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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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  Preliminary Proxy Statement
  Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to Section 240.14a-12

AKAMAI TECHNOLOGIES, INC.

(Name of Registrant as Specified In Its Charter)

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Dear Fellow Stockholders:

2020 was a year unlike any other. As the world dealt with the COVID-19 pandemic, the internet became even more critical to everyday life—and needed on a scale the world has never experienced. As we have for the last 20-plus years, Akamai rose to the challenge to help ensure our customers’ online experiences were fast, intelligent, and secure.

Our largest Media and Carrier customers saw demand surge following stay-at-home orders, and our platform provided them with great performance at global scale, delivering a year’s worth of increased traffic in just a few weeks. Our network team raced to nearly double our capacity this year, overcoming lockdowns in the field, shuttered data centers, and supply chain disruptions.

Our IT team enabled our global organization to transition to remote work in just 10 days. Marketing shifted quickly to virtual events, driving a significant increase in both digital event attendance and social engagement. And our Services and Support teams transitioned to 100% remote customer support instantly while maintaining excellent customer satisfaction ratings.

As more retailing went online, we supported many of the world’s largest commerce companies, enabling our customers to surpass e-commerce records on Singles Day in Asia and on Black Friday and Cyber Monday in the United States. We also offered flexible contract terms to help customers in the Travel and Hospitality industries weather the COVID-19 storm, focusing on winning these customers for the long term.

Cyberattackers were busier than ever this year, taking advantage of the distraction and increased vulnerability associated with the pandemic. Akamai responded by helping to keep our customers safe when they needed us most. Our security business grew 25% in 2020 and surpassed $1 billion in revenue, increasing from just $25 million in 2012. It developed into a growth engine of our business and an area of where we expect continued investment and innovation, building on our new products and technologies like Page Integrity Manager, Secure Web Gateway, and Multi-factor Authentication.

While 2020 was a year of disruption for many sectors of the economy, we achieved several notable milestones. We grew our total revenue 11% to more than $3 billion, exceeded our operating margin goal for 2020, and delivered record earnings per share.

We’re proud of the results we achieved in 2020 and are confident about our future. We believe Akamai is well-positioned to capitalize on substantial market opportunities in cloud security, “serverless” edge computing, and online video streaming, with particular focus on Asia Pacific and Latin America. And we continued to deliver our results the right way, living our values and striving to be a great place to work and a company that cares about the communities where we work and live.

I want to thank our more than 8,000 employees for their very hard work on behalf of our many customers and the billions of internet users around the world. Despite the pandemic and social unrest in many of our communities, Akamai employees maintained their can-do attitude and customer-first mindset, enabling our platform to manage more traffic, more web transactions and more cyberattacks than ever before. Their creativity, teamwork and tenacity are key to what makes Akamai such a unique and strong company.

We hope you can attend Akamai’s 2021 Annual Meeting of Stockholders to be held on June 3, 2021, at 9:30 a.m., Eastern time. In light of continued public health and travel concerns that our stockholders may have and recommendations that public health officials have issued given the COVID-19 situation, we will once again hold our stockholder meeting as a virtual-only meeting. The meeting will also be available through a link on our investor relations website (www.ir.akamai.com). Details regarding how to access the meeting and the business to be conducted at the meeting are more fully described in the accompanying Notice of 2021 Annual Meeting of Stockholders and Proxy Statement.

Your vote is important. Whether or not you plan to attend the Annual Meeting of Stockholders, please vote as soon as possible. Voting by proxy will ensure your representation at the meeting if you do not attend in person. Please review the instructions on the proxy card regarding your voting options.

We wish continued good health and well-being to all in 2021.

 

/s/ Dr. Tom Leighton

 

Dr. Tom Leighton

Chief Executive Officer

 


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AKAMAI TECHNOLOGIES, INC.

145 BROADWAY

CAMBRIDGE, MASSACHUSETTS 02142

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JUNE 3, 2021

The 2021 Annual Meeting of Stockholders (the “Annual Meeting”) of Akamai Technologies, Inc. (“Akamai” or the “Company”) will be held on Thursday, June 3, 2021, at 9:30 a.m., Eastern time, exclusively via the internet at a virtual web conference at www.meetingcenter.io/290664094. The password for the meeting will be AKAM2021.

In light of the ongoing COVID-19 pandemic, for the health and well-being of our stockholders, employees and directors, we have determined that the Annual Meeting will be held exclusively online in a virtual meeting format, via the internet, with no physical in-person meeting. Stockholders attending our virtual Annual Meeting will be able to attend, vote and submit questions. Further information about how to attend the Annual Meeting online, vote your shares online during the meeting and submit questions during the meeting is included in the accompanying proxy statement.

At the Annual Meeting, we expect stockholders will consider and vote upon the following matters:

 

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To elect eleven nominees currently serving as members of our Board of Directors and named in the attached proxy statement to serve on our Board of Directors for a one-year term expiring at the 2022 Annual Meeting of Stockholders;

 

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To approve an amendment and restatement of our 2013 Stock Incentive Plan that will include (i) a 3,000,000 share increase in the number of shares of common stock authorized for issuance thereunder and (ii) an extension of the expiration date of the plan to June 3, 2031;

 

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To approve, on an advisory basis, our named executive officer compensation;

 

  (4)

To ratify the selection of PricewaterhouseCoopers LLP as our independent auditors for the fiscal year ending December 31, 2021; and

 

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To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Stockholders of record at the close of business on April 9, 2021, are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof. The stock transfer books of Akamai will remain open for the purchase and sale of Akamai’s common stock.

A complete list of stockholders of record will be available at least 10 days prior to the meeting at 145 Broadway, Cambridge, Massachusetts 02142. This list will also be available to stockholders of record during the Annual Meeting for examination at www.meetingcenter.io/290664094.

All stockholders are cordially invited to attend the Annual Meeting online.

 

By order of the Board of Directors,

/s/ Aaron S. Ahola

 

AARON S. AHOLA

Executive Vice President, General Counsel and Secretary

Cambridge, Massachusetts

April 23, 2021

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ONLINE, PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AT YOUR EARLIEST CONVENIENCE. MOST STOCKHOLDERS HAVE A CHOICE OF VOTING OVER THE INTERNET, BY TELEPHONE OR BY MAIL. SENDING IN YOUR PROXY WILL NOT PREVENT YOU FROM VOTING YOUR SHARES ONLINE DURING THE ANNUAL MEETING IF YOU DESIRE TO DO SO, AND YOUR PROXY IS REVOCABLE AT YOUR OPTION BEFORE IT IS EXERCISED.

FURTHER INFORMATION ABOUT HOW TO ATTEND THE ANNUAL MEETING ONLINE, VOTE YOUR SHARES ONLINE DURING THE MEETING AND SUBMIT QUESTIONS DURING THE MEETING IS INCLUDED IN THE ACCOMPANYING PROXY STATEMENT.

 


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AKAMAI TECHNOLOGIES, INC.

145 BROADWAY

CAMBRIDGE, MASSACHUSETTS 02142

PROXY STATEMENT

THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE BOARD OF DIRECTORS OF AKAMAI TECHNOLOGIES, INC., OR AKAMAI OR THE COMPANY, FOR USE AT THE 2021 ANNUAL MEETING OF STOCKHOLDERS, WHICH WE REFER TO IN THIS DOCUMENT AS THE ANNUAL MEETING, TO BE HELD EXCLUSIVELY ONLINE VIA THE INTERNET AT A VIRTUAL WEB CONFERENCE AT HTTP://WWW.MEETINGCENTER.IO/290664094 AT 9:30 A.M., EASTERN TIME, ON JUNE 3, 2021, AND AT ANY ADJOURNMENT OR POSTPONEMENT OF THAT MEETING. THE PASSWORD FOR THE MEETING WILL BE AKAM2021. You may obtain instructions for how to access the Annual Meeting online by contacting Investor Relations, Akamai Technologies, Inc., 145 Broadway, Cambridge, Massachusetts 02142; telephone: 617-444-3000.

Our Annual Report to Stockholders for the year ended December 31, 2020 is being mailed to our stockholders with the mailing of the Notice of 2021 Annual Meeting of Stockholders and this Proxy Statement on or about April 23, 2021.

Important Notice Regarding the Availability of Proxy Materials for the 2021 Annual Meeting of Stockholders to be Held on June 3, 2021:

This Proxy Statement and the 2020 Annual Report to Stockholders are available for viewing, printing and downloading at www.akamai.com/html/investor/financial_reports.html.

You may obtain a copy of our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission, which we sometimes refer to herein as the Commission, except for exhibits thereto, without charge upon written request to Akamai Technologies, Inc., 145 Broadway, Cambridge, Massachusetts 02142, Attn: Investor Relations. Exhibits will be provided upon written request and payment of an appropriate processing fee.

Certain documents referenced in this Proxy Statement are available on our website at www.akamai.com. We are not including the information contained on our website, or any information that may be accessed by links on our website, as part of, or incorporating it by reference into, this Proxy Statement.

This Proxy Statement contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and are based on the beliefs and assumptions of our management based on information currently available to them. Use of words such as “believes,” “expects,” “anticipates,” “intends,” “plans,” “should,” “may,” “could,” or similar expressions indicates a forward-looking statement. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, inability to grow revenue, particularly from increased sales of security solutions, or inability to increase profitability as projected; lack of market acceptance of new solutions; cyberattacks that we are not able to successfully defend against, and other factors set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, which accompanies this Proxy Statement. We disclaim any obligation to update any forward-looking statements as a result of new information, future events or otherwise.

 

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EXECUTIVE SUMMARY

Below are highlights of important information you will find in this Proxy Statement. As it is only a summary, please review the complete Proxy Statement before you vote.

Our Mission and Purpose

Akamai’s mission is to deliver value to our customers; empowering them to manage successful online businesses by protecting their digital assets and enabling superior individual experiences. Our purpose in pursuing this mission is to help bring the world closer together by making the internet safe, fast and reliable for people around the globe.

Our Strategy

We operate in a technology landscape that is rapidly evolving, driving enterprises to enhance their digital capabilities to improve productivity, transform customer experiences, increase brand awareness, and drive competitive advantage. At the same time, security threats are growing more prevalent and advanced. Enterprise applications are moving from behind the firewall to the cloud - making cybersecurity more complex to achieve than yesterday’s strategy of a perimeter defense. More consumers are “cutting the cord” and consuming entertainment over the internet rather than through traditional cable, and they are increasingly using mobile devices to consume content and shop. With the COVID-19 pandemic and related shutdowns, we saw dramatic growth in the movement of activities to the internet - accelerating the trends discussed above. As more people watched entertainment, played games, shopped and socialized online and entire corporate workforces moved to a remote posture, we saw an acceleration in attack traffic and other security threats.

Our strategy is to leverage our unique Intelligent Edge Platform and creative employees to provide our customers with innovative, market-leading products that enable opportunities and address challenges in this evolving landscape.

In addition to delivering value to our customers, we believe it is important for Akamai to:

 

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invest in the health, safety and development of our employees;

 

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deal fairly and ethically with our suppliers and partners;

 

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support the communities in which we live and work;

 

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operate in an environmentally sustainable way; and

 

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generate long-term value for our stockholders.

 

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Akamai 2020 Performance Highlights

In 2020, Akamai registered achievements across our operations, including the following highlights.

 

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From a financial perspective, we have increased our revenue in each of the past three fiscal years and have been profitable over that same period. The charts below show our revenue and earnings per share, calculated in accordance with generally accepted accounting principles in the United States, or GAAP, for the past three fiscal years.

 

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In particular, our security business has grown rapidly in recent years as shown below:

 

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Over the past five years, we have successfully generated cash from operations to use in strategic initiatives. We believe we have effectively deployed that cash in stock repurchases and acquisition activity as reflected in the chart below.

 

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Corporate Governance Snapshot

Akamai’s governance structure reflects our commitment to advancing the long-term interests of our stockholders, maintaining accountability, diversity, ethical conduct and alignment of interests between leadership and investors. Highlights of our governance profile include:

 

 

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Executive Compensation Overview

Akamai has developed an executive compensation program that is designed to closely align executive compensation with performance by allocating a majority of target compensation to performance-based equity awards that directly link the value of executive compensation to our stock price performance and tying annual bonuses to performance against specific financial measures. Key aspects of our 2020 executive compensation program are highlighted below.

 

 

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In 2021, we introduced a change to our annual bonus plan for Akamai executives. While maintaining the core revenue and profitability financial metrics, the 2021 annual bonus plan incorporates a payout modifier based on our achievement against designated environmental, social and governance objectives established by the Talent, Leadership & Compensation Committee of the Board of Directors. These goals are centered on employee diversity, inclusion and engagement as well as environmental sustainability metrics. We adopted this change to help drive accountability within the management team for advancing Akamai’s environmental, social and corporate governance goals.

 

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Part One – Corporate Governance Highlights – Our Commitment to Environmental, Social and Governance Matters

Akamai is committed to maintaining and enhancing our record of excellence in environmental, social and governance (ESG) matters by continually refining our corporate governance policies, working to improve our energy efficiency and reduce our environmental impact, fostering a diverse and inclusive workplace and contributing to the communities in which we live and work. We also place great value on input from our investors and other stakeholders and engage regularly with them to gain insights into the governance and social issues they care about most.

In 2021, Akamai announced the establishment of a new ESG Office comprised of members of our management team. This office is charged with enabling a global ESG strategy that integrates our business goals with all ESG efforts across the enterprise, including sustainability, inclusion, diversity and engagement and the Akamai Foundation.

 

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Good Governance

Overview of the Board of Directors

Our Board of Directors, which we will often reference as the Board below, currently consists of 12 individuals with a range of backgrounds as reflected in the graphic below. Collectively, they bring industry expertise, leadership skills and financial sophistication to our corporate governance. Below is a skills matrix displaying key attributes of our Board members.

 

 

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Board Refreshment and Diversity

Akamai believes that having an independent, diverse, active and engaged Board has been key to our success. We also believe that new perspectives and ideas are critical to a forward-looking and strategic Board. Our goal is to seek a balance between new points of view and the valuable experience and familiarity that longer-serving directors bring to the boardroom. Since our 2017 annual meeting, we have seen five incumbent directors transition off the Board and have added five new directors. In considering nominations for re-election, we take into account whether a director has served for more than 10 years on the Board as one factor in our holistic approach. A summary of the tenure of our current independent directors is reflected in the graph below:

 

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Female and/or minority directors currently make up 42% of the total Board. Ms. Bowen and Mr. Ford identify as Black; Ms. Ranganathan identifies as South Asian; and Mses. Bowen, Brown, Greenthal and Ranganathan identify as women. In considering new Board members, we have adopted a policy that requires that the initial list of individuals under consideration by the Board’s Environmental Social and Governance Committee, or the ESG Committee, include individuals who represent diverse backgrounds, including diversity of gender and race or ethnicity. If a search firm is used, the search firm is instructed to do the same.

 

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Board Evaluations

A key component of our approach is a robust annual Board evaluation process. Led by our Chair of the Board and the Chair of the ESG Committee, this review is intended to elicit the views of all directors about what makes the Board effective, what improvements can be made, how their peers are most effective and whether steps should be taken to improve contributions and their views on the performance of the Board and its committees over the past year. The evaluation has taken a variety of forms including written surveys, interviews conducted by an outside consultant and interviews conducted by our Board Chair. The ESG Committee also regularly oversees and plans for director succession and refreshment of the Board to ensure a mix of skills, experience, tenure, and diversity that promotes and supports the Company’s long-term strategy. In doing so, the ESG Committee takes into consideration the overall needs, composition and size of the Board, as well as the criteria adopted by the Board regarding director candidate qualifications.

Ethics

We have adopted a written Code of Ethics that applies to all of our directors, executive officers and other employees (including our principal executive officer and our principal financial and accounting officer). Our Code of Ethics is available on our website at www.ir.akamai.com/corporate-governance/highlights. We did not waive any provisions of the Code of Ethics for our directors or executive officers during the year ended December 31, 2020. If we amend, or grant a waiver under, our Code of Ethics that applies to our executive officers or directors, we intend to post information about such amendment or waiver on our website at www.akamai.com. We have also adopted Corporate Governance Guidelines, a copy of which is also available on our website at www.ir.akamai.com/corporate-governance/highlights.

 

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Engagement with Stakeholders

Akamai and our employees are dedicated to delivering value to investors, providing excellent service to our customers, offering a great place to work and contributing to the communities in which we operate. Some of the key areas of focus as we work with our stakeholders on ESG matters are highlighted below.

 

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Commitment to Customers

At Akamai, we are focused on helping our customers navigate a rapidly-evolving technology landscape so that they can maintain the security of their operations that touch the internet, improve productivity, transform customer experiences, increase brand awareness and drive competitive advantage. With our Intelligent Edge Platform and creative and innovative employees, we believe we are uniquely situated to provide this assistance.

In a tumultuous 2020, we rose to the challenges caused by the global COVID-19 pandemic and other developments. With media and carrier customers seeing demand surge following stay-at-home orders, our network team nearly doubled capacity during the year, overcoming lockdowns in the field, shuttered data centers and supply chain disruptions. As a result, customers experienced great performance at global scale, delivering a year’s worth of increased traffic in just a few weeks. As more retailing went online, we provided

 

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extra support for some of the largest e-commerce companies in the world and offered flexible contract terms to help customers in the travel and hospitality industries weather the COVID-19 storm, focusing on winning these customers for the long term.

The pandemic also saw a surge in activity by cyberattackers, taking advantage of the distraction and increased vulnerability associated with the pandemic. We responded by providing vital security solutions for our customers to facilitate online business and remote work.

Promoting Diversity and Inclusion in the Workplace

Akamai is committed to providing a work environment and culture where all employees feel that they can contribute and perform to the best of their abilities. Our diverse workforce combines workers from different backgrounds and experiences. We believe that bringing together a diverse workforce in an inclusive environment captures the experiences, cultures, talents, and thought perspectives that will drive innovation and our business strategy in a collaborative manner. Akamai is a global company. Our aim is to understand and build on our cross-cultural competence, and by doing so, improve the way we work in our global community.

Our Diversity & Inclusion Strategy has five focus areas:

 

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Education – developing a common understanding of, and commitment to, inclusive and diverse mindsets and behaviors;

 

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Accountability – our leaders are charged with driving accountability across their teams for making Akamai an inclusive and diverse workplace;

 

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Governance – establishing a structure to enable us to manage, measure and report our successes and gaps;

 

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Inclusivity – reinforcing this value through our events, communications, job descriptions and interview practices; and

 

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Talent Management – cultivating more diverse teams across all levels of our organization.

