Form DEF 14A Okta, Inc. For: Jun 16

May 5, 2020 4:11 PM
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant ☒                 Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

   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 § 240.14a-12

OKTA, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

   No fee required.
   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:

 

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Aggregate number of securities to which transaction applies:

 

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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

   (4)  

Proposed maximum aggregate value of transaction:

 

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Total fee paid:

 

   Fee paid previously with preliminary materials.
   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:

 

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Form, Schedule or Registration Statement No.:

 

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   (4)  

Date Filed:

 

 

 

 


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LOGO

Okta, Inc.

100 First Street, Suite 600

San Francisco, California 94105

May 5, 2020

Dear Okta Stockholder:

I am pleased to invite you to attend the 2020 Annual Meeting of Stockholders of Okta, Inc. to be held on June 16, 2020, at 9:00 a.m. Pacific Time. The Annual Meeting will be held virtually via a live interactive audio webcast on the Internet. You will be able to listen, vote and submit your questions at www.virtualshareholdermeeting.com/OKTA2020 during the meeting.

Details regarding the meeting and the business to be conducted are more fully described in the accompanying Notice of 2020 Annual Meeting of Stockholders and Proxy Statement. We encourage you to vote at our Annual Meeting and any adjournments, continuations or postponements of our Annual Meeting if you were a stockholder as of the close of business on April 20, 2020.

Thank you for your ongoing support of Okta.

Sincerely,

 

LOGO

Todd McKinnon

Chairperson of the Board of Directors and Chief Executive Officer

YOUR VOTE IS IMPORTANT

On or about May 5, 2020, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy statement for our 2020 Annual Meeting of Stockholders and our 2020 Annual Report on Form 10-K. The Notice provides instructions on how to vote online or by telephone and explains how to receive a paper copy of proxy materials by mail. This Proxy Statement and our 2020 Annual Report can be accessed online at www.proxyvote.com using the control number located on the Notice, on your proxy card, or in the instructions that accompanied your proxy materials. Our 2020 Annual Report and Proxy Statement are also available on our investor relations website at investor.okta.com.

Even if you plan to attend the Annual Meeting, please ensure that your shares are voted by signing and returning a proxy card or by using our Internet or telephonic voting system.

 


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LOGO

Okta, Inc.

100 First Street, Suite 600

San Francisco, California 94105

NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 16, 2020

Notice is hereby given that Okta, Inc. will hold its 2020 Annual Meeting of Stockholders on June 16, 2020, at 9:00 a.m. Pacific Time via a live interactive audio webcast on the Internet. You will be able to listen, vote and submit your questions at www.virtualshareholdermeeting.com/OKTA2020 during the meeting. We are holding the Annual Meeting for the following purposes, which are more fully described in the accompanying proxy statement:

 

   

To elect four Class III directors to hold office until the 2023 Annual Meeting of Stockholders or until their successors are duly elected and qualified;

 

   

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021;

 

   

To conduct an advisory non-binding vote to approve the compensation of our named executive officers; and

 

   

To transact any other business that properly comes before the Annual Meeting (including adjournments, continuations and postponements thereof).

Our board of directors recommends that you vote “FOR” the director nominees named in Proposal One, “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm as described in Proposal Two, and “FOR” the approval, on an advisory non-binding basis, of the compensation of our named executive officers as described in Proposal Three.

We have elected to provide access to our Annual Meeting materials, which include the proxy statement for our 2020 Annual Meeting of Stockholders accompanying this notice, in lieu of mailing printed copies. On or about May 5, 2020, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our Proxy Statement and our 2020 Annual Report on Form 10-K. The Notice provides instructions on how to vote online or by telephone and explains how you can request a paper copy of the proxy materials. Our Proxy Statement and our 2020 Annual Report can be accessed online at www.proxyvote.com using the control number located on your Notice, on your proxy card, or in the instructions that accompanied your proxy materials.

Only stockholders of record at the close of business on April 20, 2020, are entitled to notice of and to vote at the Annual Meeting.

By Order of the Board of Directors,

 

LOGO

Jonathan T. Runyan

General Counsel and Corporate Secretary

San Francisco, California

May 5, 2020

 


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OKTA, INC.

2020 ANNUAL MEETING OF STOCKHOLDERS

PROXY STATEMENT

TABLE OF CONTENTS

 

GENERAL INFORMATION

    1  

PROPOSAL ONE: ELECTION OF DIRECTORS

    9  

CORPORATE GOVERNANCE

    14  

PROPOSAL  TWO: RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    23  

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

    25  

PROPOSAL THREE: ADVISORY NON-BINDING VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

    26  

EXECUTIVE OFFICERS

    27  

EXECUTIVE COMPENSATION

    28  

REPORT OF COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

    48  

EQUITY COMPENSATION PLAN INFORMATION

    49  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    50  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    54  

DELINQUENT SECTION 16(a) REPORTS

    56  

ADDITIONAL INFORMATION

    56  

 


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LOGO

Okta, Inc.

100 First Street, Suite 600

San Francisco, California 94105

PROXY STATEMENT

FOR THE 2020 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD JUNE 16, 2020

GENERAL INFORMATION

Our board of directors solicits your proxy on our behalf for the 2020 Annual Meeting of Stockholders and at any adjournment, continuation or postponement of the Annual Meeting for the purposes set forth in this Proxy Statement for our 2020 Annual Meeting of Stockholders and the accompanying Notice of 2020 Annual Meeting of Stockholders. The Annual Meeting will be held virtually via a live interactive audio webcast on the Internet on June 16, 2020, at 9:00 a.m. Pacific Time. On or about May 5, 2020, we mailed our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access this Proxy Statement and our 2020 Annual Report on Form 10-K. If you held shares of our Class A or Class B common stock on April 20, 2020, you are invited to attend the meeting at www.virtualshareholdermeeting.com/OKTA2020 and to vote on the proposals described in this Proxy Statement.

In this Proxy Statement the terms “Okta,” “the company,” “we,” “us,” and “our” refer to Okta, Inc. and its subsidiaries. The mailing address of our principal executive offices is Okta, Inc., 100 First Street, Suite 600, San Francisco, California 94105.

 

How can I attend the Annual Meeting online?    We will be hosting our Annual Meeting via live webcast only. Any stockholder can attend the Annual Meeting live online at www.virtualshareholdermeeting.com/OKTA2020. The webcast will start at 9:00 a.m. Pacific Time on June 16, 2020. Stockholders may listen, vote and ask questions while attending the Annual Meeting online. To attend the Annual Meeting, you will need the 16-digit control number that is located on your Notice, on your proxy card, or in the instructions accompanying your proxy materials. Instructions on how to participate in the Annual Meeting are also posted online at www.proxyvote.com.
What matters are being voted on at the Annual Meeting?   

You will be voting on:

 

•  The election of four Class III directors to serve until the 2023 Annual Meeting of Stockholders or until their successors are duly elected and qualified;

 

•  A proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021;

 

•  A proposal to approve, on an advisory non-binding basis, the compensation of our named executive officers; and

 

•  Any other business as may properly come before the Annual Meeting.

 

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How does the board of directors recommend that I vote on these
proposals?

  

Our board recommends a vote:

 

•  “FOR” the election of Shellye Archambeau, Robert L. Dixon, Jr., Patrick Grady, and Ben Horowitz as Class III directors;

 

•  “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021; and

 

•  “FOR” the approval, on an advisory non-binding basis, of the compensation of our named executive officers, as disclosed in this Proxy Statement.

Who is entitled to vote?    Holders of either class of our common stock as of April 20, 2020, the record date for our Annual Meeting (the “Record Date”), may vote at the Annual Meeting.
  

As of the Record Date, there were 116,100,977 shares of our Class A common stock and 8,484,062 shares of our Class B common stock outstanding. Our Class A common stock and Class B common stock are collectively referred to in this Proxy Statement as our “common stock.” Our Class A common stock and Class B common stock will vote as a single class on all matters described in this Proxy Statement. Stockholders are not permitted to cumulate votes with respect to the election of directors. Each share of Class A common stock is entitled to one vote on each proposal and each share of Class B common stock is entitled to 10 votes on each proposal.

 

Registered Stockholders. If shares of our common stock are registered directly in your name with our transfer agent, Computershare, you are considered the “stockholder of record” with respect to those shares. As the stockholder of record, you have the right to vote online, by telephone, or—if you receive paper proxy materials by mail—by filling out and returning the proxy card.

 

Street Name Stockholders. If shares of our common stock are held on your behalf in a brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares that are held in “street name,” (i.e., a “street name stockholder”) and the Notice was forwarded to you by your broker or nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee as to how to vote your shares. If you are a beneficial owner, you may attend the Annual Meeting. However, since a beneficial owner is not the stockholder of record, you may not vote your shares of our common stock at the Annual Meeting unless you request and obtain a valid proxy from the organization that holds your shares giving you the right to vote at the meeting. If you request a printed copy of our proxy materials by mail, your broker, bank or other nominee will provide a voting instruction form for you to use.

 

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What is the quorum requirement?    A quorum is the minimum number of shares required to be present to properly hold an Annual Meeting of Stockholders and conduct business under our bylaws and Delaware law. The presence, in person or by proxy, of a majority of the voting power of all issued and outstanding shares of our common stock entitled to vote on the Record Date will constitute a quorum at the Annual Meeting. Abstentions, withhold votes and broker non-votes are counted as shares present and entitled to vote for the purposes of determining a quorum.
How many votes are needed for the approval of each proposal?   

Proposal One. The election of directors requires a plurality of the voting power of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote thereon to be approved. “Plurality” means that the nominees who receive the largest number of votes cast “For” such nominees are elected as directors. As a result, any shares not voted “For” a particular nominee (whether as a result of stockholder abstention or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on the outcome of the election. You may vote “For” or “Withhold” on each of the nominees for election as a director.

