DEF 14A of Fortinet, Inc., May 1, 2023

DEF 14A of Fortinet, Inc.

Filed May 1, 2023 · FY20220001174947-23-000676

Open on EDGAR

  1. ELECTION OF DIRECTORS

    ELECTION OF DIRECTORS

  2. General

    General The Board of Directors currently consists of eight members, and the Current Certificate provides that the entire Board of Directors will stand for election annually for one-year terms. Each director holds office until that director’s successor is duly elected and qualified. Our Current Bylaws permit the Board of Directors to establish by resolution the authorized number of directors, and eight directors are currently authorized.

  3. Nominees

    Nominees Eight candidates have been nominated for election as directors at the 2023 Annual Meeting for a one-year term expiring at the 2023 Annual Meeting. Upon recommendation of the Governance Committee of the Board of Directors (the “Governance Committee”), the Board of Directors has nominated Ken Xie, Michael Xie, Kenneth A. Goldman, Ming Hsieh, Jean Hu, William Neukom, Judith Sim and Admiral James Stavridis (Ret) for election as directors. Biographical information about each of the nominees is contained in the following section. A discussion of the qualifications, attributes and skills of each nominee that led the Board of Directors and the Governance Committee to the conclusion that such nominee should serve as a director has been added following each of the director and nominee biographies. Each nominee has agreed to serve if elected, and management has no reason to believe that any nominee will be unavailable to serve. In the event any nominee is unable or declines to serve as a director at the time of the 2023 Annual Meeting, the proxies will be voted for any nominee who may be proposed by the Governance Committee and designated by the present Board of Directors to fill the vacancy. If you sign your proxy card or voting instruction card or vote by telephone or over the internet but do not give instructions with respect to the voting of directors, your shares will be voted for the eight nominees recommended by the Board of Directors. If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions on your proxy or voting instruction card or when you vote by telephone or over the internet. If you do not give voting instructions to your broker, your broker will leave your shares unvoted on this matter. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF Ken Xie, Michael Xie, Kenneth a. goldman, Jean Hu, Ming Hsieh, William Neukom, Judith Sim and ADMIRAL JAMES STAVRIDIS (RET).

  4. Information Regarding the Board of Directors and Director Nominees

    Information Regarding the Board of Directors and Director Nominees The names of the members of the Board of Directors and our proposed director nominees, their respective ages, their positions with Fortinet (as applicable) and other biographical information as of March 31, 2023, are set forth below. Messrs. Ken Xie and Michael Xie are brothers. There are no other family relationships among any of our directors or executive officers.

  5. Information Regarding the Board of Directors and Director Nominees

    | Name | Age | Position | | Ken Xie | 60 | Chief Executive Officer, Chairman of the Board of Directors and Director Nominee | | Michael Xie(4)**** | 54 | President, Chief Technology Officer, Director and Director Nominee | | Kenneth A. Goldman(1)(2) | 73 | Director and Director Nominee | | Ming Hsieh(2)(3)* | 67 | Director and Director Nominee | | Jean Hu(2)** | 59 | Director and Director Nominee | | William H. Neukom(3)(4) | 81 | Lead Independent Director and Director Nominee | | Judith Sim(1)(3)*** | 54 | Director and Director Nominee | | Admiral James Stavridis (Ret)(1)(4) | 68 | Director and Director Nominee |

  6. Information Regarding the Board of Directors and Director Nominees

    __________________ (1) Member of the Human Resources Committee. (2) Member of the Audit Committee. (3) Member of the Governance Committee. (4) Member of the Social Responsibility Committee. * Chairperson of the Governance Committee. ** Chairperson of the Audit Committee. *** Chairperson of the Human Resources Committee. **** Chairperson of the Social Responsibility Committee. Ken Xie has served as our Chief Executive Officer and a member of the Board of Directors since he co-founded Fortinet in October 2000. He previously served as our President until November 2013. Prior to co-founding Fortinet, Mr. Ken Xie was the Founder, President and Chief Executive Officer of NetScreen Technologies, Inc., a provider of network security products, which was acquired by Juniper Networks, Inc. in April 2004. Additionally, Mr. Ken Xie was Chief Executive Officer of SIS, Inc. and is a member of the National Academy of Engineering. In addition to the Board of Directors, Mr. Ken Xie has served on the board of directors of TeleNav, Inc. since July 2012. Mr. Ken Xie received a B.S. and an M.S. in electrical engineering from Tsinghua University in China and an M.S. in electrical engineering from Stanford University. Mr. Ken Xie has more than 25 years of technical and management experience in the networking and security industries, which includes his roles as a founder of Fortinet, NetScreen and SIS and as President and Chief Executive Officer of each of the foregoing companies. The Board of Directors also believes Mr. Ken Xie provides valuable perspective and experience as a co-founder of Fortinet and one of its largest stockholders. Michael Xie has served as our President and Chief Technology Officer since November 2013 and as a member of the Board of Directors since February 2001. He previously served as our Vice President of Engineering and Chief Technology Officer after co-founding Fortinet in October 2000. Prior to co-founding Fortinet, he held positions as Vice President of Engineering for ServGate Technologies, Inc., a network security provider that was acquired by Amarium Technologies, Inc. in April 2006, Software Director and Architect for NetScreen and Senior Software Engineer for Milkyway Networks Corporation, a network security solutions provider. Mr. Michael Xie has an M.S. in electrical engineering from the University of Manitoba in Canada, as well as a B.S. and an M.S. in automobile engineering from Tsinghua University in China. Mr. Michael Xie has more than 20 years of technical and operational experience in the network security industry, which includes positions as the President and Chief Technology Officer of Fortinet, the Vice President of Engineering of ServGate and the Software Director and Architect of NetScreen. The Board of Directors believes that Mr. Michael Xie’s deep technical knowledge is invaluable in developing and improving Fortinet’s technology and network security products. The Board of Directors also believes Mr. Michael Xie provides valuable perspective and experience as a co-founder of Fortinet and one of its largest stockholders. Kenneth A. Goldman has served as a member of the Board of Directors since October 2020. Mr. Goldman has served as the President of Hillspire LLC, a family office management company, since September 2017. From October 2012 to June 2017, Mr. Goldman served as the Chief Financial Officer of Yahoo! Inc., a provider of internet content and services. Prior to this, Mr. Goldman was our Senior Vice President and Chief Financial Officer from September 2007 to October 2012. From January 2015 to December 2017, Mr. Goldman served as a member of the PCAOB, Standing Advisory Group. From December 1999 to December 2003, Mr. Goldman served on the Financial Accounting Standards Board’s primary advisory group. Mr. Goldman currently serves on the boards of directors of GoPro, Inc., RingCentral, Inc. and Zuora, Inc. Mr. Goldman is also on the board of directors of the Value Reporting Foundation (“VRF”), which is responsible for the financing, oversight, administration and appointment of the VRF Standard Board. Mr. Goldman holds a B.S. in Electrical Engineering from Cornell University and an M.B.A. from Harvard Business School. Mr. Goldman has developed expertise in finance, including accounting and financial reporting, as a Chief Financial Officer of Yahoo! Inc. and in other finance roles, and has career experience managing human resources and legal functions. Mr. Goldman also has over ten years of outside board experience at the aforementioned companies and numerous other public and private companies. Ming Hsieh has served as a member of the Board of Directors since April 2013. Mr. Hsieh has served as the Chairman and Chief Executive Officer of Fulgent Therapeutics Inc., a cancer drug research and development company, since September 2012. From October 2010 to June 2012, Mr. Hsieh served as the President of 3M Cogent, Inc., a provider of global biometric identification solutions, following the acquisition of Cogent, Inc. by 3M Company in 2010. Prior to the acquisition, Mr. Hsieh served as the Chief Executive Officer, President and Chairman of the board of directors of Cogent since founding Cogent in 1990. Prior to that, Mr. Hsieh was a research and development engineer at International Rectifier Corporation, a manufacturer of semiconductors, from 1985 to 1987. Mr. Hsieh received a B.S.E.E. from the University of Southern California in 1983 and an M.S.E.E. from University of Southern California in 1984. Mr. Hsieh has leadership, operational and executive experience by serving as Chief Executive Officer, President and Chairman of the board of directors of Cogent. Jean Hu has served as a member of the Board of Directors since October 2019. Since January 2023, Ms. Hu has served as Executive Vice President and Chief Financial Officer of Advance Micro Devices, Inc., a semiconductor company. Prior to AMD, Ms. Hu served as Executive Vice President and Chief Financial Officer of Marvell Technology Group Ltd., a semiconductor company, from August 2016 to January 2023. Ms. Hu served as Senior Vice President and Chief Financial Officer of Qlogic Corporation, a network server and storage networking company, from April 2011 to August 2016, and as acting Chief Executive Officer of Qlogic from May 2013 to February 2014 and from August 2015 to August 2016. From 2004 to 2011, Ms. Hu served in various senior positions at Conexant Systems, Inc., a semiconductor company, including as Chief Financial Officer and Senior Vice President, Business Development from December 2008 to April 2011 and as Treasurer from June 2009 until April 2011. Ms. Hu holds a B.S. in Chemical Engineering from Beijing University of Chemical Engineering and a Ph.D. in Economics from Claremont Graduate University Ms. Hu has extensive experience in the management of technology companies from her positions at Marvell and Qlogic, and expertise in corporate financing, accounting and financial reporting.