We have implemented a number of initiatives to foster inclusivity, including: forming a Diversity & Inclusion Steering Committee of senior leaders across all parts of the business and regions that drives our progress in this area and executes the strategy outlined above; incorporating an ESG component in our executive bonus plan; incorporating diversity and inclusion goals in both our corporate level annual Mission Critical Goals and the individual performance goals of our senior personnel; supporting eleven Employee Resource Groups that are employee-led, voluntary internal global networks open for all to come together to help collaborate, share ideas, and discuss issues among colleagues with similar characteristics or common interests; and introducing a company-wide program that is intended to enhance our corporate culture by promoting an inclusive approach to decision making and innovation.

 

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We are an equal opportunity employer. To help us improve the diversity of our workforce, we participate in or sponsor professional development and recruiting forums such as the Massachusetts Conference for Women, National Society of Black Engineers, Society of Hispanic Engineers, and Hack.Diversity. We also offer Akamai Technical Academy, a technical training program targeted primarily at underrepresented talent (gender, ethnicity, experiential, generational, veterans) who are interested in pursuing a technical career path, but may not be formally educated in science, mathematics or engineering. The program consists of six months of Akamai-specific classroom training, after which participants are placed in a variety of contract roles across the organization, with the intention to convert them to permanent employees after a minimum of six months. We are a member of the Massachusetts Technology Leadership Council Tech Compact for Social Justice, committing to make change towards racial equality in our company.

Our Supplier Diversity Program seeks to identify and engage suppliers for a wide range of products and services compatible with Akamai’s current needs — from office supplies, to computer equipment and peripherals, office equipment maintenance and repair, food service, and printing to name a few examples. We are committed to developing mutually beneficial and successful partnerships with small businesses including companies owned by women, minorities, veterans, and people who are socially and economically disadvantaged or have disabilities.

Environmental Sustainability

Akamai is committed to mitigating the environmental impact of our operations. We have adopted a Sustainability Policy to reflect our belief that Akamai can and should operate with a minimal environmental footprint. We strive to run our network as efficiently as possible to be mindful of our power usage and to minimize the negative environmental impacts of our operations. We also aim to decarbonize the energy we need to operate by sourcing renewable energy where we can.

In the management of our network, we utilize both hardware and software efficiencies to cut excess usage and proactively eliminate inefficiencies to lessen our carbon emissions. Our hardware initiatives center on improving the efficiency of the servers we use by reducing their power consumption while increasing throughput. Increasing throughput leads to a more efficient platform, which reduces our environmental footprint while providing superior performance for our customers and their end users. We also make our network more efficient by developing software to only use the necessary hardware resources. Our platform only caches (stores) information that is deemed relevant and likely to be accessed again by another end user in the same geographical location. To minimize the resource drain and emissions related to power usage from space utilization and processing energy from infrequently accessed web content — “one-hit wonders” — we use machine-learning algorithms based on the type of content, its popularity, its location, and more, to see if this data is worth the resources that would be required to store it. By decreasing the amount of one-hit wonders, Akamai is able to lessen our carbon emissions output and use less energy.

 

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These efforts have enabled us to continue to decouple network growth from emissions. In 2020, we reduced our Scope 2 emissions (indirect greenhouse gas emissions) by more than 50% from 2019 levels, while growing the network by more than 60%.

Endeavoring to ensure that our network runs as efficiently as possible is only one component of our sustainability strategy. We also source renewable energy to power our operations. In 2015, we set a public goal to source renewable energy for 50% of our controlled data center operations by 2020. We are proud to have met this target. This was achieved, in part, by investing in net-new grid-connected renewable energy projects. To date, we have invested in three projects: a wind farm in Texas, a solar array in Virginia, and a wind farm in Illinois. We also work with our data center partners to procure attestable renewable energy sources to further mitigate our operations in their facilities.

We are proud to take a leadership role in environmental sustainability. We helped spearhead the first renewable buyers consortium, a virtual power purchase agreement with Apple, Etsy, and Swiss Re to enable support for renewable energy projects. These projects are made possible through collaboration with groups such as the Renewable Energy Buyers Alliance (REBA) and the Future of Internet Power (FoIP) to make renewable energy procurement easier. We help our customers understand their energy usage by providing customized reports detailing their emissions on our platform based on server and energy usage. In our own reporting, we work with a third-party auditor that focuses on the accuracy of our carbon emissions reporting in Scopes 1, 2, and 3. Our auditor adheres to the ISO 14063-3: Greenhouse gases — Part 3: specification with guidance for the validation and verification of greenhouse gas statements. We reconcile our impact annually and routinely follow recognized procedures to lower our greenhouse gas emission footprint in the areas where we can have the most material impact. We report under the following frameworks: Carbon Data Project, Dow Jones Sustainability Indices, EcoVadis, FTSE4Good, Global Reporting Initiatives, Just Capital and Sustainability Accounting Standards Board.

Employee Well-Being, Health & Safety; Human Rights

Our employees are our most valuable asset as they are fundamental to our innovation, the operation and ongoing enhancement of the Akamai Intelligent Edge Platform, the fostering and maintenance of relationships with our customers and the management of our operations. We focus on the development of our people through fostering inclusion and engagement, offering competitive compensation and benefits, providing training and development opportunities, and implementing health and safety procedures.

We have a demonstrated a history of investing in our workforce by offering competitive salaries, wages, and benefits. Our compensation and benefits philosophy is to maximize the effectiveness of pay and benefits programs to attract and retain the high caliber individuals needed to drive the success of our business, while balancing cost-effectiveness and competitive factors. Our benefits programs (which vary by country and region) include healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, adoption and fertility

 

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assistance, employee assistance programs, tuition assistance, and holistic wellness programs. Our wellness programs include educational offerings on healthy lifestyles, access to mental health experts, and access to ergonomic advice and equipment.

 

COVID-19 Response

In March 2020, when the COVID-19 pandemic became widespread, Akamai took many steps to safeguard the health and well-being of our customers and employees. In particular, we:

 

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Closed access to our offices for most employees so, at year end, approximately 99% of our employees were working remotely;

 

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Implemented enhanced health and safety protocols in all of our offices for those requiring access to an Akamai site;

 

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Expanded our wellness programs to offer courses on, among other things, caregiving during the pandemic and vaccine information;

 

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Introduced new collaboration tools and techniques and provided a productivity reimbursement program to assist all employees with purchasing equipment to support remote work;

 

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Provided four wellness days to allow additional paid time off for employees specifically to encourage mental and physical health;

 

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Guaranteed sick pay for contractors we retain;

 

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Provided frequent information updates by our CEO and Chief Human Resources Officer related to the impact of the pandemic on our operations as well as the initiatives we adopted to assist employees to cope with the situation; and

 

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Maintained a rigorous process for assessing whether any office can reopen (and remain open) based on local government regulations, local health trends and business needs.

 

In 2016, we adopted a Human Rights Policy. We believe that the internet can facilitate greater understanding among people across the globe and that we can play an important role in making that happen. We also believe that respect for human rights is fundamental to unlocking the potential of the internet and an essential value for the communities in which we operate. We are committed to ensuring that our employees, the people who work for our contractors, customers and suppliers, and individuals in the communities affected by our activities are treated with dignity and respect. Our Human Rights Policy is intended to advance these ideals.

Community Involvement

We recognize that the communities in which we live and operate are also stakeholders in our business. We address a wide range of issues to help our neighbors, including directing

 

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relief to communities ravaged by wildfires, encouraging and supporting volunteerism by our employees, responding to COVID-19 relief efforts and supporting initiatives to promote racial justice.

The centerpiece of our employee volunteer efforts is our Danny Lewin Community Care Days program. Each year we honor and celebrate our co-founder Danny Lewin’s spirit with a global initiative to encourage employees to give back to our local communities through events such as participating in blood drives, working at food banks, repairing homes, refreshing playgrounds and creating care packages for ill children. Group volunteer activities are organized for employees in many of our offices worldwide. All of our full-time employees are approved to take the equivalent of up to 16 hours of paid volunteer time per calendar year for approved volunteer activities that take place during their regularly scheduled workday.

The Akamai Foundation plays a key role in Akamai’s community outreach. Its core mission is to close the gender and diversity gap in technology and help foster the next generation of innovators by advancing access to science and mathematics education. In 2020, it provided more than 30 grants worldwide to organizations focused on this cause. With the global pandemic outbreak last year, the foundation pivoted to provide COVID-19 relief funds to charitable organizations in 16 countries. Additionally, amid prominent incidents in the U.S. that gave rise to increased focus on equal justice, the organization instituted a gift-matching program for employees and others to non-profits focused on human rights and racial equality. In late 2020, Akamai made an additional $20 million endowment contribution to the foundation to provide further support for its mission to demonstrate our long-term commitment and proactive social leadership role.

 

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Stockholder Engagement

Our management and Board are committed to driving stockholder value and communicating with our investors and other stakeholders. Our stockholder engagement model is summarized below:

Our Stockholder Engagement Process

 

LOGO

During 2020, we conducted outreach to all of our 25 largest stockholders and other investors, who collectively held approximately 54% of our outstanding shares, to express an interest in meeting with them to discuss governance or executive compensation matters at Akamai. We engaged with more than 40% of those investors and discussed a broad range of operational, strategic and governance topics with them. These engagement efforts and meaningful conversations provided the Board and management with a valuable understanding of investors’ perspectives and an opportunity to exchange views. When the Board conducted its regular reviews of governance and executive compensation, it discussed the input that we received, and the evaluation process was reflective of those views. We were encouraged by the feedback we received and look forward to continuing our dialogue with our stockholders in the coming year.

 

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One result of our engagement with stockholders in recent years was a decision by the Board to recommend that stockholders approve declassification of the structure of the Board. We presented that matter at the 2018 Annual Meeting of Stockholders, and it was approved. The Board is now fully declassified, and all directors standing for election will be elected to one-year terms.

Commitment to Privacy Best Practices

Our customers trust us to help make the internet fast, intelligent, and secure. We understand that how we process personal data is an important part of that trust. We are committed to the data protection rights of internet users, customers and employees and compliance with the data protection laws of the countries in which we operate. Akamai’s Data Protection and Privacy Program is aimed at protecting the personal data that we process based on respect for the data subject’s privacy concerns by implementing appropriate security safeguards. Our program has four main components:

Awareness

 

  🌑   

Promoting a culture of respect for, and thoughtful consideration of, privacy and personal data protection throughout Akamai.

 

  🌑   

Communicating to our employees timely information about changes in privacy laws, regulations, and standards that affect our business.

 

  🌑   

Instilling understanding of different cultures and practices around the world related to the use of individual personal information.

Policies and Procedures

 

  🌑   

Implementing privacy protection policies and related operational procedures (in harmony with our Information Security Compliance Program) that are designed to enable compliance with the law consistent with our business commitments and needs.

 

  🌑   

Utilizing privacy by design tools to timely raise, consider, and address privacy concerns at the early stage of service and product development.

Training

 

  🌑   

Conducting trainings designed to promote awareness and provide employees with privacy-related information pertinent to their roles and responsibilities.

Accountability and Transparency

 

  🌑   

Maintaining accountability standards consistent with those articulated by the Organization for Economic Co-operation and Development (OECD) in its Guidelines Governing the Protection of Privacy and Transborder Flows of Personal Data.

 

  🌑   

Communicating with our employees, customers and the public about our data protection and privacy practices.

 

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Public Policy

Akamai believes that responsible corporate citizenship requires active engagement in legislative and regulatory processes. Our engagement with policymakers and advocacy on public policy issues are coordinated by our Global Public Policy group. Members of the Global Public Policy team work closely with our senior leadership to identify legislative and regulatory priorities, both regionally and globally, that will protect and advance our business interests, increase stockholder value and promote the free and responsible use of the internet. The group also works to educate and inform policymakers about Akamai’s technology and solutions and how the internet itself works.

As part of Akamai’s engagement in the public policy process, we participate in a number of trade associations around the world that advocate for and shape public policy positions that are important to our industry. Trade associations also provide educational, training and professional networking opportunities for their members. We participate in these associations for such opportunities and to help build consensus on issues that we believe will serve our customers and investors. Our membership and participation in these organizations are not an endorsement of all of the activities and positions of these organizations. Accordingly, there may be instances where their positions diverge from ours.

We have not formed a political action committee nor have we donated to individual political candidates or parties.

 

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The Board of Directors

The Board currently consists of twelve persons. Set forth below is information about the professional experiences of each of our eleven nominees for election at the 2021 Annual Meeting, including his or her specific experience, qualifications and attributes that we believe qualify him or her to serve on the Board. We have included their age and committee memberships as of March 1, 2021 (other than with respect to Ms. Bowen who joined the Board on April 2, 2021 and was appointed to committees on that date).

Fred Salerno announced in March 2021 that he would retire as a member and Chair of the Board effective at the 2021 Annual Meeting. Mr. Salerno has been a director since 2002. We thank him for the leadership he has provided to Akamai for nearly two decades. The Board has voted to reduce its size to eleven members effective as of the 2021 Annual Meeting.

Nominees for Director for Terms That Will Expire in 2022

 

 

LOGO

 

Sharon Bowen, age 64

Director since 2021

Audit Committee, ESG Committee

 

  

 

Commissioner of the United States Commodity Futures Trading Commission from June 2014 until retirement in September 2017

 

Senior Associate and Partner at the law firm Latham & Watkins between 1988 and May 2014

 

Other Current Boards

 

Intercontinental Exchange, a provider of marketplace infrastructure, data services and technology solutions for a diverse set of asset classes

 

Bakkt Holdings, a provider of institutional and retail solutions for digital assets

 

Neuberger Berman Group, an investment management firm

 

 

Deep regulatory, securities, market risk and public policy expertise

 

Corporate finance, mergers and acquisition, strategic transactions and corporate governance expertise from her role as a partner in a global law firm

 

Experience leading ESG initiatives and programs

 

 

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LOGO

 

Marianne Brown, age 62

Director since 2020

Audit Committee, Finance Committee

 

  

 

Retired former executive at Fidelity National Information Services, Inc., or FIS, a global financial services technology company, where she was Corporate Executive Vice President and Co-Chief Operating Office from January 2018 through December 2019

 

Chief Operating Officer, Institutional and Wholesale Business of FIS from December 2015 through December 2018, when FIS acquired SunGard Financial Systems LLC, a financial software and technology services company

 

Other Current Boards

 

The Charles Schwab Corporation, an investment services firm

 

Northup Grumman, an aerospace and defense technology company

 

VMW are, a provider of cloud computing and virtualization software and services

 

 

Extensive leadership experience in technology sales and product management to provide insight into the likely perspectives of Akamai’s current and potential customers

 

Executive oversight of go-to-market initiatives and organizational and investment strategy

 

Demonstrated ability to execute and integrate acquisitions

 

 

 

LOGO

 

Monte Ford, age 61

Director since 2013

TL&C Committee, ESG Committee

 

  

 

Principal Partner of CIO Strategy Exchange, a membership organization for chief information officers, since 2016

 

Network Partner at Brightwood Capital Partners, a venture capital firm, since 2013

 

Other Current Boards

 

Iron Mountain, a provider of storage and other information management services

 

JetBlue, an airline

 

The Michaels Companies, an arts and crafts retailer

 

 

Experience as an information technology executive at Aptean Software and American Airlines, including serving as a chief executive officer and as a CIO overseeing all aspects of information systems and business analytics functions

 

Helps fellow Board members and management understand what Akamai’s current and potential customers expect and want from our solutions and to provide actionable insight into our innovation initiatives

 

Provides valuable advice and counsel regarding potential improvements to our internal IT systems

 

Contributes a personal perspective on diversity and inclusion issues impacting Akamai and our environment

 

 

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LOGO

 

Jill Greenthal, age 64

Director since 2007

Audit Committee, Finance Committee Chair

 

  

 

Senior Advisor in the Private Equity Group of The Blackstone Group, a global asset manager, since 2007

 

Other Current Boards

 

Cars.com, an online automotive marketplace

 

Houghton Mifflin Harcourt, an educational content company

 

Prior Public Company Boards in Last 5 Years

 

TEGNA Inc.

 

FLEX LTD.

 

 

Rich experience as a leading investment banker and advisor, a role that has given her a deep understanding of capital markets and mergers and acquisitions

 

Insight into financial and strategic aspects of financial matters such as debt and equity financing transactions and acquisitions

 

Experience working with other internet and media companies as they have built their businesses enables her to provide valuable counsel to both our management and fellow directors

 

 

 

LOGO

 

Dan Hesse, age 67

Director since 2016

Audit Committee, ESG Committee Chair

 

  

 

Former President and CEO, Sprint Corporation, a telecommunications provider, December 2007 to August 2014

 

Other Current Boards

 

PNC Corporation, a financial institution

 

Tech and Energy Transition Corporation, a non-operating special purpose acquisition company formed for the purpose of effecting the acquisition of one or more businesses that is focused on targets that use or facilitate disruptive, differentiated technology to build, enable, service or manage businesses or infrastructure undergoing transformation

 

Insight into mobile and telecommunications industry affords important insight into strategy deliberations

 

Experience as a chief executive officer enables him to advise on leadership, management and operational issues

 

Leverages experience overseeing a large, complex technology company to provide valuable guidance and perspective

 

Understanding of corporate governance issues, particularly social responsibility matters, contributes to his ability to provide a leadership role as chair of our ESG Committee

 

 

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LOGO

 

Tom Killalea, age 53

Director since 2018

Audit Committee, TL&C Committee

 

  

 

President, Aionle LLC, a consulting firm, since November 2014

 

VP Technology, Amazon.com, a multi-national technology company from 2008 to 2014

 

Other Current Boards

 

Capital One Financial Corp., a financial services company

 

MongoDB, a database technology company

 

Prior Public Company Boards in Last 5 Years

 

Carbon Black

Xoom Technologies

 

 

Professional focus on internet security issues, a key area of emphasis in Akamai’s strategic plan

 

Experience with digital innovation and focus on customer experience

 

Understanding of the content delivery network business through his work at Amazon

 

Extensive corporate governance experience serving on several public company boards

 

 

 

LOGO

 

Tom Leighton, age 64

Director since 1998

 

  

 

Chief Executive Officer, Akamai, since January 2013

 

Chief Scientist, Akamai from 1998 to 2012

 

Professor of Applied Mathematics at the Massachusetts Institute of Technology since 1982 (on leave)

 

 

Co-founder and key developer of the software underlying our platform

 

Unparalleled understanding of our technology and how the internet works

 

Crucial source of industry information, technical and market trends and how Akamai can address those needs

 

Provides the Board with vital information about the strategic and operational challenges and opportunities facing us

 

 

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LOGO

 

Jonathan Miller, age 64

Director since 2015

TL&C Committee, ESG Committee

 

  

 

CEO of Integrated Media Co., an investment company, since February 2018

 

Advisor at Advancit Capital, a venture capital firm focusing on early-stage companies, since January 2018, having previously served as a partner since 2013

 

Other Current Boards

 

AMC Networks, an entertainment company

 

Interpublic Group of Companies, a marketing solutions provider

 

J2 Global, which provides telecommunications solutions as well as technology, gaming and lifestyle content

 

Advancit Acquisition I, a non-operating special purpose acquisition company formed for the purpose of effecting the acquisition of one or more businesses; focusing on media and technology targets in North America and Europe

 

Prior Public Company Boards in Last 5 Years

 

TripAdvisor

Shutterstock

 

 

Insight into the challenges, goals and priorities of media companies such as those that are key current and prospective customers

 

Key participant in the rapid development of the internet as a global platform for video and audio entertainment

 

Deep understanding of the ongoing evolution of digital media

 

Involvement with early-stage media and technology companies gives our management and the Board a window into developments that could shape our industry in the future

 

 

 

 

LOGO

 

Madhu Ranganathan, age 56

Director since 2019

Audit Committee Chair, Finance Committee

 

  

 

Chief Financial Officer of Open Text Corporation, a provider of enterprise information management solutions since April 2018.