 

Proposal Two. The ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending January 31, 2021, requires the affirmative vote of a majority of the voting power of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered shares present and entitled to vote on this proposal, and thus, will have the same effect as a vote “Against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.

 

Proposal Three. The approval of the compensation of our named executive officers requires the affirmative vote of a majority of the voting power of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions will have the same effect as a vote “Against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.

How do I vote?   

If you are a stockholder of record, there are four ways to vote:

 

(1)   by Internet at www.proxyvote.com, until 11:59 p.m. Eastern Time on June 15, 2020 (have your Notice or proxy card in hand when you visit the website);

 

(2)   by toll-free telephone at 1-800-690-6903, until 11:59 p.m. Eastern Time on June 15, 2020 (have your Notice or proxy card in hand when you call);

 

(3)   by completing and mailing your proxy card (if you received printed proxy materials); or

 

(4)   by Internet during the Annual Meeting. Instructions on how to attend and vote at the Annual Meeting are described at www.virtualshareholdermeeting.com/OKTA2020.

 

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In order to be counted, proxies submitted by telephone or Internet must be received by 11:59 p.m. Eastern Time on June 15, 2020. Proxies submitted by U.S. mail must be received before the start of the Annual Meeting.

 

If you are a street name stockholder, please follow the instructions from your broker, bank or other nominee to vote by Internet, telephone or mail. You may not vote during the Annual Meeting unless you receive a legal proxy from your broker, bank or other nominee.

Can I change my vote?   

Yes. If you are a stockholder of record, you can change your vote or revoke your proxy by:

 

•  notifying our Corporate Secretary, in writing, at Okta, Inc., 100 First Street, Suite 600, San Francisco, California 94105 before the vote is counted;

 

•  voting again using the telephone or Internet before 11:59 p.m. Eastern Time on June 15, 2020 (your latest telephone or Internet proxy is the one that will be counted); or

 

•  attending and voting during the Annual Meeting.

 

Simply logging into the Annual Meeting will not, by itself, revoke your proxy.

 

If you are a street name stockholder, you may revoke any prior voting instructions by contacting your broker, bank or other nominee.

What is the effect of giving a proxy?    Proxies are solicited by and on behalf of our board. Todd McKinnon, J. Frederic Kerrest, William E. Losch and Jonathan T. Runyan have been designated as proxy holders by our board. If your proxy is properly granted, your shares represented by such proxy will be voted at the Annual Meeting in accordance with your instructions. If you do not give specific instructions, your shares will be voted in accordance with the recommendations of our board as described above. If any matters not described in this Proxy Statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote the shares. If the Annual Meeting is adjourned, continued or postponed, the proxy holders can vote your shares on the new Annual Meeting date as well, unless you revoke your proxy instructions, as described above.
What is the effect of abstentions and broker non-votes?    Votes withheld from any nominee, abstentions and “broker non-votes” (i.e., where a broker has not received voting instructions from the beneficial owner and for which the broker does not have discretionary power to vote on a particular matter) are counted as present for purposes of determining the presence of a quorum, but otherwise have no effect on the election of directors. Abstentions have the same effect as a vote “Against” (i) the ratification of the appointment of Ernst & Young LLP as our independent registered

 

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public accounting firm for the fiscal year ending January 31, 2021 and (ii) the advisory non-binding approval of the compensation of our named executive officers.

 

Brokerage firms and other intermediaries holding shares of our common stock in street name for their customers are generally required to vote such shares in the manner directed by their customers. If you do not give timely voting instructions, your broker will have discretion to vote your shares on the proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm but will not have discretion to vote on any other proposals.

Where can I find the voting results of the Annual Meeting?    We will announce preliminary results at the Annual Meeting. We will disclose final results by filing a Current Report on Form 8-K within four business days after the Annual Meeting. If final results are not available at that time, we will provide preliminary voting results in the Current Report on Form 8-K and then provide the final results in an amendment to that Current Report as soon as they become available.
How are proxies solicited for the Annual Meeting?    Our board is soliciting proxies for use at the Annual Meeting. All expenses associated with this solicitation will be borne by us. We will reimburse brokers or other nominees for reasonable expenses that they incur in sending our proxy materials to their customers who are beneficial owners of our common stock. In addition, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Our directors and employees will not be paid any additional compensation for soliciting proxies.
Why did I receive a Notice of Internet Availability of Proxy Materials instead of a full set of proxy materials?    In accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”), we have elected to furnish our proxy materials, including this Proxy Statement and our 2020 Annual Report, primarily online. On or about May 5, 2020, we mailed to our stockholders a Notice that contains instructions on how to access our proxy materials electronically, how to vote at the meeting, and how to request printed copies of the proxy materials and 2020 Annual Report. The Notice explains how you can request to receive all future proxy materials in printed form by mail or electronically by e-mail. We encourage stockholders to access our proxy materials online to help reduce the environmental impact of our annual meetings.
I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy?    As permitted by the SEC, we have adopted a procedure called “householding.” Under this procedure, we deliver a single copy of the Notice and, if applicable, our proxy materials to multiple stockholders who share the same address, unless we have received contrary instructions from one or more of such stockholders. Householding reduces our printing costs, mailing costs and fees, as well as our environmental impact. Stockholders who participate in householding will continue to be able to access and receive individual proxy cards. Upon written or oral request, we will deliver

 

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promptly a separate copy of the Notice and, if applicable, our proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these materials. To receive a separate copy, or if you are receiving multiple copies and wish to participate in householding, please contact us at our principal office address:

 

Okta, Inc.

Attention: Investor Relations

100 First Street, Suite 600

San Francisco, California 94105

(415) 604-3346

 

Street name stockholders may contact their broker, bank or other nominee to request information about householding.

What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?   

Stockholder Proposals

 

Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at next year’s Annual Meeting of Stockholders by submitting their proposals in writing to our Corporate Secretary at our principal office address shown above. To be considered for inclusion in our proxy statement for the 2021 Annual Meeting of Stockholders, our Corporate Secretary must receive the written stockholder proposal no later than January 5, 2021. In addition, stockholder proposals must comply with the requirements of SEC Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Stockholder proposals should be addressed to:

 

Okta, Inc.

Attention: Corporate Secretary

100 First Street, Suite 600

San Francisco, California 94105

 

Our bylaws establish an advance notice procedure for stockholders who wish to present a proposal before an Annual Meeting of Stockholders but do not intend for the proposal to be included in our proxy statement. Our bylaws provide that the only business that may be conducted at an Annual Meeting of Stockholders is business that is (i) specified in our proxy materials with respect to such Annual Meeting of Stockholders, (ii) otherwise properly brought before such Annual Meeting of Stockholders by or at the direction of our board, or (iii) properly brought before such meeting by a stockholder of record entitled to vote at such Annual Meeting of Stockholders who has delivered timely written notice to our Corporate Secretary, which notice must contain the information specified in our bylaws. To be timely for the 2021 Annual Meeting of Stockholders, our Corporate Secretary must receive the written notice at our principal executive offices:

 

•  not earlier than February 19, 2021, and

 

•  not later than the close of business on March 21, 2021.

 

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In the event we hold the 2021 Annual Meeting of Stockholders more than 30 days before or more than 60 days after the one-year anniversary of the 2020 Annual Meeting, then, for notice by the stockholder to be timely, it must be received by the Corporate Secretary not earlier than the close of business on the 120th day prior to such Annual Meeting and not later than the close of business on the later of the 90th day prior to such Annual Meeting or the tenth day following the day on which public announcement of the date of such Annual Meeting is first made.

 

If a stockholder who has notified us of his, her or its intention to present a proposal at an Annual Meeting of Stockholders does not appear to present his, her or its proposal at such Annual Meeting of Stockholders, we are not required to present the proposal for a vote at such Annual Meeting of Stockholders.

  

Nomination of Director Candidates

 

Holders of our common stock may propose director candidates for consideration by our nominating and corporate governance committee (the “nominating committee”). Any such recommendation must include the nominee’s name and qualifications for membership on our board and be directed to our Corporate Secretary at the address set forth above. For additional information regarding stockholder recommendations for director candidates, see the section titled “Corporate Governance—Stockholder Recommendations.”

 

In addition, our bylaws permit stockholders to nominate directors for election at an Annual Meeting of Stockholders. To nominate a director, you must provide the information required by our bylaws. In addition, you must give timely notice to our Corporate Secretary in accordance with our bylaws, which, in general, require that the notice be received by our Corporate Secretary within the time periods described above under the section titled “Stockholder Proposals” for stockholder proposals that are not intended to be included in a proxy statement.

 

Availability of Bylaws

 

A copy of our bylaws is included as Exhibit 3.2 to our 2020 Annual Report and available via the SEC’s website at www.sec.gov. You may also contact our Corporate Secretary at the address set forth above for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

Why is this Annual Meeting being held virtually?    We are excited to embrace the latest technology to provide ease of access, real-time communication, and cost savings for our stockholders and our company. Hosting a virtual meeting makes it easy for our stockholders to participate from any location around the world.

 

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You will be able to participate in the Annual Meeting of Stockholders online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/OKTA2020. You also will be able to vote your shares electronically prior to or during the Annual Meeting.

How can I submit a question at the
Annual Meeting?
   If you want to submit a question during the Annual Meeting, log into www.virtualshareholdermeeting.com/OKTA2020, type your question in the “Ask a Question” field, and click “Submit.” Questions pertinent to meeting matters will be read and answered during the meeting, subject to time constraints. The questions and answers will be available as soon as practical after the Annual Meeting at investor.okta.com and will remain available for one week after posting.
What if I have technical difficulties or trouble accessing the Annual Meeting?    If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting log in page. Technical support will be available starting at 8:30 a.m. Pacific Time on June 16, 2020 and will remain available until the Annual Meeting ends.

