation

Our equity compensation program focuses the efforts of our NEOs and other executive officers on the achievement of long-term objectives and aligns the interests of our executive officers with those of our stockholders through the grant of equity awards, the value of which depends on our stock performance and other performance measures, to achieve strong long-term performance.

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These equity awards consist of time-based RSUs and performance-based PSUs granted to our executive officers. We believe that RSUs offer predictable value delivery and promote retention of our executive officers while aligning their interests with the long-term interests of our stockholders in a manner consistent with competitive market practices. We believe that PSUs directly link a significant portion of our executive officers’ target total direct compensation to our financial and stock price performance based on the achievement of multiple, distinct and pre-established financial and stock price 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 their continued service. Going forward, we may modify our equity award program, including performance targets, to our executive officers, including our NEOs, to continue to maintain a strong alignment of their interests with the interests of our stockholders.

The Compensation Committee, in consultation with our CEO (other than with respect to himself) and its independent compensation consultant, determines the size, mix, material terms and, in the case of PSUs, performance metrics of the equity awards granted to our executive officers, taking into account a number of factors as described in “Compensation Process—Role of Compensation Committee” above.

FISCAL 2020 EQUITY AWARDS

Annual Equity Awards. In March 2019, the Compensation Committee granted RSUs and PSUs to each of Messrs. Merritt, Morgan, Tully, and Ms. St. Ledger. Mr. Child was granted new hire RSUs and PSUs in connection with his hiring in May 2019. The goal of attracting Mr. Child to the Company in a highly competitive environment factored heavily into the determination of the amounts of his new hire equity awards. Mr. Conte was not granted any fiscal 2020 RSUs or PSUs.

The following table sets forth the number of shares of our common stock subject to the RSUs and PSUs granted to each NEO.

NEO       Nature of
Equity Awards
      Percentage of
Award as RSUs
      RSUs
(number of
shares)
      Percentage of
Award as PSUs
      Target PSUs
(number of
shares)
Douglas Merritt Annual               40 % 36,800               60 % 55,200
Jason Child New Hire 40 % 41,537 60 % 62,305
David Conte N/A
Scott Morgan Annual 40 % 15,276 60 % 22,914
Susan St. Ledger Annual 40 % 21,047 60 % 31,570
Timothy Tully Annual 40 % 21,047 60 % 31,570

Each of these decisions was made in consultation with Compensia and after considering the factors described above, and for Mr. Child, his hiring, and for Mr. Morgan, his promotion. The annual RSUs granted to the NEOs in fiscal 2020 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 NEO’s continued service with us on each vesting date. The annual PSUs granted to the NEOs vest over four years and may be earned based on corporate performance metrics and a stock price performance modifier. The corporate performance metrics have a one-year performance period, with 25% of earned corporate PSUs vesting shortly following the end of the performance period and 75% vesting quarterly thereafter over the remaining three years, subject to the NEO’s continued service with us on each vesting date. In order to further align the interests of our NEOs and stockholders, a modifier to any earned corporate PSUs provides an opportunity to earn additional PSUs based on the Company’s stock price growth rate over a multi-year performance period. Other terms and conditions are described in the “PSU Award Design” section below.

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PSU Award Design. The terms and conditions of the PSUs granted to the NEOs in fiscal 2020 are substantially similar to the terms and conditions of the PSUs granted in fiscal 2019. The principal terms and conditions of the fiscal 2020 PSUs, as well as the rationale for our design approach, are set forth in the following table:

PSU Feature Our Approach Our Rationale
Corporate PSUs
Corporate Performance Metrics      
Two equally weighted corporate metrics–50% based on revenue achievement and 50% based on non-GAAP operating margin achievement
The revenue metric is as determined under GAAP, but excluding revenue recognized during the performance period from any unanticipated acquisitions made during the performance period
The non-GAAP operating margin metric is non-GAAP operating income as reported in the Company’s Annual Report on Form 10-K for fiscal 2020, and as further adjusted for the financial impact of any unanticipated acquisitions made during the performance period, divided by revenue (adjusted as described above)
     