 

Executive Vice President and Chief Financial Officer for 24/7 Customer, Inc., a provider of customer engagement technology solutions, from June 2008 to March 2018

 

Other Current Boards

 

Bank of Montreal, a financial services company

 

Prior Public Company Boards in Last 5 Years

 

Service Source International

 

 

Extensive public-company financial expertise that enables her to qualify as an “audit committee financial expert” (as defined by Commission rules) and advise management and other directors on complex accounting and internal control matters

 

Experience in developing global software and SaaS companies to provide insight from both a customer and an operational perspective

 

Oversight of acquisition programs position her well to participate in the Finance Committee’s oversight of Akamai’s M&A program

 

Understanding of complex global tax matters

 

 

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LOGO

 

Ben Verwaayen, age 68

Director since 2013

TL&C Committee Chair, ESG Committee

 

  

 

General Partner of Keen Venture Partners, a venture capital firm, since 2017

 

Former Chief Executive Officer of Alcatel-Lucent, a provider of communications equipment and solutions from 2008 to 2013

 

Other Current Boards

 

Renewi, a waste-to-product company that collects and processes waste and then sells the recyclates and energy it produces

 

Ofcom, the regulatory and competition authority for the broadcasting, telecommunications and postal industries of the United Kingdom

 

 

Brings an international perspective to Board deliberations, helping us better understand non-U.S. markets, public policy issues and how to operate with a global employee base

 

CEO experience enables him to provide significant guidance to our CEO on management, leadership and operational issues

 

Ability to leverage knowledge of telecommunications industry to advise us on carrier strategy and network relationships

 

Deep understanding of motivational aspects of executive compensation approaches and applicable international issues

 

 

 

LOGO

 

Bill Wagner, age 54

Director since 2018

TL&C Committee, Finance Committee

 

  

 

President and CEO of LogMeIn, Inc., a software-as-a-service company, since December 2015, having previously served from May 2013 through November 2015 as its President and Chief Operating Officer. In 2020, LogMeIn, Inc. transitioned from being a publicly-traded company to being privately held.

 

Other Current Boards

 

LogMeIn, Inc.

 

Extensive sales and marketing experience in the software industry brings a valuable perspective on the company’s go-to-market operations

 

Current experience as a chief executive officer of a large software company and formerly as a CEO of a publicly-traded software company enables him to provide valuable counsel to the CEO and Board on matters related to strategy, leadership and operations.

 

Brings a customer perspective on how companies purchase, deploy and rely on Akamai solutions to enable and secure their businesses

 

Experience successfully executing mergers, acquisitions and divestitures position him well to participate in the Finance Committee’s oversight of Akamai’s M&A program

 

 

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Our Executive Officers

Our executive officers as of March 1, 2021 were:

 

LOGO   Tom Leighton, age 64, was elected Akamai’s Chief Executive Officer in January 2013, having previously served as our Chief Scientist since he co-founded the company in 1998. As discussed above, Dr. Leighton also serves on the Board.
LOGO   Aaron Ahola, age 51, was named our Executive Vice President, General Counsel and Corporate Secretary in May 2019. From October 2017 through April 2019, he was Senior Vice President, General Counsel and Corporate Secretary. Mr. Ahola joined Akamai in April 2000. During his tenure, he has served in a variety of positions, including as Vice President and Deputy General Counsel from 2011 to 2017 and our Chief Privacy Officer from 2008 until 2017.
LOGO   Robert Blumofe, age 56, became Akamai’s Chief Technology Officer on March 1, 2021. From April 2016 through February 2021, he was our Executive Vice President, Platform and General Manager of the Enterprise Division, having previously served as our Executive Vice President – Platform since January 2013. Before taking on that role, Mr. Blumofe served in a variety of positions at Akamai since joining us in 1999.
LOGO   Paul Joseph, age 47, became our Executive Vice President – Global Sales in March 2021. Mr. Joseph joined Akamai in January 2000 and has served in a variety of roles during his tenure with us. From September 2018 through February 2021, he was Senior Vice President, Global Sales for our Media and Carrier Division. Between October 2017 and August 2018, he served as Vice President Field Business Development in our Media Division. From March 2016 through September 2017, he was Vice President of our America Channel Sales group.

 

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LOGO   Adam Karon, age 49, joined Akamai in February 2005 and has served in numerous leadership positions during his tenure with us. He was named our Chief Operating Officer and General Manager Edge Technology Group effective March 1, 2021. From March 2017 through February 2021, he was Executive Vice President and General Manager of the Media and Carrier Division. He served as Senior Vice President, Global Services and Support from January 2014 through February 2017.
LOGO   Rick McConnell, age 55, became Akamai’s President and General Manager of the Security Technology Group effective March 1, 2021. From May 2016 through February 2021, he was President and General Manager of the Web Division. He previously served as President – Products and Development from January 2013 through May 2016, having previously held other executive titles since joining us in November 2011. Prior to joining Akamai, Mr. McConnell was in a number of executive positions at Cisco Systems. Mr. McConnell was Chief Executive Officer of Latitude Communications, which was acquired by Cisco in January 2004.
LOGO   Edward McGowan, age 50, became Akamai’s Executive Vice President and Chief Financial Officer in March 2019. Mr. McGowan began his career at Akamai in 2000 and has served in numerous roles across the organization since that time, including as Senior Vice President, Finance, between September 2018 and February 2019; Senior Vice President, Global Sales Media & Carrier Division from January 2017 through August 2018; Vice President, Global Carrier Strategy & Sales from April 2013 through December 2016.
LOGO   Kim Salem-Jackson, age 45, became our Executive Vice President and Chief Marketing Officer on March 1, 2021. Ms. Salem-Jackson joined us as Vice President of Global Marketing in August 2017 before being promoted to Senior Vice President Marketing and Corporate Communications in November 2019. Prior to joining Akamai, Ms. Salem-Jackson had been Senior Vice President of Worldwide Marketing and Business Development at Informatica, a provider of enterprise cloud management solutions, from August 2015 to August 2017 after holding a number of management roles at the company since joining it in 2008.

 

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LOGO   Mani Sundaram, age 45, became our Executive Vice President Global Services & Support and CIO in November 2019. Mr. Sundaram began his career at Akamai in February 2007 and has held a variety of positions during his tenure with us. Most recently, he was Senior Vice President Global Services and Support from March 2017 until November 2019, after serving as Vice President Global Services from January 2015 through February 2017.
LOGO   Anthony Williams, age 47, became our Executive Vice President and Chief Human Resources Officer in January 2020. He joined Akamai in April 2015 as Vice President, Talent Acquisition and Diversity and served in that role until January 2018 when his title became Vice President, International HR, Talent Acquisition & Diversity. Prior to Akamai, Mr. Williams held a wide range of global human resource positions at First Data Corporation, Newell Rubbermaid and Time Warner – Turner Broadcasting System.

 

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Security Ownership of Certain Beneficial Owners and Management

The following table includes information as to the number of shares of our common stock beneficially owned as of March 15, 2021, by the following:

 

  🌑   

each person known to us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

 

  🌑   

each of our directors;

 

  🌑   

our Named Executive Officers, who consist of (i) our principal executive officer, (ii) each person who served as our principal financial officer during 2020; and (iii) our three other most highly compensated executive officers in 2020; and

 

  🌑   

all of our executive officers and directors as of March 15, 2021 as a group.

Beneficial ownership is determined in accordance with the rules of the Commission and includes voting and/or investment power with respect to shares. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to the shares of common stock identified below, except to the extent authority is shared by spouses under applicable law. Beneficial ownership includes any shares that the person has the right to acquire within 60 days after March 15, 2021, through the exercise of any stock option or other equity right. Unless otherwise indicated, the address of each person identified in the table below is c/o Akamai Technologies, Inc., 145 Broadway, Cambridge, Massachusetts 02142. On March 15, 2021, there were 163,689,489 shares of our common stock outstanding.

 

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Name of Beneficial Owner                        Number of Shares of Common
Stock Beneficially Owned
   

Percentage of Common

Stock Outstanding (%)

 

  5% Stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Vanguard Group (1)

 

 

 

 

 

 

 

 

 

 

 

 

    17,608,178       10.8  

BlackRock, Inc. (2)

 

 

 

 

 

 

 

 

 

 

 

 

    14,258,519       8.7  

  Directors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sharon Bowen

 

 

 

 

 

 

 

 

 

 

 

 

    0       *  

Marianne Brown

 

 

 

 

 

 

 

 

 

 

 

 

    27       *  

Monte Ford

 

 

 

 

 

 

 

 

 

 

 

 

    22,187       *  

Jill Greenthal (3)

 

 

 

 

 

 

 

 

 

 

 

 

    41,697       *  

Dan Hesse (4)

 

 

 

 

 

 

 

 

 

 

 

 

    20,723       *  

Tom Killalea (5)

 

 

 

 

 

 

 

 

 

 

 

 

    11,495       *  

Tom Leighton (6)

 

 

 

 

 

 

 

 

 

 

 

 

    2,260,863       1.4  

Jonathan Miller

 

 

 

 

 

 

 

 

 

 

 

 

    20,567       *  

Madhu Ranganathan

 

 

 

 

 

 

 

 

 

 

 

 

    0       *  

Fred Salerno (7)

 

 

 

 

 

 

 

 

 

 

 

 

    5,522       *  

Ben Verwaayen (8)

 

 

 

 

 

 

 

 

 

 

 

 

    26,224       *  

Bill Wagner (9)

 

 

 

 

 

 

 

 

 

 

 

 

    8,495       *  

  Other Named Executive Officers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert Blumofe

 

 

 

 

 

 

 

 

 

 

 

 

    38,297       *  

Adam Karon

 

 

 

 

 

 

 

 

 

 

 

 

    35,433       *  

Rick McConnell

 

 

 

 

 

 

 

 

 

 

 

 

    61,915       *  

Edward McGowan (10)

 

 

 

 

 

 

 

 

 

 

 

 

    25,187       *  

All executive officers and directors as of March 15, 2021 as a group (21 persons) (11)

 

 

 

 

 

 

 

 

 

 

 

 

    2,659,648       1.6  

 

*

Percentage is less than 1% of the total number of outstanding shares of our common stock.

(1)

The information reported is based on a Schedule 13G/A filed with the Commission on February 10, 2021 by The Vanguard Group, Inc., or Vanguard, which reports its address as 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. Vanguard reports that it holds sole dispositive power with respect to 16,867,428 shares, shared voting power with respect to 299,127 shares and shared dispositive power with respect to 740,750 shares.

 

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(2)

The information reported is based on a Schedule 13G/A filed with the Commission on February 5, 2021 by BlackRock, Inc., or BlackRock, which reports its address as 55 East 52nd Street, New York, New York 10055. BlackRock reports that it holds sole dispositive power with respect to 14,258,519 shares and sole voting power with respect to 12,518,527 shares held by it.

(3)

Includes 8,658 shares issuable in respect of deferred stock units, or DSUs, that have vested but not yet been distributed.

(4)

Includes 13,034 shares issuable in respect of DSUs that have vested but not yet been distributed.

(5)

Includes 1,867 shares issuable upon vesting of restricted stock units, or RSUs, within 60 days after March 15, 2021 and 2,936 shares issuable in respect of DSUs that have vested but not yet been distributed.

(6)

Includes 129,321 shares held by Dr. Leighton in a trustee capacity with respect to which he disclaims beneficial ownership.

(7)

Includes 1,000 shares held by a charitable foundation of which Mr. Salerno is a trustee and with respect to which he disclaims beneficial ownership.

(8)

Consists of shares issuable in respect of DSUs that have vested but not yet been distributed.

(9)

Includes 1,867 shares issuable upon vesting of RSUs within 60 days after March 15, 2021.

(10)

Includes 463 shares issuable upon vesting of RSUs within 60 days after March 15, 2021

(11)

Includes 6,623 shares issuable upon vesting of RSUs within 60 days after March 15, 2021 and 50,852 shares issuable in respect of DSUs that have vested but not yet been distributed.

Board Leadership and Role in Risk Oversight

Chair of the Board

In March 2018, Fred Salerno was elected as our independent Chair of the Board. In this role, he works with his fellow directors and management to prepare Board meeting agendas, chairs meetings of the Board (including its independent director sessions) and our annual stockholder meetings and informs other directors about the overall progress of Akamai. Mr. Salerno also provides leadership and advice to management on key strategic initiatives and seeks to ensure effective communication among the committees of the Board. He leads discussions on the performance of the Chief Executive Officer and succession planning for executive officers and other key management positions. Mr. Salerno also led our 2020 board evaluation process.

In March 2021, Mr. Salerno announced that he would retire from service on the Board effective at the time of the Annual Meeting. Dan Hesse has been elected to succeed Mr. Salerno as independent Chair of the Board, effective following the Annual Meeting.

Roles of Chair of the Board and CEO

Currently, the roles of Chair of the Board and Chief Executive Officer are held by two different individuals. We believe this structure represents an appropriate allocation of roles and responsibilities at this time. Mr. Salerno, as a strong independent director, has been able to play a key role in ensuring Board effectiveness, management oversight and adherence to good governance principles, and it is expected that Mr. Hesse will be similarly effective in this role following the Annual Meeting. Dr. Leighton is then better able to focus on our day-to-day business and strategy, meet with investors and convey the management perspective to other directors.

 

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Risk Oversight

The Board has an active role in supervising management’s oversight of Akamai’s risks as described in the graphic below:

Board and Committee Oversight of Risk Management

 

LOGO

The Board and our management team have increased their focus on cybersecurity risk oversight and management in recent years. Our information security leadership meets with the Audit Committee on a quarterly basis to discuss management’s process for identifying, tracking and mitigating cybersecurity risks, progress on mitigation initiatives and industry-wide developments related to security matters. All of our employees are required to take annual security compliance training. We have not had a data breach during the last three years.

 

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Board Committees

The standing committees of the Board consist of an Audit Committee, an Environmental, Social and Governance (ESG) Committee (formerly known as the Nominating and Corporate Governance Committee), a Finance Committee and a Talent, Leadership and Compensation (TL&C) Committee (formerly known as the Compensation Committee). Each committee operates under a charter that has been approved by the Board. Copies of the charters are posted in the Investor Relations section of our website at www.ir.akamai.com. The Board has determined that all of the members of each of the four standing committees of the Board are independent as defined under The Nasdaq Stock Market, Inc. Listing Rules, or the Nasdaq Rules, including, in the case of all members of the Audit Committee, the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, in the case of all members of the TL&C Committee, the independence requirements under Rule 10C-1 under the Exchange Act. Membership on each standing committee as of March 1, 2021 is reflected in the chart below.

Membership in Standing Committees as of March 1, 2021

 

      Audit    ESG    Finance    TL&C

  Marianne Brown

   X         X     

  Monte Ford

        X         X

  Jill Greenthal

   X         X*     

  Dan Hesse

   X    X*          

  Tom Killalea

   X              X

  Jonathan Miller

        X         X

  Madhu Ranganathan

   X*         X     

  Fred Salerno

   X    X    X     

  Ben Verwaayen

        X         X*

  Bill Wagner

             X    X

 

  *

Committee Chair

In April 2021, Ms. Bowen was elected to the Board and was appointed to the Audit Committee and the ESG Committee, and the Board approved a shift of Mr. Hesse from the Audit Committee to the TL&C Committee and Mr. Killalea from the TL&C Committee to the Finance Committee.

The Audit Committee assists the Board in overseeing the financial and accounting reporting processes and audits of our financial statements, which includes reviewing the professional services provided by our independent auditors, the independence of such auditors from our management, our annual financial statements and our system of internal financial and IT controls including cybersecurity matters. The Audit Committee also reviews such other

 

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matters with respect to our accounting, auditing and financial reporting practices and procedures as it may find appropriate or may be brought to its attention. The Board has determined that each of Fred Salerno and Madhu Ranganathan is an “audit committee financial expert” within the meaning of Item 407(d)(5)(ii) under Regulation S-K promulgated by the Commission under the Exchange Act. The Audit Committee held nine meetings in 2020.

The ESG Committee is responsible for, among other things, identifying individuals qualified to become members of the Board; recommending to the full Board the persons to be nominated for election as directors and to each of its committees; overseeing self-evaluation of the Board, including the performance of individual directors; and reviewing and making recommendations to the Board with respect to corporate governance practices. The ESG Committee also reviews management’s initiatives with respect to environmental, social and governance matters (including charitable activities of the Akamai Foundation). The ESG Committee held seven meetings in 2020.

The Finance Committee is responsible for, among other things, reviewing matters pertaining to the capital structure and corporate finance strategy, oversight of the Treasury function, review of proposed acquisitions and similar strategic transactions, ongoing evaluation and assessment of completed acquisitions, oversight of our defined contribution and other retirement plans, review of Akamai’s insurance program and assisting and advising management on its operating plans, including any specific plans in place from time to time related to margin improvement or other financial goals. The Finance Committee held nine meetings in 2020.

The TL&C Committee assists the Board in discharging its responsibilities relating to the compensation of our executive officers, including determining the compensation of our Chief Executive Officer and other executive officers, administering our bonus, incentive compensation and stock plans, approving equity grants and approving the salaries and other benefits of our executive officers. In addition, the TL&C Committee consults with our management regarding our benefit plans and compensation policies and practices as well as our leadership development initiatives. The TL&C Committee is directly responsible for the appointment and oversight of our independent compensation consultants and other advisors it retains. The TL&C Committee held five meetings in 2020.