  7. Information Regarding the Board of Directors and Director Nominees

    William H. Neukom has served as a member of the Board of Directors since January 2013 and has served as our Lead Independent Director since April 2018. Mr. Neukom is the Founder and Chief Executive Officer of the World Justice Project, an organization devoted to promoting the rule of law throughout the world. He is a retired partner in the Seattle office of the international law firm K&L Gates LLP and is a lecturer at Stanford Law School, where he teaches a seminar on the rule of law. He is a member of the Dean’s Council at Stanford Law School and was its chair from 2012 to 2015. Mr. Neukom was the Chief Executive Officer of the San Francisco Giants major league baseball team from 2008 to 2011, and served as its Chairman Emeritus during 2012. He is a trustee emeritus of Dartmouth College, having served as chair of the board from 2004 to 2007, and was president of the American Bar Association from 2007 to 2008, and was awarded the ABA Medal in 2020. Mr. Neukom was previously the lead lawyer for Microsoft Corporation for nearly 25 years, managing its legal, government affairs and philanthropic activities. He retired from Microsoft as its Executive Vice President of Law and Corporate Affairs in 2002, when he returned to Preston, Gates & Ellis LLP and served as the firm’s chairman from 2003 until its merger with Kirkpatrick & Lockhart Nicholson Graham LLP in 2007. Mr. Neukom also serves on the board of several not-for-profit organizations. Mr. Neukom earned an A.B. from Dartmouth College and an LL.B. from Stanford University. Mr. Neukom has business leadership, operational, legal and executive experience as a result of his service as Managing General Partner and Chief Executive Officer of San Francisco Baseball Associates, as President of the American Bar Association, as a partner at an international law firm and as the Executive Vice President of Law and Corporate Affairs for Microsoft. The Board of Directors believes that Mr. Neukom, with his experience with the technology industry and his expertise in legal, governance and compliance matters, brings a unique and valuable perspective to the Board of Directors. Judith Sim has served as a member of the Board of Directors since June 2015. Ms. Sim previously held various customer-related and marketing positions at Oracle Corporation from 1991 to April 2020, including as its Chief Marketing Officer from 2005 to April 2020. Ms. Sim received a B.S. in dietetics from the University of California at Davis. Ms. Sim has leadership and executive experience from her position as head of marketing programs at Oracle, including experience in field marketing, corporate communications, global customer programs, advertising, campaigns, events and corporate branding. Admiral James Stavridis, USN (Ret), PhD has served as a member of the Board of Directors since October 2021. Admiral Stavridis (Ret) spent 37 years in the U.S. Navy, rising to the rank of 4-star Admiral. Among Admiral Stavridis’ (Ret) many commands were four years as the 16th Supreme Allied Commander of NATO, leading the NATO Alliance in global operations and where his responsibilities included cybersecurity. He was the longest serving Combatant Commander in recent U.S. history. In the course of his Navy career, Admiral Stavridis (Ret) served as senior military assistant to the Secretary of the Navy and the Secretary of Defense. He led the Navy’s premier operational think tank for innovation, Deep Blue. Following his military career, Admiral Stavridis (Ret) served for five years as the 12th Dean of The Fletcher School of Law and Diplomacy at Tufts University. While Dean, he created a blended master’s degree in cyber and international relations at Tufts. He is a nationally recognized cybersecurity expert and routinely teaches on cyber challenges and offers insights via speaking appearances. He is currently Managing Director and Vice Chairman, Global Affairs of The Carlyle Group and is Chair of the Board of Trustees of the Rockefeller Foundation. Admiral Stavridis (Ret) attended the U.S. Naval Academy at Annapolis and earned a PhD in international relations from The Fletcher School at Tufts University. Admiral Stavridis (Ret) has extensive government and leadership experience as a result of his military service. The Board of Directors believes that Admiral Stavridis (Ret), with his experience with NATO and his expertise governance matters, brings a unique and valuable perspective to the Board of Directors.

  8. Role of Compensation Consultant

    Role of Compensation Consultant The Human Resources Committee relies on its independent compensation consultant to provide advice on matters relating to the compensation of our named executive officers and non-employee directors. For 2022, the Human Resources Committee engaged Compensia, Inc. (“Compensia”) in this capacity. A representative of Compensia generally attends meetings of the Human Resources Committee. In addition, Compensia provided competitive market assessments our executive and non-employee director compensation programs, reviewed the Compensation Discussion and Analysis section of this Proxy Statement and provided support on other matters as requested by the Human Resources Committee. For 2022, the Human Resources Committee also engaged Compensia to provide and to report on the results of a competitive assessment of the compensation of our named executive officers, which is based on analysis of market and peer company compensation data. This assessment is one factor considered by the Human Resources Committee as discussed in more detail below under “— Determining the Amount of Elements of Executives’ Compensation in 2022.” Compensia reports directly to the Human Resources Committee and provided no services to us other than the consulting services to the Human Resources Committee. Based on consideration of the various factors set forth in the rules of the SEC and Nasdaq listing standards, the Human Resources Committee does not believe that its relationship with Compensia and the work of Compensia on behalf of the Human Resources Committee has raised any conflict of interest.

