DEF 14A of Fortinet, Inc., Apr 26, 2024

DEF 14A of Fortinet, Inc.

Filed Apr 26, 2024 · FY20230001174947-24-000602

Open on EDGAR

  1. ELECTION OF DIRECTORS

    ELECTION OF DIRECTORS

  2. General

    General The Board of Directors currently consists of nine members, and our Restated Certificate of Incorporation (our “Restated 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 Bylaws permit the Board of Directors to establish by resolution the authorized number of directors, and nine directors are currently authorized.

  3. Nominees

    Nominees Nine candidates have been nominated for election as directors at the 2024 Annual Meeting for a one-year term expiring at the 2025 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, Admiral James Stavridis (Ret) and Mary Agnes “Maggie” Wilderotter 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 2024 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 nine 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, ADMIRAL JAMES STAVRIDIS (Ret) AMD Mary Agnes “Maggie” Wilderotter.

  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, 2024, 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 | 61 | Chief Executive Officer, Chairman of the Board of Directors and Director Nominee | | Michael Xie(4)**** | 55 | President, Chief Technology Officer, Director and Director Nominee | | Kenneth A. Goldman(1)(2)** | 74 | Director and Director Nominee | | Ming Hsieh(1)(2) | 68 | Director and Director Nominee | | Jean Hu(2) | 60 | Director and Director Nominee | | William H. Neukom(3)(4) | 82 | Director and Director Nominee | | Judith Sim(1)(3)(5)* | 55 | Lead Independent Director and Director Nominee | | Admiral James Stavridis (Ret)(3)(4)*** | 69 | Director and Director Nominee | | Mary Agnes “Maggie” Wilderotter | 69 | 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. (5) Ms. Sim replaced Mr. Neukom as Lead Independent Director on April 19, 2024. * Chairperson of the Human Resources Committee. ** Chairperson of the Audit Committee. *** Chairperson of the Governance 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 Systems Integration Solutions, Inc., a talent services firm that specializes in delivering technology solutions, 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., a wireless location-based services corporation, 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. Mr. Goldman currently serves as a member of the PCAOB, Investor 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., a company that designs, develops and markets cameras, mounts, and accessories, RingCentral, Inc., a provider of cloud-based communication and collaboration products and services, and Zuora, Inc., an enterprise software company. 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 AMD, 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 served as our Lead Independent Director from April 2018 until April 2024. Mr. Neukom was previously the lead lawyer for Microsoft Corporation, a multinational technology 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. 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 is the Cofounder and President of the World Justice Project, an organization devoted to promoting the rule of law throughout the world. 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 L.P., an operator and promoter of professional and semiprofessional athletic clubs and events and owner of the San Francisco Giants, 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 and has served as our Lead Independent Director since April 2024. Ms. Sim previously held various customer-related and marketing positions at Oracle Corporation, multinational computer technology company providing cloud applications and cloud platform services, 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 (Ret), USN, 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, a multinational private equity, alternative asset management and financial services corporation, and is Chair of the Board of Trustees of the Rockefeller Foundation, an American private foundation and philanthropic medical research and arts funding organization. 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. Mary Agnes “Maggie” Wilderotter has served as a member of the Board of Directors since April 2024. Ms. Wilderotter currently serves as the Chairman and Chief Executive Officer of Wilderotter Vineyards, a winery located in Plymouth, California, serves on the public boards of Costco Wholesale Corp., membership warehouse club, and Sana Biotechnologies, Inc., a biotechnology company creating and delivering cell and gene therapies, and is chair of the Board of Directors at DocuSign, Inc, a cloud-based digital transaction administration platform, at which she served as interim Chief Executive Officer from June 2022 to September 2022. She serves on the private boards of Tanium Inc, privately held cybersecurity and systems management company and Sonoma Biotherapeutics Inc, a clinical-stage biotechnology company developing engineered regulatory T cell therapies. She is also a senior advisor to a number of companies including Accenture Public Limited Company, a professional services company, Okta, Inc., an identity and access management company, Blackstone Inc., an alternative asset management company, Atairos Management LP, an independent strategic investment company, Bank of America Corporation, a multinational investment bank and financial services holding company, American Century Companies, Inc., a privately controlled and independent investment management firm, Garden City Equity, a private equity firm headquartered in Atlanta, GA, Celonis GmbH, a data processing company offering software as a service to improve business processes, and Sixth Street Partners, LLC, a global investment firm. Ms. Wilderotter was Chief Executive Officer of The Grand Reserve Inn, a five-star luxury resort, for seven years and before that, she was Chief Executive Officer of Frontier Communications Parent, Inc., an American telecommunications company, from 2004 through 2015, and then Executive Chairman of Frontier Communications until 2016. Ms. Wilderotter was previously a director of Xerox Holdings Corporation, a document management technology and services enterprise, DreamWorks Animation LLC, an American entertainment company producing animated feature films, Cadence Design Systems, Inc., a computational software company delivering hardware, software and IP for electronic design, Hewlett Packard Enterprise Company, an information technology company, The Procter & Gamble Company, a consumer goods company, and Lyft, Inc, a ride-sharing company.