Meeting Attendance

The Board held seven meetings during 2020. Each incumbent director attended more than 75% of the total number of meetings of the Board and each committee on which he or she served during the fiscal year ended December 31, 2020. All directors are expected to attend regular Board meetings, Board committee meetings for committees on which he or she serves and our annual meeting of stockholders. All of our directors then in office attended the 2020 Annual Meeting of Stockholders.

 

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Determination of Independence

Under the Nasdaq Rules, a director of Akamai will only qualify as an “independent director” if, in the opinion of the Board, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has determined that each member of the Board, other than Dr. Leighton, is an “independent director” as defined under Nasdaq Rule 5605(a)(2).

In making its independence determination with respect to Mr. Wagner, the Board considered that, in 2020, Akamai sold approximately $1.5 million of products and services to LogMeIn, Inc., where Mr. Wagner is an executive officer. The amount of sales and the amount of purchases in 2020 were less than 1% of LogMeIn’s annual revenues and less than 1% of Akamai’s annual revenues and the transactions were conducted in the ordinary course of business, on commercial terms and on an arms’-length basis. We expect similar commercial arrangements to recur in 2021.

In making its independence determination with respect to Ms. Ranganathan, the Board considered that, in 2020, Akamai sold approximately $0.7 million of products and services to, and purchased approximately $21,000 of products and services from, Open Text Corporation, where Ms. Ranganathan is an executive officer. The amount of sales and the amount of purchases in 2020 were less than 1% of Open Text’s annual revenues and less than 1% of Akamai’s annual revenues and the transactions were conducted in the ordinary course of business, on commercial terms and on an arms’-length basis. We expect similar commercial arrangements to recur in 2021.

Our independent directors meet separately as part of each Board meeting and at other times as appropriate. In the independent director sessions, Mr. Salerno and the other independent directors review management performance, assess the focus and content of meetings of the Board and establish the strategic issues that the Board believes should be the focus of management’s attention to drive short-term and longer-term business success. Mr. Salerno then provides feedback to the Chief Executive Officer and other members of management on their performance and important issues on which the independent members of the Board believe management should focus.

Director Compensation

The TL&C Committee, with our independent compensation consultant, periodically reviews the compensation structure and levels paid to non-employee directors and makes recommendations for adjustments, as appropriate, to the Board. Our objective is to pay non-employee directors at or near the median of our executive compensation benchmarking peer group, to award the majority of compensation in equity, and to make meaningful adjustments every few years.

 

 

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The following table sets forth compensation paid in 2020 to individuals who served on the Board for any portion of that year for their service as directors, other than Dr. Leighton, whose compensation is reflected in “Executive Compensation Matters” below. Ms. Bowen joined the Board in 2021.

 

Name             

Fees Earned

or Paid in Cash ($) (1)

  

Stock Awards

($) (2)

   Total ($)

  Marianne Brown (3)

   

 

 

 

   

 

 

 

       12,500        624,903        637,403

  Monte Ford (4)

   

 

 

 

   

 

 

 

       75,000        224,997        299,997

  Jill Greenthal (5)

   

 

 

 

   

 

 

 

       80,000        244,912        324,912

  Dan Hesse (6)

   

 

 

 

   

 

 

 

       80,000        234,955        314,955

  Tom Killalea (7)

   

 

 

 

   

 

 

 

       75,000        224,997        299,997

  Jonathan Miller (8)

   

 

 

 

   

 

 

 

       75,000        224,997        299,997

  Madhu Ranganathan (9)

   

 

 

 

   

 

 

 

       75,000        254,970        329,970

  Fred Salerno (10)

   

 

 

 

   

 

 

 

       105,000        299,930        404,930

  Ben Verwaayen (11)

   

 

 

 

   

 

 

 

       80,000        244,912        324,912

  Bill Wagner (12)

   

 

 

 

   

 

 

 

       75,000        224,997        299,997

 

(1)

Cash retainer amounts are paid in arrears for the annual service period ending on the date of the annual stockholder meeting and are reflected in the chart above. Throughout the year, all directors earn a pro rata portion of the cash retainer payable to them in the amounts described in the description of the Director Compensation Plan below.

(2)

For individuals other than Ms. Brown, consists of DSUs granted to directors on May 20, 2020. Ms. Brown was issued RSUs on May 22, 2020 following her appointment to the Board as well as DSUs. The amount reflects the grant date fair value, calculated in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718.

(3)

At December 31, 2020, Ms. Brown held 3,976 unvested RSUs and 2,237 unvested DSUs.

(4)

At December 31, 2020, Mr. Ford held 2,237 unvested DSUs.

(5)

At December 31, 2020, Ms. Greenthal held 2,435 unvested DSUs.

(6)

At December 31, 2020, Mr. Hesse held 2,336 unvested DSUs.

(7)

At December 31, 2020, Mr. Killalea held 2,237 unvested DSUs and 1,867 unvested RSUs.

(8)

At December 31, 2020, Mr. Miller held 2,237 unvested DSUs.

(9)

At December 31, 2020, Ms. Ranganathan held 2,535 unvested DSUs and 3,351 unvested RSUs.

(10)

At December 31, 2020, Mr. Salerno held 2,982 unvested DSUs.

(11)

At December 31, 2020, Mr. Verwaayen held 2,435 unvested DSUs.

(12)

At December 31, 2020, Mr. Wagner held 2,237 unvested RSUs and 1,867 unvested DSUs.

In 2020, our independent compensation consultant conducted a benchmarking review of our outside director compensation, covering both compensation levels and program design as compared to our peer group and shared its findings with TL&C Committee members. The results of the review indicated that our overall non-employee director program is generally aligned with our peers, both in terms of practices and structure as well as pay

 

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levels; however, we did increase compensation for certain leadership positions on the Board in recognition of increased work associated with those roles and to align with peer levels. Effective as of May 15, 2020, supplemental annual compensation for our Chair of the Board increased from $80,000 to $100,000; for our Audit Committee Chair and TL&C Committee Chair increased from $25,000 to $35,000; and for ESG Committee Chair increased from $10,000 to $15,000. The supplemental compensation for the Finance Committee Chair was set to match that of the Audit Committee Chair.

Under our non-employee director compensation plan, non-employee directors are entitled to receive annual compensation of $300,000, of which $75,000 is paid in cash and $225,000 is paid in DSUs representing the right to receive shares of Akamai common stock. This compensation is generally paid or, in the case of DSUs, granted, on the date of our annual meeting of stockholders, and the number of DSUs issued is based on the fair market value of our common stock on that date. For so long as the person remains a director, DSUs will vest in full on the first anniversary of the grant date, but a director may defer distribution of his or her shares for up to ten years. If a director has completed one year of service on the Board, vesting of 100% of the DSUs held by such director will accelerate at the time of his or her departure from the Board.

In addition, our Chair of the Board receives $100,000 of additional annual compensation, of which $25,000 is paid in cash and $75,000 is paid in DSUs. Chairs of the Audit Committee, the TL&C Committee and the Finance Committee receive $35,000 of additional compensation, of which $5,000 is paid in cash and $30,000 is paid in DSUs. The Chair of the ESG Committee receives $15,000 of additional compensation, of which $5,000 is paid in cash and $10,000 is paid in DSUs. Each non-employee director is eligible to receive RSUs with a fair value at the time of grant of $400,000 when he or she first joins the Board. Such RSUs vest over a three-year period, with one-third vesting on each of the first, second and third anniversaries of the date of grant. We also reimburse directors for reasonable out-of-pocket expenses incurred in attending meetings of the Board.

Stock Ownership Guidelines

We have minimum stock ownership requirements for our senior management team and Board. Pursuant to the guidelines, each member of Akamai’s senior management team is required to own a number of shares of our common stock having at least the value calculated by applying the following multiples: for the Chief Executive Officer, six times his base salary; for our other Named Executive Officers, two times his or her base salary; and for other executives, one time his or her base salary. In addition, each non-employee director is required to own a number of shares of our common stock having a value equal to five times his or her then-current base cash retainer. Non-employee directors shall have three years from the date of election or appointment to attain required ownership levels. The Chief Executive Officer and each other senior executive shall have five years from the date of their respective appointments to attain required ownership levels. Unvested options, RSUs and DSUs do not count toward satisfying the requirements; vested but undistributed DSUs held by directors do count toward satisfying the requirements.

 

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If a director’s base cash retainer or an executive’s base salary is increased, the minimum ownership requirement is re-calculated at the end of the year in which the increase occurred, taking into account our stock price at that time. If a non-employee director or executive does not meet the ownership guidelines as of a test date that occurs after the period of time for attainment of the ownership level, he or she will not be permitted to sell any shares of our common stock until such time as he or she has exceeded the required ownership level. A more detailed description of these guidelines, including the timeline for compliance, is set forth in our Corporate Governance Guidelines, which are posted on our website at www.ir.akamai.com/corporate-governance/highlights.

All directors are currently in compliance with the ownership guidelines. See “Stock Ownership Requirements” in Part Two of this Proxy Statement for additional information regarding our executive officers’ compliance with the ownership guidelines.

ESG Committee’s Process for Reviewing and Considering Director Candidates

The ESG Committee assists the Board in identifying and attracting individuals qualified to become members of the Board. In executing its mission to solicit qualified candidates to become directors of Akamai, the ESG Committee seeks to attract qualified potential candidates from varied backgrounds who have a strong desire to understand and provide insight about Akamai’s business and corporate goals; to understand and contribute to the role of the Board in representing the interests of stockholders; and to promote good corporate governance and ethical behavior by the members of the Board and our employees.

Criteria Used to Consider Nominees to the Board of Directors

In assessing whether an individual has these characteristics and whether to recommend any particular candidate for inclusion in the Board’s slate of recommended director nominees, the ESG Committee will apply the criteria attached to its charter. These criteria include:

 

  🌑   

Integrity, honesty and adherence to high ethical standards

 

  🌑   

Business and financial acumen

 

  🌑   

Knowledge of Akamai’s business and industry

 

  🌑   

Experience in business, government, or other fields relevant to our business

 

  🌑   

Diversity

 

  🌑   

Avoidance of potential conflicts of interest with various constituencies of Akamai

 

  🌑   

Commitment to dedicate the necessary time and attention to Akamai

 

  🌑   

Ability to act in the interests of all stockholders

 

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The Board particularly values demonstrated leadership experience and skills and reputation for high standards of honesty, ethics and integrity. Although the ESG Committee does not assign specific weights to particular criteria, we believe that it is essential that all potential Board members have integrity and honesty, adhere to high ethical standards and possess a commitment to dedicate the necessary time and attention to Akamai and an ability to act in the interests of all stockholders without any potential personal conflict of interest. The ESG Committee and the Board believe that the backgrounds and qualifications of its directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.

With respect to considering whether to re-nominate our incumbent directors, the ESG Committee and the full Board apply the criteria discussed above. In addition, the ESG Committee and the full Board take into account whether a director has served for more than 10 years on the Board and may consider information available to it about directors’ professional status and performance on other boards of directors. If there is a change in a director’s professional status, under our Corporate Governance Guidelines, that director must offer to resign from the Board and in considering whether to accept the resignation, the Board considers whether the director’s new status continues to complement the Board’s skills and qualities.

Importance of Diversity

Since adoption in 2003, the Criteria for Nomination as a director appended to Akamai’s ESG Committee charter have always emphasized the importance of diversity in determining the appropriate composition of the Board. The Criteria specifically state, “The [ESG] Committee shall actively consider nominees who can contribute to the diversity of the Board in terms of gender, race, ethnicity and professional background. Nominees shall not be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability or any other basis proscribed by law.”

Process for Identifying Candidates to Serve as Directors

To identify and evaluate attractive candidates, the members of the ESG Committee actively and regularly solicit recommendations for highly-qualified director candidates, including from other members of Akamai’s Board and other professional contacts. From time to time, we have also retained professional search firms to help identify individuals that would meet our selection criteria. As potential candidates emerge, the ESG Committee meets from time to time to evaluate biographical information and background material relating to potential candidates; discusses those individuals with other members of the Board; and reviews the results of personal interviews and meetings conducted by members of the Board, senior management and our outside advisors. In considering new Board members, we have a policy that requires that the initial list of individuals under consideration by the ESG Committee include individuals who represent diverse backgrounds, including diversity of gender and race or ethnicity. If a search firm is used, it is instructed to do the same.

 

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Stockholders may recommend individuals to the ESG Committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials and a statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of our common stock for at least a year as of the date such recommendation is made, to the Environmental, Social and Governance Committee, c/o Corporate Secretary, Akamai Technologies, Inc., 145 Broadway, Cambridge, Massachusetts 02142. Assuming that appropriate biographical and background material has been provided on a timely basis, the ESG Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.

At the 2021 Annual Meeting, stockholders will be asked to consider the election of Ms. Brown, who has been nominated for re-election as a director for the first time. Ms. Brown was appointed to fill a vacancy on the Board in 2020. She was initially recommended by an external search firm. The Board determined to include Ms. Brown among its nominees.

At the 2021 Annual Meeting, stockholders will also be asked to consider the election of Ms. Bowen, who has been nominated for re-election as a director for the first time. Ms. Bowen was appointed to fill a vacancy on the Board in 2021. She was initially recommended by Mr. Salerno. The Board determined to include Ms. Bowen among its nominees.

Stockholders also have the right under Akamai’s bylaws to directly nominate director candidates, without any action or recommendation on the part of the ESG Committee or the Board, by following the procedures set forth in our bylaws and described under “Deadline for Submission of Stockholder Proposals for the 2022 Annual Meeting” below.

The Board will give appropriate attention to written communications that are submitted by stockholders and will respond if and as appropriate. The Chair of the Board, with the assistance of our General Counsel, is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the other directors as he or she considers appropriate. Communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the Chair of the Board considers to be important for the Board to know.

Stockholders who wish to send communications on any topic to the Board should address such communications to Board of Directors, c/o Corporate Secretary, Akamai Technologies, Inc., 145 Broadway, Cambridge, Massachusetts 02142.

Compensation Committee Interlocks and Insider Participation

Messrs. Ford, Killalea, Miller, Verwaayen and Wagner were members of the TL&C Committee throughout 2020. No member of the TL&C Committee was at any time during

 

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2020, or formerly, an officer or employee of Akamai or of any of our subsidiaries, and no member of the TL&C Committee had any relationship with us requiring disclosure under Item 404 of Regulation S-K under the Exchange Act. No member of the TL&C Committee receives compensation, directly or indirectly, from Akamai in any capacity other than as a director.

None of our executive officers served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity where an executive officer of that entity also served as a director or member of our TL&C Committee at any time during 2020.

Report of the Audit Committee

The Audit Committee of the Board has furnished the following report on the Audit Committee’s review of our audited financial statements:

The Audit Committee is responsible for, among other things:

 

  🌑   

Monitoring the integrity of Akamai’s consolidated financial statements

 

  🌑   

Oversight of Akamai’s compliance with legal and regulatory requirements

 

  🌑   

Oversight of Akamai’s system of internal controls (including oversight of our internal audit function, which reports directly to the Audit Committee)

 

  🌑   

Oversight of Akamai’s management of cybersecurity risks

 

  🌑   

Appointment, oversight and evaluation of the qualifications, independence and performance of our internal and independent auditors with the authority to replace Akamai’s independent auditors

 

  🌑   

Review and oversight of the handling of ethical and compliance issues brought to the attention of management and the Board

 

  🌑   

Review of management’s enterprise risk assessments

The Audit Committee acts under a written charter that is available on our website at www.ir.akamai.com/corporate-governance/highlights. The members of the Audit Committee are independent directors as defined by the Audit Committee charter and the Nasdaq Rules.

Akamai’s management is responsible for the financial reporting process, including Akamai’s system of internal controls, and for the preparation of consolidated financial statements in accordance with GAAP. PricewaterhouseCoopers LLP, or PwC, Akamai’s independent auditors, is responsible for auditing those financial statements and expressing an opinion as to their conformity with GAAP. The Audit Committee’s responsibility is to oversee and review these processes. The members of the Audit Committee are not, however,

 

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professionally engaged in the practice of accounting or auditing and do not provide any expert or other special assurance as to the financial statements concerning compliance with laws, regulations or GAAP or as to auditor independence.

Our Vice President of Internal Audit reports directly to the Audit Committee. The Internal Audit function annually conducts a series of audits to test Akamai’s internal financial and IT controls. This annual internal audit plan is reviewed and approved by the Audit Committee. Individual audit reports are reviewed at each Audit Committee meeting and any deficiencies are reviewed with management.

We reviewed Akamai’s audited consolidated financial statements that were included in Akamai’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the Commission, which we refer to herein as the Financial Statements. We reviewed and discussed the Financial Statements with Akamai’s management and PwC. PwC has represented to the Audit Committee that, in its opinion, Akamai’s Financial Statements were prepared in accordance with GAAP. We discussed with PwC the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the Commission.

We also discussed with PwC its independence from Akamai and considered whether PwC’s rendering of certain services to Akamai, other than services rendered in connection with the audit or review of the Financial Statements, is compatible with maintaining PwC’s independence. See “Ratification of Selection of Independent Auditors” included elsewhere in this Proxy Statement. In connection with these matters, Akamai received the written disclosures and letter from PwC required by the applicable requirements of the Public Company Accounting Oversight Board.

Based on our review of the Financial Statements and reports to us and our participation in the meetings and discussions described above, and subject to the limitations on our role and responsibilities referred to above and in the Audit Committee charter, we recommended to the Board that the Financial Statements be included in Akamai’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Commission.

We, the undersigned members of the Audit Committee as of March 31, 2021, have also appointed PwC to act as Akamai’s independent auditors for 2021.

 

Audit Committee      
Madhu Ranganathan—Chair    Marianne Brown    Jill Greenthal
Dan Hesse    Tom Killalea    Fred Salerno

 

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Certain Relationships and Related Party Transactions; Code of Ethics; Interest in Annual Meeting Matters

Akamai did not enter into any transactions of the type required to be disclosed under Item 404 of Regulation S-K under the Exchange Act. Under our written Code of Ethics, each of our employees and members of the Board is prohibited from entering into any business, financial, or other relationship with our existing or potential customers, competitors, or suppliers that might impair, or appear to impair, the exercise of his or her judgment for Akamai. Our Code of Ethics also prohibits situations involving Akamai entering into a business transaction with an executive officer or director, a family member of an executive officer or director, or a business in which such a person has any significant role or interest if such a transaction could give rise to a conflict of interest. Our executive officers and directors are obligated under the Code of Ethics to disclose to our Legal Department any existing or proposed transaction or relationship that reasonably could be expected to give rise to a conflict of interest. Under the procedures reflected in our Code of Ethics and Audit Committee Charter, proposed related party transactions are subject to review to determine if they are in our best interests and, if such transaction is entered into, the conditions under which it may proceed. Proposed transactions involving executive officers, other than the General Counsel, are reviewed and subject to approval by the General Counsel after notifying the Audit Committee and the Chair of the Board. Proposed transactions involving the General Counsel or a director are reviewed and subject to approval by disinterested members of the Audit Committee after notifying the Chair of the Board.