 

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PROPOSAL ONE:

ELECTION OF DIRECTORS

Board Structure

Our board is divided into three staggered classes of directors. One class is elected each year at the Annual Meeting of Stockholders for a term of three years. The term of the Class III directors expires at the Annual Meeting. The term of the Class I directors expires at the 2021 Annual Meeting of Stockholders and the term of the Class II directors expires at the 2022 Annual Meeting of Stockholders. Directors who are re-elected are expected to hold office for a three-year term or until the election and qualification of their successors in office.

Nominees

Our board has nominated Ms. Shellye Archambeau and Messrs. Robert L. Dixon, Jr., Patrick Grady and Ben Horowitz for re-election as Class III directors to hold office until the 2023 Annual Meeting of Stockholders or until their successors are duly elected and qualified, subject to their earlier resignation or removal. Each of the nominees is a current Class III director and member of our board and has consented to serve if elected.

Unless you direct otherwise through your proxy voting instructions, the persons named as proxies will vote all proxies received “FOR” the election of each nominee. If any nominee is unable or unwilling to serve at the time of the Annual Meeting, the persons named as proxies may vote for a substitute nominee chosen by our present board. In the alternative, the proxies may vote only for the remaining nominees, leaving a vacancy on our board. Our board may fill such vacancy at a later date or reduce the size of our board. We have no reason to believe that any of the nominees will be unwilling or unable to serve if elected as a director.

Recommendation of our Board

OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES.

The biographies of each of the nominees and continuing directors below contain information regarding each such person’s service as a director, business experience, director positions held currently or at any time during the last five years and the experiences, qualifications, attributes or skills that caused our board to determine that the person should serve as a director of the company. In addition to the information presented below regarding each nominee’s and continuing director’s specific experience, qualifications, attributes and skills that led our board to conclude that he or she should serve as a director, we believe that each of our directors has a reputation for integrity, honesty and high ethical standards. Each of our directors has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our company and our board. Finally, we value our directors’ experience in relevant areas of business management and on other boards of directors and board committees.

Our corporate governance guidelines dictate that a majority of our board must consist of directors whom our board has determined are “independent” under the listing requirements of the NASDAQ Stock Market LLC (the “NASDAQ”).

Directors

The following table sets forth information regarding our directors as of April 20, 2020.

 

Name   Age   Director
Since
 

Principal Occupation

 

Class

 

Audit
Committee

 

Compensation
Committee

 

Nominating
Committee

Employee Directors

Todd McKinnon, Chairperson

  48   2009   Chief Executive Officer   I      

J. Frederic Kerrest, Executive Vice Chairperson

  43   2009   Chief Operating Officer   II      

 

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Name   Age   Director
Since
 

Principal Occupation

 

Class

 

Audit
Committee

 

Compensation
Committee

 

Nominating
Committee

Independent Directors

Shellye Archambeau

  57   2018   Former Chief Executive Officer, MetricStream, Inc.   III   member    

Robert L. Dixon, Jr.

  64   2019   Former Global Chief Information Officer and Senior Vice President, PepsiCo, Inc.   III     member  

Patrick Grady

  37   2014   Managing Member, Sequoia Capital   III   member    

Ben Horowitz, Lead Independent Director

  53   2010   General Partner, Andreessen Horowitz   III      

Michael Kourey

  60   2015   Chief Financial Officer, Vlocity Inc.   I   chair    

Rebecca Saeger

  65   2019   Former Executive Vice President and Chief Marketing Officer, Charles Schwab   II     member   member

Michael Stankey

  61   2016   Vice Chairman, Workday, Inc.   I     chair   member

Michelle Wilson

  57   2015   Former Senior Vice President and General Counsel, Amazon.com Inc.   II     member   chair

Our board believes that directors who provide a significant breadth of experience, knowledge, and abilities in areas relevant to our business, while also representing a diversity of age, gender, race, sexual orientation and ethnicity, contribute to a well-balanced and effective board. Our board’s current metrics are highlighted in the following graphic. Information about each individual director and director nominee follows.

 

LOGO

 

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Information Concerning Director Nominees

Shellye Archambeau. Ms. Archambeau joined our board in December 2018. From 2002 until 2018, Ms. Archambeau was Chief Executive Officer of MetricStream, Inc., a leading provider of governance, risk, compliance and quality management solutions to corporations across diverse industries. Prior to that, Ms. Archambeau served as Chief Marketing Officer and Executive Vice President of Sales for Loudcloud, Inc., Chief Marketing Officer of NorthPoint Communications, and President of Blockbuster Inc.’s e-commerce division. Before she joined Blockbuster, she held domestic and international executive positions during a 15-year career at IBM. Ms. Archambeau has served on the boards of Nordstrom, Inc. since 2015, Verizon, Inc. since 2013, and Roper Technologies since 2018. She formerly served on the board of Arbitron, Inc.

We believe that Ms. Archambeau is qualified to serve as a member of our board because of her valuable knowledge of technology, digital media and communications platforms and her experience serving on other boards.

Robert L. Dixon, Jr. Mr. Dixon joined our board in June 2019. Mr. Dixon has owned The RD Factor, Inc., a digital and information technology consulting business, since December 2016. Mr. Dixon served at PepsiCo, Inc., a global food and beverage company, as Global Chief Information Officer and Senior Vice President from 2007 through 2016. Previously, Mr. Dixon held various positions with The Procter & Gamble Company, a consumer household products company, since 1977, including Vice President of Global Business Services. Mr. Dixon has served on the boards of Anthem, Inc., a health benefits company, since 2011, and Build-A-Bear Workshop, Inc., a specialty retailer, since February 2018. At the Georgia Institute of Technology, Mr. Dixon serves on the President’s Advisory Board, the College of Engineering Advisory Board and the College of Computing Advisory Board. He previously served on the CIO Advisory Board for IBM. Mr. Dixon holds a Bachelor of Science Degree in electrical engineering from The Georgia Institute of Technology.

We believe that Mr. Dixon is qualified to serve as a member of our board because he brings valuable technology experience and the perspective of our customers through his prior role as Global Chief Information Officer and his service on the CIO advisory board for another large public company.

Patrick Grady. Mr. Grady joined our board in May 2014. Since March 2007, Mr. Grady has held various roles at Sequoia Capital, a venture capital firm, where he currently serves as a Managing Member. From July 2004 to February 2007, Mr. Grady served as an associate at Summit Partners, a venture capital and private equity firm. Since January 2013, Mr. Grady has served as a member of the board of directors of Prosper Marketplace, Inc., a peer-to-peer lending platform. Mr. Grady also currently serves on the boards of several private companies. Mr. Grady holds a Bachelor of Science in economics and finance from Boston College.

We believe that Mr. Grady is qualified to serve as a member of our board because of his significant knowledge of and history with our company, his experience as a seasoned investor and as a current and former director of many companies, and his knowledge of the industry in which we operate.

Ben Horowitz. Mr. Horowitz joined our board in February 2010. Mr. Horowitz is a co-founder and has served as a General Partner of Andreessen Horowitz, a venture capital firm, since July 2009. From September 2007 to October 2008, Mr. Horowitz served as a Vice President and General Manager at Hewlett-Packard Company, an information technology company. From September 1999 to September 2007, Mr. Horowitz co-founded and served as the President and Chief Executive Officer of Opsware Inc., a computer software company. Since June 2016, Mr. Horowitz has served as a member of the board of directors of Lyft, Inc., which operates a multimodal transportation network. Mr. Horowitz also currently serves on the boards of several private companies. Mr. Horowitz holds a Master of Science in computer science from the University of California, Los Angeles and a Bachelor of Arts in computer science from Columbia University.

We believe that Mr. Horowitz is qualified to serve as a member of our board because of his significant knowledge of and history with our company; his experience as a company executive, a seasoned investor, and a current and former director of many companies; and his knowledge of the industry in which we operate.

 

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Information Concerning Continuing Directors

J. Frederic Kerrest. Mr. Kerrest co-founded Okta and has served as our Chief Operating Officer and as a member of our board since July 2009. Mr. Kerrest was appointed Executive Vice Chairperson of our board in March 2019. From August 2002 to February 2007, Mr. Kerrest served in a variety of sales and business development roles at salesforce.com, inc., a cloud-based customer relationship management company. Mr. Kerrest holds a Masters in Business Administration from the MIT Sloan School of Management and a Bachelor of Science in computer science from Stanford University.

We believe that Mr. Kerrest is qualified to serve as a member of our board because of his experience and perspective as our Chief Operating Officer and co-founder.

Michael Kourey. Mr. Kourey joined our board in October 2015. Since January 2019, Mr. Kourey has served as the Chief Financial Officer of Vlocity Inc., a cloud software company. From June 2015 to November 2018, Mr. Kourey served as the Chief Financial Officer of Medallia, Inc., a cloud-based customer experience management company. From May 2013 to March 2015, Mr. Kourey served as a Partner at Khosla Ventures, a venture capital firm, where he previously served as Operating Partner from April 2012 to May 2013. From July 1991 to February 2012, Mr. Kourey served in a variety of roles at Polycom, Inc., a communications solutions company, most recently as Chief Financial Officer. Mr. Kourey also served as a director of Polycom from January 1999 to May 2011. Mr. Kourey serves on the board of trustees of Villanova University and on the board of directors of a private company. He previously served on the boards of RingCentral, Inc., Aruba Networks, Inc., Riverbed Technology, Inc. and other public and private companies. Mr. Kourey holds a Masters of Business Administration from Santa Clara University and a Bachelor of Science from University of California, Davis.