  8. Information Regarding the Board of Directors and Director Nominees

    Ms. Wilderotter previously served as the Chief Executive Officer of Wink Communications Inc., a video production company that creates, organizes and prepares video content for online distribution, from 1997 to 2002. From 2002 to 2004, Ms. Wilderotter also served as Senior Vice President of Global Business Strategy at Microsoft Corporation, a multinational technology corporation. Ms. Wilderotter has also served in various leadership capacities, including as Executive Vice President of National Operations for AT&T Communications Services International Inc., Chief Executive Officer of AT&T’s Aviation Communications Division, and as Senior Vice president of McCaw Cellular Communications, an American communication service company. Ms. Wilderotter previously served on the President’s National Security Telecommunications Advisory Committee as both Vice Chairman and Chairman during her four-year tenure, which ended in 2014. She also served until 2017 on a special commission responsible for a recommendation report to the U.S. president on enhancing national cybersecurity. Ms. Wilderotter received her Bachelor’s Degree in economics from the College of the Holy Cross, and also holds an Honorary Doctor of Engineering degree from the Stevens Institute of Technology and an Honorary Doctor of Laws degree from the University of Rochester. Ms. Wilderotter has developed extensive knowledge and experience during her service on the boards of over 35 public companies in her career, and her broad-ranging corporate experiences, including senior leadership positions, in the areas of telecommunications, retail, media, healthcare and technology.

  9. Overview of Executive Compensation Program

    Overview of Executive Compensation Program We compete with many other technology companies in seeking to attract and retain highly skilled top talent. We also seek to keep our employees highly motivated. To meet these challenges, we have designed our executive compensation program to attract, retain and motivate our NEOs to enhance stockholder value. By delivering compensation in a mix of fixed and variable pay, including long-term vesting equity awards, we seek to align the incentives of our NEOs with the achievement of long-term business objectives and financial performance that drives sustained stockholder value. To support our long-term objectives and reinforce a strong pay-for-performance culture, a majority of total direct compensation for our NEOs is awarded in the form of at-risk cash annual incentives and long-term vesting equity awards. In addition, our compensation program includes competitive base salaries and standard health and welfare benefits that are generally available to our other team members, including medical, dental, vision, life and disability insurance and 401(k) plans. For 2023, the material elements of our executive compensation program were:

  10. Overview of Executive Compensation Program

    | Base Salary | 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, an NEO’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 NEO’s work and contribution and to be competitive in attracting or retaining the NEO. | | Annual Incentive | 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 NEOs 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 individual 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 NEOs, 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. | | Long-Term Incentive 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 NEOs with a long-term reward that aligns their interests with those of our stockholders. The Human Resources Committee approved awards of RSUs to our NEOs in January 2023 and PSUs to our NEOs in February 2023, all of which were granted effective in February 2023. The RSUs represent a right to receive shares of our common stock upon vesting over time. The PSUs also represent a right to receive shares of our common stock and vest based on relative TSR, as further described below. | | Other Benefits | Our NEOs 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. |

  11. Role of the Human Resources Committee in Executive Compensation Decisions

    Role of the Human Resources Committee in Executive Compensation Decisions The Human Resources Committee has overall responsibility for approving the compensation of our NEOs. The Human Resources Committee also oversees our diversity, equity and inclusion initiatives and reviews with management the compensation disclosures required by the SEC. Members of the Human Resources Committee are appointed by the Board of Directors. See “Corporate Governance — Board Meetings and Committees — Human Resources Committee” for more detail about the responsibilities and procedures of the Human Resources Committee. 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 NEOs and non-employee directors. For 2023, the Human Resources Committee engaged Compensia in this capacity. A representative of Compensia generally attends meetings of the Human Resources Committee. In addition, Compensia provided competitive market assessments of 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 2023, the Human Resources Committee also engaged Compensia to provide and to report on the results of a competitive assessment of the compensation of our NEOs, 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 “— 2023 Compensation Decisions.” 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. Role of Executives in Executive Compensation Decisions The Human Resources Committee generally seeks input from our Chief Executive Officer, Mr. Ken Xie, when discussing the performance of and compensation levels for our NEOs other than for himself and Mr. Michael Xie. Neither Mr. Ken Xie nor any of our other NEOs participates in deliberations relating to their own compensation, and Messrs. Ken Xie and Michael Xie do not participate in deliberations related to each other’s compensation. Peer Group In October 2022, 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 2023. 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 $2.0 billion to $7.6 billion and a market capitalization generally ranging from $19.8 billion to $79.3 billion as of October 4, 2022. The peer group approved in October 2022 included the 18 technology companies listed below:

  12. Role of the Human Resources Committee in Executive Compensation Decisions

    For 2023, the Human Resources Committee removed Cloudflare, DocuSign and Okta from the peer group and added Datadog, Equinix and ServiceNow to the peer group.