No person who served as a director or executive officer of Akamai during the year ended December 31, 2020 has a substantial interest, direct or indirect, in any matter to be acted upon at the Annual Meeting. Each executive officer serves at the discretion of the Board and holds office until his or her successor is elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.

 

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Part Two – Executive Compensation Matters

Compensation Discussion and Analysis (CD&A)

The following discussion and analysis of Akamai’s executive compensation objectives, policies and practices is designed to provide an overview of the material elements of our compensation structure. This discussion is focused on the following persons who served as Akamai executive officers in 2020. We refer to them as our Named Executive Officers, or our NEOs.

 

 Name   Title (1)   Date Appointed
to Current Role
    Year of Hire

 Tom Leighton

  Chief Executive Officer     January 2013     1998

 Robert Blumofe

  Chief Technology Officer     March 2021     1999

 Adam Karon

  COO and GM Edge Technology Group     March 2021     2005

 Rick McConnell

  President and GM Security Technology Group     March 2021     2011

 Edward McGowan

  EVP and Chief Financial Officer     March 2019     2000

 

(1)

Prior to March 1, 2021 and throughout 2020, Mr. Karon was Executive Vice President and General Manager of the Media & Carrier Division; Mr. McConnell was President and General Manager of the Web Division; and Mr. Blumofe was Executive Vice President – Platform and General Manager of the Enterprise Division.

Executive Summary

In this Executive Summary, we describe our guiding principles on executive compensation, how those principles have aligned with our executive pay outcomes, and how we establish our compensation levels and performance targets. We also discuss key compensation policies and practices. In February 2021, the Board approved a change in the name of its Compensation Committee to the Talent, Leadership and Compensation Committee, or the TL&C Committee, to better reflect the scope of its oversight responsibilities.

 

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Our Compensation Philosophy

 

 

LOGO

 

Aligning Executive Compensation with our Performance

Akamai seeks to align executive compensation with performance by:

 

  🌑   

Tying annual bonuses to performance against specific financial measures that require achievement of rigorous financial targets for payment

 

  🌑   

Utilizing performance-based vesting restricted stock units, or PRSUs, that require achievement of rigorous financial targets in order to vest

 

  🌑   

Granting restricted stock units that require us to meet relative total shareholder return, or TSR, targets in order to vest

 

 

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We believe that a significant portion of executive pay should be variable and at risk. Specifically, the amount earned by an executive officer should primarily be tied to our financial performance and the performance of our stock price. The charts below show the percentage of “at risk” 2020 compensation for our CEO and other NEOs at target. We consider compensation to be “at risk” if vesting is subject to achievement of performance targets and/or the value received is dependent on our stock price.

 

 

LOGO

  

LOGO

 

Overview of Compensation Components

We structure the compensation opportunities for our NEOs using three principal components: base salary, annual bonuses and long-term equity incentives. Within our long-term equity incentive program, we grant three types of awards: time-vesting RSUs, PRSUs and relative TSR-Based RSUs. In making decisions about how to balance different compensation components, we first adhere to our overarching compensation principles outlined above. In addition, we consider the practices of our peer group, our business model, and individual factors, such as the ability of a given executive to contribute to our results.

 

 

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In the graphic below, we provide an overview of each material component of our 2020 executive compensation program and describe how each component is tied to our compensation objectives.

 

 

LOGO

 

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Compensation Policies and Practices Highlights

Every year, the TL&C Committee assesses the effectiveness of the performance of our compensation plans and practices. We evaluate the financial metrics we use and how our programs compare with those used by our peer group companies. We also evaluate whether our compensation continues to align with performance and if our programs appear to have led to any unintended consequences. In recent years, we have continuously taken steps to strengthen and improve our executive compensation policies and practices. Highlights of our current policies and practices include:

 

What we do and don’t do

We align executive compensation with the interests of our stockholders by designing our executive compensation to avoid excessive risk and foster sustainable growth       Focus on Performance-Based Pay
      Include a Relative Market-Based Performance Metric (TSR) in Executive Compensation
      Pay NEOs Annual Bonuses in Akamai Common Stock
      Utilize Double-Trigger Change in Control Provisions for All Equity Awards
      Utilize Objective Performance Metrics
      Review Tally Sheets when Making Executive Compensation Decisions
      Provide Few, if any, Perquisites
      Enforce Stock Ownership Guidelines for Officers and Directors
      Cap Bonus and Performance-Based Equity Awards through Maximum Payouts
      Mitigate Undue Risk in Compensation Programs
     
We adhere to executive compensation best practices       Prohibit Hedging Transactions and Short Sales
      Prohibit Pledging of Company Stock
      Maintain a Clawback Policy
      Mitigate Potential Dilutive Effect of Equity Awards Through Robust Share Repurchase Program
      Utilize an Independent Compensation Consulting Firm that Provides No Other Services to Akamai
      Provide Reasonable Post-Employment/Change in Control Provisions
      No Employment Contracts (unless required by law)
      No Repricing Underwater Stock Options
      No Excise Tax Gross-Ups Upon Change in Control

 

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CEO Compensation

Dr. Leighton became our CEO in January 2013, having previously served as our Chief Scientist since co-founding Akamai. In establishing his salary as CEO, the TL&C Committee considered Dr. Leighton’s past compensation history, his significant equity holdings, peer group practices and the desire to include performance-based compensation as the majority of his pay package. This approach conforms to our philosophy of aligning his compensation with the interests of our long-term investors. In 2013, when Dr. Leighton became CEO, his salary was established at $1. In 2018, in order to align Dr. Leighton with his leadership team, the TL&C Committee established an annual target bonus opportunity for him of $1 million, with the remainder of his annual compensation to be market competitive and consisting of equity-based components. The TL&C Committee increased the target bonus in 2019 to $1.25 million based on his job performance and the company’s performance and to better align Dr. Leighton’s compensation mix to be more consistent with market practices. Dr. Leighton had the same target bonus in 2020. As in the prior year, the TL&C Committee and Dr. Leighton agreed that his earned 2020 annual bonus would be paid to him in shares of our common stock in lieu of cash to reinforce and further the alignment of his compensation with stockholder interests. Ultimately, therefore, nearly 100% of Dr. Leighton’s compensation is at risk.

2020 Executive Compensation Program and Results

In this section, we describe in detail our 2020 NEO compensation program including the impact of our 2020 financial performance on overall achievement. The TL&C Committee set 2020 total direct compensation for Messrs. Leighton, Blumofe, Karon, McConnell and McGowan at approximately the 50th percentile of the benchmarking peer group (as described more fully below). See “Setting Compensation Levels for our NEOs” for a discussion of factors we use to establish the overall compensation levels for these executives.

Base Salary

Base salary is used to provide NEOs with a fixed amount of annual cash compensation. The TL&C Committee views base salary as a way to attract and retain talent by providing a reliable source of income while also motivating strong business performance without encouraging excessive risk-taking. Base salaries represent a relatively small percentage of our overall compensation in order to ensure that our programs provide significant alignment with our stockholders’ interests. In 2020, we were focused on meeting our published 30% non-GAAP operating margin target. To help demonstrate management’s commitment to meeting such goal, it was agreed to hold base salaries for our NEOs, other than Mr. McGowan, constant. Entering his second year as our Chief Financial Officer, Mr. McGowan received a 5.6% increase, effective in July 2020, to bring his salary to a level more consistent with those in our benchmarking peer group.

 

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Year-End 2020 Base Salaries for NEOs

 

     
Name                            2020 Salary Level    Percentage Increase from 2019

Dr. Leighton

  

 

  

 

  

 

  

 

   $1    0%

Mr. McGowan

  

 

  

 

  

 

  

 

   $475,000    5.6%

Dr. Blumofe

  

 

  

 

  

 

  

 

   $505,000    0%

Mr. Karon

  

 

  

 

  

 

  

 

   $475,000    0%

Mr. McConnell

  

 

  

 

  

 

  

 

   $580,000    0%

Annual Bonuses

Annual bonuses are performance-based awards that are intended to drive the achievement of key business results while rewarding NEOs based upon their contributions to Akamai’s success. Each year, the TL&C Committee sets a target annual bonus award opportunity for each NEO, or Target Annual Bonus Opportunity, expressed as a percentage of base salary, based upon each NEO’s role and responsibilities, internal equity considerations and peer group data. In addition, the TL&C Committee believes that the Target Annual Bonus Opportunity should make up a more significant portion of an NEO’s target total compensation as the individual’s level of responsibility increases.

Under the 2020 compensation plan, each NEO had the opportunity to earn between 0% and 200% of his Target Annual Bonus Opportunity based on performance against objective financial targets. The TL&C Committee believes that these goals and objectives encourage a balanced focus on revenue growth and profitability.

As with Dr. Leighton, the TL&C Committee and each of our other NEOs agreed that earned 2020 annual bonuses would be paid in shares of our common stock in lieu of cash to further align compensation with stockholder interests.

 

 

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The table below reflects the structure, goals and outcomes of the 2020 annual incentive program. For performance at intermediate achievement levels not specified in the chart, the amount paid is calculated based on where actual performance falls proportionately between the two identified tiers. The overall payout percentage against the Target Annual Bonus Opportunity was 135.9% due to above-target performance on revenue and profitability.

 

Metric

 

%
Weighting

 

Why We Use This Metric

 

2020

Threshold

(0%
payout)

 

2020

Target
(100%
payout)

 

2020

Maximum
(200%
payout)

 

2020

Actual

 

Payout %

Against
Target

 

Revenue (adjusted for

foreign currency)*

 

 

50%

 

 

Revenue is a fundamental
measure of our success
at selling our solutions,
innovating and
competing in the
marketplace.

 

 

$2,797
million

 

 

$3,108
million

 

 

$3,418
million

 

 

$3,182

million

 

 

124.0%

 

Non-GAAP Operating Income*

 

 

50%

 

 

Non-GAAP operating
income is an indicator of
profitability that
eliminates the effects of
events that either are not
part of our core
operations or are
non-cash as well as the
impact of income taxes;
we use it as a component
of the bonus targets to
align our NEOs’ interests
with those of our
investors.

 

 

$844

million

 

 

$937

million

 

 

$1,031

million

 

 

$982
million

 

 

147.9%

 

Overall Payout as a % Against Target

 

 

135.9%

 

*

Refer to “Financial Metrics Definitions” below for an explanation of the calculation of this measure.

The table below shows each NEO’s target bonus percentage of base salary, target bonus payout for 2020 and actual bonus earned for 2020. The target bonus payout is calculated by multiplying the NEO’s base salary earnings by his or her target bonus percentage. The actual bonus earned in calculated by multiplying the NEO’s target bonus payout by our overall payout percentage, which was 135.9% for 2020 as described above.

 

Name                   2020 Target
Bonus Percentage
  2020 Target Payout    2020 Actual
Bonus Earned

Dr. Leighton

   

 

 

 

   

 

 

 

   

 

 

 

       *Not applicable     $ 1,250,000      $ 1,699,106

Mr. McGowan

   

 

 

 

   

 

 

 

   

 

 

 

       85 %     $ 392,962      $ 534,147

Dr. Blumofe

   

 

 

 

   

 

 

 

   

 

 

 

       80 %     $ 404,000      $ 549,151

Mr. Karon

   

 

 

 

   

 

 

 

   

 

 

 

       80 %     $ 380,000      $ 516,528

Mr. McConnell

   

 

 

 

   

 

 

 

   

 

 

 

       100 %     $ 580,000      $ 788,385

 

*

In accordance with the terms of his annual incentive plan, Dr. Leighton’s 2020 annual bonus is not based on a percentage of his base salary of $1.

 

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Long-Term Equity Incentives

We believe that long-term equity-based compensation grants motivate and reward strong corporate performance and drive long-term value creation for stockholders. In addition, these awards assist in attracting and retaining our NEOs. The chart below explains why we granted each award type to our NEOs in 2020.

 

Type of RSU    Why We use This Type of RSU    Vesting
Schedule
   Weighting

 

Time-Vesting RSUs

  

 

Vesting based on continued employment, help retain our NEOs and incentivize them to enhance stockholder value.

  

 

1/3
annually over 3
years

  

 

40%

 

PRSUs

  

 

Vesting based on performance against specific financial metrics, align our NEOs’ compensation our corporate performance.

  

 

3-year
cliff

  

 

40%

 

Relative TSR-Based RSUs

  

 

Vesting based on our stock price performance, align our NEOs’ compensation with how our stock price has performed relative to the S&P 500 Technology Index Group, which we refer to as the Index Group, enhancing the alignment of management and investor interests.

  

 

3-year
cliff

  

 

20%

The TL&C Committee sets each NEO’s target equity award value based on market data, future expected contributions and performance, job responsibilities and duties. The 2020 grant-date target long-term equity incentive values for our NEOs were:

 

Name                      Grant Date
Value of PRSUs
   Grant Date Value of
Time-Vesting RSUs
   Grant Date
Value of Relative
TSR-Based RSUs
   Total

Dr. Leighton

    

 

 

 

    

 

 

 

    

 

 

 

     $ 3,500,000      $ 3,500,000      $ 1,750,000      $ 8,750,000

Mr. McGowan

    

 

 

 

    

 

 

 

    

 

 

 

     $ 1,000,000      $ 1,000,000      $ 500,000      $ 2,500,000

Dr. Blumofe

    

 

 

 

    

 

 

 

    

 

 

 

     $ 1,120,000      $ 1,120,000      $ 560,000      $ 2,800,000

Mr. Karon

    

 

 

 

    

 

 

 

    

 

 

 

     $ 1,200,000      $ 1,200,000      $ 600,000      $ 3,000,000

Mr. McConnell

    

 

 

 

    

 

 

 

    

 

 

 

     $ 1,640,000      $ 1,640,000      $ 820,000      $ 4,100,000

PRSUs. Each NEO has the opportunity to earn between 0% and 200% of his target PRSUs based on achievement against annual revenue and non-GAAP earnings per share

 

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performance targets for each of 2020, 2021 and 2022. Achievement below the threshold level below would mean that no PRSUs vest with respect to that performance period; achievement at or above the maximum level would mean that 200% of the target number of PRSUs eligible for vesting would vest. One-third of an NEO’s 2020 PRSUs may be earned over each one-year period. At the beginning of each year, the TL&C Committee sets the performance targets for the year. After the conclusion of the year, the TL&C Committee certifies achieved performance for that year. Vesting of PRSUs does not, however, occur until the date of the TL&C Committee’s certification of results for 2022.

In structuring our PRSUs, the TL&C Committee considered the difficulties in establishing long-term performance goals in our industry, where traffic and other trends are outside of our control and highly unpredictable. The TL&C Committee also carefully considered the implications of using one-year performance periods, as opposed to a single three-year period, and determined that the current approach was appropriate and supported by our peer group practice. See “Setting Financial Performance Targets” below for further discussion of how we set these metrics.

We use revenue as a target metric for our PRSUs, as well as our annual bonus plan, because it is a fundamental metric used by investors to assess our performance. Revenue growth is also key to both our short- and long-term strategic plans.

Because the PRSUs are dependent upon annual financial goals, the values reported in the Summary Compensation Table below are different than the target values set forth in the tables above. Financial Accounting Standards Board ASC Topic 718 requires that the value of the PRSUs reported in the Summary Compensation Table include only that portion of the value of the PRSUs for which annual financial performance metrics were established during fiscal 2020 based on probable achievement of such metrics. As a result, for the 2020 PRSUs, the Summary Compensation Table does not include the value of the PRSUs based on the annual financial metrics for fiscal 2021 or fiscal 2022. Such amounts will be included as equity compensation in the Summary Compensation Table for fiscal 2021 and fiscal 2022, respectively, when the financial metrics are established.

 

 

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The chart below shows the applicable 2020 performance metrics and our achievement against them. For performance at intermediate achievement levels not specified in the chart, the amount paid is calculated based on where actual performance falls proportionately between the two identified tiers.

 

2020 PRSU Targets and Results

                 
Metric   %
Weighting
  Why We Use This Metric  

2020

Threshold
(0%
payout)

 

2020

Target
(100%
payout)

 

2020

Maximum
(200%
payout)

 

2020

Actual

 

Achievement
% Against

Target

 

% of
PRSUs
Earned

Against
Target

 

Revenue (adjusted for foreign currency)*

 

 

50%

 

 

Revenue is a fundamental measure of our performance against our long-term growth strategy.

 

 

$2,797
million

 

 

$3,108
million

 

 

$3,418
million

 

 

$3,182
million

 

 

102.4%

 

 

124.0%

 

Non-GAAP Earnings per Share*

 

 

50%

 

 

Non-GAAP earnings per share is an indicator of profitability that eliminates the effects of events that either are not part of our core operations or are non-cash as well as the impact of income taxes; we use it as a performance target to align our NEOs’ interests with those of our investors.

 

 

$4.46/per
share

 

 

$4.95/per
share

 

 

$5.45 per
share

 

 

$5.16/per
share

 

 

104.2%

 

 

142%

 

Overall Payout as a % Against Target

     

 

133.0%

 

*

Refer to “Financial Metrics Definitions” below for an explanation of the calculation of this measure.

The metrics described above also apply to the 2020 performance period used to calculate the number of PRSUs earned under grants made to NEOs in 2018 and 2019.

Relative TSR-Based RSUs. Each NEO has the opportunity to earn between 0% and 200% of his target relative TSR-Based RSU award based on the three-year performance of our stock price relative to that of companies in the Index Group. The number of relative TSR-Based RSUs earned and vested is based upon the percentile ranking of our TSR within the Index Group at the conclusion of the three-year performance period ending on December 31, 2022. TSR is calculated on a per share basis as the quotient of (i) (Ending Price plus Dividends per Share Paid minus Beginning Price), divided by (ii) the Beginning Price, where Ending Price means the average closing stock price of one share of common stock over the 90 trading days immediately preceding January 1, 2023; Dividends per Share Paid means cumulative dividends per share of common stock paid between January 1, 2020 through December 31, 2022; and Beginning Price means the average closing stock price of one share of common stock over the 90 trading days immediately preceding January 1, 2020. TSR-Based RSUs, to the extent earned, will vest following the TL&C Committee’s certification of our financial results for 2022.