We believe that Mr. Kourey is qualified to serve as a member of our board because of his experience as a public company chief financial officer and as a public and private company executive with primary responsibility for financial oversight; his extensive finance background; his service as a current and former director of many companies; and his knowledge of the industry in which we operate.

Todd McKinnon. Mr. McKinnon co-founded Okta and has served as our Chief Executive Officer (“CEO”) and as a member of our board since January 2009. Mr. McKinnon was appointed Chairperson of our board in February 2017. From October 2003 to February 2009, Mr. McKinnon served in various roles at salesforce.com, inc., a cloud-based customer relationship management company, most recently as Senior Vice President of Development. From 1995 to 2003, Mr. McKinnon held various engineering and leadership positions at Peoplesoft, Inc., an enterprise application software company, which was acquired by Oracle Corporation in January 2005. Mr. McKinnon holds a Master of Science in computer science from California Polytechnic State University, San Luis Obispo and a Bachelor of Science in management and information systems from Brigham Young University.

We believe that Mr. McKinnon is qualified to serve as a member of our board because of his experience and perspective as our CEO and co-founder.

Rebecca Saeger. Ms. Saeger joined our board in January 2019. Ms. Saeger served as an Executive Vice President at Charles Schwab from 2004 until 2011, most recently as Chief Marketing Officer. Prior to joining Charles Schwab, she was Executive Vice President, Marketing at Visa U.S.A. Before joining Visa, Ms. Saeger was Senior Vice President and head of Account Management at Foote, Cone & Belding, and Senior Vice President at Ogilvy & Mather. Since February 2012, Ms. Saeger has served on the board of directors of E*TRADE Financial Corporation, a financial services company, and as a member of the E*TRADE Bank board. She holds a Bachelor of Arts from Muhlenberg College and a Masters in Business Administration from the Wharton School at the University of Pennsylvania.

We believe that Ms. Saeger is qualified to serve as a member of our board because of her valuable expertise in consumer and business-to-business marketing, strategic planning, and brand development, as well as her experience serving on other boards.

 

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Michael Stankey. Mr. Stankey joined our board in December 2016. Mr. Stankey currently serves as the Vice Chairman at Workday, Inc., a financial and human capital management software vendor where, from September 2009 to June 2015, he served as President and Chief Operating Officer. From October 2007 to September 2009, Mr. Stankey was an Operating Partner at Greylock, a venture capital firm. From December 2001 to April 2007, Mr. Stankey served as Chairman and Chief Executive Officer at PolyServe, a database and file serving utility service. Since February 2017, Mr. Stankey has served as a member of the board of directors of Cloudera, Inc., a data management, machine learning and advance analytics platform provider. Mr. Stankey also serves on the boards of two private companies. Mr. Stankey holds a Bachelor of Business Administration from the University of Wisconsin-Eau Claire.

We believe that Mr. Stankey is qualified to serve as a member of our board because of his experience as a company executive and as a current and former director of many companies, and because of his knowledge of the industry in which we operate.

Michelle Wilson. Ms. Wilson joined our board in August 2015. From 1999 to 2012, Ms. Wilson served as Senior Vice President and General Counsel, and held a variety of other senior roles, at Amazon.com Inc., an electronic commerce and cloud computing company. Prior to Amazon.com, Ms. Wilson was a Partner at Perkins Coie LLP, a law firm. Ms. Wilson has served on the boards of Zendesk Inc., a software development company that provides a SaaS customer service platform, since 2014, and of Pinterest, Inc., a visual discovery engine, since May 2016. Ms. Wilson also currently serves on the board of directors of a private company. Ms. Wilson holds a Juris Doctor from University of Chicago and a Bachelor of Arts in finance from University of Washington.

We believe that Ms. Wilson is qualified to serve as a member of our board because of her experience as a public company board member, her experience as a public company executive officer with primary responsibility for advising on legal and corporate governance issues, her extensive experience advising an internet services company, and her knowledge of the industry in which we operate.

 

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CORPORATE GOVERNANCE

Our business and affairs are managed under the direction of our board, which is elected by our stockholders. In carrying out its responsibilities, our board selects and monitors our top management, provides oversight of our financial reporting processes, and determines and implements our corporate governance policies.

Our board and management team are committed to good corporate governance to ensure that Okta is managed for the long-term benefit of our stockholders, and we have a variety of policies and procedures to promote such goals. To that end, during the past year, our management periodically reviewed our corporate governance policies and practices to ensure that they remain consistent with the requirements of the Sarbanes-Oxley Act of 2002, SEC rules and NASDAQ listing standards.

Besides verifying the independence of the members of our board and committees (as discussed below under “Independence of Our Board”), at the direction of our board, we also:

 

   

Periodically review and make necessary changes to the charters for our audit, compensation and nominating committees;

 

   

Have established disclosures control policies and procedures in accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC;

 

   

Have a procedure to receive and address anonymous and confidential complaints or concerns regarding audit or accounting matters; and

 

   

Have a code of conduct that applies to our employees, officers and directors, including our CEO, Chief Financial Officer, and other executive and senior financial officers.

Corporate Governance Guidelines

Our board has adopted a set of corporate governance guidelines, which can be found on our investor relations website at investor.okta.com under “Corporate Governance.” Our corporate governance guidelines address such matters as:

 

   

Director independence—independent directors must constitute at least a majority of our board;

 

   

Board effectiveness—our board and each of its committees must conduct an annual self-evaluation;

 

   

Access to independent advisors—our board as a whole, and each of its committees separately, has authority to retain independent experts, advisors or professionals as each deems necessary or appropriate; and

 

   

Board committees—all members of the audit, compensation and nominating committees are independent in accordance with applicable NASDAQ criteria.

Our nominating committee is responsible for reviewing our corporate governance guidelines from time to time and reporting and making recommendations to our board concerning corporate governance matters.

Code of Conduct

Our board has adopted a code of conduct that applies to all of our employees, officers and directors, including our CEO, Chief Financial Officer, and other executive and senior financial officers. The full text of our code of conduct is available on our investor relations website at investor.okta.com under “Corporate Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendments to, or waiver from, a provision of our code of conduct by posting such information on our Corporate Governance web page. During the fiscal year ending January 31, 2020, or fiscal 2020, no waivers were granted from any provision of the code of conduct.

 

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Independence of Our Board

Our Class A common stock is listed on NASDAQ. Under the NASDAQ listing standards, independent directors must constitute a majority of a listed company’s board. In addition, the NASDAQ listing standards require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating committees be independent. Under the NASDAQ listing standards, a director will only qualify as an “independent director” if, in the opinion of that listed company’s board of directors, that director does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the NASDAQ listing standards. Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under the Exchange Act and the NASDAQ listing standards.

Our board has undertaken a review of the independence of each director. Based on information provided by each director concerning his or her background, employment and affiliations, our board has determined that Ms. Archambeau, Mr. Dixon, Mr. Grady, Mr. Horowitz, Mr. Kourey, Ms. Saeger, Mr. Stankey and Ms. Wilson do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC and the NASDAQ listing standards. In making these determinations, our board considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director and any of their affiliated funds, and any transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.”

Board Leadership Structure and Role of Our Lead Independent Director

Todd McKinnon, our co-founder and CEO, serves as Chairperson of our board. In that capacity, he presides over meetings of our board and holds such other powers and carries out such other duties as are customarily carried out by a board chairperson. Mr. Kerrest, our co-founder and Chief Operating Officer, serves as Executive Vice Chairperson of our board. Mr. McKinnon and Mr. Kerrest bring valuable insight to our board due to their perspective and experience as Okta’s co-founders and senior executives.

Our corporate governance guidelines provide that one of our independent directors will serve as the lead independent director. Our board has appointed Ben Horowitz to serve as lead independent director. In that capacity, Mr. Horowitz presides over periodic meetings of our independent directors, serves as a liaison between the Chairperson of our board and the independent directors, and performs such additional duties as our board may otherwise determine and delegate.

Our Board’s Role in Risk Oversight

Risk is inherent in every business, and we face a number of risks, including, among others, strategic, financial, business and operational, macroeconomic, cybersecurity, legal and regulatory compliance and reputational risks. We have designed and implemented processes to manage risk in our operations, including our enterprise risk management program launched in fiscal 2020.

Our management team is responsible for the day-to-day management of risks the company faces, while our board, as a whole and assisted by its committees, has responsibility for the oversight of risk management, including our enterprise risk management program. In its risk oversight role, our board has the responsibility to satisfy itself that the enterprise risk management processes our management team has designed and implemented are appropriate and functioning as designed. To that end, our board believes that open communication between

 

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our management team and our board is essential for effective risk management and oversight. Our CEO and other members of the senior management team attend quarterly meetings of our board, as well as such other meetings as the board deems appropriate, where, among other topics, they discuss strategy and risks facing the company. In this respect, our full board reviews strategic and operational risk in the context of reports from our management team, receives reports on all significant committee activities at each regular meeting, and evaluates the risks inherent in significant transactions.

While our board is ultimately responsible for risk oversight, our board committees help fulfill those oversight responsibilities in certain areas of risk, as described below.

Our audit committee assists our board in fulfilling its oversight responsibilities with respect to risk management in the areas of internal control over financial reporting and disclosure controls and procedures, legal and regulatory compliance, liquidity risk, and cybersecurity. Our audit committee discusses with our management team and Ernst & Young LLP guidelines and policies with respect to risk assessment and risk management and reviews our major financial risk exposures and the steps our management team has taken to monitor and control these exposures. Our audit committee also monitors certain key risks on a regular basis, such as risk associated with internal control over financial reporting and liquidity risk.

Our compensation committee assesses risks created by the incentives inherent in our compensation policies. Specifically, the compensation committee, along with our management team, at least annually considers potential risks when reviewing and approving various compensation plans, including executive compensation. Based on its most recent review, our compensation committee has concluded that our compensation programs, including our executive compensation program, do not encourage risk taking to a degree that is reasonably likely to have a materially adverse impact on Okta or our operations.