Motivate and incentivize our executives to drive top-line growth in our business while enhancing their focus on specific financial goals considered important to the Company’s long-term growth
Use of revenue as both a PSU metric and an executive bonus plan metric underscores the importance of top-line growth to our overall strategy and our stockholders’ expectations
Use of non-GAAP operating margin as a performance metric reflects increased strategic focus on a profitability measure and bottom-line performance
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
Targets for Corporate Performance Metrics
Target revenue and non-GAAP operating margin set based on our operating plan at the beginning of fiscal 2020
Target revenue for fiscal 2020 reflected an increase of 30% over our fiscal 2019 revenue results, and maximum achievement required an increase of 36% or more over our fiscal 2019 revenue results
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 (threshold) and maximum performance levels provide accountability for underperformance and incentive for overperformance
Capped, maximum payouts only possible when the Company has exceptional performance
Corporate Performance Period
One-year performance period for corporate performance metrics in fiscal 2020
Earned corporate PSUs will not fully vest until approximately four years after date of grant, thus placing awards at-risk for a prolonged period
Steep trajectory of our top-line growth and a shift in our business model towards renewable agreements make performance periods difficult to estimate over a longer period
Allows for adjusted priorities in a rapidly changing competitive business environment
Our historical financial outperformance
Risk of setting inappropriate target levels that may not align with our stockholders’ interests if we were to project more than one year in advance
Corporate PSU Vesting Schedule
25% of earned corporate PSUs vested shortly following the end of the performance period and upon approval of our fiscal 2020 audited financial statements
Remainder will vest quarterly over the next three years, subject to continued service through each vesting date
Time-based vesting schedule for earned corporate PSUs provides additional long-term retention incentives and encourages our NEOs to take a long-term view of our business
Stock Price Modifier
Up to an additional 50% of the number of earned corporate PSUs can be earned if our stock price growth rate is (a) equal to or greater than that of the SPDR S&P Software & Services ETF (or its successor) stock price growth rate and (b) at least 46.41% over four years
Stock price growth rate measured over four-year performance period through March 2023, with stock price PSUs eligible to be earned quarterly beginning in June 2021 if stock price hurdles achieved on each measurement date
Requiring our stock price to outperform an index of other software and services companies as a threshold in order for any additional PSUs to be earned helps reward our performance not just stock market performance
Below-market stockholder returns will not be rewarded
Aligns the interests of our NEOs and stockholders, and rewards, retains and incentivizes our NEOs for above-market stockholder returns
Eligibility for any stock price PSUs to be earned does not begin until over two years after grant, providing long-term incentive and alignment

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The target number of shares subject to the fiscal 2020 PSUs represents the number of shares eligible to be earned and subsequently eligible to vest based on the target level performance of both the revenue metric and the non-GAAP operating margin metric for fiscal 2020, without giving effect to the stock price modifier.

The following chart presents the tiers of the revenue metric payout multiples relative to target (with linear interpolation in between tiers).

      Fiscal 2020
Revenue
(in millions)
(1)
      Payout Multiple
Relative to Target
Max $2,450 or more 200%
$2,425 165%
$2,400 130%
$2,375 110%
Target $2,350 100%
$2,280 75%
Threshold $2,233 50%
Less than $2,233 0%
(1) Excluding revenue recognized during the fiscal year from acquisitions made during the fiscal year.

The following chart presents certain tiers of the non-GAAP operating margin metric payout multiples relative to target (with linear interpolation in between tiers).

      Fiscal 2020
Non-GAAP
Operating Margin
(1)
      Payout Multiple
Relative to Target
Max 15% 200%
Target 13.5% 100%
Threshold 13% 50%
Less than 13% 0%
(1) As adjusted for the impact of acquisitions made during the fiscal year.

A summary of the stock price modifier is shown below.

Threshold Performance       Company Stock Price Growth Rate       Stock Price Modifier Relative to Earned
Corporate PSUs (with linear
interpolation
in between tiers)
Company stock price growth rate
equal to or greater than SPDR S&P
Software & Services ETF stock price
growth rate
74.90% (or $206.09) 50%
46.41% or below (or $172.51
or below)
0%

Earned Corporate PSU Awards. In fiscal 2020, we achieved GAAP revenue of $2.359 billion, representing a 31% growth rate from our fiscal 2019 revenue achievement, and non-GAAP operating margin of 14.2%. The Compensation Committee considered the impact of acquisitions in fiscal 2020 both to the revenue metric and to the non-GAAP operating margin metric, and, in accordance with the terms of the fiscal 2020 PSUs, made adjustments to both metrics.