 

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For every percentile by which our ranking within the Index Group exceeds the 50th percentile, the number of relative TSR-Based RSUs eligible to vest will increase by 3.33% of the target, up to a maximum of 200% of the target if our TSR ranking is above the 80th percentile. For every percentile by which our ranking within the Index Group is below the 50th percentile, the number of relative TSR-Based RSUs eligible to vest will decrease by 3%, with no payout if our TSR ranking is below the 25th percentile. This is illustrated below.

 

Akamai’s TSR Performance Stated as a
Comparative Percentile Ranking Within
the Index Group
   Percentage Payout Against Target
Number of Shares

Lower than 25th

   0%

25th

   25%

50th

   100%

80th

   200%

Higher than 80th

   200%

Our three-year TSR for the period 2018-2020 is reflected in the chart below.

 

Metric   Why We Use
This Metric
  Target  

2018-20

TSR

  2018-20
Percentile
Ranking
 

% of

Target
RSUs

Earned

           
2018-2020 TSR   Performance   Alignment of share performance with executive compensation.   50th percentile as compared to return for the Index Group   101.6%   74th Percentile   180.6%

A Look Ahead to 2021

In 2021, the TL&C Committee introduced a change to our annual bonus plan for NEOs and other Akamai executives. While maintaining the core revenue and profitability financial metrics, the 2021 bonus plan incorporates a payout modifier based on our achievement against designated environmental, social and governance objectives established by the TL&C Committee. These goals are centered on employee diversity, inclusion and engagement as well as environmental sustainability metrics. If management exceeds the goals, the bonus earned based on the financial metrics will be increased by up to 10%; if management fails to meet the goals, the bonus earned on the financial metrics above will be decreased by up to 10%. The TL&C Committee adopted this change to help drive accountability within the management team for advancing Akamai’s corporate social responsibility goals.

 

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Setting Compensation Levels for our NEOs

Each year we establish the base salary, target bonus and equity levels for each NEO based on a review and assessment of the following factors:

 

  🌑   

Each individual’s overall performance

 

  🌑   

Company performance

 

  🌑   

Success in executing against corporate and functional goals

 

  🌑   

Importance and scope of role

 

  🌑   

Future potential contributions

 

  🌑   

Prior background, training and experience

 

  🌑   

Internal pay equity considerations

 

  🌑   

Retention concerns

 

  🌑   

Practices of companies in our compensation benchmarking and design peer groups

Our philosophy is generally to set each NEO’s target total compensation (i.e., the sum of base salary, target annual incentive bonus and target value of long-term incentives) at the 50th percentile of our benchmarking peer group; however, the TL&C Committee may ultimately set an NEO’s total direct compensation at a level above or below the 50th percentile based on non-market data factors such as those described above.

The TL&C Committee does not assign relative weights or rankings to such factors. Rather, the TL&C Committee relies upon the CEO’s recommendations (for NEOs other than the CEO) and the directors’ knowledge and judgment in assessing the various qualitative and quantitative inputs it receives as to each individual and makes compensation decisions accordingly.

If our results do not meet our expectations, our NEOs will receive compensation that is below target opportunity levels and may be below market in comparison. Similarly, when superior results are achieved, our NEOs may receive compensation that is above their respective target opportunity level.

Setting Financial Performance Targets

Revenue and profitability performance targets are used both in our annual bonus plan and our equity incentive plan. We engage in a rigorous and deliberate process in setting those targets, which are set early in the year and are directly linked to our annual operating plan. The performance targets for 2020 were also consistent with the financial guidance we gave to investors on our public earnings call in February 2020. As a result, we believe that the performance targets reflect our goals and expectations for the business, are common

 

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performance indicators in our industry, and are meaningful to our stockholders. The performance goals are rigorous but achievable without encouraging inappropriate risk-taking.

Key factors underlying revenue goals include:

 

  🌑   

Trends in sales of our solutions in prior quarters

 

  🌑   

Our understanding of how markets for our offerings may be evolving

 

  🌑   

Information we learn about customer plans

 

  🌑   

Expectations associated with new product introductions

 

  🌑   

Assessments about how macro-economic conditions could change

 

  🌑   

Changes we have witnessed in the competitive landscape

Profitability goals are set based primarily on:

 

  🌑   

Our revenue expectations

 

  🌑   

Plans for capital expenditures and hiring

 

  🌑   

Expected growth in operating expenses as well as efforts to curtail spending growth

Our performance targets are also adjusted during the year to give effect to acquisitions that occur and to eliminate the impact of foreign currency exchange rate fluctuations.

We carefully set our minimum and maximum target opportunities. Because we primarily derive income from sales of services to customers executing contracts with terms of one year or longer, we have a relatively consistent base level of revenue growth from year to year. The TL&C Committee takes this into account in setting annual performance targets and associated payout levels. A 5%-10% or greater improvement over target revenue or operating income targets represents excellent performance and is reflected in cash bonus payments; a 5%-10% or greater shortfall against such targets leads to much lower payouts. For example, bonuses are not payable under our annual incentive plan unless revenue achievement is at least 90% of target.

The TL&C Committee has considered using different metrics for the annual incentive and equity incentive programs but has concluded that using both revenue and profitability targets is appropriate because they are fundamental metrics used by investors to assess our performance. In particular, these performance targets represent key metrics by which we are evaluated by investors. We believe they also provide an appropriate and effective balance of performance incentives to focus and motivate executive officers to maximize value for our stockholders without excessive risk-taking. For example, we have continued to focus on revenue growth without sacrificing profit margins.

 

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Once the TL&C Committee has approved performance targets, we set a range of payouts that can be earned by the NEOs based on achieved results against those targets. For annual bonus, PRSUs and relative TSR-Based RSU awards, the payout ranges from 0%-200% based on performance against targets.

The TL&C Committee approves the performance targets and applicable ranges only after the full Board has met to review, discuss and approve the short- and long-term financial plans for the company.

We did not adjust any financial metric targets in 2020 to account for the COVID-19 pandemic.

How We Select and Use Peer Groups

The TL&C Committee works closely with Meridian Compensation Partners, LLC, or Meridian, our independent compensation consultant, to establish the peer groups we use in reviewing and setting executive compensation. We adhere to the following key principles to establish our peer groups:

 

  🌑   

Consistency. Peer group composition should remain relatively stable year over year.

 

  🌑   

Competitors. Peer group companies should reflect Akamai’s competitors for executive talent, business and capital.

 

  🌑   

Similarity in Size. Peer group companies that are used for benchmarking compensation levels should be similar to Akamai in size; we generally consider revenue and market capitalization.

 

  🌑   

Statistical Validity. Peer group should include enough data points to develop statistically valid data. We expect to include approximately 20 companies in our peer group.

There are also a number of companies with which we compete for executive talent that are significantly larger than Akamai and inappropriate for benchmarking NEO compensation levels but are still informative from a design perspective. To address this, the TL&C Committee approved and adopted a second peer group of these larger companies for compensation design considerations.

Benchmarking Peer Group

The benchmarking peer group is comprised of companies that are similar in size to Akamai and operate in related industries. The TL&C Committee reviewed compensation data for executive officers with comparable positions at these companies to gauge the reasonableness and competitiveness of each of our NEO’s total compensation as well as to

 

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inform the design of our programs. Our benchmarking peer group for setting 2020 executive compensation consisted of the following companies:

 

Adobe Systems

  Arista Networks    Autodesk

Ciena

  Citrix Systems    Equinix

F5 Networks

  Fortinet    IAC/Interactive Group

Juniper Networks

  Nuance Communications    Palo Alto Networks

PTC

  Red Hat    Sabre

Twitter

  VeriSign    VMWare

Akamai’s revenue for 2020 was $3.1 billion, and our market capitalization at the end of that year was $17.0 billion. The median 2020 revenue for our benchmarking peer group was approximately $3.3 billion, and the median market capitalization for the group at the end of that year was $22.0 billion.

Design Reference Peer Group

In addition to the benchmarking peer group, the TL&C Committee approved a design reference peer group to provide further information on competitive market design practices. The companies in the design reference peer group consistently provide the greatest challenges for Akamai in competing for talent; however, given that they are considerably larger than us, we do not include them in our benchmarking peer group. The TL&C Committee used data derived from the design reference peer group to inform our incentive plan design, pay mix, long-term incentive vehicles and other practices. The TL&C Committee believes that this information helps us to successfully attract and retain experienced and talented individuals who are critical to our long-term success. We also structure and balance the different elements of compensation to reflect trends across our design reference peer group.

Our 2020 design reference peer group consisted of the following companies:

 

Alphabet

  Amazon.com   Apple    Cisco Systems

eBay

  Facebook   Microsoft    Netflix

Oracle

  Salesforce.com     

 

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Our Executive Compensation Process

The TL&C Committee constructs our executive compensation program with input from Meridian and our Chief Executive Officer. We establish the annual compensation packages for our executive officers at the beginning of each year after an extensive process of analysis of competitive trends, assessment of prior compensation programs, consideration of the peer group practices, performance evaluations and investor input. The following is an overview of the planning and assessment process for our 2020 executive compensation:

 

 

LOGO

Role of the TL&C Committee

The TL&C Committee sets the compensation for each of our NEOs and other senior executive officers. It establishes the financial metrics for performance-based awards based on Akamai’s operating plans and long-term strategy approved by the Board and then assesses performance against those targets in later years. For NEOs other than our CEO, the TL&C Committee reviews Dr. Leighton’s evaluation of his direct reports’ performance and establishes compensation levels and opportunities. The full Board makes the determination of our CEO’s performance when setting his compensation levels and opportunities.

The TL&C Committee makes judgments about the role of each executive officer in the pursuit and achievement of our corporate and strategic objectives. Typically, these

 

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judgments involve qualitative, rather than quantitative, evaluations of each individual’s past performance and expectations about future contributions. We believe that it is important to reward excellence, leadership and outstanding long-term company performance through compensation arrangements designed to retain and motivate executive officers while aligning their incentives with continued high levels of performance.

The TL&C Committee approves and grants all equity incentive awards to our NEOs. In general, annual executive compensation determinations are made at the scheduled TL&C Committee meeting in January or February of each year. For 2020, we made such grants at the same time as annual equity grants were made to our non-executive employees in early March. Equity incentive awards to newly-hired executive officers are generally approved at the first regularly-scheduled TL&C Committee meeting following the individual’s date of hire. For retention purposes or to reflect changes in responsibilities or similar events or circumstances, the TL&C Committee may approve equity awards to our executive officers at other times during the year. The TL&C Committee sets a dollar value for each executive RSU award that is granted as part of our compensation program; the number of RSUs granted is determined based on the closing sale price of our stock on the grant date.

The TL&C Committee retains, but we do not currently expect that it will exercise in the future, discretion to waive the achievement of stated corporate performance targets as a condition to payment of annual bonuses.

Role of our Chief Executive Officer

Annually, the Chief Executive Officer evaluates the performance of the other NEOs and sets expectations for their roles in the upcoming year. He makes a recommendation to the TL&C Committee as to salary, bonus and equity incentive compensation for the coming year for these NEOs. With respect to his own compensation, the CEO conducts a self-assessment of prior year performance. The Board (without the participation of the CEO) then discusses and evaluates the Chief Executive Officer’s performance. The TL&C Committee is the ultimate decision-maker with respect to the compensation of our Chief Executive Officer and other NEOs.

Role of Independent Compensation Consultants

Our TL&C Committee considered advice provided by Meridian in establishing our 2020 executive compensation program. Meridian is retained by and reports directly to the Chair of the TL&C Committee. Meridian provides the following services to the TL&C Committee: (i) recommending a peer group of companies, (ii) assisting the TL&C Committee in understanding compensation levels of executive officers in the benchmarking peer group, (iii) assisting the TL&C Committee in understanding compensation design practices of companies in the design reference group, (iv) reviewing the value of equity compensation previously granted to executive officers, and (v) developing a long-term executive compensation strategy and related services. Meridian has not provided us with any services beyond providing advice on the amount or form of executive and director compensation. The TL&C Committee determined that Meridian was independent of management.

 

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How We Considered the 2020 “Say-on-Pay” Advisory Vote on Executive Compensation

The TL&C Committee has consistently strived to balance the need to offer competitive executive compensation with what it believes is in the long-term best interests of Akamai and our stockholders. The TL&C Committee takes seriously stockholder input. We consider that input, best practices and the competitive environment to develop compensation programs that are designed to support our short- and long-term success without encouraging excessive risk-taking.

At our 2020 Annual Meeting of Stockholders, we held an advisory vote on our 2019 executive compensation program, and 92% of the votes cast were in support of the program.

 

Taking into account feedback we have received from investors, we have made the following changes to our executive compensation programs in recent years:

🌑     Introduced a one-year minimum vesting requirement

🌑     Introduced a relative TSR metric

🌑     Increased the emphasis on PRSUs and relative TSR-Based RSUs to 60% of the target value of executive equity awards

🌑     Eliminated the subjective component of our annual incentive plan

🌑     Adopted a compensation recovery, or clawback, policy

🌑     Moved away from the issuance of stock options to our executive officers and directors

🌑     Amended our Change in Control Agreements for NEOs to eliminate single-trigger vesting for RSUs unless such awards are not assumed by the acquiring entity

How We Evaluate and Address Risk in Our Compensation Policies and Practices

Annual Risk Assessment

Annually, the TL&C Committee asks management and Meridian to review the potential risks associated with the structure and design of various Akamai compensation plans. The analysis includes assessing executive and non-executive compensation programs, with particular emphasis on incentive compensation plans, including sales compensation, against key risks that our company faces. Our review takes into account changes in compensation programs, as well as new risks we identify. In addition, our compensation plans and programs operate within strong governance and review structures that serve and support

 

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risk mitigation. In particular, we believe the following factors mitigate any components of our compensation programs that may encourage excessive risk-taking:

 

🌑   

Our pay mix has a significant weighting towards long-term incentive compensation in order to discourage short-term risk-taking

 

🌑   

Our performance goals are appropriately set to avoid significant changes in payout for minimal changes in performance

 

🌑   

Our annual incentive awards, relative TSR-Based RSUs and PRSU payouts for NEOs are capped

 

🌑   

Our stock ownership requirements align the interests of management with those of our stockholders

 

🌑   

Our executives, other than our CEO who has a salary of $1, are provided a mix of fixed and variable compensation

 

🌑   

Our incentive plans are balanced with different types of performance metrics

In reviewing our compensation policies and practices for all employees, the TL&C Committee determined that they do not create risks that are reasonably likely to have a material adverse effect on Akamai.

Compensation Recovery Policy

In 2014, the TL&C Committee adopted a Compensation Recovery Policy that is applicable to our NEOs and other members of senior management. The policy provides that the TL&C Committee may require a covered person who engages in detrimental conduct (e.g., committing a felony, gross negligence or willful misconduct with respect to our financial statements) to reimburse us for all, or a portion of, any bonus, incentive payment, equity-based award or other compensation received by him or her during the 12 months preceding such detrimental conduct and remit to us any profits realized by him or her from the sale of Akamai securities during such 12-month period. In addition, if we need to restate our reported financial results to correct a material accounting error due to material noncompliance with a financial reporting requirement under U.S. securities laws, the TL&C Committee may seek to recover or cancel the excess portion of incentive compensation paid (including through vesting of equity awards) to such individual during the 36-month period preceding the filing of the restatement that is deemed by us to be unearned.

Stock Ownership Requirements

Our executive officers are subject to minimum stock ownership requirements. Our Chief Executive Officer must hold shares of our common stock with a value at least equal to six times his annual base salary. Other NEOs must hold shares of our common stock with a value at least equal to two times their annual base salary. An individual’s stock ownership includes all shares of our common stock owned by the individual outright or held in trust for the senior executive and/or his or her immediate family and any shares of Akamai common stock in employee plans. It does not include the executive officer’s unvested or unexercised equity.

 

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If an executive fails to meet the ownership guidelines under the review procedures set forth in the guidelines as of the end of a five-year qualification period, he or she will not be permitted to sell shares of Akamai stock until such time as he or she has exceeded the required minimum ownership level. As of March 15, 2021, all of our NEOs had satisfied the minimum ownership requirement.

Anti-Hedging Policy

We have an insider trading policy that is applicable to all of our employees, consultants and members of the Board. The policy prohibits those individuals and certain related persons from engaging in any speculative transactions involving our stock including the following activities: use of Akamai’s securities to secure a margin loan; short sales of our securities; buying or selling puts or calls on Akamai’s securities; transactions in publicly-traded options relating to our securities (i.e., options that are not granted by Akamai); and other transactions involving financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our securities. In addition, Akamai’s executive officers and members of the Board may not pledge Akamai securities as collateral for a loan.

Severance Arrangements

We believe that having in place reasonable and competitive executive severance plans is essential to attracting and retaining highly-qualified executive officers. Akamai’s severance arrangements are designed to provide reasonable compensation to departing executive officers under certain circumstances to facilitate an executive officer’s transition to new employment. We seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring the executive officer to sign a separation and release agreement acceptable to Akamai as a condition to receiving severance benefits.

We do not consider specific amounts payable under the severance arrangements when establishing annual compensation. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive. In determining payment and benefit levels under the various circumstances triggering the provision of benefits under employment and severance agreements, the TL&C Committee has drawn a distinction between voluntary terminations or terminations for cause, and terminations without cause or as a result of a change in control. Payment in the latter circumstances has been deemed appropriate in light of the benefits to us described above, as well as the likelihood that the executive officer’s departure is due, at least in part, to circumstances not within his or her control. In contrast, we believe that payments are not appropriate in the event of a termination for cause or voluntary resignation because such events often reflect either inadequate performance or an affirmative decision by the executive officer to end his or her relationship with Akamai.

 

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We have change in control agreements in place with each of our NEOs (except in the case of Dr. Leighton, who is party to an employment offer letter agreement). We believe that these agreements are designed to align the interests of management and stockholders when considering the long-term best future for Akamai. The primary purpose of these arrangements is to keep executive officers focused on pursuing corporate transaction activity that is in the best interests of stockholders regardless of whether those transactions may result in their own job loss. Reasonable post-acquisition benefits should serve the interests of both the executive officer and our investors.

Our Executive Severance Pay Plan, Change in Control Agreements and equity award programs have the following features:

 

🌑   

No single-trigger vesting of equity awards upon a change in control of Akamai unless such awards are not assumed by the acquiring entity. If they are assumed, such awards convert to time-based vesting awards based on an assumed target-level of performance.