  9. Elements of Our Compensation Program

    Elements of Our Compensation Program The four key elements of our compensation program for our named executive officers are base pay, variable pay, equity-based awards and our benefits programs. As a total package, we design our compensation program to enable us to attract and retain talent who we believe will enhance Fortinet’s long-term value. The individual elements of Fortinet’s compensation program are designed to satisfy this larger goal in specific ways as described below. For a detailed discussion of the amounts awarded to our named executive officers during 2022, see “— Determining the Amount of Elements of Executives’ Compensation in 2022” below. Base Pay. We establish base pay that is both reasonable and competitive in relation to the competitive market of similar companies in the technology industry. The Human Resources Committee monitors competitive base pay levels at least annually and makes adjustments to base pay as appropriate. In general, a named executive officer’s base pay level should reflect that individual’s overall sustained performance and contribution over time. The Human Resources Committee sets base pay to provide the ongoing reward for each named executive officer’s work and contribution and to be competitive in attracting or retaining the executive. Any increases in base pay are provided generally on an annual basis. Variable Pay. Rewarding performance through cash variable pay is an important element of named executive officer compensation. We design our variable pay program to be both reasonable and competitive in relation to the market. Our senior management incentive bonus program is designed to motivate our named executive officers to achieve business goals and to align payouts with actual results. The variable pay incentives are based on a formulaic assessment of our financial performance and an assessment of each individual’s performance. A factor in this evaluation is our executive “peer review” process, in which our broader executive team reviews the performance of the other members of the team, including certain of the named executive officers, on a quarterly basis, and their confidential feedback is reviewed by the Human Resources Committee when considering individual variable pay incentives. We believe the executive peer review motivates executive officers to work together in a productive fashion. The Human Resources Committee has the discretion to increase or decrease a payout under our variable pay program at any time in the event that it determines that circumstances warrant adjustment. In 2022, the payout was 96.3% as a percentage of target for our named executive officers. Equity-Based Awards. The Human Resources Committee designs our equity-based awards to be both reasonable and competitive in relation to the market. As described in more detail below, we design our equity-based awards to help retain talent over a period of time and to provide our named executive officers with a long-term reward that aligns their interests with those of our stockholders. The Human Resources Committee considers a number of factors when determining the size of equity awards, including competitive market data, named executive officer performance, the proposed award’s retention value, the value of unvested equity awards already held by the named executive officer and a review of the named executive officer’s overall compensation package, which takes into account our approach to base pay and variable pay. Initial equity awards granted upon hire are generally designed to attract experienced executives with established records of success and help retain them over the long term. Subsequent equity awards are designed to help retain and incentivize our named executive officers. The Human Resources Committee approved awards of stock options and restricted stock units (“RSUs”) to our named executive officers in January 2022, which were effective in February 2022. The RSUs represent a right to receive shares of our common stock upon vesting over time. The Human Resources Committee determined to grant stock options and RSUs based on an evaluation of the objectives of our compensation program and taking into consideration market practice among companies in our compensation peer group. The Human Resources Committee grants stock options and RSUs in order to: create a stronger and more visible link between executive pay and Fortinet’s stock price performance; further align our executives’ interests with those of our stockholders; to better incentivize and retain our senior executives; and maintain a long-term incentive program that is competitive with practices at peer companies. The Human Resources Committee considers stock options a strong pay-for-performance vehicle as the value of a stock option is limited to the excess of then-current stock price over the exercise price of the option. Stock options also support a long-term perspective as the grants to our named executive officers in fiscal 2022 vest over four years and can be exercised for up to seven years after grant. Beginning in late 2022, our Human Resources Committee initiated a review of our approach to executive long-term incentives. This review considered a broad range of factors, including input from our stockholders, analysis of competitive practice among companies in our peer group, input from our Chief Executive Officer and discussions with Compensia. Following this review and taking into consideration our desired compensation objectives and pay-for-performance philosophy, the Human Resources Committee approved long-term incentive awards in February 2023 for our name executive officers, that consisted of 50% PSUs and 50% time-vesting RSUs. The Human Resources Committee determined that a mix of time-based RSUs and PSUs was best aligned with the interests of our stockholders by creating an appropriate balance between our goals of business execution, long-term share price growth and named executive officer retention. The PSUs are measured based on the percentile ranking of our total stockholder return among companies included in the S&P 500 Index. The PSUs include four performance periods of one, two, three and four years; the first three performance periods are each weighted 20% while the four-year performance period is weighted 40%. The Human Resources Committee believes that the introduction of multi-year PSUs with a relative stockholder return performance measurement supports our compensation objectives, including a strong pay-for-performance culture and focus on long-term stockholder value creation, and drives alignment with our stockholders. Information on the vesting schedules for the awards of stock options and RSUs made to our named executive officers in 2022 can be found below in “— Determining the Amount of Elements of Executives’ Compensation in 2022 — Equity-Based Awards.” See “— Outstanding Equity Awards at 2022 Fiscal Year-End Table” for additional information regarding the outstanding and unvested equity awards held by each named executive officer as of the end of fiscal 2022. Benefits Programs. Our named executive officers generally receive the same benefits as those provided to our other employees in their respective countries and do not receive any additional perquisites, including, where applicable: health and welfare benefits, including participation in our 401(k) retirement plan; group health insurance plans; and life, disability and accidental death insurance plans. We design our employee benefits programs to be both cost-effective and competitive in relation to the market as well as compliant with applicable laws and practices. We adjust our benefits programs as needed based upon regular monitoring of applicable laws and practices and the overall market.

  10. Determining the Amount of Elements of Executives’ Compensation in 2022

    Determining the Amount of Elements of Executives’ Compensation in 2022 Peer Group. In October 2021, with assistance from Compensia, the Human Resources Committee developed and approved a compensation peer group as a source of competitive market data for evaluating the compensation of our executive officers and to support pay decisions for 2022. The peer group was comprised of security competitors, network infrastructure technology companies and other software companies focusing on data management, internet infrastructure and enterprise application software. In selecting peers, the Human Resources Committee also generally sought to include companies with annual revenue ranging from approximately $531.0 million to $5.9 billion and a market capitalization generally ranging from $16.0 billion to $65.8 billion as of September 30, 2021. The peer group approved in October 2021 included the 18 technology companies listed below:

  11. Determining the Amount of Elements of Executives’ Compensation in 2022

    For 2022, the Human Resources Committee removed ANSYS, Citrix Systems and VeriSign from the peer group and added Autodesk, Cloudflare, DocuSign, Marvell Technology and Zoom Video Communications to the peer group. Base Pay. As part of our annual performance review process and review of named executive officers’ compensation, early each year the Human Resources Committee assesses the performance of the named executive officers, considering factors such as company performance, department performance and individual performance, including the named executive officer’s expertise, position, past contributions to Fortinet and potential future contributions to Fortinet. Largely as a result of this assessment and taking into account reasonable annual base pay increase practices and Compensia’s data and analysis, the Human Resources Committee considered whether and how much to adjust the base pay of the named executive officers. Taking into consideration performance and reasonable merit increases, in January 2022, the Human Resources Committee kept the annual base pay of Mr. Ken Xie at $797,000, of Mr. Michael Xie at $445,000 and of Mr. Perche at $495,268. The Human Resources Committee approved increases in the annual base salary of Mr. Jensen by 3.3% to $506,000 and of Mr. Whittle by 9% to $482,000; these changes were approved to maintain a competitive positioning with the 50th percentile of market data. Equity-Based Awards. In granting stock options and RSUs to our named executive officers in 2022, the Human Resources Committee exercised its judgment and considered, among other things, the role and contribution of the named executive officer, the value of unvested stock options and RSUs already held by the executive and Compensia’s data and analysis. In January 2022, the Human Resources Committee approved awards of stock options exercisable for up to 288,795 shares for Mr. Ken Xie, 97,440 shares for Mr. Michael Xie, 90,735 shares for Mr. Jensen, 90,735 shares for Mr. Perche and 56,700 shares for Mr. Whittle. Each of these stock options was granted in accordance with Fortinet’s Equity Award Grant Policy discussed in “— Timing of Equity Awards” below, and vests over four years, with 25% vesting one year from February 17, 2023 and the remainder vesting monthly thereafter. Also in January 2022, the Human Resources Committee approved awards of 96,265 RSUs for Mr. Ken Xie, 32,480 RSUs for Mr. Michael Xie, 30,245 RSUs for Mr. Jensen, 30,245 RSUs for Mr. Perche and 18,900 RSUs for Mr. Whittle. Each of these RSUs was granted in accordance with Fortinet’s Equity Award Grant Policy discussed in “— Timing of Equity Awards” below, and vests over four years, with 25% vesting one year from February 1, 2023 and the remainder vesting quarterly thereafter. Variable Pay. We determine the executive’s actual level of variable compensation in accordance with the terms of the Senior Management Bonus Program (the “Bonus Program”) approved by the Human Resources Committee for the year. In developing the framework, we seek to set total cash compensation (i.e., base salary plus variable pay) to meet our goal of ensuring that our cash compensation levels are competitive and to enable us to retain and motivate our named executive officers. In 2022, the Human Resources Committee based the Bonus Program funding on achievement of revenue and operating income targets, as set forth in more detail below, with 70% of the bonus pool funding based on revenue achievement and 30% based on operating income achievement. The Human Resources Committee weighted the Bonus Program funding more heavily toward achieving revenue over operating income because it believed that, at this stage, a continued focus on growing revenue would help drive our long-term success and result in greater opportunity for profit in the future and enhanced stockholder value. However, because we believe it is important for our executives to monitor expenses closely as well, the Human Resources Committee also based a portion of the bonus pool funding on our operating income performance. Operating income for purposes of the Bonus Program is not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”) but rather is defined as net income plus income taxes, stock-based compensation, interest income and foreign exchange currency gains or losses and other adjustments to GAAP income as defined in our non-GAAP definition for external reporting purposes. For purposes of the Bonus Program, a minimum performance level (based on a percentage of the revenue and operating income target levels) had to be met before funding could occur. For 2022, threshold (i.e., the minimum) performance level was 90% of both the revenue target and the operating income target. Once the threshold performance level was attained, the funding of the bonus payments for our named executive officers was to increase on a graduated basis for each of the revenue portion and the operating income portion as follows:

  12. Determining the Amount of Elements of Executives’ Compensation in 2022

    For example, for the revenue portion for our named executive officers: • At 90% achievement of the revenue target, the revenue portion of the Bonus Program would be funded at 40%; • At 95% achievement of the revenue target, the revenue portion of the Bonus Program would be funded at 70%; • At 100% achievement of the revenue target, the revenue portion of the Bonus Program would be funded at 100%; and • At 140% achievement of the revenue target, the revenue portion of the Bonus Program would be funded at 140%. Bonuses payments were calculated and awarded quarterly. Bonus payments were based on unaudited, preliminary revenue and operating income results. Adjustments based on actual revenue and operating income results may be made in subsequent quarters at the Human Resources Committee’s discretion. No bonuses are paid to our named executive officers under the Bonus Program if our financial results are below our guidance such that we pre-announce our financial results. Individual target bonuses under the Bonus Program are expressed as a percentage of the named executive officer’s base salary for 100% goal achievement. During 2022, our Chief Executive Officer made recommendations for target bonuses to the Human Resources Committee for Messrs. Jensen, Perche and Whittle, taking into consideration company achievement versus the financial targets discussed below and peer group data. The Human Resources Committee in turn gave final approval after discussing the recommendations. The Human Resources Committee approved target bonuses for Messrs. Ken Xie and Michael Xie based upon the same criteria under the Bonus Program. For 2022, the Human Resources Committee approved target bonuses of 120% of base salary for Mr. Ken Xie, 75% of base salary for Mr. Michael Xie, 80% of base salary for Mr. Jensen, 100% of base salary for Mr. Perche and 75% of base salary for Mr. Whittle. See “— 2022 Summary Compensation Table” below. As noted above, the Bonus Program was based on revenue and operating income performance targets set at the beginning of the year. The targets were set at levels determined to be challenging and requiring substantial effort on the part of senior management. For 2022, we achieved between 96% and 109% of our quarterly and annual revenue targets and we achieved between 102% and 136% of our quarterly and annual operating income targets. The Human Resources Committee approved bonus payments for our senior management for 2022 based on achievement of these corporate goals and the individual performance of certain of our named executive officers as evaluated pursuant to the “peer review” process described above. The following charts set forth both the target levels for our revenue and operating income performance, the revenue and operating income levels actually achieved, and the percentages of target revenue actually achieved. Benefits Programs. In 2022, our named executive officers received the same employee benefits as our other employees in their respective countries and did not receive any additional perquisites. Additional details regarding our benefits programs can be found above in “— Elements of Our Compensation Program — Benefits Programs.”

  13. Change of Control Severance Agreements

    Change of Control Severance Agreements We have entered into a Change of Control Severance Agreement or an Amended and Restated Change of Control Severance Agreement (each, a “Change of Control Severance Agreement”) with each of our named executive officers. The term of each named executive officer’s Change of Control Severance Agreement expires on August 7, 2024. These Change of Control Severance Agreements provide for payments and benefits upon termination of their employment in specified circumstances. These arrangements (including potential payments and terms) are discussed in more detail in the “— Potential Payments Upon Termination or Change of Control” section below. We believe that these agreements help us from a retention standpoint, and they are particularly necessary in an industry such as ours, where there has been market consolidation. We believe that entering into these agreements helps the named executive officers maintain continued focus and dedication to their assigned duties to maximize stockholder value. The terms of these agreements were determined after review by the Human Resources Committee of our retention goals for each named executive officer, as well as analysis of market data, similar agreements established by our peer group and applicable law.

  14. Timing of Equity Awards

    Timing of Equity Awards The Human Resources Committee approved grants of both stock options and RSUs to our named executive officers in January 2022. The Board of Directors and Human Resources Committee reserve the right, however, to grant stock options, RSUs, PSUs or other equity awards at other times during the year. With respect to newly hired employees, our practice is typically to grant equity awards at the first quarterly meeting of the Human Resources Committee following such employee’s hire date. Pursuant to our Equity Award Grant Policy, equity awards are granted effective as of the date that is the tenth trading day on Nasdaq following the date of our next quarterly earnings announcement following the meetings of the Human Resources Committee or the Board of Directors when such equity awards were approved.

  15. Effect of Accounting and Tax Treatment on Compensation Decisions

    Effect of Accounting and Tax Treatment on Compensation Decisions In the review and establishment of our compensation program, we consider the anticipated accounting and tax implications to us and our executives. In this regard, we have historically used stock options, RSUs and PSUs, and we reserve the right to use other forms of equity, as additional forms of equity incentives in response to changes in the accounting treatment of equity awards and taking into consideration potential impact on dilution and competitive practices. While the Human Resources Committee considers the applicable accounting and tax treatment, these factors alone are not determinative, and the Human Resources Committee also considers the cash and non-cash impact of the programs and whether a program is consistent with our overall compensation philosophy and objectives. Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), imposes limitations on the deductibility for corporate federal income tax purposes of compensation in excess of $1 million paid to any person who has served as chief executive officer, chief financial officer and each of the three next most highly compensated executive officers of a public company. As a result, we expect that compensation awarded to our named executive officers will not be deductible to the extent it is in excess of the $1 million threshold. We expect that the Human Resources Committee will continue to seek to balance the cost and benefit of tax deductibility with our executive compensation goals designed to promote stockholder interests, retaining discretion to approve compensation that is non-deductible when it believes that such payments are appropriate to attract and retain executive talent. As a result, we expect that a significant portion of future cash and equity payments to our executive officers will not be tax deductible under Section 162(m)

  16. 2022 Summary Compensation Table

    2022 Summary Compensation Table The following table presents information concerning the compensation of the named executive officers for the years ended December 31, 2022, 2021 and 2020.

  17. 2022 Summary Compensation Table

    | Name and Principal Positions | Year | Salary ($) | Option Awards ($)(1) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | | Ken Xie | 2022 | 797,000 | 6,447,285 | 5,978,827 | 977,341 | — | 14,200,453 | | Chief Executive Officer | 2021 | 797,000 | 6,145,875 | 6,235,385 | 1,024,951 | — | 14,203,211 | | | 2020 | 793,083 | 4,169,569 | 4,704,899 | 983,163 | — | 10,650,714 | | Michael Xie | 2022 | 445,000 | 2,175,327 | 2,017,268 | 341,058 | — | 4,978,653 | | President and Chief Technology Officer | 2021 | 445,000 | 2,469,229 | 2,505,192 | 357,673 | — | 5,777,094 | | | 2020 | 443,500 | 1,653,096 | 1,865,337 | 343,090 | — | 4,305,023 | | Keith Jensen | 2022 | 504,000 | 2,025,639 | 1,878,456 | 418,543 | 5,440 | 4,832,078 | | Chief Financial Officer | 2021 | 490,000 | 2,165,893 | 2,197,437 | 431,000 | 5,343 | 5,289,673 | | | 2020 | 486,000 | 1,377,749 | 1,554,638 | 401,000 | 5,334 | 3,824,721 | | Patrice Perche | 2022 | 495,268 | 2,025,639 | 1,878,456 | 522,806 | — | 4,922,169 | | Chief Revenue Officer and Executive Vice President of Support | | | | | | | | | John Whittle | 2022 | 477,000 | 1,265,815 | 1,173,841 | 343,029 | 6,100 | 3,265,785 | | Executive Vice President of Corporate Development, Chief Legal Officer and Corporate Secretary | 2021 | 440,375 | 1,378,911 | 1,398,994 | 312,000 | 5,800 | 3,536,080 | | | 2020 | 426,833 | 804,736 | 908,055 | 230,242 | 5,700 | 2,375,566 |

  18. 2022 Summary Compensation Table

    (1) The amounts shown represent the aggregate grant date fair value of equity awards granted in the years shown, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). The assumptions used in the valuation of these awards are set forth in note 13 to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023. The grant date fair value of these awards is determined for financial statement reporting purposes and does not correspond to the actual value that the named executive officers will receive from the awards. (2) See “— Grants of Plan-Based Awards in 2022 Table” under the column “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” for the amounts named executive officers were eligible to earn in fiscal 2022. See also “— Determining the Amount of Elements of Executives’ Compensation in 2022 — Variable Pay” above for a discussion regarding our Bonus Program. (3) Represents company matching contributions to Fortinet’s 401(k) plan, a tax-qualified defined contribution plan.

  19. Grants of Plan-Based Awards in 2022 Table

    Grants of Plan-Based Awards in 2022 Table The following table presents information concerning each grant of an award made to the named executive officers in 2022 under any plan.