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Based on our actual performance, after considering the impact of acquisitions in fiscal 2020, and in accordance with the payout multiples described above, the Compensation Committee determined that 150.05% of each continuing NEO’s target PSU award was earned as corporate PSUs. The number of corporate PSUs earned by each continuing NEO was as follows:

NEO       Number of Earned Corporate
PSUs
Douglas Merritt 82,827
Jason Child 93,488
David Conte N/A
Scott Morgan 34,382
Susan St. Ledger 47,370
Timothy Tully 47,370

As described above, 25% of these earned corporate PSUs vested upon the Compensation Committee’s certification of our adjusted revenue and non-GAAP operating margin results for fiscal 2020, and the remainder will vest quarterly over the next three years, so long as the NEO continues to be a service provider through each vesting date.

The following chart presents the number of stock price PSUs that will be eligible to be earned and vest beginning in June 2021 through March 2023, as described above:

NEO       Number of Stock Price PSUs
Eligible to be Earned
Douglas Merritt 41,413
Jason Child 46,744
David Conte N/A
Scott Morgan 17,191
Susan St. Ledger 23,685
Timothy Tully 23,685

Severance and Change in Control-Related Benefits

Our executive officers, including our NEOs, are provided certain protections in the event of their termination of employment under specified circumstances, including following a change in control of the 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 the Company. In March 2019, the Compensation Committee, in consultation with Compensia, reviewed market practices and our retention goals for our executive officers, including our NEOs, and made certain amendments to their severance and change in control-related benefits. The chart below describes the material terms of these benefits for our continuing NEOs.

Triggering Event(s)       Benefits
Within three months after signing of a definitive agreement that ultimately results in a change in control or 18 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 NEO’s then-current base salary (24 months, in the case of our CEO), plus 100% of NEO’s annual target bonus for the year of termination (24 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), less any amounts already paid for such year;
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 NEO’s outstanding equity awards; and
Six-month post-termination exercise period for NEO’s outstanding options.
In each case subject to NEO timely signing a release of claims that becomes effective.
Employment is terminated without cause (other than in connection with a change in control)
A lump sum payment equal to six months of NEO’s then-current base salary (18 months, in the case of our CEO), plus a pro-rated portion of NEO’s annual target bonus for the year of termination, less any amounts already paid for such year;
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 NEO’s outstanding equity awards (12 months, in the case of our CEO); and
Six-month post-termination exercise period for NEO’s outstanding options.
In each case subject to NEO timely signing a release of claims that becomes effective.

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In addition, in the event any of the payments provided for under the executive employment letters, or otherwise payable to the NEO, would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and could be subject to the related excise tax under Section 4999 of the Internal Revenue Code, he or she would be entitled to receive either full payment of benefits or such lesser amount which would result in no portion of the benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to such executive. No employment letter with any of our NEOs provides for any tax gross-up payments.

In connection with Mr. Conte’s announced retirement, on November 30, 2018, we entered into a transition services agreement (the “Transition Services Agreement”) with Mr. Conte in connection with his announced retirement, in order to provide him with incentives to remain with us through and for a prescribed period of time following the hiring of a new chief financial officer. Following our hiring of a new chief financial officer, on October 3, 2019, we entered into a release agreement with Mr. Conte in connection with his retirement, pursuant to which he became entitled to receive the severance benefits as set forth in his Transition Services Agreement. For a description of the Transition Services Agreement, including the severance and change in control-related benefits applicable to Mr. Conte thereunder, see “Compensation Tables—Executive Employment Arrangements.”

Under our 2012 Plan, our employees, including our executive officers, and our non-employee directors are entitled to vesting acceleration benefits in the event of their death. See “Compensation Tables—Equity Acceleration Death Benefit” below for further information.

On April 24, 2020, the Compensation Committee, in consultation with Compensia, reviewed our retention goals for our executive officers, including our NEOs, and made certain updates to their severance and change in control-related benefits. See “Other Compensation Policies and Information—Recent Fiscal 2021 Compensation Decisions” below for further information.

Other Compensation Policies and Information

One-Time Transition Bonuses

Signing Bonus for Mr. Child. In May 2019, pursuant to his offer letter, Mr. Child received a cash signing bonus in the amount of $500,000, subject to reimbursement in full if he voluntarily resigns from the Company without good reason within 12 months of his start date. Mr. Child was also granted 41,537 RSUs and 62,305 target PSUs in connection with his hiring. His RSUs vest over four years with 25% of his RSUs vesting in June 2020 and the remainder vesting quarterly over three years, if he remains employed by the Company. On March 26, 2020, 150.05% of his target PSU award was earned as corporate PSUs and 25% vested based on Company performance for fiscal 2020. The remainder of his PSUs vest quarterly over three years, if he continues to be a service provider of the Company.