 

🌑   

No excise tax gross ups from existing agreements

 

🌑   

No perpetual terms of executive Change in Control Agreements, thus providing flexibility to the TL&C Committee to revisit the benefits and other terms of these arrangements in response to future events

See “Post-Employment Compensation and Other Employment Agreements” below for a more detailed discussion of our severance and change-in-control agreements referenced above, including the specific benefits payable to our NEOs, if any, upon termination of employment.

Compliance with Code Section 162(m)

Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, generally disallows a tax deduction to public companies for compensation in excess of $1 million paid in any one taxable year to each of certain of the company’s current and former executive officers. Historically, compensation that qualified under Section 162(m) as performance-based compensation was exempt from the deduction limitation. However, subject to certain transition rules, tax reform legislation signed into law on December 22, 2017, which we refer to as the Tax Act, eliminated the qualified performance-based compensation exception. As a result, for taxable years beginning after December 31, 2017, all compensation in excess of $1 million paid to each of the executive officers described above (other than certain grandfathered compensation) will not be deductible by us.

 

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Financial Metrics Definitions

Below are definitions of the financial metrics we used in our 2020 performance-based compensation programs:

“Revenue (adjusted for foreign currency)” means revenue calculated in accordance with GAAP, adjusted for the impact of fluctuations in foreign currency exchange rates.

“Non-GAAP Operating Income” means our annual GAAP operating income excluding amortization of intangible assets, stock-based compensation, restructuring charges and benefits, acquisition-related costs and similar items excluded by us in determining non-GAAP income from operations in issuing our public earnings announcements; adjusted for the impact of fluctuations in foreign currency exchange rates.

“Non-GAAP Earnings per Share” means our non-GAAP net income for the applicable fiscal year (adjusted for constant currency) divided by our diluted weighted average shares outstanding. Non-GAAP net income per share is GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; other operating expenses (comprised of acquisition-related costs, restructuring charges, benefit from adoption of software development activities, gains and other activity related to divestiture of a business, gains and losses on legal settlements and costs incurred with respect to Akamai’s internal investigation relating to sales practices in a country outside the U.S.; loss on early extinguishment of debt; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; and other non-recurring or unusual items that may arise from time to time).

“Non-GAAP Operating Margin” means non-GAAP income from operations stated as a percentage of revenue. Non-GAAP income from operations means GAAP income from operations adjusted for the following items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; amortization of capitalized interest expense; acquisition-related costs; restructuring charges; gains and losses on legal settlements; transformation costs; and other non-recurring or unusual items that may arise from time to time. We have discussed forward-looking projections with respect to Non-GAAP Operating Margin targets. This information is provided on a non-GAAP basis and cannot be reconciled to the closest GAAP measures without unreasonable effort because of the unpredictability of the amounts and timing of events affecting the items we exclude from non-GAAP measures. For example, stock-based compensation is unpredictable for Akamai’s performance-based awards, which can fluctuate significantly based on current expectations of future achievement of performance-based targets. Amortization of intangible assets, acquisition-related costs and restructuring costs are all impacted by the timing and size of potential future actions, which are difficult to predict. In addition, from time to time, Akamai excludes certain items that occur infrequently, which are also inherently difficult to predict and estimate. It is also difficult to predict the tax effect of the items we exclude and to

 

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estimate certain discrete tax items, like the resolution of tax audits or changes to tax laws. As such, the costs that are being excluded from non-GAAP guidance are difficult to predict and a reconciliation or a range of results could lead to disclosure that would be imprecise or potentially misleading. Material changes to any one of the exclusions could have a significant effect on our guidance and future GAAP results.

*    *    *

Talent, Leadership and Compensation Committee Report

The TL&C Committee of the Board of Directors:

(1) has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement as required by Item 402(b) of Regulation S-K under the Exchange Act with management; and

(2) based on the review and discussion referred to in paragraph (1) above, the members of the TL&C Committee have recommended to the Board the inclusion of this Compensation Discussion and Analysis in this Proxy Statement for the 2021 Annual Meeting.

The TL&C Committee as of March 31, 2021.

Ben Verwaayen - Chair

Monte Ford

Tom Killalea

Jonathan Miller

Bill Wagner

 

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Summary Compensation Table

The following table sets forth information with respect to compensation paid to our NEOs during the years ended December 31, 2020, 2019 and 2018:

 

Name and Principal
Position

 

 

Year

 

 

Salary

($)

 

 

Bonus

($)

 

 

 

Stock

Awards

($)

(1)(2)(3)

 

 

 

Non-Equity

Incentive Plan

Compensation

($)

 

 

Total ($)

 

 

(a)

 

 

 

(b)

 

 

 

(c)

 

 

 

(d)

 

 

 

(e)

 

 

 

(g)

 

 

 

(j)

 

 

Mr. Leighton

 

 

2020

 

 

1

 

 

 

 

11,750,559(4)

 

 

 

 

11,750,560

    2019   1     10,937,600(4)     10,937,601
    2018

 

  1

 

 

 

  11,347,675(4)

 

 

 

  11,347,676

 

 

Mr. McGowan (5)

 

 

2020

 

 

462,308

 

 

 

 

3,072,736(4)

 

 

 

 

3,547,736

  2019

 

  441,538

 

 

 

  1,952,036

 

  536,945

 

  2,930,519

 

 

Dr. Blumofe

 

 

2020

 

 

505,000

 

 

 

 

3,758,284(4)

 

 

 

 

4,263,284

  2019   497,500     3,053,222   598,761   4,149,483
  2018

 

  482,500

 

 

 

  3,038,659

 

  599,143

 

  4,120,302

 

 

Mr. Karon

 

 

2020

2019

 

 

475,000

462,500

 

 

 

 

3,824,738(4)

2,737,576

 

 

556,637

 

 

4,299,738

3,756,713

  2018

 

  425,000

 

 

 

  2,334,431

 

  527,743

 

  3,287,174

 

Mr. McConnell

  2020   580,000     5,484,895(4)     6,064,895
  2019   572,500     4,211,482   861,283   5,645,265
  2018

 

  557,500

 

 

 

  4,400,574

 

  865,343

 

  5,823,417

 

 

(1)

Amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for equity awards granted to the NEO during the applicable year. The assumptions we use in calculating these amounts are discussed in Note 18 of the notes to our consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K, which accompanies this Proxy Statement, except that the amounts reflected in the table above exclude the impact of estimated forfeitures of equity awards. As a result, the Summary Compensation Table does not reflect the value as determined by the Compensation Committee. For example, the amounts for fiscal 2020 represent the grant date fair value for the PRSUs at target for the fiscal 2020 tranche of the PRSUs issued in each of 2018, 2019 and 2020. These amounts do not include shares that may be earned in respect of the 2020 PRSUs based on performance against 2021 and 2022 targets because such targets will not be established until 2021 and 2022, respectively. The table below shows the value of the stock awards (assuming target-level vesting) granted to the NEOs in the years presented as approved by the Compensation Committee (including all tranches of PRSUs that may be earned at target by the NEOs).

 

Name

 

 

 

  Intended Value of 2020  

Stock Awards ($)

 

 

 

  Intended Value of 2019  

Stock Awards ($)

 

 

 

  Intended Value of 2018  

Stock Awards ($)

 

 

Dr. Leighton

 

   

 

 

 

 

8,750,000

 

 

 

   

 

 

 

 

8,500,000

 

 

 

   

 

 

 

 

8,500,000

 

 

 

 

Mr. McGowan

 

   

 

 

 

 

2,500,000

 

 

 

   

 

 

 

 

2,200,000

 

 

 

   

 

 

 

 

 

 

 

 

Dr. Blumofe

 

   

 

 

 

 

2,800,000

 

 

 

   

 

 

 

 

2,700,000

 

 

 

   

 

 

 

 

2,700,000

 

 

 

 

Mr. Karon

 

   

 

 

 

 

3,000,000

 

 

 

   

 

 

 

 

2,800,000

 

 

 

   

 

 

 

 

2,300,000

 

 

 

 

Mr. McConnell

 

   

 

 

 

 

4,100,000

 

 

 

   

 

 

 

 

4,000,000

 

 

 

   

 

 

 

 

3,900,000

 

 

 

 

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(2)

Includes both time-vesting RSUs, PRSUs (at target) and relative TSR-Based RSUs (at target). See also footnote (4) with respect to payment of shares of our common stock in lieu of cash.

(3)

For PRSUs, because the performance-related component is based on separate measurements of our financial performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated at the commencement of each separate year of the performance cycle when the respective performance measures are approved. The value of the 2018 PRSUs assuming vesting at target and maximum, respectively, in each case across 2018, 2019 and 2020 performance periods, would have been as follows: Dr. Leighton—$3,399,956 and $6,799,912, respectively; Dr. Blumofe—$1,079,952 and $2,159,904, respectively; Mr. Karon—$919,978 and $1,839,956, respectively; and Mr. McConnell—$1,559,938 and $3,119,876, respectively. The value of relative TSR-Based RSUs issued in 2018 assuming vesting at maximum would have been as follows: Dr. Leighton—$5,056,304; Dr. Blumofe—$1,606,070; Mr. Karon—$1,368,161; and Mr. McConnell—$2,319,796. The value of the 2019 PRSUs assuming vesting at target and maximum, respectively, in each case across 2019, 2020 and 2021 performance periods, is as follows: Dr. Leighton—$3,602,992 and $7,205,983, respectively; Mr. McGowan—$540,499 and $1,080,900, respectively; Dr. Blumofe—$1,320,727 and $2,641,454, respectively; Mr. Karon—$940,990 and $1,881,979, respectively; and Mr. McConnell—$1,644,897 and $3,289,795, respectively. The value of relative TSR-Based RSUs issued in 2019 assuming vesting at maximum would be as follows: Dr. Leighton—$4,108,253; Mr. McGowan—$1,063,270; Dr. Blumofe—$1,304,993; Mr. Karon—$1,353,269; and Mr. McConnell—$1,933,265. The value of the 2020 PRSUs assuming vesting at target and maximum, respectively, in each case across 2020, 2021 and 2022 performance periods, is as follows: Dr. Leighton—$4,243,250 and $8,486,501, respectively; Mr. McGowan—$879,237 and $1,758,475, respectively; Dr. Blumofe—$1,350,679 and $2,701,359, respectively; Mr. Karon—$1,317,094 and $2,634,190, respectively; and Mr. McConnell—$1,975,146 and $3,950,292, respectively. The value of relative TSR-Based RSUs issued in 2020 assuming vesting at maximum would be as follows: Dr. Leighton—$4,616,493; Mr. McGowan—$1,318,930; Dr. Blumofe—$1,477,068; Mr. Karon—$1,582,573; and Mr. McConnell—$2,162,969.

(4)

Includes amounts that were earned in 2020, 2019, and 2018, respectively, under the terms of the NEOs’ annual bonus plans that were paid in shares of our common stock in lieu of cash to Dr. Leighton in 2021, 2020, and 2019 and to the other NEOs in 2021.

(5)

Mr. McGowan became our Chief Financial Officer on March 1, 2019.

 

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2020 Grants of Plan-Based Awards

The following table sets forth information with respect to grants of plan-based awards to our NEOs during the year ended December 31, 2020. All equity awards were issued under the Akamai Technologies, Inc. 2013 Stock Incentive Plan, as amended, which we refer to as the 2013 Stock Incentive Plan.

 

Name/Award  

Grant

Date

  Date of
Approval
of Grant
if
Different
from
Grant
Date
  Estimated Future
Payouts Under Non-
Equity Incentive Plan
Awards
 

Estimated Future
Payouts Under

Equity Incentive Plan
Awards

  All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(#)
 

Grant
Date Fair
Value

of Stock

and

Options

Awards (1)

  Threshold
($)
  Target
($)
  Maxi-
mum
($)
  Thres-
hold
(#)
  Target   Maximum
(a)   (b)        (c)   (d)   (e)   (f)   (g)   (h)   (i)   (l)

Dr. Leighton

                                       

PRSUs (2)

  3/3/20             47,001   94,002     4,243,250

Time-Vesting RSUs (3)

  3/3/20                 38,768   3,499,975

Relative TSR-Based RSUs (4)

  3/3/20           4,846   19,384   38,768     2,308,247

Annual Incentive Plan (5)

  2/18/21             $1,250,000   $2,500,000     1,699,087

Mr. McGowan

PRSUs (2)

  3/3/20             9,739   19,478     879,237

Time-Vesting RSUs (3)

  3/3/20                 11,076   999,941

Relative TSR-Based RSUs (4)

  3/3/20           1,385   5,538   11,076     659,465

Annual Incentive Plan (5)

  2/18/21             $403,750   $807,500     534,093

Dr. Blumofe

PRSUs (2)

  3/3/20             14,961   29,922     1,350,679

Time-Vesting RSUs (3)

  3/3/20                 12,405   1,119,923

Relative TSR-Based RSUs (4)

  3/3/20           1,551   6,202   12,404     738,534

Annual Incentive Plan (5)

  2/18/21             $404,000   $808,000     549,148

Mr. Karon

PRSUs (3)

  3/3/20             14,589   29,178     1,317,094

Time-Vesting RSUs (4)

  3/3/20                 13,291   1,199,911

Relative TSR-Based RSUs (5)

  3/3/20           1,661   6,645   13,290     791,287

Annual Incentive Plan (5)

  2/18/21             $380,000   $760,000     516,446

Mr. McConnell

PRSUs (2)

  3/3/20             21,878   43,756     1,975,146

Time-Vesting RSUs (3)

  3/3/20                 18,165   1,639,936

Relative TSR-Based RSUs (4)

  3/3/20           2,271   9,082   18,164     1,081,485

Annual Incentive Plan (5)

  2/18/21             $580,000   $1,160,000     788,328

 

(1)

Amounts reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for equity awards granted to the NEO during 2020 and assumes target level of achievement for both types of performance-based awards. The assumptions we use in calculating these amounts are discussed in Note 18 of the notes to our consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K, which accompanies this Proxy Statement, except that the amounts reflected in the table above exclude the impact of estimated forfeitures of equity awards.

(2)

Consists of PRSUs eligible for vesting in 2023. Grant date fair value is calculated based on number of shares issuable at target achievement level. Because the performance-related component is based on separate measurements of our financial performance for each year in the three-year performance cycle, FASB ASC Topic 718 requires the grant date fair value to be calculated at the commencement of each separate year of the performance cycle when the respective performance measures are approved. The amounts for fiscal

 

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  2020 represent the grant date fair value for PRSUs at target granted in 2018, 2019 and 2020 for the fiscal 2020 tranche of such award. The amounts do not include shares that may be earned based on performance against 2021 and 2022 targets.
(3)

Time-vesting RSUs vest in three equal annual installments over a three-year period from the date of grant.

(4)

Consists of relative TSR-Based RSUs eligible for vesting in 2023. The grant date fair value is calculated based on a Monte Carlo valuation.

(5)

Consists of a performance-based annual incentive plan bonus award that was denominated in dollars at the time of approval on February 18, 2021 but was payable in shares of our common stock calculated based on a closing sale price of $99.70 on such date. The actual number of shares issued was 17,042 for Dr. Leighton, 5,537 for Mr. McGowan, 5,508 for Dr. Blumofe, 5,180 for Mr. Karon, and 7,907 for Mr. McConnell.

 

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Outstanding Equity Awards at December 31, 2020

The following table sets forth information with respect to outstanding equity incentive awards held by our NEOs as of December 31, 2020:

 

 

        

Stock Awards

Name/Award   Award
Grant Date
   

Number of
Shares or
Units of
Stock That
Have Not
Vested

(#)

 

Market
Value of
Shares or

Units of
Stock That
Have Not

Vested

($) (1)

 

Equity
Incentive
Plan
Awards:
Number of

Unearned

Shares,
Units or
Other
Rights

That Have

Not Vested

(#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of

Unearned
Shares,
Units or
Other
Rights

That Have
Not Vested

($) (1)

(a)

        

(g)

 

(h)

 

(i)

 

(j)

 

Dr. Leighton

 

           

 

2018 Time-Vesting RSUs (2)

 

 

 

 

 

2/08/18

 

 

 

 

 

 

18,137

 

 

 

1,904,204

 

 

 

 

 

 

 

 

2018 PRSUs (3)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

82,227

 

 

 

8,633,013

 

 

 

 

 

 

 

 

2018 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

49,130

 

 

 

5,158,159

 

 

 

 

 

 

 

 

2019 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

31,885

 

 

 

3,347,606

 

 

 

 

 

 

 

 

2019 PRSUs (5)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

47,155

 

 

 

4,950,803

 

 

15,942

 

 

 

1,673,751

 

 

2019 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

 

 

 

 

 

 

47,826

 

 

 

5,021,252

 

 

2020 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

38,768

 

 

 

4,070,252

 

 

 

 

 

 

 

 

2020 PRSUs (6)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

17,186

 

 

 

1,804,358

 

 

 

25,846

 

 

 

2,713,572

 

 

2020 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

 

 

 

 

 

 

38,768

 

 

 

4,070,252

 

 

2020 Annual Incentive Plan Award (7)

 

 

 

 

 

 

2/18/21

 

 

 

 

 

 

 

 

 

 

 

 

17,042

 

 

 

1,699,087

 

 

Mr. McGowan

 

           

 

2018 Time-Vesting RSUs (2)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

1,921

 

 

 

201,686

 

 

 

 

 

 

 

 

2018 PRSUs (3)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

8,703

 

 

 

913,728

 

 

 

 

 

 

 

 

2018 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

5,201

 

 

 

546,053

 

 

 

 

 

 

 

 

2019 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

8,253

 

 

 

866,482

 

 

 

 

 

 

 

 

2019 PRSUs (5)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

12,204

 

 

 

1,281,298

 

 

 

4,126

 

 

 

433,189

 

 

2019 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

 

 

 

 

 

 

12,378

 

 

 

1,299,566

 

 

2020 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

11,076

 

 

 

1,162,869

 

 

 

 

 

 

 

 

2020 PRSUs (6)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

4,910

 

 

 

515,501

 

 

 

7,384

 

 

 

775,246

 

 

2020 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

 

 

 

 

 

 

11,076

 

 

 

1,126,869

 

 

2020 Annual Incentive Plan Award (7)

 

 

 

 

 

 

2/18/21

 

 

 

 

 

 

 

 

 

 

 

 

5,357

 

 

 

534,093

 

 

Time-Vesting RSUs (8)

 

 

 

 

 

 

10/31/18

 

 

 

 

 

 

1,391

 

 

 

146,041

 

 

 

 

 

 

 

 

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Table of Contents

 

        

Stock Awards

Name/Award   Award
Grant Date
   

Number of
Shares or
Units of
Stock That
Have Not
Vested

(#)

 

Market
Value of
Shares or

Units of
Stock That
Have Not

Vested

($) (1)