  13. Target Bonus Opportunities

    Target Bonus Opportunities

  14. Target Bonus Opportunities

    | Name | 2022 Target Bonus Opportunity (% of Salary) | 2023 Target Bonus Opportunity (% of Salary) | | Mr. Ken Xie | 120% | 120% | | Mr. Michael Xie | 75% | 75% | | Mr. Jensen | 80% | 80% | | Mr. Perche | 100% | 100% | | Mr. Whittle | 75% | 75% |

  15. 2023 Bonus Program

    2023 Bonus Program In 2023, 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, revenue is calculated in accordance with GAAP. 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 2023, threshold (i.e., the minimum) performance level was 90% of both the revenue target and the operating income target. Once the threshold performance level is surpassed, the funding of the bonus payments for our NEOs was to increase on a graduated basis for each of the revenue portion and the operating income portion as follows:

  16. 2023 Bonus Program

    | | Revenue (70% of Overall Bonus Program) | | | Operating Income (30% of Overall Bonus Program) | | | | | Performance (% Target) | | Bonus Funding (% of Target) | Performance (% Target) | | Bonus Funding (% of Target) | | Threshold | 90 | %(1) | 40% | 90 | %(1) | 40% | | Target | 100 | | 100% | 100 | | 100% | | Max | 140 | | 140% | 140 | | 140% |

  17. 2023 Bonus Program

    (1) Our NEOs are ineligible for bonus payments at or below 90%; performance levels must surpass 90% for our NEOs to be eligible to receive bonus payments pursuant to the Bonus Program. Bonus 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 NEOs under the Bonus Program if our financial results are below our guidance such that we determine to pre-announce our financial results.

  18. 2023 Bonus Results

    2023 Bonus Results For 2023, we achieved between 91% and 104% of our quarterly and annual revenue targets and we achieved between 95% and 119% of our quarterly and annual operating income targets. 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. Based on our results for 2023, and certain adjustments made for individual performance made by our Human Resources Committee, our NEOs earned the following aggregate bonuses during 2023:

  19. 2023 Bonus Results

    | Name | Bonus Earned in 2023 | | Mr. Ken Xie | $597,921 | | Mr. Michael Xie | $271,402 | | Mr. Jensen | $339,218 | | Mr. Perche | $396,289 | | Mr. Whittle | $298,317 |

  20. Equity-Based Awards

    Equity-Based Awards We grant annual long-term incentive equity awards with multi-year vesting requirements to incentivize and reward our NEOs for long-term corporate performance based on the value of our common stock and, thereby, to align the interests of our NEOs with those of our stockholders. In 2023, the Human Resources Committee re-introduced PSUs to the NEOs’ equity compensation program. In 2023, the NEOs were granted an equal split of time-based RSUs and performance-based PSUs (at target). The Human Resources Committee determined to continue to grant 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 and determined to grant PSUs based on our desired compensation objectives and pay-for-performance philosophy. In addition, the Human Resources Committee grants RSUs and PSUs in order to (i) create a stronger and more visible link between executive pay and Fortinet’s stock price performance, (ii) further align our executives’ interests with those of our stockholders, (iii) to better incentivize and retain our senior executives and (iv) maintain a long-term incentive program that is competitive with practices among companies in our compensation peer group. In granting RSUs and PSUs to our NEOs in 2023, the Human Resources Committee exercised its judgment and considered, among other things, the role and contribution of the NEO, the value of unvested stock options and RSUs already held by the NEO and Compensia’s data and analysis. In January 2023 and February 2023, the Human Resources Committee approved the following awards to our NEOs, as further described below:

  21. Equity-Based Awards

    | Name | Number of RSUs | Number of PSUs (at target) | Total Grant Date Value | | Mr. Ken Xie | 100,160 | 100,160 | $15,081,692 | | Mr. Michael Xie | 44,214 | 44,214 | $6,657,577 | | Mr. Jensen | 41,169 | 41,169 | $6,199,073 | | Mr. Perche | 41,169 | 41,169 | $6,199,073 | | Mr. Whittle | 25,730 | 25,730 | $3,874,320 |

  22. Equity-Based Awards

    Each of these RSU and PSU awards were granted in accordance with Fortinet’s Equity Award Grant Policy discussed in “— Timing of Equity Awards” below. 2023 RSU Awards. In January 2023, the Human Resources Committee approved awards of RSUs to our NEOs as set forth in the table above. These RSUs vest over four years, with 25% vesting one year from February 1, 2024 and the remainder vesting monthly thereafter. 2023 PSU Awards. In February 2023, the Human Resources Committee approved awards of PSUs as set forth in the table above. Vesting of up to 200% of the target PSUs may be achieved upon maximum achievement of the performance metrics described below. Vesting of the PSUs will be earned based on the relative level of achievement of the Company’s TSR as compared to the TSR of the companies that comprise the S&P 500 as of January 1, 2023 over the applicable performance period. The Human Resources Committee selected the S&P 500 because it is a well-recognized, independent and external metric to measure the equity performance of a large cap company like Fortinet. Generally, TSR will be measured using the 30-consecutive trading day period at the beginning and end of each performance period. The PSUs are split in four “tranches” and vest based on the following terms:

  23. Equity-Based Awards

    | Percentile Rank vs. S&P 500 Companies | Award Multiplier (PSU Vesting as % of Target) | | 75th percentile or greater | 200% | | 50th percentile | 100% | | 25th percentile | 50% | | Less than 25th percentile | 0% |

  24. Equity-Based Awards

    Achievement between levels will be measured on a straight-line interpolation basis. Each Tranche can only be achieved in its performance period. For example, if Tranche 1 is achieved at 50%, 50% of the Tranche 1 PSUs will vest and 50% of the Tranche 1 PSUs will be forfeited, each at the end of the Tranche 1 performance period. To the extent a Tranche is achieved, earned PSUs shall vest the February 1st following the end of its performance period, so long as the grantee remains in service to Fortinet on such date. Regarding the Tranche 1 performance period ending on December 31, 2023, Fortinet’s TSR percentile rank was 52nd, resulting in the following number of PSUs being earned by each of our NEOs:

  25. Equity-Based Awards

    | Name | Number of PSUs Earned in the Tranche 1 Performance Period | | Mr. Ken Xie | 21,834 | | Mr. Michael Xie | 9,637 | | Mr. Jensen | 8,973 | | Mr. Perche | 8,973 | | Mr. Whittle | 5,609 |

  26. 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 NEOs. The term of each NEO’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 NEOs 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 NEO, as well as analysis of market data, similar agreements established by our peer group and applicable law.

  27. Other Compensation Practices and Policies

    Other Compensation Practices and Policies Timing of Equity Awards The Human Resources Committee approved grants of RSUs to our NEOs in January 2023 and grants of PSUs to our NEOs in February 2023. 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.

  28. 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 NEOs 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).

  29. 2023 Summary Compensation Table

    2023 Summary Compensation Table The following table presents information concerning the compensation of the NEOs for the years ended December 31, 2023, 2022, and 2021.

  30. 2023 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 | 2023 | 622,000 | — | 15,081,692 | 597,921 | — | 16,301,613 | | Chief Executive Officer | 2022 | 797,000 | 6,447,285 | 5,978,827 | 977,341 | — | 14,200,453 | | | 2021 | 797,000 | 6,145,875 | 6,235,385 | 1,024,951 | — | 14,203,211 | | Michael Xie | 2023 | 445,000 | — | 6,657,577 | 271,402 | — | 7,373,979 | | President and Chief Technology | 2022 | 445,000 | 2,175,327 | 2,017,268 | 341,058 | — | 4,978,653 | | Officer | 2021 | 445,000 | 2,469,229 | 2,505,192 | 357,673 | — | 5,777,094 | | Keith Jensen | 2023 | 506,000 | — | 6,199,073 | 339,218 | 6,600 | 7,050,891 | | Chief Financial Officer | 2022 | 504,000 | 2,025,639 | 1,878,456 | 418,543 | 6,100 | 4,832,738 | | | 2021 | 490,000 | 2,165,893 | 2,197,437 | 431,000 | 5,343 | 5,289,673 | | Patrice Perche(4)(5) | 2023 | 551,317 | — | 6,199,073 | 396,289 | 114,706(6) | 7,261,385 | | Chief Revenue Officer and Executive Vice President of Support | 2022 | 519,202 | 2,025,639 | 1,878,456 | 532,907 | 95,309(7) | 5,051,513 | | John Whittle | 2023 | 482,000 | — | 3,874,320 | 298,317 | 6,600 | 4,661,237 | | Chief Operating Officer and | 2022 | 477,000 | 1,265,815 | 1,173,841 | 343,029 | 6,100 | 3,265,785 | | former 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 |

  31. 2023 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, 2023, filed with the SEC on February 26, 2024. The PSUs granted in 2023 are considered to have a “market condition” for accounting purposes and are therefore valued using a Monte Carlo simulation. For the PSUs, the amount reported is based on the probable outcome of the applicable performance condition at the time of grant. 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 NEOs will receive from the awards. (2) See “— Grants of Plan-Based Awards in 2023 Table” under the column “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” for the amounts NEOs were eligible to earn in 2023. See also “Executive Compensation — Compensation Discussion and Analysis — 2023 Compensation Decisions — Variable Pay” above for a discussion regarding our Bonus Program. (3) The amounts shown for Messrs. Jensen and Whittle represent company matching contributions to Fortinet’s 401(k) plan, a tax-qualified defined contribution plan. (4) For 2023, Mr. Perche’s base salary, non-equity incentive compensation and all other cash compensation was paid in Swiss Franc. The amounts set forth in the table reflect the conversion from Swiss Franc to U.S. dollars using an average exchange rate of 1.11 U.S. dollar for one Swiss Franc for 2023. (5) The 2022 compensation amounts for Mr. Perche were incorrectly reported in our proxy statement filed for our 2023 annual meeting of stockholders. The correct amounts are reflected in the Summary Compensation Table (“SCT”) above. (6) The amount shown for Mr. Perche represents (i) $20,538 for a car allowance, (ii) $24,004 for health allowance and (iii) $70,164 in contributions on a defined contribution plan. (7) The amount shown for Mr. Perche represents (i) $19,342 for a car allowance, (ii) $22,606 for health allowance and (iii) $53,361 in contributions on a defined contribution plan.