In considering Mr. Child’s compensation package, including his signing bonus, the Compensation Committee took into account the substantial effort, focus and commitment required of Mr. Child to achieve the Company’s strategic business goals, and to transition the finance operations of the Company from our former chief financial officer, including all management, budgeting, planning, investor relations, treasury, accounting, internal controls and audit obligations. The Compensation Committee was also mindful of the competition for talented chief financial officers in the technology sector and the goal of attracting Mr. Child to the Company in light of his prior experience serving as CFO at Groupon, Inc. and leading global finance teams at Amazon.com, Inc. for over 11 years as well as compensation he forfeited when he separated from his prior employer. For a description of Mr. Child’s offer letter, see “Compensation Tables—Executive Employment Arrangements.”

Transition Bonus for Mr. Conte. In August 2019, as a result of Mr. Conte’s announced retirement, and pursuant to his Transition Services Agreement, Mr. Conte received a cash bonus in the amount of $1 million in consideration for his assistance with a successful transition to our new chief financial officer. Under the terms of the Transition Services Agreement, a successful transition required that (1) the Company timely filed all annual and quarterly reports and timely

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furnished all current reports under Item 2.02 of Form 8-K, from November 30, 2018, under the Securities Exchange Act of 1934, (2) Mr. Conte maintained the operations of the finance function of the Company in a manner reasonably consistent with the professional standards and competency displayed by him during his tenure as the Company’s CFO, including without limitation, all management, budgeting, planning, investor relations, treasury, accounting, internal controls and audit obligations, and (3) the new CFO, Mr. Child, was provided with all information and assistance reasonably necessary to enable Mr. Child to operate the finance function independently of Mr. Conte’s assistance and continue the operation of the Company’s finance function consistent with past practice.

For a description of the Transition Services Agreement, and the benefits thereunder, see “Compensation Tables—Executive Employment Arrangements.”

Recent Fiscal 2021 Compensation Decisions

In March 2020, the Compensation Committee conducted its annual executive compensation review and made fiscal 2021 compensation decisions for our continuing NEOs as set forth below. In making these decisions, the Compensation Committee considered, among other factors, pay levels of our NEOs relative to peers and the overall competitive market, performance of each continuing NEO, the continued talent war for experienced leadership in our industry and the feedback from our stockholders as discussed above.

Increased the base salaries of continuing NEOs by 5% to 26% of their fiscal 2020 base salaries.
Increased certain NEO’s target annual cash bonus percentage by 7% to 17% to align with market.
Maintained the mix of fiscal 2021 equity awards for all continuing NEOs, including our CEO, at 60% PSUs and 40% RSUs. This mix is consistent with that of fiscal 2020 equity awards.
Maintained a stock price modifier to any earned corporate PSUs that provides for an opportunity to earn additional stock price PSUs based on the Company’s stock price growth rate measured over a four-year performance period through March 2024, subject to a threshold performance requirement relative to an index of other software and services companies.

In response to stockholder feedback to consider performance metrics that tie to our business strategy and are appropriate during our transition to a renewable business model, the Compensation Committee replaced revenue with annual recurring revenue (“ARR”) as a metric in our executive bonus plan and our fiscal 2021 PSU program to align our incentives with key drivers of stockholder value. ARR represents the annualized revenue run-rate of active term license, maintenance, and subscription contracts at the end of a reporting period. In addition, the Compensation Committee replaced non-GAAP operating margin with operating cash flow as a metric for our fiscal 2021 PSU program to reflect focus on disciplined execution of our business objectives during our transition to a renewable business model.

The Compensation Committee, in consultation with Compensia, reviewed our retention goals for our executive officers, including our continuing NEOs, and on April 24, 2020 approved updates to their severance and change in control-related benefits as described below.

Amended the offer letter for Mr. Merritt to clarify that if, following a change in control, he is not the chief executive officer of a publicly traded company that is the ultimate parent entity of the acquirer, such change in his job will constitute good reason.
Changed the terms and conditions of the PSUs granted in fiscal 2021 to provide that if, prior to the end of fiscal 2021, there is a change in control (as defined in our 2012 Equity Incentive Plan), then the earned corporate PSUs for each award will equal the product of (i) the target number of corporate PSUs subject to that award multiplied by (ii) the greater of (x) 100% and (y) the average of the achievement percentage of earned corporate PSUs under the performance-based equity awards granted in fiscal 2019 and fiscal 2020 (rounded applying standard rounding principles); for the avoidance of doubt, this formula shall apply irrespective of whether the recipient of such grant received performance-based equity awards in fiscal 2019 or fiscal 2020.