  20. Grants of Plan-Based Awards in 2022 Table

    | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Shares Underlying Options (#) | Exercise or Base Price of Option Awards ($/Share) | Grant Date Fair Value of Stock and Option Awards ($)(2) | | Name | Type of Award | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($) | | | | | | Ken Xie | Cash | — | — | 22,954 | 956,400 | 1,338,960 | — | — | — | — | | | RSU | 2/17/2022 | 1/21/2022 | — | — | — | 96,265 | — | — | 5,978,827 | | | Stock Option | 2/17/2022 | 1/21/2022 | — | — | — | — | 288,795 | 62.11 | 6,447,285 | | Michael Xie | Cash | — | — | 8,010 | 333,750 | 467,250 | — | — | — | — | | | RSU | 2/17/2022 | 1/21/2022 | — | — | — | 32,480 | — | — | 2,017,268 | | | Stock Option | 2/17/2022 | 1/21/2022 | — | — | — | — | 97,440 | 62.11 | 2,175,327 | | Keith Jensen | Cash | — | — | 9,715 | 404,800 | 566,720 | — | — | — | — | | | RSU | 2/17/2022 | 1/21/2022 | — | — | — | 30,245 | — | — | 1,878,456 | | | Stock Option | 2/17/2022 | 1/21/2022 | — | — | — | — | 90,735 | 62.11 | 2,025,639 | | Patrice Perche | Cash | — | — | 11,886 | 495,268 | 693,375 | — | — | — | — | | | RSU | 2/17/2022 | 1/21/2022 | — | — | — | 30,245 | — | — | 1,878,456 | | | Stock Option | 2/17/2022 | 1/21/2022 | — | — | — | — | 90,735 | 62.11 | 2,025,639 | | John Whittle | Cash | — | — | 8,586 | 357,750 | 500,850 | — | — | — | — | | | RSU | 2/17/2022 | 1/21/2022 | — | — | — | 18,900 | — | — | 1,173,841 | | | Stock Option | 2/17/2022 | 1/21/2022 | — | — | — | — | 56,700 | 62.11 | 1,265,815 |

  21. Grants of Plan-Based Awards in 2022 Table

    (1) Reflects threshold, target and maximum target bonus amounts for fiscal 2022 performance under the Bonus Program, as described in “Executive Compensation — Determining the Amount of Elements of Executives’ Compensation in 2022 — Variable Pay.” These amounts do not necessarily correspond to the actual value that may be received by the named executive officer. (2) The amounts shown represent the grant date fair value of RSUs and stock options granted during fiscal 2022, computed in accordance with FASB ASC Topic 718. The assumptions used in the valuation of these awards are set forth in note 13 to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023. Grant date fair value is determined for financial statement reporting purposes and does not correspond to the actual value that the named executive officers will realize from the award.

  22. Outstanding Equity Awards at 2022 Fiscal Year-End Table

    Outstanding Equity Awards at 2022 Fiscal Year-End Table The following table presents information concerning unexercised options and unvested RSUs for each named executive officer outstanding as of December 31, 2022.

  23. Outstanding Equity Awards at 2022 Fiscal Year-End Table

    | | | Option Awards | | | | Stock Awards | | | Name | Grant Date(1) | Number of Securities Underlying Unexercised Options (#) | | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | | | Exercisable | Unexercisable | | | | | | Ken Xie | 2/16/2017 | 500,000 | — | 7.45 | 2/16/2024 | — | — | | | 2/20/2018 | 1,000,000 | — | 9.81 | 2/20/2025 | — | — | | | 2/21/2019 | 704,255 | 30,625 | 16.90 | 2/21/2026 | — | — | | | 2/21/2019 | — | — | — | — | 15,310 | 748,506 | | | 2/21/2020 | 436,660 | 179,810 | 22.90 | 2/21/2027 | — | — | | | 2/21/2020 | — | — | — | — | 64,220 | 3,139,716 | | | 2/19/2021 | 249,330 | 294,675 | 34.39 | 2/19/2028 | — | — | | | 2/19/2021 | — | — | — | — | 102,005 | 4,987,024 | | | 2/17/2022(3) | — | 288,795 | 62.11 | 2/17/2029 | — | — | | | 2/17/2022 | — | — | — | — | 96,265 | 4,706,396 | | Michael Xie | 2/11/2016 | 225,000 | — | 4.77 | 2/11/2023 | — | — | | | 2/16/2017 | 300,000 | — | 7.45 | 2/16/2024 | — | — | | | 2/20/2018 | 473,050 | — | 9.81 | 2/20/2025 | — | — | | | 2/21/2019 | 310,770 | 13,515 | 16.90 | 2/21/2026 | — | — | | | 2/21/2019 | — | — | — | — | 6,760 | 330,496 | | | 2/21/2020 | 173,120 | 71,290 | 22.90 | 2/21/2027 | — | — | | | 2/21/2020 | — | — | — | — | 25,460 | 1,244,739 | | | 2/19/2021 | 100,170 | 118,395 | 34.39 | 2/19/2028 | — | — | | | 2/19/2021 | — | — | — | — | 40,985 | 2,003,757 | | | 2/17/2022(3) | — | 97,440 | 62.11 | 2/17/2029 | — | — | | | 2/17/2022 | — | — | — | — | 32,480 | 1,587,947 | | Keith Jensen | 2/21/2019 | 19,640 | 9,825 | 16.90 | 2/21/2026 | — | — | | | 2/21/2019 | — | — | — | — | 4,910 | 240,050 | | | 2/21/2020 | 16,975 | 59,415 | 22.90 | 2/21/2027 | — | — | | | 2/21/2020 | — | — | — | — | 21,220 | 1,037,446 | | | 2/19/2021 | 15,975 | 103,850 | 34.39 | 2/19/2028 | — | — | | | 2/19/2021 | — | — | — | — | 35,950 | 1,757,596 | | | 2/17/2022(3) | — | 90,735 | 62.11 | 2/17/2029 | — | — | | | 2/17/2022 | — | — | — | — | 30,245 | 1,478,678 | | Patrice Perche | 2/20/2018 | 52,085 | — | 9.81 | 2/20/2025 | — | — | | | 2/21/2019 | 160,970 | 7,000 | 16.90 | 2/21/2026 | — | — | | | 2/21/2019 | — | — | — | — | 3,500 | 171,115 | | | 2/27/2020 | 129,440 | 53,305 | 22.90 | 2/21/2027 | — | — | | | 2/21/2020 | — | — | — | — | 19,040 | 930,866 | | | 2/19/2021 | 81,960 | 96,870 | 34.39 | 2/19/2028 | — | — | | | 2/19/2021 | — | — | — | — | 33,535 | 1,639,526 | | | 2/17/2022(3) | — | 90,735 | 62.11 | 2/17/2029 | — | — | | | 2/17/2022 | — | — | — | — | 30,245 | 1,478,678 | | John Whittle | 2/16/2017 | 43,745 | — | 7.45 | 2/16/2024 | — | — | | | 2/20/2018 | 103,325 | — | 9.81 | 2/20/2025 | — | — | | | 2/21/2019 | 31,495 | 7,000 | 16.90 | 2/21/2026 | — | — | | | 2/21/2019 | — | — | — | — | 3,500 | 171,115 | | | 2/21/2020 | 22,310 | 34,705 | 22.90 | 2/21/2027 | — | — | | | 2/21/2020 | — | — | — | — | 12,395 | 605,992 | | | 2/19/2021 | 22,885 | 66,115 | 34.39 | 2/19/2028 | — | — | | | 2/19/2021 | — | — | — | — | 22,890 | 1,119,092 | | | 2/17/2022(3) | — | 56,700 | 62.11 | 2/17/2029 | — | — | | | 2/17/2022 | — | — | — | — | 18,900 | 924,021 |

  24. Outstanding Equity Awards at 2022 Fiscal Year-End Table

    (1) Reflects stock options and RSUs granted under the 2009 Plan. Unless otherwise indicated below, (i) all options granted to named executive officers vest over four years starting on February 1 of the year of grant, with 25% vesting after one year and the remainder vesting monthly thereafter, and (ii) all RSUs granted to named executive officers vest over four years starting on February 1 of the year of grant, with 25% vesting after one year and the remainder vesting quarterly thereafter. (2) Represents the fair market value of the shares underlying the RSUs as of December 30, 2022, which was the last business day of 2022, based on the closing price on Nasdaq of our common stock on December 30, 2022, which was $48.89 per share. (3) Stock option vests over four years starting on the grant date of February 17, 2022, with 25% vesting after one year and the remainder vesting monthly thereafter.

  25. 2022 Option Exercises and Stock Vested Table

    2022 Option Exercises and Stock Vested Table The following table presents information concerning amounts realized from stock option exercises and RSUs vested during fiscal 2022 for each of the named executive officers.