  32. Grants of Plan-Based Awards in 2023 Table

    Grants of Plan-Based Awards in 2023 Table The following table presents information concerning each grant of an award made to the NEOs in 2023 under any plan.

  33. Grants of Plan-Based Awards in 2023 Table

    | Name | Type of Award | Grant Date | Approval Date | Estimated Future Payouts Under Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards ($)(3) | | | | | | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | | | | Ken Xie | Cash | — | — | — | — | — | 17,914 | 746,400 | 1,044,960 | — | — | | | RSU | 2/27/2023 | 1/20/2023 | — | — | — | — | — | — | 100,160 | 5,971,539 | | | PSU | 2/27/2023 | 2/17/2023 | — | 100,160 | 200,320 | — | — | — | — | 9,110,153 | | Michael Xie | Cash | — | — | — | — | — | 8,010 | 333,750 | 467,250 | — | — | | | RSU | 2/27/2023 | 1/20/2023 | — | — | — | — | — | — | 44,214 | 2,636,039 | | | PSU | 2/27/2023 | 1/20/2023 | — | 44,214 | 88,428 | — | — | — | — | 4,021,539 | | Keith Jensen | Cash | — | — | — | — | — | 9,715 | 404,800 | 566,720 | — | — | | | RSU | 2/27/2023 | 1/20/2023 | — | — | — | — | — | — | 41,169 | 2,454,496 | | | PSU | 2/27/2023 | 1/20/2023 | — | 41,169 | 82,338 | — | — | — | — | 3,744,578 | | Patrice Perche(4) | Cash | — | — | — | — | — | 13,232 | 551,317 | 771,844 | — | — | | | RSU | 2/27/2023 | 1/20/2023 | — | — | — | — | — | — | 41,169 | 2,454,496 | | | PSU | 2/27/2023 | 1/20/2023 | — | 41,169 | 82,338 | — | — | — | — | 3,744,578 | | John Whittle | Cash | — | — | — | — | — | 8,676 | 361,500 | 506,100 | — | — | | | RSU | 2/27/2023 | 1/20/2023 | — | — | — | — | — | — | 25,730 | 1,534,023 | | | PSU | 2/27/2023 | 1/20/2023 | — | 25,730 | 51,460 | — | — | — | — | 2,340,298 |

  34. Grants of Plan-Based Awards in 2023 Table

    ________________________ (1) These columns show a range of outcomes possible under the PSU awards granted in 2023. The amount shown in the “Target” column represents the number of PSUs that would become Earned PSUs if our Percentile Rank among the Index Companies is in the 50th to 75th Percentile. The amount shown in the “Threshold” column represents the number of PSUs that would become Earned PSUs if our Percentile Rank among the Index Companies is below the 25th percentile. The amount shown in the “Maximum” column represents the number of PSUs that would become Earned PSUs if our Percentile Rank among Index Companies is in the 75th percentile or higher. Further information about these awards is provided in the section titled “— Compensation Discussion and Analysis — Equity-Based Awards.” (2) Reflects threshold, target and maximum target bonus amounts for fiscal 2023 performance under the Bonus Program, as described in “Executive Compensation — Compensation Discussion and Analysis — 2023 Compensation Decisions — Variable Pay.” These amounts do not necessarily correspond to the actual value that may be received by the NEO. (3) The amounts shown represent the grant date fair value of PSUs, RSUs and stock options granted during fiscal 2023, 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, 2023, filed with the SEC on February 26, 2024. The PSUs granted in 2023 are considered to have a “market condition” for accounting purposes and are therefore valued using a Monte Carlo simulation. Further information about these awards is provided in the section titled “Executive Compensation — Compensation Discussion and Analysis — Equity-Based Awards.” Grant date fair value is determined for financial statement reporting purposes and does not correspond to the actual value that the NEOs will realize from the award. (4) The amounts set forth in the table for Mr. Perche for estimated future payouts under Non-Equity Incentive Plan Awards reflect the conversion from Swiss Franc to U.S. dollar using an average exchange rate of 1.11 U.S. dollar for one Swiss Franc for 2023.

  35. Outstanding Equity Awards at 2023 Fiscal Year-End Table

    Outstanding Equity Awards at 2023 Fiscal Year-End Table The following table presents information concerning unexercised options, unvested RSUs and PSUs for each NEO outstanding as of December 31, 2023.