 

Equity
Incentive
Plan
Awards:
Number of

Unearned

Shares,
Units or
Other
Rights

That Have

Not Vested

(#)

 

Equity
Incentive
Plan
Awards:
Market or
Payout
Value of

Unearned
Shares,
Units or
Other
Rights

That Have
Not Vested

($) (1)

(a)

        

(g)

 

(h)

 

(i)

 

(j)

 

Dr. Blumofe

 

           

 

2018 Time-Vesting RSUs (2)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

5,761

 

 

 

604,847

 

 

 

 

 

 

 

 

2018 PRSUs (3)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

26,117

 

 

 

2,742,024

 

 

 

 

 

 

 

 

2018 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

15,605

 

 

 

1,638,369

 

 

 

 

 

 

 

 

2019 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

10,129

 

 

 

1,063,444

 

 

 

 

 

 

 

 

2019 PRSUs (5)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

14,979

 

 

 

1,572,645

 

 

 

5,064

 

 

 

531,669

 

 

2019 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

 

 

 

 

 

 

15,192

 

 

 

1,595,008

 

 

2020 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

12,405

 

 

 

1,302,401

 

 

 

 

 

 

 

 

2020 PRSUs (6)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

5,499

 

 

 

577,340

 

 

 

8,270

 

 

 

868,267

 

 

2020 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

 

 

 

 

 

 

12,404

 

 

 

1,302,296

 

 

2020 Annual Incentive Plan Award (7)

 

 

 

 

 

 

2/18/21

 

 

 

 

 

 

 

 

 

 

 

 

5,508

 

 

 

549,148

 

 

Mr. Karon

 

           

 

2018 Time-Vesting RSUs (2)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

4,908

 

 

 

515,291

 

 

 

 

 

 

 

 

2018 PRSUs (3)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

22,248

 

 

 

2,335,818

 

 

 

 

 

 

 

 

2018 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

13,293

 

 

 

1,395,632

 

 

 

 

 

 

 

 

2019 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

10,503

 

 

 

1,102,710

 

 

 

 

 

 

 

 

2019 PRSUs (5)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

15,531

 

 

 

1,630,600

 

 

 

5,252

 

 

 

551,407

 

 

2019 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

 

 

 

 

 

 

15,754

 

 

 

1,395,317

 

 

2020 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

13,291

 

 

 

1,395,422

 

 

 

 

 

 

 

 

2020 PRSUs (6)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

5,891

 

 

 

618,496

 

 

 

8,861

 

 

 

930,316

 

 

2020 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

 

 

 

 

 

 

13,290

 

 

 

1,395,317

 

 

2020 Annual Incentive Plan Award (7)

 

 

 

 

 

 

2/18/21

 

 

 

 

 

 

 

 

 

 

 

 

5,180

 

 

 

516,446

 

 

Mr. McConnell

 

           

 

2018 Time-Vesting RSUs (2)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

8,322

 

 

 

873,727

 

 

 

 

 

 

 

 

2018 PRSUs (3)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

37,725

 

 

 

3,960,748

 

 

 

 

 

 

 

 

2018 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

2/08/18

 

 

 

 

 

 

22,540

 

 

 

2,366,475

 

 

 

 

 

 

 

 

2019 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

15,005

 

 

 

1,575,375

 

 

 

 

 

 

 

 

2019 PRSUs (5)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

22,190

 

 

 

2,329,728

 

 

 

7,502

 

 

 

787,635

 

 

2019 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/01/19

 

 

 

 

 

 

 

 

 

 

 

 

22,506

 

 

 

2,362,905

 

 

2020 Time-Vesting RSUs (2)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

18,165

 

 

 

1,907,143

 

 

 

 

 

 

 

 

2020 PRSUs (6)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

8,053

 

 

 

845,484

 

 

 

12,110

 

 

 

1,271,429

 

 

2020 Relative TSR-Based RSUs (4)

 

 

 

 

 

 

3/03/20

 

 

 

 

 

 

 

 

 

 

 

 

18,164

 

 

 

1,907,038

 

 

2020 Annual Incentive Plan Award (7)

 

 

 

 

 

 

2/18/21

 

 

 

 

 

 

 

 

 

 

 

 

7,907

 

 

 

788,328

 

 

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Table of Contents
(1)

Based on the $104.99 closing sale price of our common stock on December 31, 2020 as reported by the Nasdaq Global Select Market.

(2)

Consists of time-vesting RSUs that vest in three equal annual installments on the first, second and third anniversaries of the date of grant.

(3)

Consists of performance-based RSUs issuable based on achievement against two targets for each of 2018, 2019 and 2020; such shares vested on February 18, 2021, the date that financial results for 2020 were certified by the Compensation Committee. Reflects actual number of shares earned based on performance against 2018, 2019 and 2020 targets.

(4)

For relative TSR-Based RSUs granted in 2018, reflects the actual number of RSUs earned. For relative TSR-based RSUs granted in 2019 and 2020, assumes maximum level of performance against target.

(5)

Consists of performance-based RSUs issuable based on achievement against two targets for each of 2019, 2020 and 2021; such shares, if issued, vest on the date that financial results for 2021 are certified by the Compensation Committee. Reflects actual number of shares earned based on performance against 2019 and 2020 targets and target number of shares issuable in respect of performance against 2021 targets.

(6)

Consists of performance-based RSUs issuable based on achievement against two targets for each of 2020, 2021 and 2022; such shares, if issued, vest on the date that financial results for 2022 are certified by the Compensation Committee. Reflects actual number of shares earned based on performance against 2020 targets and target number of shares issuable in respect of performance against 2021 and 2022 targets.

(7)

Consists of shares earned under 2020 annual incentive plan that were issued on February 18, 2021.

(8)

Consists of time-vesting RSUs that vest over three years with 1/3 vesting on the first anniversary of the date of grant and the remainder vesting quarterly over the next two years.

2020 Option Exercises and Stock Vested

The following table sets forth the value realized upon vesting of RSU awards in 2020. There were no stock option exercises by our NEOs in 2020.

 

    

 

Stock Awards

 

Name

(a)

 

  

 

Number of Shares

Acquired on

Vesting (#) (1)

(d)

 

  

 

Value

Realized on

Vesting ($) (2)

(e)

 

Dr. Leighton

 

  

 

162,841

 

  

 

14,920,701

 

 

Mr. McGowan

 

   19,324

 

   1,778,168

 

 

Dr. Blumofe

 

   45,108

 

   3,679,885

 

 

Mr. Karon

   30,474

 

   2,790,264

 

 

Mr. McConnell

 

   63,438

 

   5,823,296

 

 

(1)

Consists of RSUs vesting during 2020.

(2)

Calculated by multiplying the number of shares vested by the fair market value of one share of our common stock on the vesting date used to calculate taxable compensation to the NEO.

 

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Post-Employment Compensation and Other Employment Agreements

Severance Arrangements. Each of our currently-serving NEOs, other than Dr. Leighton, is eligible to participate in the Executive Severance Pay Plan, which we refer to herein as the Severance Plan. Under the Severance Plan, participants who are terminated for any reason other than “cause” (as defined in the Severance Plan) and have signed a separation and release agreement acceptable to Akamai are entitled to:

 

🌑   

a lump sum payment equal to one year of the participant’s then-current base salary;

 

🌑   

a lump sum payment equal to the annual bonus at target that would have been payable to the executive officer under Akamai’s then-current annual incentive plan, if any, in the year of the executive officer’s termination had both Akamai and the executive officer achieved the target bonus objectives set forth in such executive’s bonus plan during such year; and

 

🌑   

a payment equal to 12 times the monthly premium for continued health and dental insurance coverage.

Executive Equity and Change in Control Agreements. Each of our NEOs had entered into Change in Control Agreements (except in the case of Dr. Leighton) and RSU grant agreements that provide for acceleration of all or a portion of equity awards held by such NEOs following a change in control of Akamai.

Under the terms of the Change in Control Agreements, in the event of a termination without cause (as defined in the agreement), or a resignation for “good reason” (as defined in the agreement) within one year following a change in control of Akamai, such NEOs will receive full acceleration of stock options so that such stock options become 100% vested and exercisable; full acceleration of time-vesting RSUs; a lump sum payment equal to one year of the NEO’s then-current base salary; a lump sum payment equal to the annual bonus at target that would have been payable to the NEO under our annual incentive plan in effect immediately before the change in control event; and reimbursement for up to 12 months of health and dental insurance coverage. Under the terms of grant agreements governing PRSUs and relative TSR-Based RSUs, such awards (at the target level) accelerate immediately prior to a change in control of Akamai if the awards are not assumed by the acquiring company. If the awards are assumed by the acquiring company and the NEO is subsequently terminated without “cause” of for “good reason,” each as defined in the appliable grant agreement, within 12 months of the change in control, vesting of such awards accelerates at the target level of performance. If PRSUs and relatives TSR-Based RSUs are assumed by the acquiror, they automatically convert into time-vesting RSUs at the target level. See “Potential Payments Upon Termination or Change in Control” below for a description of the benefits payable to our NEOs upon a change in control of Akamai.

 

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Dr. Leighton’s Employment Offer Letter Agreement. In February 2013, we entered into a letter agreement with Dr. Leighton in connection with his becoming our Chief Executive Officer; the agreement was amended in November 2015 to eliminate single-trigger vesting of PRSUs following a change in control for awards issued after that date. The amended agreement provides that, in addition to his annual salary, Dr. Leighton is eligible to receive a bonus in any year that Akamai enters into a bonus plan for its senior executive team. Either Akamai or Dr. Leighton may terminate the agreement upon 30 days’ advance written notice to the other party; provided however, that in the event Dr. Leighton is terminated for “cause” (as defined in the amended agreement), Akamai may elect to pay Dr. Leighton an amount equal to 30 days of his then-current salary in lieu of providing him 30 days’ notice of the termination of his employment. If Dr. Leighton is terminated without cause or terminates his employment for “good reason” (as defined in the letter agreement) following a “change in control” (as defined in the letter agreement) of Akamai, he shall be entitled to:

 

🌑   

accelerated vesting of any options and any time-vesting RSUs held by him;

 

🌑   

vesting at target of PRSUs and relative TSR-Based RSUs held by him that are not assumed by the acquiror;

 

🌑   

a lump sum cash payment equal to one year of his then-current base salary; and

 

🌑   

a lump sum cash payment equal to one year of his then-applicable annual bonus at target.

If, outside of the change in control context, Dr. Leighton’s employment is involuntarily terminated for any reason other than cause or if he dies or becomes disabled, he shall be entitled to:

 

🌑   

a lump sum cash payment equal to one year of his then-current base salary;

 

🌑   

a lump sum cash payment equal to his then-applicable annual bonus at target; and

 

🌑   

a lump sum cash payment in an amount equal to 12 times the monthly premium for continued health and dental insurance coverage paid by Akamai on his behalf in the month preceding termination of his employment.

The letter agreement also provides that unless Akamai consents otherwise on a case by case basis, to ensure the maximum efficiency of Dr. Leighton’s business travel and to ensure his security on business travel, all of his air travel on Akamai business shall be via private air transportation; however, Dr. Leighton shall pay the costs of such airfare.

PRSUs and Relative TSR-Based RSUs Retirement Plan

The terms of our PRSUs and relative TSR-Based RSUs provide for vesting of such awards under certain circumstances upon the voluntary retirement of an executive officer or his or

 

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her termination for a reason other than Detrimental Conduct (as defined in our Compensation Recovery Policy). If a U.S.-based executive officer is at least 55 years old at the time of retirement, the sum of his or her age plus years of service with the Company is greater than or equal to 70 and at least half of a performance period (under the terms of the applicable equity award) has been completed, then he or she is entitled to vest in a pro-rated number of shares based on our actual performance for the applicable period.

Death and Disability

Upon an NEO’s death or permanent disability, all time-based vesting RSUs outstanding on such date shall vest as of such date and all PRSUs outstanding on such date shall vest, on a pro-rated basis, at the actual achievement level for completed performance periods (under the terms of the applicable equity award) and target achievement level for uncompleted periods.

Potential Payments Upon Termination or Change in Control

The chart set forth below describes the estimated benefits provided under various circumstances that trigger payments or provision of benefits under Akamai’s Severance Plan and other arrangements. Payments would not be cumulative. The value of equity incentive awards for which vesting would accelerate is calculated as if the triggering event occurred on December 31, 2020. Our closing stock price on December 31, 2020, the last trading day of the year, was $104.99. In addition to the amounts listed below, each NEO is eligible to receive a lump sum payment equal to the sum of 12 times the monthly premium for continued health and dental coverage in the event of a termination without cause including following a change in control of Akamai.

 

Name

 

 

Triggering Event

 

 

Cash

Severance

Payment

($)

 

 

Acceleration

of Time-
Vesting RSUs
($)

 

 

Acceleration
of
Performance-

Based RSUs

($)(1)

 

Dr. Leighton

 

Voluntary Separation

 

 

 

 

 

  20,546,333

 

 

Involuntary Separation Without Cause

 

  1,250,001

 

 

 

  20,546,333

 

 

Termination for Cause

 

 

 

 

 

 

 

 

Change in Control Event

 

 

 

 

 

 

 

 

Termination following a Change in Control

 

  1,250,001

 

  9,322,062

 

  22,205,700

 

 

Death or Disability

 

 

 

  9,322,062

 

  29,749,392

 

 

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Table of Contents

Name

 

 

Triggering Event

 

 

Cash

Severance

Payment

($)

 

 

Acceleration

of Time-
Vesting RSUs
($)

 

 

Acceleration
of
Performance-

Based RSUs

($)(1)

 

Mr. McGowan

 

Voluntary Separation

 

 

 

 

 

 

 

 

Involuntary Separation Without Cause

 

  878,750

 

 

 

 

 

 

Termination for Cause

 

 

 

 

 

 

 

 

Change in Control Event

 

 

 

 

 

 

 

 

Termination following a Change in Control

 

  878,750

 

  2,425,794

 

  4,496,569

 

 

Death or Disability

 

 

 

  2,425,794

 

  5,769,309

 

Dr. Blumofe

 

Voluntary Separation

 

 

 

 

 

  6,474,838

 

 

Involuntary Separation Without Cause

 

  909,000

 

 

 

  6,474,838

 

 

Termination for Cause

 

 

 

 

 

 

 

 

Change in Control Event

 

 

 

 

 

 

 

 

Termination following a Change in Control

 

  909,000

 

  2,970,692

 

  7,067,717

 

 

Death or Disability

 

 

 

  2,970,692

 

  9,443,075

 

Mr. Karon

 

Voluntary Separation

 

 

 

 

 

 

 

 

Involuntary Separation Without Cause

 

  855,000

 

 

 

 

 

 

Termination for Cause

 

 

 

 

 

 

 

 

Change in Control Event

 

 

 

 

 

 

 

 

Termination following a Change in Control

 

  855,000

 

  3,013,423

 

  6,892,594

 

 

Death or Disability

 

 

 

  3,013,423

 

  9,000,283

 

Mr. McConnell

 

Voluntary Separation

 

 

 

 

 

 

 

 

Involuntary Separation Without Cause

 

  1,160,000

 

 

 

 

 

 

Termination for Cause

 

 

 

 

 

 

 

 

Change in Control Event

 

 

 

 

 

 

 

 

Termination following a Change in Control

 

  1,160,000

 

  4,356,241

 

  10,336,265

 

 

Death or Disability

 

 

 

  4,356,241

 

  13,811,644

 

 

(1)

Includes both PRSUs and relative TSR-Based RSUs and assumes the company acquiring Akamai assumed such PRSUs and relative TSR-Based RSUs. For PRSUs and relative TSR-Based RSUs, there is no acceleration of vesting upon a change in control unless the acquiring company does not assume such awards.

 

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CEO Pay Ratio

Pursuant to Item 402(u) of Regulation S-K and Section 953(b) of the Dodd-Frank Act, presented below is the ratio of the annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO).

The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u). The Commission’s rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.

In 2020, there was no significant change in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio. Accordingly, for purposes of calculating the pay ratio set forth below, we referenced the median identification analysis from fiscal year 2018.

We selected the median employee based on 7,275 full-time, part-time, and temporary workers who were employed as of a determination date of October 1, 2018, which number excludes 336 non-US employees (representing less than 4.2% of our global workforce of 7,611 persons and consisting of employees located in China (57), Hong Kong (46), Sweden (43), Spain (41), Italy (39), Czech Republic (24), Netherlands (23), Denmark (13), Taiwan (13), Brazil (11), United Arab Emirates (8), Mexico (5), Switzerland (5), Malaysia (4), Belgium (2), and Turkey (2) who were excluded pursuant to the de minimis exemption provided under Item 402(u)). We selected the median employee using a compensation measure that incorporates base salary, overtime, bonuses paid, and equity granted during the twelve-month period preceding the determination date. Conforming adjustments were made for full-time and part-time employees who were hired during the twelve-month period and did not receive pay for the full period, and international employees’ pay was converted to US dollars using the exchange rates on the determination date. We did not apply any cost-of-living adjustments as part of the calculation.

In 2019, as permitted by Commission guidance, we changed our median employee from the person used in 2018 as the individual was impacted by a material reduction in pay and substituted another employee with substantially similar compensation (based on the compensation measure described above). For 2020’s analysis, we used the same median employee as in 2019. The 2020 annual total compensation as determined under Item 402 of Regulation S-K for our CEO was $11,750,467, as reported in the Summary Compensation Table of this Proxy Statement. The 2020 annual total compensation as determined under Item 402 of Regulation S-K for our median employee was $120,734. Based on the foregoing, our estimate of the ratio of our CEO’s annual total compensation to our median employee’s annual total compensation for fiscal year 2020 is 97 to 1.

 

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table reflects the number of shares of our common stock that, as of December 31, 2020, were outstanding and available for issuance under compensation plans that have previously been approved by our stockholders as well as compensation plans that have not previously been approved by our stockholders.

 

  Plan Category

 

 

Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

(a)

 

 

Weighted-

Average

Exercise Price
of Outstanding
Options, Warrants
and Rights ($)

(b)(1)

 

 

Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))(2)

(c)

 

  Equity Compensation
  Plans Approved by
  Security Holders (3)(4)

 

  4,723,166

 

  —  

 

  7,979,364

 

 

  Equity Compensation
  Plans not Approved by
  Security Holders (5)

 

 

 

3,745

 

 

2.77

 

 

 

24,917

 

 

  Total

 

 

 

4,726,911

 

 

 

2.77

 

 

 

8,004,281

 

 

(1)

RSUs issued under our equity compensation plans do not require payment by the recipient to us at the time of vesting. As such, the weighted-average exercise price does not take these awards into acc