Our nominating committee assists our board in fulfilling its oversight responsibilities with respect to the management of risk associated with our board’s organization, membership and structure, and corporate governance.

Meetings of Our Board and Annual Meeting Attendance

Our board held six meetings during fiscal 2020. Each director attended at least 75% of all meetings of our board and the committees on which he or she served that were held during fiscal 2020. Under our corporate governance guidelines, directors are expected to spend the time needed and meet as frequently as our board deems necessary or appropriate to discharge their responsibilities. Directors are also expected to make efforts to attend our Annual Meeting of Stockholders, all meetings of our board, and all meetings of the committees on which they serve. All directors then in office attended the 2019 Annual Meeting of Stockholders.

Committees of Our Board

Our board has established three standing committees: audit, compensation, and nominating. The composition and responsibilities of each committee is described below. Members serve on these committees until they resign or until otherwise determined by our board. Our board assesses the composition of the committees at least annually to consider whether committee assignments should be rotated. Each committee operates pursuant to a written charter adopted by our board that is available on our website at investor.okta.com.

Audit Committee

During fiscal 2020, our audit committee consisted of Messrs. Grady and Kourey and Ms. Archambeau, with Mr. Kourey serving as Chairperson. Ms. Wilson served on our audit committee until March 2019, when Ms. Archambeau joined the committee. The composition of our audit committee meets the requirements for independence under current NASDAQ listing standards and SEC rules and regulations. Each member of our

 

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audit committee meets the financial literacy requirements of the NASDAQ listing standards. In addition, our board has determined that Mr. Kourey is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”). Our audit committee, among other things:

 

   

selects a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;

 

   

discusses the scope and results of the audit with the independent registered public accounting firm, and reviews, with our management team and the independent registered public accounting firm, our interim and year-end results of operations;

 

   

develops procedures for employees to submit concerns anonymously about questionable accounting or audit matters;

 

   

reviews our policies on risk assessment and risk management;

 

   

reviews related party transactions; and

 

   

approves (or, as permitted, pre-approves) all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm.

Our audit committee annually reviews the independent registered public accounting firm’s performance and independence, including reviewing all relationships between the independent registered public accounting firm and Okta and any disclosed relationships or services that may impact the objectivity and independence of the independent registered public accounting firm.

Our audit committee operates under a written charter that satisfies the applicable rules of the SEC and the NASDAQ listing standards. Our audit committee held nine meetings during fiscal 2020.

Compensation Committee

During fiscal 2020, our compensation committee consisted of Messrs. Dixon and Stankey and Mses. Saeger and Wilson, with Mr. Stankey serving as Chairperson. Mr. Grady served on our compensation committee until March 2019, when Ms. Saeger joined the committee. The composition of our compensation committee meets the requirements for independence under the NASDAQ listing standards and SEC rules and regulations. Each member of our compensation committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act. The purpose of our compensation committee is to discharge the responsibilities of our board relating to the compensation of our executive officers. Our compensation committee, among other things:

 

   

reviews, approves and determines, or makes recommendations to our board regarding, the compensation of our executive officers;

 

   

administers our equity incentive plans;

 

   

reviews and approves, or makes recommendations to our board regarding, incentive compensation and equity plans; and

 

   

establishes and reviews general policies relating to the compensation and benefits offered to our employees.

Our compensation committee operates under a written charter that satisfies the applicable rules of the SEC and the NASDAQ listing standards, a current copy of which is available at the following web address: https://investor.okta.com/corporate-governance/governance-overview. Our compensation committee held seven meetings during fiscal 2020.

 

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Compensation Committee Interlocks and Insider Participation

During fiscal 2020, Messrs. Dixon and Stankey and Ms. Wilson, and through March 2019, Mr. Grady, and from March 2019, Ms. Saeger, were the only members of our compensation committee. No member of our compensation committee is or has been an officer or employee of our company. No Okta executive officer currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board or compensation committee. See the section titled “Certain Relationships and Related Party Transactions” for information about related party transactions involving members of our compensation committee or their affiliates.

Nominating Committee

During fiscal 2020, our nominating committee consisted of Mr. Stankey and Mses. Saeger and Wilson, with Ms. Wilson serving as Chairperson. Mr. Kourey served on our nominating committee until March 2019, when Ms. Saeger joined the committee. The composition of our nominating committee meets the requirements for independence under the NASDAQ listing standards and SEC rules and regulations. Our nominating committee, among other things:

 

   

identifies, evaluates and selects, or makes recommendations to our board regarding, nominees for election to our board and its committees;

 

   

evaluates the performance of our board and its committees;

 

   

considers and makes recommendations to our board regarding the composition of our board and its committees;

 

   

reviews developments in corporate governance practices, including environmental, social and governance (“ESG”) issues and disclosures;

 

   

evaluates the adequacy of our corporate governance practices and reporting; and

 

   

develops and makes recommendations to our board regarding our corporate governance guidelines.

Our nominating committee operates under a written charter that satisfies the applicable listing requirements and rules of NASDAQ. Our nominating committee held three meetings during fiscal 2020.

Identifying and Evaluating Director Nominees

Our board has delegated to our nominating committee the responsibility of identifying suitable candidates to nominate to our board (including candidates to fill any vacancies that may occur) and assessing their qualifications in light of the policies and principles in our corporate governance guidelines and the committee’s charter. Our nominating committee may gather information about candidates through interviews, detailed questionnaires, comprehensive background checks, or any other means its members deem appropriate. Our nominating committee then meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of our board. Based on the results of the evaluation process, our nominating committee recommends candidates for our board’s approval as director nominees for election to our board.

Our board appointed Ms. Archambeau and Mr. Dixon as directors effective December 13, 2018 and June 14, 2019, respectively. Both Ms. Archambeau and Mr. Dixon were introduced to us by other non-executive members of our board.

Minimum Qualifications

Our nominating committee uses a variety of methods for identifying and evaluating director nominees and will consider all facts and circumstances that it deems appropriate or advisable. As part of this process, our nominating committee will consider the current size and composition of our board, as well as the needs of our board and its committees.

 

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Some of the qualifications that our nominating committee considers include, without limitation, issues of character, ethics, integrity, judgment, independence, diversity, skills, education, expertise, business acumen, length of service, understanding of our business and industry and other commitments. In addition, nominees must have proven achievement and competence in their respective fields, the ability to exercise sound business judgment, an objective perspective, the ability to offer advice and support to our management team, and the ability to make significant contributions to Okta’s success. The nominating committee looks for individuals who have skills that are complementary to those of our existing board, the highest ethics, a commitment to the long-term interests of our stockholders, and an understanding of the fiduciary responsibilities of a public company director. Finally, nominees must have sufficient time available in the judgment of our nominating committee to effectively perform all board and committee responsibilities. Members of our board are expected to prepare for, attend, and participate in all board and applicable committee meetings. Other than the foregoing, there are no stated minimum criteria for director nominees, although our nominating committee may also consider other factors that it deems, from time to time, to be in the best interests of Okta and our stockholders. After completing its review and evaluation of director candidates, our nominating committee recommends to our full board the director nominees for selection.

Stockholder Recommendations

Stockholders may submit recommendations for director candidates to our nominating committee by writing to our Corporate Secretary at Okta, Inc., 100 First Street, Suite 600, San Francisco, California 94105. All such recommendations should include the nominee’s name and qualifications and all other information required by our bylaws. Our nominating committee will evaluate any candidates properly recommended by stockholders against the same criteria and pursuant to the same policies and procedures that govern the evaluation of candidates proposed by directors or members of our management team.

Stockholder Outreach

With oversight and direction from the nominating committee, in fall 2019 we commenced our initial annual stockholder outreach program to better understand stockholder perspectives and actively seek stockholder feedback on our board, governance, sustainability, and executive compensation practices. In fiscal 2020, we contacted stockholders representing in total over 53% of our outstanding Common Stock, or over 57% of our shares of outstanding Common Stock excluding shares held by our executive officers and board members and engaged in extensive discussions with several of our largest stockholders. In this regard, our team met with governance professionals from passive funds as well as portfolio managers from active funds. We received many supportive and positive comments on our direction with respect to our business, growth, corporate governance and executive compensation program. The breadth of our outreach program enabled us to gather feedback from a significant cross-section of our stockholder base. We will continue to engage with stockholders to maintain an open dialogue and ensure that we have an in-depth understanding of our stockholders’ perspectives.

Stockholder Communications

All stockholders and other interested parties are welcome to communicate with our board as a whole or with individual directors through an established process for stockholder communication. For a communication directed to our board as a whole, please contact our General Counsel in writing at the address listed below or by email to investor@okta.com (specifying “ATTN General Counsel” in the subject line). For a communication directed to an individual director in his or her capacity as a member of our board, please contact the director in writing at the address listed below or by email to investor@okta.com (specifying “ATTN [name of director]” in the subject line).

Okta, Inc.

100 First Street, Suite 600

San Francisco, California 94105

Attn: [General Counsel or Name of Individual Director]

 

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Our General Counsel, in consultation with appropriate members of our board as necessary, will review all incoming communications and, if appropriate, will forward such communications to the appropriate director(s) or to the Chairperson of our board. The General Counsel will generally not forward communications if they are deemed inappropriate; if they are solicitations, advertisements, surveys, “junk” mail, or mass mailings; or if they consist of individual grievances or other interests that are personal to the writer and could not reasonably be construed to be of concern to securityholders or other constituencies of the company.