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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, health savings account, 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 certain spousal travel expenses and certain tax gross-ups.

In fiscal 2020, the Company reimbursed Mr. Merritt for costs associated with certain personal home security services, including installation of a home security system. We provided this protection to Mr. Merritt because we believe that his personal safety and security is of utmost importance to the Company and its stockholders. The Compensation Committee believes that amounts paid by the Company for these security services have been reasonable, necessary and for the Company’s benefit.

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. To promote this belief, our Board adopted stock ownership guidelines requiring our executive officers to achieve certain stock ownership levels within five years of the later of September 13, 2018 or such executive officer’s hire, appointment, promotion or election date, as applicable. The current stock ownership guidelines are set forth below:

Our CEO must own the lesser of (i) Company stock with a value of five times his or her annual base salary and (ii) 50,000 shares; and
Each other executive officer must own the lesser of (i) Company stock with a value of two times his or her annual base salary and (ii) 12,000 shares.

The salary multiples above are consistent with current market practices, and the alternative share number thresholds are intended to provide our executive officers with certainty as to whether the guidelines are met, regardless of our then-current stock price.

If an executive officer fails to meet the ownership guidelines within the applicable compliance period, he or she will be required to hold 50% of shares acquired (which will be calculated based on net shares after taxes) through our equity incentive plans until such time as he or she meets the required ownership guidelines.

As of the end of fiscal 2020, all of our NEOs have met, exceeded, or are on track to meet, these guidelines based on their current rate of stock accumulations in the time frames set out in the guidelines.

See “Corporate Governance at Splunk—Non-Employee Director Compensation—Stock Ownership Guidelines” for information about the guidelines applicable to our non-employee directors.

Clawback Policy

We have a Clawback Policy pursuant to which we may seek the recovery of cash performance-based incentive compensation paid by us 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) we restate our 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

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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 our best interests 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.

Anti-Hedging and Anti-Pledging Policy; Stock Trading Practices

We maintain an Insider Trading Policy that, among other things, prohibits our NEOs from trading during quarterly and special blackout periods. We also prohibit our NEOs from engaging in short sales, hedging, swaps, exchange funds and similar transactions designed to decrease the risks associated with holding the Company’s securities, as well as pledging the Company’s securities as collateral for loans and transactions involving derivative securities relating to our common stock. None of the Company’s subsidiaries have publicly traded equity securities. Our Insider Trading Policy requires all NEOs to obtain written pre-clearance from the Insider Trading Compliance Officer or his or her designee prior to buying, selling, or engaging in any other transaction in the Company’s securities.

Further, we have adopted Rule 10b5-1 Trading Plan Guidelines that permit 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 NEO 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 (the “Tax Code”), or Section 162(m), 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 certain other current and former highly compensated officers that qualify as covered employees 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 current and former executive officers and do not currently have any immediate plans to do so. The Compensation Committee may, in its judgment, authorize compensation payments that is not fully tax deductible when it believes that such payments are appropriate to attract and retain executive talent or meet other business objectives. The Compensation Committee intends to continue to compensate our current and former executive officers in a manner consistent with our best interests of and the best interests of 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 Tax Code. Sections 280G and 4999 of the Tax 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 Tax Code.

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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 a 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 Compensia, assesses and considers potential risks when reviewing and approving our compensation programs, policies and practices for our executive officers and our employees. We 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 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
Elisa Steele


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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, 2020, 2019 and 2018.

Name and Principal Position    Fiscal
Year
   Salary
($)
   Bonus
($)
   Stock
Awards
($) (1)
   Non-Equity
Incentive Plan
Compensation
($)
   All Other
Compensation
($)
   Total
($)
Douglas Merritt 2020 675,000 14,100,955 874,125 60,565 (2) 15,710,645
President, CEO and Director 2019 650,000 11,174,462 1,625,000 56,333 (3) 13,505,796
2018 475,000 8,025,313 652,365 9,664 (4) 9,162,342
Jason Child 2020 341,534 (5) 500,000 (6) 16,294,280 265,372 (5) 84,623 (2) 17,485,809
Senior Vice President and
Chief Financial Officer
David Conte 2020 296,260 1,000,000 (7) 178,000 (8) 381,370 (9) 1,855,630
Former Senior Vice 2019 445,000 3,947,856 712,000 54,352 (10) 5,159,208
President and Chief 2018 385,000 4,012,687 423,007 9,925 (11) 4,830,619
Financial Officer
Scott Morgan 2020 375,000 5,853,518 233,100 10,599 (2) 6,472,217
Senior Vice President, Chief
Legal Officer, Global Affairs
and Secretary
Susan St. Ledger 2020 475,000 8,064,755 780,425 21,556 (2) 9,341,736
President, Worldwide 2019 460,000 7,237,736 1,357,000 40,244 (3) 9,094,980
Field Operations 2018 426,667 (12) 11,257,413 906,638 (12) 11,734 (4) 12,602,452
Timothy Tully 2020 420,000 8,064,755 304,584 10,464 (2) 8,799,803
Senior Vice President, 2019 400,000 5,263,808 560,000 25,490 (3) 6,249,298
Chief Technology Officer
(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 2020, 2019 and 2018 and the PSUs granted to our NEOs in fiscal 2020, 2019 and 2018, as computed in accordance with FASB 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. The fiscal 2020 PSUs include both corporate performance and market-related (stock price modifier) goals. Consistent with the applicable accounting standards, the grant date fair value of the stock price modifier component has been determined using a Monte Carlo simulation model. 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, 2020.