  26. 2022 Option Exercises and Stock Vested Table

    | | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | | Ken Xie | 300,000 | 14,251,200 | 207,565 | 12,266,995 | | Michael Xie | — | — | 88,135 | 5,211,300 | | Keith Jensen | 166,780 | 5,359,394 | 70,820 | 4,187,701 | | Patrice Perche | — | — | 58,425 | 3,453,475 | | John Whittle | 66,275 | 2,345,689 | 47,185 | 2,791,822 |

  27. 2022 Option Exercises and Stock Vested Table

    __________________ (1) The value realized on exercise reflects the difference between the fair market value of Fortinet common stock at the time of exercise on the exercise date and the exercise price of the stock option. Amounts shown are presented on an aggregate basis for all exercises that occurred during 2022. (2) The value realized on vesting reflects the aggregate fair market value of all Fortinet common stock issued pursuant to vested RSUs during 2022.

  28. Potential Payments Upon Termination or Change of Control

    Potential Payments Upon Termination or Change of Control

  29. Termination or Change of Control Arrangements

    Termination or Change of Control Arrangements We have entered into a Change of Control Severance Agreement with each of our named executive officers, under which each named executive officer may receive certain payments and benefits upon certain terminations of employment, provided that the named executive officer has provided us with an executed release of claims and subject to non-solicitation and non-competition for a period of 12 months. The term of each named executive officer’s Change of Control Severance Agreement expires on August 7, 2024. Pursuant to each Change of Control Agreement, if a named executive officer is terminated without Cause (as defined below) or if a named executive officer terminates the named executive officer’s employment with us for Good Reason (as defined below) prior to, or absent, a Change of Control (as defined below), or after 12 months following a Change of Control, the named executive officer will be entitled to: (i) a severance payment in an amount equal to 12 months of the named executive officer’s then-current base salary; (ii) acceleration of the unvested equity awards then held by the named executive officer that would have vested over the next 12 months; and (iii) 12 months of medical, dental and/or vision benefits for the named executive officer and/or the named executive officer’s eligible dependents. Also pursuant to each Change of Control Agreement, if a named executive officer is terminated without Cause or if a named executive officer terminates the named executive officer’s employment with us for Good Reason within 12 months following a Change of Control, the named executive officer will be entitled to: (i) a severance payment in an amount equal to 12 months of the named executive officer’s then-current base salary; (ii) acceleration of 100% of the unvested equity awards then held by the named executive officer; and (iii) 12 months of medical, dental and/or vision benefits for the named executive officer and/or the named executive officer’s eligible dependents. In the event of acceleration of a named executive officer’s unvested equity awards, the awards will remain exercisable, to the extent applicable, following the termination for the period prescribed in the respective stock plan and agreement for each award. In the event any payment to a named executive officer is subject to the excise tax imposed by Section 4999 of the Code (as a result of a payment being classified as a “parachute payment” under Section 280G of the Code), the named executive officer will be entitled to receive such payment as would entitle the named executive officer to receive the greatest after-tax benefit of either the full payment or a lesser payment which would result in no portion of such severance benefits being subject to excise tax. For the purpose of our Change of Control Severance Agreements: (i) “Change of Control” generally means: (a) the acquisition by one person or group of persons of Fortinet securities representing 50% or more of total voting power at the time of acquisition; (b) a change in the composition of the Board of Directors occurring within a 12-month period, which results in fewer than a majority of the directors on the Board of Directors being incumbent directors; (c) the date of the consummation of a merger or consolidation between Fortinet and any other corporation that has been approved by our stockholders, other than a merger or consolidation that would result in our voting securities representing 50% or more of the total voting power immediately after such merger or consolidation, or if our stockholders approve a plan of Fortinet’s complete liquidation; or (d) a change in the ownership of a substantial portion of Fortinet’s assets, having a total gross fair market value equal to or more than 50% of the total fair market value of all of Fortinet’s assets immediately prior to such acquisition. Notwithstanding the foregoing, a transaction that does not constitute a change of control event under Treasury Regulation 1.409A-3(i)(5)(v) or (vii) shall not be considered a Change of Control. (ii) “Cause” generally means: (a) an act of dishonesty by the named executive officer in connection with the named executive officer’s responsibilities as an employee that materially and adversely affects Fortinet; (b) the named executive officer’s conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude; (c) the named executive officer’s gross misconduct that materially and adversely affects Fortinet’s reputation or business; or (d) the named executive officer’s continued intentional refusal to perform employment duties in a material fashion that materially and adversely affects Fortinet’s reputation or business, after the named executive officer has received a written demand of performance from Fortinet that specifically sets forth the factual basis for Fortinet’s belief that the named executive officer has not substantially performed the named executive officer’s duties and the named executive officer continues to refuse to cure such non-performance within thirty days after receiving such notice. (iii) “Good Reason” generally means the occurrence of one of more of the following events without the named executive officer’s express written consent: (a) a material diminution in the named executive officer’s position or responsibilities with Fortinet; (b) a material reduction in the base salary of the named executive officer; (c) a material change in the geographic location of the named executive officer of 25 miles or more; (d) any material breach by Fortinet of any material provision of the Change of Control Severance Agreement; or (e) Fortinet’s failure to obtain the assumption of the Change of Control Severance Agreement by any successor to substantially all of Fortinet’s business and/or assets. The named executive officer may not resign for Good Reason without first providing us with written notice of the acts or omissions constituting the grounds for “Good Reason” within 90 days of the initial existence of the grounds for Good Reason and a reasonable cure period of not less than 30 days following the date of such notice, and the named executive officer’s resignation of employment must occur no later than 30 days following the end of such 30-day cure period.

  30. Estimated Payments upon Termination or Change in Control

    Estimated Payments upon Termination or Change in Control The following table provides information concerning the estimated payments and benefits that would be provided in the circumstances described above for each of the named executive officers. Except where otherwise noted, payments and benefits are estimated assuming that the triggering event took place on the last business day of 2022, which was December 30, 2022, and the price per share of Fortinet’s common stock was the closing price on Nasdaq as of that date, which was $48.89 per share. There can be no assurance that a triggering event would produce the same or similar results as those estimated below if such event occurs on any other date or at any other price, of if any other assumption used to estimate potential payments and benefits is not correct. Due to the number of factors that affect the nature and amount of any potential payments or benefits, any actual payments and benefits may be different.

  31. Estimated Payments upon Termination or Change in Control

    | | Qualifying Termination Not Within One Year after a Change of Control(1) | | | Qualifying Termination Within One Year after a Change of Control(1) | | | | Name | Salary ($)(2) | Acceleration of Equity Vesting ($)(3) | COBRA Benefit ($)(4) | Salary ($)(2) | Acceleration of Equity Vesting ($)(5) | COBRA Benefit ($)(4) | | Ken Xie | 797,000 | 14,494,227 | 34,299 | 797,000 | 23,509,344 | 34,299 | | Michael Xie | 445,000 | 7,177,572 | 34,299 | 445,000 | 9,169,625 | 34,299 | | Keith Jensen | 506,000 | 4,831,033 | 23,776 | 506,000 | 7,878,765 | 23,776 | | Patrice Perche | 495,268 | 4,351,314 | — | 495,268 | 7,234,741 | — | | John Whittle | 482,000 | 2,997,116 | 34,299 | 482,000 | 4,905,217 | 34,299 |

  32. Estimated Payments upon Termination or Change in Control

    __________________ (1) A “Qualifying Termination” under the Change of Control Severance Agreement is an involuntary termination of employment without “Cause” or a voluntary resignation for “Good Reason,” in each case as defined above. (2) The severance amount related to base salary was determined based on base salaries in effect on December 30, 2022, the last business day of 2022. (3) The value is calculated by multiplying (i) the number of the named executive officer’s unvested shares that would have vested over the 12 months after December 30, 2022 by (ii) (a) the difference between $48.89 (the per share closing stock price on December 30, 2022) and the exercise price for stock options or (b) $48.89 for RSUs. Stock options outstanding as of December 30, 2022 for which the exercise price was greater than $48.89 are not included in the acceleration of equity vesting calculations. (4) The value represents the total value for reimbursement for insurance premium expenses incurred for group health insurance continuation coverage under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, for a period of up to 12 months. Mr. Perche is not eligible for such reimbursement as a non-U.S. employee. (5) The value is calculated by multiplying (i) the number of the named executive officer’s total unvested shares by (ii) (a) the difference between $48.89 (the per share closing stock price on December 30, 2022) and the exercise price for stock options or (b) $48.89 for RSUs. Stock options outstanding as of December 30, 2022 for which the exercise price was greater than $48.89 are not included in the acceleration of equity vesting calculations.