  36. Outstanding Equity Awards at 2023 Fiscal Year-End Table

    | Name | Grant Date | Option Awards | | | | Stock Awards | | | | | | | Number of Securities Underlying Unexercised Options (#)(1) | | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)(4) | | | | Exercisable | Unexercisable | | | | | | | | Ken Xie | 2/16/2017 | 333,333 | — | 7.45 | 2/16/2024 | — | — | | | | | 2/20/2018 | 1,000,000 | — | 9.81 | 2/20/2025 | — | — | | | | | 2/21/2019 | 734,880 | — | 16.90 | 2/21/2026 | — | — | | | | | 2/21/2020 | 590,780 | 25,690 | 22.90 | 2/21/2027 | — | — | | | | | 2/21/2020 | — | — | — | — | 12,845 | 751,818 | | | | | 2/19/2021 | 385,335 | 158,670 | 34.39 | 2/19/2028 | — | — | | | | | 2/19/2021 | — | | — | — | 56,670 | 3,316,895 | | | | | 2/17/2022 | 132,361 | 156,434 | 62.11 | 2/17/2029 | — | — | | | | | 2/17/2022 | — | — | — | — | 54,150 | 3,169,400 | | | | | 2/27/2023 | — | — | — | — | 100,160 | 5,862,365 | | | | | 2/27/2023 | — | — | — | — | 20,032(5) | 1,172,472 | 80,128 | 4,689,892 | | Michael Xie | 2/20/2018 | 473,050 | — | 9.81 | 2/20/2025 | — | — | | | | | 2/21/2019 | 324,285 | — | 16.90 | 2/21/2026 | — | — | | | | | 2/21/2020 | 234,225 | 10,185 | 22.90 | 2/21/2027 | — | — | | | | | 2/21/2020 | — | — | — | — | 5,095 | 298,210 | | | | | 2/19/2021 | 154,815 | 63,750 | 34.39 | 2/19/2028 | — | — | | | | | 2/19/2021 | — | — | — | — | 22,770 | 1,332,728 | | | | | 2/17/2022 | 44,660 | 52,780 | 62.11 | 2/17/2029 | — | — | | | | | 2/17/2022 | — | — | — | — | 18,270 | 1,069,343 | | | | | 2/27/2023 | — | — | — | — | 44,214 | 2,587,845 | | | | | 2/27/2023 | — | — | — | — | 8,842(5) | 517,522 | 35,372 | 2,070,323 | | Keith Jensen | 2/21/2020 | 4,245 | 8,490 | 22.90 | 2/21/2027 | — | — | | | | | 2/21/2020 | — | — | — | — | 4,245 | 248,460 | | | | | 2/19/2021 | 3,995 | 55,920 | 34.39 | 2/19/2028 | — | — | | | | | 2/19/2021 | — | — | — | — | 19,975 | 1,169,137 | | | | | 2/17/2022 | 41,580 | 49,155 | 62.11 | 2/17/2029 | — | — | | | | | 2/17/2022 | — | — | — | — | 17,015 | 995,888 | | | | | 2/27/2023 | — | — | — | — | 41,169 | 2,409,622 | | | | | 2/27/2023 | — | — | — | — | 8,233(5) | 481,877 | 32,936 | 1,927,744 | | Patrice Perche | 2/27/2020 | — | 7,615 | 22.90 | 2/21/2027 | — | — | | | | | 2/21/2020 | — | — | — | — | 3,810 | 222,999 | | | | | 2/19/2021 | — | 52,160 | 34.39 | 2/19/2028 | — | — | | | | | 2/19/2021 | — | — | — | — | 18,630 | 1,090,414 | | | | | 2/17/2022 | 41,584 | 49,151 | 62.11 | 2/17/2029 | — | — | | | | | 2/17/2022 | — | — | — | — | 17,015 | 995,888 | | | | | 2/27/2023 | — | — | — | — | 41,169 | 2,409,622 | | | | | 2/27/2023 | — | — | — | — | 8,233(5) | 481,877 | 32,936 | 1,927,744 | | 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 | 38,495 | — | 16.90 | 2/21/2026 | — | — | | | | | 2/21/2020 | 52,055 | 4,960 | 22.90 | 2/21/2027 | — | — | | | | | 2/21/2020 | — | — | — | — | 2,480 | 145,154 | | | | | 2/19/2021 | 53,400 | 35,600 | 34.39 | 2/19/2028 | — | — | | | | | 2/19/2021 | — | — | — | — | 12,715 | 744,209 | | | | | 2/17/2022 | 25,987 | 30,713 | 62.11 | 2/17/2029 | — | — | | | | | 2/17/2022 | — | — | — | — | 10,635 | 622,467 | | | | | 2/27/2023 | — | — | — | — | 25,730 | 1,505,977 | | | | | 2/27/2023 | — | — | — | — | 5,146(5) | 301,195 | 20,584 | 1,204,782 |