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Assuming the highest level of performance is achieved under the applicable performance measures for the fiscal 2020 PSUs, the maximum possible value of the fiscal 2020 PSUs using the grant date fair value is presented below:

Name       Maximum Value of Fiscal 2020 PSUs
(as of Grant Date for Accounting
Purposes) ($)
Douglas Merritt 27,678,177
Jason Child 32,047,895
David Conte
Scott Morgan 11,489,718
Susan St. Ledger 15,829,977
Timothy Tully 15,829,977
(2) For Mr. Merritt, this amount represents $5,562 in tax gross-ups; spousal expenses associated with attendance at our annual sales achievement event and a gift presented to all attendees at the event; $42,698 in one-time home security installation, equipment and monitoring cost; $2,000 in a matching contribution and $2,000 in a discretionary contribution to Mr. Merritt’s 401(k) plan account, which contributions were made to all eligible participants; and a premium payment for long-term disability benefits. For Mr. Child, this amount represents $24,830 in tax gross-ups; spousal expenses associated with attendance at our annual sales achievement event and a gift presented to all attendees at the event; $48,807 reimbursement of relocation expenses provided as part of his offer letter; $1,769 in a matching contribution and $2,000 in a discretionary contribution to Mr. Childs’ 401(k) plan account, which contributions were made to all eligible participants; and a premium payment for long-term disability benefits. For Mr. Morgan, this amount represents $6,599 in tax gross-ups; and $2,000 in a matching contribution and $2,000 in a discretionary contribution to Mr. Morgan’s 401(k) plan account, which contributions were made to all eligible participants. For Ms. St. Ledger, this amount represents $7,196 in tax gross-ups; guest expenses associated with attendance at our annual sales achievement event and a gift presented to all attendees at the event; $2,000 in a matching contribution and $2,000 in a discretionary contribution to Ms. St. Ledger’s 401(k) plan account, which contributions were made to all eligible participants; and a premium payment for long-term disability benefits. For Mr. Tully, this amount represents $6,225 in tax gross-ups; and $2,239 in a matching contribution and $2,000 in a discretionary contribution to Mr. Tully’s 401(k) plan account, which contributions were made to all eligible participants.
(3) For Mr. Merritt, this amount represents $21,817 in tax gross-ups; $25,662 in spousal expenses associated with attendance at our annual sales achievement event and a gift presented to all attendees at the event; $4,000 in a matching contribution and $3,000 in a discretionary contribution to Mr. Merritt’s 401(k) plan account, which contributions were made to all eligible participants; and a premium payment of $1,854 for long-term disability benefits. For Ms. St. Ledger, this amount represents $14,405 in tax gross-ups; guest expenses associated with attendance at our annual sales achievement event and a gift presented to all attendees at the event; $4,000 in a matching contribution and $3,000 in a discretionary contribution to Ms. St. Ledger’s 401(k) plan account, which contributions were made to all eligible participants; and a premium payment for long-term disability benefits. For Mr. Tully, this amount represents $8,708 in tax gross-ups; a Company gift; spousal expenses associated with attendance at our annual sales achievement event and a gift presented to all attendees at the event; and $3,538 in a matching contribution and $3,000 in a discretionary contribution to Mr. Tully’s 401(k) plan account, which contributions were made to all eligible participants.
(4) For Mr. Merritt, this amount represents $3,664 in tax gross-ups and a discretionary contribution of $6,000 to Mr. Merritt’s 401(k) plan account, which contribution was made to all eligible participants. For Ms. St. Ledger, this amount represents $5,734 in tax gross-ups and a discretionary contribution of $6,000 to Ms. St. Ledger’s 401(k) plan account, which contribution was made to all eligible participants.
(5) Mr. Child joined the Company on May 6, 2019. The salary and non-equity incentive plan compensation amounts presented for Mr. Child are prorated based on the number of days in fiscal 2020 during which he was employed with us.
(6) Pursuant to his offer letter, Mr. Child received a cash signing bonus, subject to reimbursement if he voluntarily resigns from the Company without good reason within 12 months of his start date.
(7) Pursuant to the Transition Services Agreement, Mr. Conte received a $1,000,000 cash bonus in consideration for his assistance with a successful transition to our new chief financial officer as described in the Transition Services Agreement and remained employed by the Company for 30 days after the Transition Date (as defined in the Transition Services Agreement). See “Executive Employment Arrangements” section below for a description of the Transition Services Agreement.
(8) This amount reflects 50% of Mr. Conte’s fiscal 2020 target cash bonus opportunity, which was paid prior to Mr. Conte’s Retirement Date (as defined in the Transition Services Agreement) in accordance with the terms of the executive bonus plan.
(9) This amount represents $3,575 in tax gross-ups; $288 in a matching contribution and $2,000 in a discretionary contribution to Mr. Conte’s 401(k) plan account, which contributions were made to all eligible participants. This amount also includes payments pursuant to the Transition Services Agreement, which consists of a lump sum payment of the remaining amount of Mr. Conte’s salary through March 11, 2020 and payment of 100% of his target bonus for fiscal 2020, reduced by amounts of fiscal 2020 bonus previously paid to him. Payment of these amounts was deferred six months and one day from his retirement date to comply with Section 409A. This amount does not include values for accelerated vesting of equity awards received under the Transition Services Agreement, as the grant date values of those equity awards have already been reported in prior fiscal years.