  33. Pay Versus Performance

    Pay Versus Performance The following table provides information required under Item 402(v) of Regulation S-K disclosing (i) a measure of total compensation and a measure reflecting “compensation actually paid” for our principal executive officer (our “PEO”) and, as an average, for our other named executive officers (our “NEOs”), and (ii) select financial performance measures, in each case, for our three most recently completed fiscal years. The Human Resources Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown. The amounts shown for Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized or received by our NEOs; these amounts reflect the Summary Compensation Table totals with certain adjustments as described in the following table and footnotes.

  34. Pay Versus Performance

    | Year | Summary Compensation Table Total for PEO ($) | Compensation Actually Paid to PEO ($) | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) | Value of Initial Fixed $100 Investment Based On: | | Net Income ($) | Company Selected Measure: Revenue ($) | | | | | | | Total Stockholder Return ($) | Peer Group Total Stockholder Return ($) | | | | (a) | (b)(1) | (c)(2)(5) | (d)(3) | (e)(4)(5) | (f)(6) | (g)(7) | (h)(8) | (i)(9) | | 2022 | 14,200,453 | (15,190,085) | 4,499,671 | (4,899,823) | 228.97 | 132.79 | 857,302,079 | 4,417,356,061 | | 2021 | 14,203,211 | 84,745,190 | 4,867,616 | 27,685,473 | 336.64 | 206.76 | 606,792,011 | 3,342,217,533 | | 2020 | 10,650,714 | 24,460,298 | 3,501,770 | 8,120,795 | 139.13 | 149.98 | 488,482,961 | 2,594,367,174 |

  35. Pay Versus Performance

    __________________ (1) The dollar amounts reported in column (b) are the amounts of total compensation reported for our PEO for each corresponding year in the “Total” column of the Summary Compensation Table. Our PEO for fiscal years 2022, 2021 and 2020 was Ken Xie. (2) The dollar amounts reported in column (c) represent the amount of “compensation actually paid” (which is sometimes referred to as the “CAP”) for our PEO for the corresponding fiscal year, as calculated in accordance with Item 402(v) of Regulation S-K and as further described below. (3) The dollar amounts reported in column (d) represent the average of the amounts reported for our non-PEO NEOs as a group in the “Total” column of the Summary Compensation Table for the corresponding year. Our non-PEO NEOs included for purposes of such calculations are as follows: (i) for fiscal year 2022, Michael Xie, Keith Jensen, Patrice Perche and John Whittle; (ii) for fiscal year 2021, Michael Xie, Keith Jensen and John Whittle; and (iii) for fiscal year 2020, Michael Xie, Keith Jensen and John Whittle. (4) The dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to our non-PEO NEOs specified in footnote (3) as a group, as further described below. (5) The calculation of “compensation actually paid” uses the “Total” compensation reported in the Summary Compensation Table for the applicable fiscal year, with certain adjustments (i.e., additions or subtractions) with respect to the fair value of equity awards. The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted and vest in the same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. The methodology used to develop the valuation assumptions as of each applicable measurement date is consistent with those disclosed at the time of grant. The following table provides reconciling information for the amounts reported in the Summary Compensation Table for our PEO for each of the years set forth below to the amount of “compensation actually paid.”

  36. Pay Versus Performance

    | Year | SCT Total ($) | Deductions of Equity Value from SCT Total ($) | Additions of Equity Value to SCT Total ($) | CAP ($) | | | | (i) | (ii) | | | 2022 | 14,200,453 | (12,426,112) | (16,964,426) | (15,190,085) | | 2021 | 14,203,211 | (12,381,260) | 82,923,239 | 84,745,190 | | 2020 | 10,650,714 | (8,874,468) | 22,684,052 | 24,460,298 |

  37. Pay Versus Performance

    The following table provides reconciling information for the average amounts reported in the Summary Compensation Table for our non-PEO NEOs for each of the years set forth below to the amount of “compensation actually paid.”

  38. Pay Versus Performance

    | Year | SCT Total ($) | Deductions of Equity Value from SCT Total ($) | Additions of Equity Value to SCT Total ($) | CAP ($) | | | | (i) | (ii) | | | 2022 | 4,499,671 | (3,610,110) | (5,789,384) | (4,899,823) | | 2021 | 4,867,616 | (4,038,552) | 26,856,409 | 27,685,473 | | 2020 | 3,501,770 | (2,721,204) | 7,340,228 | 8,120,795 |

  39. Pay Versus Performance

    __________________ (i) The dollar amounts represent the grant date fair value of equity-based awards granted each year to our PEO, and the average grant date fair value of equity-based awards granted each year for our non-PEO NEOs, as reported in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table for fiscal years 2022, 2021 and 2020. (ii) The dollar amounts reflect the value of equity-based awards granted to our PEO, and the average value of the equity-based awards for our non-PEO NEOs, calculated in accordance with the methodology contained in the SEC’s rules for determining CAP for each year shown. The equity-based awards component of CAP for fiscal years 2022, 2021 and 2020 is detailed in the supplemental table below. The table below illustrates the calculations described in this footnote (5) with respect to the equity component of our PEO’s CAP for fiscal years 2022, 2021 and 2020:

  40. Pay Versus Performance

    | Year | Year End Fair Value of Equity Awards Granted During Year that Remained Unvested as of Last Day of Year ($) | Year over Year Change in Fair Value from Last Day of Prior Year to Last Day of Year of Equity Awards Granted in Prior Years that remained Unvested as of Last Day of Year ($) | Fair Value as of Vesting Date of Equity Awards Granted During Year and Vested in the Year ($) | Year over Year Change in Fair Value from Last Day of Prior Year to Vesting Date of Equity Awards Granted in Prior Years that Vested in the Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Equity Award Adjustments ($) | | | (i) | (ii) | (iii) | (iv) | (v) | (vi) | | | 2022 | 9,012,564 | (15,153,818) | — | (10,823,172) | — | — | (16,964,426) | | 2021 | 35,720,792 | 32,042,959 | — | 15,159,488 | — | — | 82,923,239 | | 2020 | 13,214,545 | 7,103,910 | — | 2,365,598 | — | — | 22,684,052 |

  41. Pay Versus Performance

    The table below illustrates the calculations described in this footnote (5) with respect to the average equity component of our non-PEO NEO’s CAP for fiscal years 2022, 2021 and 2020:

  42. Pay Versus Performance

    | Year | Year End Fair Value of Equity Awards Granted During Year that Remained Unvested as of Last Day of Year ($) | Year over Year Change in Fair Value from Last Day of Prior Year to Last Day of Year of Equity Awards Granted in Prior Years that remained Unvested as of Last Day of Year ($) | Fair Value as of Vesting Date of Equity Awards Granted During Year and Vested in the Year ($) | Year over Year Change in Fair Value from Last Day of Prior Year to Vesting Date of Equity Awards Granted in Prior Years that Vested in the Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Equity Award Adjustments ($) | | | (i) | (ii) | (iii) | (iv) | (v) | (vi) | | | 2022 | 2,392,897 | (4,807,501) | — | (3,374,780) | — | — | (5,789,384) | | 2021 | 11,651,503 | 10,220,943 | — | 4,983,963 | — | — | 26,856,409 | | 2020 | 4,052,015 | 2,438,678 | — | 849,536 | — | — | 7,340,228 |

  43. Pay Versus Performance

    (6) Amounts represent the cumulative total stockholder return of our common stock for the period beginning on the market close on December 31, 2019, the last trading day before the earliest fiscal year in the table, through and including December 31, 2022, the end of the last fiscal year in the table for which cumulative total stockholder return is being calculated. Amount assumes that $100 was invested for the period starting December 31, 2019. The amount included in the table is the value of such fixed investment based on the cumulative total stockholder return as of the end of each year, including reinvestment of dividends (if any). (7) The peer group used for this purpose is NASDAQ Computer Index, which we also use in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report for the year ended December 31, 2022. Amount assumes $100 was invested for the period starting December 31, 2019, through the end of the listed year in our common stock and in the NASDAQ Computer Index, respectively. (8) The dollar amounts are our net income as reflected in our audited consolidated financial statements for the applicable year. (9) We determined Revenue to be the most important financial measure used to link our performance to Compensation Actually Paid for our PEO and Non-PEO NEOs for fiscal year 2022.