Environmental, Social and Governance Matters

We believe we have a responsibility to the communities and the environment in which we operate, and we believe that operating our company in an environmentally and socially responsible manner will help drive our long-term growth. We are committed to managing the risks and opportunities that arise from ESG issues. To that end, our nominating committee is responsible for conducting a periodic review of ESG matters of significance to us. In addition, we are proud of our Okta for Good program, which focuses on driving long-term impact to strengthen the connections between people, technology and community through philanthropy in the following areas:

 

   

Tech Impact: we enable tech-for-good ecosystems to boost technology capacity for nonprofits.

 

   

Community Impact: we support Okta’s key global communities.

 

   

Employee Impact: we empower Okta employees to deepen their personal impact by giving back.

For more information, please visit https://www.okta.com/responsibility

Non-Employee Director Compensation

Our non-employee director compensation program is designed to attract, retain and reward qualified directors and further align the financial interests of our non-employee directors with those of our stockholders. Under our Non-Employee Director Compensation Policy, non-employee directors receive initial equity grants when they join the board, and annual cash retainers and equity grants for their continued annual service. We also reimburse all reasonable out-of-pocket expenses incurred by directors in order to attend meetings of our board or any committee thereof.

When first appointed to our board, non-employee directors are granted restricted stock units (“RSUs”) having a fair market value of $350,000 on the date of grant. These initial RSU grants will vest in equal annual installments on the first three anniversaries of the date on which the non-employee director was appointed to our board, subject to continuous service.

Non-employee directors receive the following annual cash retainers for their service:

 

Position   Annual Cash
Retainer
 

Board Member

  $ 30,000  

Lead Independent Director

  $ 20,000  

Audit Committee Chair

  $ 20,000  

Compensation Committee Chair

  $ 15,000  

Nominating Committee Chair

  $ 8,000  

Audit Committee Member other than Chair

  $ 10,000  

Compensation Committee Member other than Chair

  $ 7,500  

Nominating Committee Member other than Chair

  $ 4,000  

 

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In addition, on the date of each Annual Meeting of Stockholders, each non-employee director who will continue as a non-employee director following such meeting will be granted RSUs having a fair market value of $200,000 on the date of grant. These annual RSU grants will fully vest on the earlier of the first anniversary of the grant date or immediately prior to the next Annual Meeting of Stockholders, subject to continuous service.

Under our Non-Employee Director Compensation Policy, all RSUs granted to non-employee directors will be settled for shares of our Class A common stock. These RSUs are subject to full accelerated vesting upon the sale of our company in a change in control transaction (as defined in our Non-Employee Director Compensation Policy).

The following table presents the total compensation for each person who served as a non-employee director during fiscal 2020. Other than as set forth in the table below, we did not pay any compensation or make any equity awards to our non-employee directors during fiscal 2020. Messrs. McKinnon and Kerrest, who were also our employees, received no compensation for their service as directors. The compensation received by Mr. McKinnon as CEO and by Mr. Kerrest as Chief Operating Officer is presented in “Executive Compensation—Fiscal 2020 Summary Compensation Table” below.

Fiscal 2020 Director Compensation Table

 

Name   Fees Earned or Paid In
Cash ($)
    Stock Awards
($)(1)(2)(3)
    Total
($)
 

Shellye Archambeau(4)

    38,736       200,087       238,823  

Robert L. Dixon, Jr.(5)

    25,258       350,099       375,357  

Patrick Grady

    41,145       200,087       241,232  

Ben Horowitz

    50,140       200,087       250,227  

Michael Kourey(6)

    50,691       200,087       250,778  

Rebecca Saeger(7)

    40,034       200,087       240,121  

Michael Stankey(8)

    49,138       200,087       249,225  

Michelle Wilson

    47,004       200,087       247,091  

 

(1) 

The amounts reported represent the aggregate grant date fair value of the RSUs granted during fiscal 2020 under our 2017 Equity Incentive Plan (the “2017 Plan”) as computed in accordance with FASB ASC 718. Such grant date fair values do not take into account any estimated forfeitures related to service-based vesting conditions. The assumptions used in calculating the grant date fair values are set forth in the notes to our consolidated financial statements included in our 2020 Annual Report. These amounts do not necessarily correspond to the actual value recognized or that may be recognized by the directors.

(2) 

Notwithstanding the respective RSU vesting schedules, all the RSUs are subject to full accelerated vesting upon the sale of our company in a change in control transaction (as defined in our Non-Employee Director Compensation Policy.

(3) 

As of January 31, 2020, Ms. Archambeau, Mr. Grady, Mr. Horowitz, Mr. Kourey, Ms. Saeger, Mr. Stankey and Ms. Wilson each held 1,535 RSUs in connection with the annual RSU award granted to them in accordance with our Non-Employee Director Compensation Policy. These RSUs will vest on June 13, 2020, the first anniversary of the grant date, subject to the director’s continued service through such date.

(4) 

As of January 31, 2020, in addition to her annual RSU award, Ms. Archambeau held 3,469 RSUs in connection with her appointment to our board in accordance with the Non-Employee Director Compensation Policy. Such RSUs vest in three equal annual installments commencing December 13, 2019, subject to her continued service through each such dates.

(5) 

Mr. Dixon joined our board in June 2019. As of January 31, 2020, Mr. Dixon held 2,715 RSUs in connection with his appointment to our board in accordance with the Non-Employee Director Compensation

 

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  Policy. The RSUs vest in three equal annual installments commencing June 14, 2020, subject to his continued service through each such dates.
(6) 

As of January 31, 2020, in addition to his annual RSU award, Mr. Kourey held an option to purchase 160,000 shares of our Class B common stock, of which all shares underlying the options are outstanding and exercisable.

(7) 

As of January 31, 2020, in addition to her annual RSU award, Ms. Saeger held 3,022 RSUs in connection with her appointment to our board in accordance with the Non-Employee Director Compensation Policy. The RSUs vest in three equal annual installments commencing January 22, 2020, subject to her continued service through each such date.

(8) 

As of January 31, 2020, in addition to his annual RSU award, Mr. Stankey held an option to purchase 190,000 shares of our Class B common stock, of which 146,458 shares underlying the options were vested and 43,542 shares were unvested.

 

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PROPOSAL TWO:

RATIFICATION OF THE APPOINTMENT OF

OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our audit committee has appointed Ernst & Young LLP as our independent registered public accounting firm to perform the audit of our consolidated financial statements for the fiscal year ending January 31, 2021. We are asking our stockholders to ratify this appointment. Ernst & Young LLP has served as our independent registered public accounting firm since 2013.

Our board is submitting the appointment of Ernst & Young LLP to stockholders for ratification as a matter of good corporate governance. In the event our stockholders do not ratify this appointment by a majority of the votes properly cast at the Annual Meeting, our audit committee will reconsider retaining Ernst & Young LLP. Even if the appointment is ratified, our audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the stockholders.

We expect a representative of Ernst & Young LLP to attend the Annual Meeting. That individual will have an opportunity to make a statement and will be available to respond to appropriate questions from stockholders.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

We have adopted a policy under which our audit committee must pre-approve all audit and permissible non-audit services to be provided by the independent registered public accounting firm. As part of its review, our audit committee considers whether the categories of pre-approved services are consistent with rules on accountant independence prescribed by the SEC and the Public Company Accounting Oversight Board. Our audit committee pre-approved all services performed by the independent registered public accounting firm in fiscal 2020.

Audit Fees

The following table sets forth the fees billed or to be billed by Ernst & Young LLP and its affiliates for professional services rendered with respect to the fiscal years ended January 31, 2020 and 2019. All of these services were approved by our audit committee.

 

Fee Category   Fiscal 2020     Fiscal 2019  

Audit Fees(1)

  $ 3,417,000     $ 3,201,000  

Audit-Related Fees

  $     $  

Tax Fees(2)

  $ 19,000     $ 50,000  

All Other Fees(3)

  $ 4,000     $ 3,000  

Total Fees

  $ 3,440,000     $ 3,254,000  

 

(1) 

Audit Fees consist of fees billed for professional services provided in connection with the audit of our consolidated financial statements and audit of internal control over financial reporting, reviews of our quarterly condensed consolidated financial statements, and accounting consultations billed as audit services. For fiscal 2020, this category also includes fees for services provided in connection with our offering of 0.25% convertible senior notes due September 1, 2025. For fiscal year ending January 31, 2019, or fiscal 2019, this category also includes fees for services provided in connection with our offering of 0.25% convertible senior notes due February 15, 2023.

 

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(2) 

Tax Fees consist of fees billed for permissible tax services in connection with (i) our assessment of net operating loss carryforward limitations in fiscal 2020 and (ii) the convertible debt offering in fiscal 2019 described above.

(3) 

All Other Fees consist of aggregate fees billed for products and services provided other than those disclosed above, which include subscription fees paid for access to online accounting research software applications.

Recommendation of our Board

OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 31, 2021.

 

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

The information contained in this audit committee report shall not be deemed to be “soliciting material,” “filed” with the SEC, subject to Regulations 14A or 14C of the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act. No portion of this audit committee report shall be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, through any general statement incorporating by reference in its entirety the proxy statement in which this report appears, except to the extent that Okta specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed filed under either the Securities Act or the Exchange Act.

This report is submitted by the audit committee of the board of directors. The audit committee consists of the directors whose names appear below. No member of the audit committee is an officer or employee of Okta, and the board of directors has determined that each member of the audit committee is “independent” for audit committee purposes as that term is defined under Rule 10A-3 of the Exchange Act and the applicable NASDAQ rules. Each member of the audit committee meets the requirements for financial literacy under the applicable rules and regulations of the SEC and NASDAQ.

The audit committee’s general role is to assist the board of directors in monitoring the company’s financial reporting process and related matters. The audit committee’s specific responsibilities are set forth in its charter.