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(10) This amount represents $17,281 in tax gross-ups; $29,235 in legal fees paid in connection with the Transition Services Agreement; $3,712 in a matching contribution and $3,000 in a discretionary contribution to Mr. Conte’s 401(k) plan account, which contributions were made to all eligible participants; and a premium payment of $1,125 for long-term disability benefits.
(11) This amount represents $3,925 in tax gross-ups for Mr. Conte. For fiscal 2018, we made a discretionary contribution to the 401(k) plan accounts of all eligible participants in the amount of $6,000 each.
(12) Ms. St. Ledger was promoted to President, Worldwide Field Operations, effective as of October 1, 2017. The salary and non-equity incentive plan compensation amounts for Ms. St. Ledger are prorated based on the number of days in fiscal 2018 she served as Senior Vice President, Chief Revenue Officer or President, Worldwide Field Operations, respectively.

Grants of Plan-Based Awards for Fiscal 2020

The following table presents, for each of our NEOs, information concerning grants of plan-based awards made during fiscal 2020. 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 421,875 843,750 1,687,500
RSUs 03/21/2019 36,800 4,874,896
PSUs 03/21/2019 27,600 55,200 165,600 9,226,059
Jason Child 172,500 345,000 690,000
RSUs 05/06/2019 41,537 5,611,649
PSUs 05/06/2019 31,152 62,305 186,915 10,682,632
David Conte 178,000 356,000 712,000
RSUs
PSUs
Scott Morgan 112,500 225,000 450,000
RSUs 03/21/2019 15,276 2,023,612
PSUs 03/21/2019 11,457 22,914 68,742 3,829,906
Susan St. Ledger 237,500 475,000 1,425,000
RSUs 03/21/2019 21,047 2,788,096
PSUs 03/21/2019 15,785 31,570 94,710 5,276,659
Timothy Tully 147,000 294,000 588,000
RSUs 03/21/2019 21,047 2,788,096
PSUs 03/21/2019 15,785 31,570 94,710 5,276,659
(1) Amounts in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” columns relate to cash incentive compensation opportunities under each NEO’s 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, Child, Conte, Morgan and Tully under these plans are subject to a maximum payment of 200%, based on achievement of 104% or more of the target corporate performance objective. TCV-based payments to Ms. St. Ledger were capped at a maximum of 300% for achievement of 110% or greater of the 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 Analysis—Discussion of Our Fiscal 2020 Executive Compensation Program—Components of Compensation Program and Fiscal 2020 Compensation—Cash Bonuses” above.