  44. Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company Total Stockholder Return (“TSR”)

    Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company Total Stockholder Return (“TSR”) The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs, our cumulative TSR and the index TSR over the three most recently completed fiscal years.

  45. Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income

    Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income The following chart sets forth the relationship between Compensation Actually Paid to our PEOs, the average of Compensation Actually Paid to our Non-PEO NEOs and our net income during the three most recently completed fiscal years.

  46. Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Revenue

    Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Revenue The following chart sets forth the relationship between Compensation Actually Paid to our PEO, the average of Compensation Actually Paid to our Non-PEO NEOs and our revenue during the three most recently completed fiscal years.

  47. CEO Pay Ratio Disclosure

    CEO Pay Ratio Disclosure As required by Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation our Chief Executive Officer, Mr. Ken Xie (our “CEO”), and the median of the annual total compensation of all our employees of, excluding our CEO. For 2022: • the annual total compensation of our median employee was $123,122; • the annual total compensation of our CEO as disclosed in the 2022 Summary Compensation Table was $14,200,453; and • the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our employees was 115 to 1. This ratio is a reasonable estimate calculated in a manner consistent with SEC rules. We were required to reidentify our median employee for 2022. For 2022, we identified the employee with compensation at the median of the annual total compensation of all our employees, using the following methodology. For 2022, we identified the employee with compensation at the median of the annual total compensation of all our employees using as our consistently applied compensation measure each employee’s base salary, allowances, bonuses, sales commissions paid and the grant date fair value of equity awards granted during the 12-month period from January 1, 2022 through December 31, 2022. We calculated annual base salary by annualizing this amount using a reasonable estimate of the hours worked during 2022 for hourly employees and the actual annual salary rate on December 31, 2022 for our remaining employees. We calculated annual target variable pay (bonus and/or commissions) using the target amount as of December 31, 2022. With respect to annual equity awards for 2022, we computed the value in accordance with FASB ASC Topic 718. The assumptions used in the valuation of these awards are set forth in note 13 to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023. In determining our employee population, we considered the individuals, excluding our CEO, who were employed by us and our consolidated subsidiaries on December 31, 2022, whether employed on a full-time, part-time, seasonal or temporary basis. We did not include any contractors or other non-employee workers in our employee population. For employees paid other than in U.S. dollars, we converted their compensation to U.S. dollars using the applicable exchange rates in effect on December 31, 2022. We did not make any cost-of-living adjustment. Using this methodology, we identified the individual at the median of our employee population. We then calculated the annual total compensation for this individual using the same methodology we use to calculate the amount reported for our CEO in the “Total” column of the 2022 Summary Compensation Table as set forth in this Proxy Statement. Because SEC rules for identifying the median of the annual total compensation of all employees allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their employee population and compensation practices, the pay ratio reported by other companies may not be comparable to our pay ratio, as other companies have different employee populations and compensation practices and may have used different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. As explained by the SEC when it adopted these rules, the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures.

  48. Compensation of Directors

    Compensation of Directors

  49. Director Compensation Table for 2022

    Director Compensation Table for 2022 The following table provides information concerning the compensation earned by each of our non-employee directors for service on the Board of Directors in fiscal 2022. Messrs. Ken Xie and Michael Xie, who are employees of Fortinet, do not receive additional compensation for their services as directors.

  50. Director Compensation Table for 2022

    | Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Total ($) | | Kelly Ducourty(3) | 33,632 | — | 33,632 | | Kenneth A. Goldman(4) | 76,901 | 214,523 | 291,424 | | Ming Hsieh(5) | 83,887 | 214,523 | 298,410 | | Jean Hu(6) | 88,582 | 214,523 | 303,105 | | William H. Neukom(7) | 100,746 | 214,523 | 315,269 | | Judith Sim(8) | 86,928 | 214,523 | 301,451 | | Admiral James Stavridis (Ret)(9) | 66,071 | 214,523 | 280,594 |

  51. Director Compensation Table for 2022

    (1) Reflects fees earned or paid in cash for services rendered in the last fiscal year. (2) The amounts shown represent the aggregate grant date fair value of the RSU award made to each director during the year, computed in accordance with FASB ASC Topic 718. The assumptions used in the valuation of these awards are set forth in note 13 to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023. The grant date fair value of these awards is determined for financial statement reporting purposes and does not correspond to the actual value that the directors will receive from the awards. (3) Ms. Ducourty’s term as a director ended with the 2022 Annual Meeting. (4) As of December 31, 2022, Mr. Goldman held 2,066 RSUs, 1,033 of which vested on March 31, 2023 and the remainder of which will vest in full on June 15, 2023, so long as Mr. Goldman is a member of the Board of Directors on such date. (5) As of December 31, 2022, Mr. Hsieh held 2,066 RSUs, 1,033 of which vested on March 31, 2023 and the remainder of which will vest in full on June 15, 2023, so long as Mr. Hsieh is a member of the Board of Directors on such date. (6) As of December 31, 2022, Ms. Hu held 2,066 RSUs, 1,033 of which vested on March 31, 2023 and the remainder of which will vest in full on June 15, 2023, so long as Ms. Hu is a member of the Board of Directors on such date. (7) As of December 31, 2022, Mr. Neukom held 2,066 RSUs, 1,033 of which vested on March 31, 2023 and the remainder of which will vest in full on June 15, 2023, so long as Mr. Neukom is a member of the Board of Directors on such date. (8) As of December 31, 2022, Ms. Sim held 2,066 RSUs, 1,033 of which vested on March 31, 2023 and the remainder of which will vest in full on June 15, 2023, so long as Ms. Sim is a member of the Board of Directors on such date. (9) As of December 31, 2022, Admiral Stavridis (Ret) held 2,066 RSUs, of which 1,033 vested on March 31, 2023 and the remainder of which will vest in full on June 1516, 2023, so long as Admiral Stavridis (Ret) is a member of the Board of Directors on such date.

  52. Standard Director Compensation Arrangements

    Standard Director Compensation Arrangements Following a review by Compensia of our annual cash retainer policy and equity award grant policy for non-employee directors, in July 2022, the Human Resources Committee recommended, and the Board of Directors approved, various changes to our cash retainer policy and equity award grant policy for non-employee directors. In accordance with our annual cash retainer policy and equity award grant policy applicable to non-employee directors, each non-employee director is entitled to receive the following compensation for service on the Board of Directors: • an annual cash retainer for serving on the Board of Directors of $55,000, paid quarterly, in addition to the annual cash retainer for service on the committees of the Board of Directors as discussed below; • an annual cash retainer for serving as lead independent director of the Board of Directors of $35,000, paid quarterly; • an annual cash retainer for serving in a non-chairperson position on the (i) Audit Committee of $14,000, (ii) Human Resources Committee of $10,000, (iii) Governance Committee of $7,500 and (iv) Social Responsibility Committee of $7,500; • an annual cash retainer of (i) $35,000 for serving as the chairperson of the Audit Committee, (ii) $25,000 for serving as the chairperson of the Human Resources Committee, (iii) $15,000 for serving as the chairperson of the Governance Committee and (iv) $15,000 for serving as the chairperson of the Social Responsibility Committee; • after completion of each full year of service, an annual grant of a number of RSUs based on a total grant value equal to the peer 50th percentile per Compensia’s director compensation analysis (which for 2022 was $245,000), vesting quarterly on the last day of each quarter and with the final installment vesting on the earlier of the last day of the second quarter and the day prior to the next annual meeting of stockholders; and • for newly appointed non-employee directors, an initial grant of a number of RSUs based on a total grant value equal to the then-applicable grant amount, pro-rated based on the projected days from the directors’ appointment date through the next annual meeting of stockholders, vesting in full on the day prior to the next annual meeting of stockholders. Prior to July 2022, the annual cash retainer for serving in a non-chairperson position on the Audit Committee was $13,800, the annual cash retainer for serving as the chairperson of the Audit Committee was $32,500 and the annual cash retainer for serving as the chairperson of the Human Resources Committee was $22,500. Otherwise, the compensation described above remained unchanged from the date of the 2022 Annual Meeting.

  53. Termination or Change of Control Arrangements

    Termination or Change of Control Arrangements We have entered into change of control agreements with each of our non-employee directors. These agreements provide that, upon a Change of Control, 100% of the outstanding and unvested equity awards held by such directors will immediately vest in full. “Change of Control” in our change of control agreements with our non-employee directors has the same meaning as used in our Change of Control Severance Agreements with the named executive officers. See “— Potential Payments Upon Termination or Change of Control — Termination or Change of Control Arrangements.”