The audit committee has reviewed the company’s consolidated financial statements for its fiscal year ended January 31, 2020, and met with its management team, as well as with representatives of Ernst & Young LLP, the company’s independent registered public accounting firm, to discuss the consolidated financial statements and management’s assessment and Ernst & Young’s evaluation of the effectiveness of the company’s internal control over financial reporting as of January 31, 2020. The audit committee also discussed with members of Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board.

In addition, the audit committee received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board and the SEC regarding the independent accountant’s communications with the audit committee concerning independence. The audit committee has discussed with Ernst & Young LLP the independence of that firm and has considered whether the provision of non-audit services was compatible with maintaining the independence of that firm.

Based on these discussions, the financial statement review, and other matters it deemed relevant, the audit committee recommended to the board of directors that the company’s audited consolidated financial statements for its fiscal year ended January 31, 2020, be included in its Annual Report on Form 10-K for its 2020 fiscal year.

Audit Committee

Michael Kourey (Chairperson)

Shellye Archambeau

Patrick Grady

 

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PROPOSAL THREE:

ADVISORY NON-BINDING VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

We are asking our stockholders to vote to approve, on an advisory non-binding basis, the compensation of our named executive officers for fiscal 2020 as disclosed in this Proxy Statement. As described in detail under the heading “Compensation Discussion and Analysis,” our executive compensation program is designed to drive and reward performance and align the compensation of our named executive officers with the long-term interests of our stockholders. Please read the “Compensation Discussion and Analysis” and the compensation tables and narrative disclosure that follow for information about our executive compensation program, including details of the fiscal 2020 compensation of our named executive officers.

This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation as a whole. This vote is not intended to address any specific element of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Our board and our compensation committee believe that these policies and practices are effective in implementing our compensation philosophy and achieving our compensation program goals.

Accordingly, we are asking our stockholders to vote “FOR” the following resolution:

RESOLVED, that the stockholders hereby approve, on an advisory non-binding basis, the compensation paid to Okta’s named executive officers, as disclosed in the company’s proxy statement for the 2020 Annual Meeting of Stockholders, pursuant to the compensation disclosure rules of the SEC, including in the Compensation Discussion and Analysis, the compensation tables and the narrative discussions that accompany the compensation tables.

Vote Required

The approval of this advisory non-binding proposal requires the affirmative vote of a majority of the voting power of the shares of our common stock present in person or by proxy at the Annual Meeting and entitled to vote thereon.

As an advisory vote, the outcome of the vote on this proposal is not binding. However, our management team, our board and our compensation committee, which is responsible for designing and administering our executive compensation program, value the opinions expressed by our stockholders, and will consider the outcome of this vote when making future executive compensation decisions.

Recommendation of the Board

OUR BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON AN ADVISORY NON-BINDING BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.

 

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EXECUTIVE OFFICERS

The following table sets forth information regarding our executive officers, including their ages, as of April 20, 2020:

 

Name   Age    

Positions and Offices Held with the Company

Todd McKinnon

    48     Chairperson of the Board of Directors, CEO and Director

J. Frederic Kerrest

    43     Executive Vice Chairperson of the Board of Directors, Chief Operating Officer and Director

William E. Losch

    58     Chief Financial Officer

Christopher K. Kramer

    49     Chief Accounting Officer

Charles Race

    48     President, Worldwide Field Operations

Jonathan T. Runyan

    44     General Counsel and Secretary

Information Concerning Executive Officers

In addition to Mr. Todd McKinnon and Mr. J. Frederic Kerrest, who both serve as directors, our executive officers as of April 20, 2020, consisted of the following individuals:

William E. Losch. Mr. Losch has served as our Chief Financial Officer since June 2013. From June 2007 to June 2013, Mr. Losch served as Chief Financial Officer at MobiTV, Inc., a technology platform provider of multiscreen video delivery services. From October 2004 to May 2007, Mr. Losch served as the Chief Accounting Officer at DreamWorks Animation, SKG, Inc., an animation company. From March 1998 to July 2003, Mr. Losch served in various finance positions, most recently as Vice President of Finance and Chief Accounting Officer, at Yahoo! Inc., an internet company. Mr. Losch holds a Bachelor of Arts in economics from the University of California, Los Angeles.

Christopher K. Kramer. Mr. Kramer has served as our Chief Accounting Officer since October 2019. Prior to that, Mr. Kramer, served as our Vice President, Controller from June 2016 to October 2019 and as the Company’s Controller from May 2014 to June 2016. From April 2013 to May 2014, Mr. Kramer served as Vice President, Corporate Controller of Cyan, Inc., a global supplier of software-defined networks. From December 2008 to April 2013, Mr. Kramer served as Vice President, Assistant Controller of Riverbed Technology, an information technology performance company. Mr. Kramer holds a Bachelor of Science in accounting from California Polytechnic State University, San Luis Obispo, and is a licensed CPA (inactive) in the State of California.

Charles Race. Mr. Race has served as our President, Worldwide Field Operations, since October 2016. From 2005 to May 2016, Mr. Race served in a variety of senior roles at Informatica Corporation, a provider of data integration software, most recently as Executive Vice President, Worldwide Operations. Mr. Race served from 2003 to 2005 as EMEA Business Development Manager, and from 1999 to 2002 as Business Development Manager, at Hummingbird Ltd., a provider of enterprise software solutions. Mr. Race holds a Bachelor of Engineering in computer science from University of York.

Jonathan T. Runyan. Mr. Runyan has served as our General Counsel since January 2015 and our Secretary since July 2015. From January 2011 to January 2015, Mr. Runyan served as a Partner and Associate at Goodwin Procter LLP, a law firm, where he practiced corporate and securities law, primarily advising companies and investors in technology industries. From September 2006 to December 2010, Mr. Runyan served as an Associate at Gunderson Dettmer, LLP, a law firm. Mr. Runyan holds a Masters in Business Administration from the Yale School of Management, a Juris Doctor from the University of California, Hastings, and a Bachelor of Science in business administration from San Diego State University.

 

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Discussion and Analysis describes our executive compensation program and the decisions in fiscal 2020 regarding the compensation for:

 

   

Todd McKinnon, our CEO, Chairperson of the board and co-founder;

 

   

William E. Losch, our Chief Financial Officer;

 

   

J. Frederic Kerrest, our Chief Operating Officer, Executive Vice Chairperson of the board and co-founder;

 

   

Charles Race, our President, Worldwide Field Operations; and

 

   

Jonathan T. Runyan, our General Counsel.

We refer to these executive officers collectively in this Compensation Discussion and Analysis and the accompanying compensation tables as the “named executive officers.”

This Compensation Discussion and Analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each element of compensation that we provide. In addition, we explain how and why our compensation committee arrived at the specific compensation policies and decisions involving our named executive officers during fiscal 2020.

This Compensation Discussion and Analysis contains forward-looking statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation plans and arrangements. The actual compensation plans and arrangements that we adopt may differ materially from currently anticipated plans and arrangements as summarized in this Compensation Discussion and Analysis.

Executive Summary

Okta is the leading independent identity management platform for the enterprise. Our vision is to enable any organization to use any technology, and we believe identity is the key to making that happen. The Okta Identity Cloud is our category-defining platform that enables our customers to securely connect people to technology, anywhere, anytime and from any device.

Highlights of Fiscal 2020 Corporate Performance

Fiscal 2020 was a year of continued strong growth and improved operating leverage for our business. Specific financial highlights of our performance in fiscal 2020 include:

 

   

Revenue: Total revenue was $586.1 million, an increase of 47% year-over-year. Subscription revenue was $552.7 million, an increase of 49% year-over-year.

 

   

Remaining Performance Obligations (RPO): RPO was $1.21 billion, an increase of 66% year-over-year. Current RPO, which is subscription revenue expected to be recognized over the next 12 months, was $592.3 million, up 54% compared to the fourth quarter of fiscal 2019.

 

   

Calculated Billings: Total calculated billings were $703.6 million, an increase of 44% year-over-year.

 

   

Operating Loss: GAAP operating loss was $185.8 million, or 31.7% of total revenue, compared to $119.6 million, or 30.0% of total revenue for fiscal 2019. Non-GAAP operating loss was $48.5 million, or 8.3% of total revenue, compared to $41.5 million, or 10.4% of total revenue for fiscal 2019.

 

   

Net Loss: GAAP net loss was $208.9 million, compared to $125.5 million for fiscal 2019. GAAP net loss per share was $1.78, compared to $1.17 for fiscal 2019. Non-GAAP net loss was $36.7 million,

 

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compared to $34.1 million for fiscal 2019. Non-GAAP net loss per share was $0.31, compared to $0.32 for fiscal 2019.

 

   

Cash Flow: Net cash provided by operations was $55.6 million, or 9.5% of total revenue, compared to net cash provided by operations of $15.2 million, or 3.8% of total revenue for fiscal 2019. Free cash flow was $36.3 million, or 6.2% of total revenue, compared to negative $6.8 million, or 1.7% of total revenue for fiscal 2019.

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP operating loss, non-GAAP operating margin, non-GAAP net loss, non-GAAP net loss per share, and free cash flow. For a full reconciliation for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP, please see the “Non-GAAP Financial Measures” section of Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2020 Annual Report and Exhibit 99.1 to our Current Report on Form 8-K filed March 5, 2020.

Highlights of Fiscal 2020 Executive Compensation Program

Consistent with our performance and compensation objectives for fiscal 2020, our compensation committee took the following key actions relating to the compensation of our named executive officers for fiscal 2020:

Base Salary – Approved changes to annual base salaries ranging from flat to a 20.7% increase, as we continue to transition the compensation of our named executive officers to levels that are more consistent with those of comparable executives in our compensation peer group.