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(2) Amounts in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns relate to estimated payouts of the fiscal 2020 PSUs. The amounts shown in the Threshold column reflect the corporate PSUs if the minimum revenue metric and non-GAAP operating margin metric are met and are 50% of the amounts shown under the Target column. The amounts shown in the Target column reflect the corporate PSUs if the revenue metric and non-GAAP operating margin metric are at target. The amounts shown in the Maximum column reflect the corporate PSUs if the maximum revenue metric and non-GAAP operating margin metric are met and are 200% of the amounts shown under the Target column, plus the maximum number of stock price PSUs eligible to be earned, which is 50% of the maximum number of corporate PSUs. The PSUs vest over four years, subject to continued service to us. On March 26, 2020, 150.05% of each NEO’s target fiscal 2020 PSUs were deemed earned based upon our fiscal 2020 financial results, and one-fourth of these earned corporate PSUs vested on March 26, 2020 and 1/16th vest quarterly thereafter, beginning on June 10, 2020, over the remaining three years, subject to continued service to us.
(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 2020 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 2020 performance period as of the date on which the PSUs were granted for accounting purposes. The fiscal 2020 PSUs include both corporate performance and market-related (stock price modifier) goals. Consistent with the applicable accounting standards, the grant date fair value of the stock price modifier component has been determined using a Monte Carlo simulation model. 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, 2020.

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Outstanding Equity Awards at Fiscal 2020 Year-End

The following table sets forth information concerning outstanding equity awards held by our NEOs as of January 31, 2020.

Stock Awards
Name       Vesting
Commencement
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 3/10/2016 2,261 (2)   351,043
3/10/2016 6,046 (3)   938,702
3/10/2017 16,667 (2)   2,587,718
3/10/2017 42,170 (4)   6,547,314
3/10/2018 21,017 (2)   3,263,099
3/10/2018 63,050 (5)   9,789,143
3/10/2019 36,800 (2)   5,713,568
3/10/2019 82,827 (6)   12,859,720
Jason Child 6/10/2019 41,537 (2)   6,449,035
3/10/2019 93,488 (6)   14,514,947
David Conte (7)
Scott Morgan 12/10/2016 3,375 (2)   524,003
3/10/2017 3,750 (2)   582,225
12/10/2017 6,500 (2)   1,009,190
9/10/2018 6,875 (2)   1,067,413
3/10/2019 15,276 (2)   2,371,752
3/10/2019 34,382 (6)   5,338,149
Susan St. Ledger 6/10/2016 8,500 (2)   1,319,710
6/10/2016 11,366 (3)   1,764,685
3/10/2017 10,417 (2)   1,617,343
3/10/2017 26,355 (4)   4,091,877
9/10/2017 41,125 (2)   6,385,068
3/10/2018 13,613 (2)   2,113,554
3/10/2018 40,838 (5)   6,340,508
3/10/2019 21,047 (2)   3,267,757
3/10/2019 47,370 (6)   7,354,666
Timothy Tully 9/10/2017 33,425 (2)   5,189,566
3/10/2018 9,900 (2)   1,537,074
3/10/2018 29,700 (5)   4,611,222
3/10/2019 21,047 (2)   3,267,757
3/10/2019 47,370 (6)   7,354,666
(1) Market Value is calculated based on the closing price of our common stock on The NASDAQ Global Select Market on January 31, 2020 (the last trading day of our fiscal year), which was $155.26.
(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.

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(3) On March 29, 2017, 89.15% of each NEO’s target fiscal 2017 PSUs were deemed earned based upon our fiscal 2017 financial results. The earned PSUs vest over four years, subject to continued service to us. For Mr. Merritt, 30% of these earned PSUs vested on March 29, 2017 and 5.83% vest quarterly thereafter, beginning on June 10, 2017, over the remaining three years. For Ms. St. Ledger, one-fourth of these earned PSUs vested on June 10, 2017 and 1/16th vest quarterly thereafter, beginning on September 10, 2017, over the remaining three years.
(4) On March 30, 2018, 168.67% of each NEO’s target fiscal 2018 PSUs were deemed earned based upon our fiscal 2018 financial results. The earned PSUs vest over four years, subject to continued service to us. For Mr. Merritt and Ms. St. Ledger, one-fourth of the PSUs granted on March 9, 2017 vested on March 30, 2018 and 1/16th vest quarterly thereafter, beginning on June 10, 2018, over the remaining three years.
(5) On March 27, 2019, 200% of each NEO’s target fiscal 2019 PSUs were deemed earned based upon our fiscal 2019 financial results, and one-fourth of these earned cor