  37. Outstanding Equity Awards at 2023 Fiscal Year-End Table

    (1) Reflects stock options granted under the 2009 Plan. Unless otherwise indicated, all options granted to NEOs vest over four years starting on the date of the grant, with 25% vesting after one year and the remainder vesting monthly thereafter. (2) Represents RSUs granted under the 2009 Plan. Unless otherwise indicated, all RSUs granted to NEOs 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. Further information about the RSUs is provided in the section titled “Executive Compensation — Compensation Discussion and Analysis — Equity-Based Awards.” (3) Represents PSUs granted under the 2009 Plan. Unless otherwise indicated, all PSUs are earned based on the percentile ranking of our total stockholder return among companies included in the S&P 500 Index and include four performance periods of one, two, three and four years, with the first three performance periods each weighted 20% and the four-year performance period weighted 40%. PSUs earned become time vested on February 1, 2024. Further information about the PSUs is provided in the section titled “Executive Compensation — Compensation Discussion and Analysis — Equity-Based Awards.” (4) Represents the fair market value of the shares underlying the RSUs and PSUs as of December 29, 2023, which was the last business day of 2023, based on the closing price on Nasdaq of our common stock on December 29, 2023, which was $58.53 per share. (5) Includes PSUs for which the 2023 TSR goal has been achieved as of December 31, 2023 and which became vested on February 1, 2024. Further information about the PSUs is provided in the section titled “Executive Compensation — Compensation Discussion and Analysis — Equity-Based Awards.”

  38. 2023 Option Exercises and Stock Vested Table

    2023 Option Exercises and Stock Vested Table The following table presents information concerning amounts realized from stock option exercises and RSUs vested during 2023 for each of the NEOs.

  39. 2023 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 | 166,667 | 7,946,342 | 154,135 | 9,356,780 | | Michael Xie | 525,000 | 24,354,195 | 59,550 | 3,615,434 | | Keith Jensen | 153,030 | 5,194,139 | 51,090 | 3,106,153 | | Patrice Perche | 521,855 | 19,361,960 | 46,865 | 2,854,437 | | John Whittle | — | — | 31,855 | 1,932,259 |

  40. 2023 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 2023. (2) The value realized on vesting reflects the aggregate fair market value of all Fortinet common stock issued pursuant to vested RSUs during 2023.

  41. Potential Payments Upon Termination or Change of Control

    Potential Payments Upon Termination or Change of Control

  42. 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 NEOs. Except where otherwise noted, payments and benefits are estimated assuming that the triggering event took place on the last business day of 2023, which was December 29, 2023, and the price per share of Fortinet’s common stock was the closing price on Nasdaq as of that date, which was $58.53 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.

  43. Estimated Payments upon Termination or Change in Control

    | Name | Qualifying Termination Not Within One Year After a Change of Control(1) | | | Qualifying Termination Within One Year After a Change of Control(1) | | | | | Salary ($)(2) | Acceleration of Equity Vesting ($)(3) | COBRA Benefit ($)(4) | Salary ($)(2) | Acceleration of Equity Vesting ($)(5) | COBRA Benefit ($)(4) | | Ken Xie | 622,000 | 12,855,550 | 35,704 | 622,000 | 23,709,208 | 35,704 | | Michael Xie | 445,000 | 5,217,958 | 35,704 | 445,000 | 9,778,085 | 35,704 | | Keith Jensen | 506,000 | 4,665,384 | 24,750 | 506,000 | 8,885,393 | 24,750 | | Patrice Perche(6) | 551,317 | 4,467,667 | — | 551,317 | 8,659,248 | — | | John Whittle | 482,000 | 2,917,445 | 35,704 | 482,000 | 5,560,055 | 35,704 |

  44. 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 29, 2023, the last business day of 2023. (3) The value is calculated by multiplying (i) the number of the NEO’s unvested shares that would have vested over the 12 months after December 29, 2023 by (ii) (a) the difference between $58.53 (the per share closing stock price on December 29, 2023) and the exercise price for stock options or (b) $58.53 for RSUs and PSUs. Stock options outstanding as of December 29, 2023 for which the exercise price was greater than $58.53 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 NEO’s total unvested shares by (ii) (a) the difference between $58.53 (the per share closing stock price on December 29, 2023) and the exercise price for stock options or (b) $58.53 for RSUs and PSUs. Stock options outstanding as of December 29, 2023 for which the exercise price was greater than $58.53 are not included in the acceleration of equity vesting calculations. (6) The amounts set forth in the table for Mr. Perche for salary payouts under a Qualifying Termination Not Within One Year After a Change of Control and Within One Year After a Change of Control reflect the conversion from Swiss Franc to U.S. dollar using an average exchange rate of 1.11 U.S. dollar for one Swiss Franc for 2023.

  45. 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 NEOs, and (ii) select financial performance measures, in each case, for our four 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.

  46. 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) | | 2023 | 16,301,613 | 21,526,918 | 6,586,873 | 8,065,655 | 274.12 | 221.06 | 1,147,780,499 | 5,304,835,490 | | 2022(10) | 14,200,453 | (15,190,085) | 4,532,172 | (4,867,322) | 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 |

  47. 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 2023, 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 2023 and 2022, Messrs. Michael Xie, Jensen, Perche and Whittle; (ii) for fiscal year 2021 and 2020, Messrs. Michael Xie, Jensen, and 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.”

  48. Pay Versus Performance

    | Year | SCT Total ($) | Deductions of Equity Value from SCT Total ($) | Additions of Equity Value to SCT Total ($) | CAP ($) | | | | (i) | (ii) | | | 2023 | 16,301,613 | (15,081,692) | 20,306,997 | 21,526,918 | | 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 |

  49. 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.”

  50. Pay Versus Performance

    | Year | SCT Total ($) | Deductions of Equity Value from SCT Total ($) | Additions of Equity Value to SCT Total ($) | CAP ($) | | | | (i) | (ii) | | | 2023 | 6,586,873 | (5,732,511) | 7,211,293 | 8,065,655 | | 2022 | 4,532,172 | (3,610,110) | (5,789,384) | (4,867,322) | | 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 |

  51. 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 2023, 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 2023, 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 2023, 2022, 2021, and 2020:

  52. 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) | | | 2023 | 13,495,112 | 1,546,428 | — | 5,265,458 | — | — | 20,306,997 | | 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 |

  53. 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 2023, 2022, 2021, and 2020:

  54. 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) | | | 2023 | 5,129,449 | 470,718 | — | 1,611,126 | — | — | 7,211,293 | | 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 |

  55. 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, 2023, 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, 2023. 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 2023. (10) Please see Footnote (5) to the SCT for an explanation of the changes to the Average SCT Total for Non-PEO NEOs and Average CAP to Non-PEO NEOs.

  56. Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company TSR & NASDAQ Computer Index TSR

    Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company TSR & NASDAQ Computer Index 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 four most recently completed fiscal years.

  57. 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 four most recently completed fiscal years.

  58. 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 four most recently completed fiscal years.

  59. 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 2023: • the annual total compensation of our median employee was $124,446; • the annual total compensation of our CEO as disclosed in the 2023 Summary Compensation Table was $16,301,613; and • the ratio of the annual total compensation of our CEO to the median of the annual total compensation of our employees was 130 to 1. This ratio is a reasonable estimate calculated in a manner consistent with SEC rules. For purposes of calculating the pay ratio for 2023, we elected to use as our median employee the same individual that we originally identified as our median employee for 2022 because there was no significant change to our employee population or compensation arrangements that we reasonably believed would significantly impact our pay ratio disclosure. For a description of our methodology for identifying the median employee, see “CEO Pay Ratio Disclosure” on page 56 of our definitive proxy statement filed with the SEC on May 1, 2023. 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 2023 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.

  60. Compensation of Directors

    Compensation of Directors

  61. Director Compensation Table for 2023

    Director Compensation Table for 2023 The following table provides information concerning the compensation earned by each of our non-employee directors for service on the Board of Directors in 2023. Messrs. Ken Xie and Michael Xie, who are employees of Fortinet, do not receive additional compensation for their services as directors.

  62. Director Compensation Table for 2023

    | Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Total ($) | | Kenneth A. Goldman(4) | 88,089 | 189,855 | 277,944 | | Ming Hsieh(5) | 81,836 | 189,855 | 271,691 | | Jean Hu(6) | 80,911 | 189,855 | 270,766 | | William H. Neukom(7) | 105,000 | 189,855 | 294,855 | | Judith Sim(8) | 87,500 | 189,855 | 277,355 | | Admiral James Stavridis (Ret)(9) | 74,664 | 189,855 | 264,519 |

  63. Director Compensation Table for 2023

    ________________________ (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, 2023, filed with the SEC on February 26, 2024. 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. (4) As of December 31, 2023, Mr. Goldman held 1,654 RSUs, 827 of which vested on March 31, 2024 and the remainder of which will vest in full on June 13, 2024, so long as Mr. Goldman is a member of the Board of Directors on such date. (5) As of December 31, 2023, Mr. Hsieh held 1,654 RSUs, 827 of which vested on March 31, 2024 and the remainder of which will vest in full on June 13, 2024, so long as Mr. Hsieh is a member of the Board of Directors on such date. (6) As of December 31, 2023, Ms. Hu held 1,654 RSUs, 827 of which vested on March 31, 2024 and the remainder of which will vest in full on June 13, 2024, so long as Ms. Hu is a member of the Board of Directors on such date. (7) As of December 31, 2023, Mr. Neukom held 1,654 RSUs, 827 of which vested on March 31, 2024 and the remainder of which will vest in full on June 13, 2024, so long as Mr. Neukom is a member of the Board of Directors on such date. (8) As of December 31, 2023, Ms. Sim held 1,654 RSUs, 827 of which vested on March 31, 2024 and the remainder of which will vest in full on June 13, 2024, so long as Ms. Sim is a member of the Board of Directors on such date. (9) As of December 31, 2023, Admiral Stavridis (Ret) held 1,654 RSUs, of which 827 vested on March 31, 2024 and the remainder of which will vest in full on June 13, 2024, so long as Admiral Stavridis (Ret) is a member of the Board of Directors on such date.

  64. 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 2023, the Human Resources Committee recommended, and the Board of Directors approved, that no changes be made 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, 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.

  65. 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 NEOs. See “— Potential Payments Upon Termination or Change of Control — Termination or Change of Control Arrangements.”