Bonus Plan – With 120.7% funding for achievement of the performance objectives established for fiscal 2020 under our Senior Executive Incentive Bonus Plan (the “Bonus Plan”), awarded a 106.5% payout after the exercise of negative discretion to reduce the size of awards for internal pay equity purposes. In February 2020, our compensation committee determined to provide bonus payouts in fully-vested RSUs, instead of cash, in order to further align the interests of our named executive officers with our long-term growth.

Long-Term Incentive Compensation – Granted long-term incentive compensation in the form of stock options to purchase shares of our Class A common stock and service-based vesting RSUs that may be settled for shares of our Class A common stock to align the long-term incentive opportunities of our named executive officers with the interests of our stockholders. The grant date fair values of these equity awards are set forth in the “Fiscal 2020 Summary Compensation Table” and the “Fiscal 2020 Grants of Plan-Based Awards Table” below.

 

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Fiscal 2020 Executive Compensation Policies and Practices

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

 

What we do

  

What we do not do

☑   Use a pay-for-performance philosophy to align executive compensation with performance

  

☒   No “single-trigger” cash or equity change in control benefits for executives

☑   Use equity-based compensation to deliver a significant majority of the total compensation of our executive officers to further align their interests with those of our stockholders

  

☒   No tax gross-ups on severance or change in control benefits

☑   Establish maximum payout amounts under the Bonus Plan and require a threshold level of achievement for payout with respect to each performance measure

  

☒   No guaranteed bonuses or base salary increases

☑   Conduct an annual risk assessment of our executive and broad-based compensation programs to promote prudent risk management

  

☒   No post-termination retirement, pension or deferred compensation benefits

☑   Maintain a compensation committee consisting solely of independent directors with extensive relevant experience

  

☒   No perquisites and no health or other benefits, other than those that are generally available to our employees

☑   Conduct an annual review of our executive compensation strategy, competitiveness and peer group

  

☒   No strict benchmarking of compensation to a specific percentile of our peer group

☑   Retain an independent compensation consultant who reports directly to our compensation committee

  

☒   No hedging or pledging of Okta securities by any employees or directors

Say-on-Pay Advisory Stockholder Vote on Executive Compensation

Okta and the compensation committee value the input of our stockholders. In fiscal 2020, over 98% of the votes cast on our Say-on-Pay proposal were favorable, which reflected strong stockholder support for our executive compensation programs. In fiscal 2020, members of our management team contacted stockholders representing in total over 53% of our outstanding Common Stock, or over 57% of our shares of outstanding Common Stock excluding shares held by our executive officers and board members, and engaged in extensive discussions with several of our largest stockholders. Our team met with governance professionals from passive funds as well as portfolio managers from active funds to discuss our board, governance, sustainability, and executive compensation practices. The breadth of the Company’s outreach program enabled us to gather feedback from a significant cross-section of Okta’s stockholder base. Based on these discussions, the compensation committee found that our stockholders continued to be supportive of our executive compensation programs and the alignment between executive officer pay and Okta’s performance. We value the opinions of our stockholders, and when making compensation decisions for our named executive officers in the future, our board and our compensation committee intend to consider the outcome of the say-on-pay advisory vote, in addition to other stockholder feedback we may receive throughout the year.

 

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Executive Compensation Philosophy, Objectives and Design

Our compensation philosophy is that an executive compensation program should drive and reward performance and further align the compensation of our executive officers with the long-term interests of our stockholders. Consistent with this philosophy, our executive compensation program is designed to achieve the following primary objectives:

 

   

attract, motivate, incentivize and retain our executive officers, who contribute to our long-term success;

 

   

provide compensation packages to our executive officers that are competitive and drive and reward the achievement of our business objectives; and

 

   

effectively align our executive officers’ interests with the interests of our stockholders by focusing on long-term equity incentives that correlate with the growth of sustainable long-term value for our stockholders.

Our executive compensation program design incorporates a mix of compensation elements, including base salary, short-term bonus opportunities, long-term equity incentives and benefits (such as change in control payments and benefits), to attract and retain our named executive officers. In determining the amount of each element of direct compensation awarded to the named executive officers, our compensation committee does not apply any fixed percentage of any one element in relation to the overall compensation package. Rather, our compensation committee looks at the overall compensation package and the relative amount of each element on a stand-alone basis for each individual to determine whether such amounts and mix of elements are consistent with the basic principles and objectives of our overall executive compensation program.

A significant majority of the compensation opportunity for our named executive officers is weighted towards equity, as opposed to cash, compensation. We structure our executive compensation program to be heavily weighted towards long-term equity incentives as we continue to transition the compensation of our named executive officers to levels that are more consistent with executive compensation in our compensation peer group, which we also believe correlates with the growth of sustainable long-term value for our stockholders.

We evaluate our executive compensation philosophy and executive compensation program, including design and competitiveness, at least annually and as circumstances require. As part of this review process, our compensation committee applies our values and the objectives outlined above.

Compensation Committee Oversight of Executive Compensation Process

Our compensation committee discharges many of the responsibilities of our board relating to the compensation of our executive officers and the non-employee members of our board (described in “Corporate Governance—Non-Employee Director Compensation” above), and regularly reports to our board on its discussions, decisions and other actions. Our compensation committee has overall responsibility for overseeing our compensation structure, policies and programs generally, and for overseeing and evaluating the compensation plans, policies and practices applicable to our executive officers. Our compensation committee has the authority to retain, and has retained, an independent compensation consultant to provide support to the committee in its review and oversight of our executive compensation program.

Our compensation committee reviews the base salary levels, short-term incentive compensation opportunities, and long-term incentive compensation opportunities of our named executive officers each fiscal year at the beginning of the year, or more frequently as warranted. Long-term incentive compensation is granted on a regularly-scheduled basis, as described in “Other Compensation Policies—Equity Award Grant Policy” below.

 

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Compensation-Setting Process

Role of the CEO

In discharging its responsibilities, our compensation committee works with members of management, including our CEO. Management assists our compensation committee by providing information on corporate and individual performance, competitive market compensation data and management’s perspective on compensation matters. Our CEO makes compensation recommendations for each of our executive officers other than himself. These recommendations cover each executive officer’s total target direct compensation, consisting of base salary, short-term incentive opportunity and long-term equity incentives. In making these recommendations, our CEO considers a variety of factors, including our business results, the executive officer’s individual contribution toward these results, the executive officer’s role and performance of his duties, whether the executive has achieved his individual goals, and the relative compensation parity among all of our executive officers. Our compensation committee reviews the recommendation of our CEO and other data and then exercises its own independent judgment to determine the target total direct compensation, and each element thereof, for each of our executive officers, including our CEO. While our CEO typically attends meetings of our compensation committee, our compensation committee meets in executive session outside the presence of our CEO when determining his compensation and when discussing certain other matters as well.

Role of the Compensation Consultant

Our compensation committee engages an independent compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from the committee’s annual executive compensation review. For fiscal 2020, our compensation committee retained Compensia, a national compensation consulting firm with expertise relating to technology companies, to provide it with market information, analysis and other advice relating to executive compensation on an ongoing basis. Compensia was engaged directly by our compensation committee to, among other things:

 

   

assist in developing a relevant group of peer companies to help our compensation committee determine the appropriate level of overall compensation for our executive officers;

 

   

assess each separate element of compensation, with a goal of ensuring that the compensation we offer to our executive officers, individually as well as in the aggregate, is competitive and fair;

 

   

review compensation for the non-employee members of our board;

 

   

provide market practices for equity compensation design;

 

   

develop a compensation risk assessment;

 

   

coordinate with our management for data collection and job matching for our executive officers; and

 

   

support other ad hoc matters throughout the year.

Based on its consideration of the factors specified in SEC rules and the NASDAQ listing standards, our compensation committee does not believe that its relationship with Compensia and the work of Compensia on behalf of our compensation committee and our management team has raised any conflict of interest. Our compensation committee reviews these factors on an annual basis. As part of our compensation committee’s determination of Compensia’s independence, it received written confirmation from Compensia addressing these factors and stating its belief that it remains an independent compensation consultant to our compensation committee.

Role of the Compensation Committee

Our compensation committee determines the target total direct compensation opportunities for our executive officers. When making these decisions, the compensation committee reviews the recommendations of our CEO and other data, including input from the independent compensation consultant, compensation survey data, and

 

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publicly-available compensation data of our peers. Our compensation committee then exercises its independent judgment to determine the target total direct compensation, and each element of compensation, for each of our executive officers.

Our compensation committee does not use a single method or measure in making its determinations, nor does it establish specific targets for the total direct compensation opportunities of our executive officers. Nonetheless, as it continues to adjust the compensation of our named executive officers to levels that are more consistent with those of our compensation peer group, our compensation committee begins its deliberations on cash and equity compensation levels with reference to the 25th, 50th and 75th percentile levels for cash compensation and target total direct compensation as reflected in competitive market data. For more information, see “Competitive Positioning” below.

When determining the amount and approving each compensation element and the target total direct compensation opportunity for our executive officers, our compensation committee considers the following factors, among others:

 

   

Okta’s performance against the corporate performance objectives established by our compensation committee and our board;

 

   

Okta’s financial performance relative to our compensation peer group;

 

   

the compensation levels and practices of our compensation peer group;

 

   

each individual executive officer’s skills, experience and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;

 

   

the scope of each individual executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group; and

 

   

the performance of each individual executive officer, based on a subjective assessment of his contributions to our overall performance, ability to lead his function, and ability to work as part of a team.

These items reflect our core values and compensation parity among our individual executive officers and provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer. No single factor is determinative in setting pay levels, nor was the impact of any factor on the determination of pay levels quantifiable.

Competitive Positioning

For purposes of comparing our executive compensation against the competitive market, our compensation committee reviews and considers the compensation levels and practices of a group of peer companies.

In September 2018, with the assistance of Compensia, our compensation committee reviewed our compensation peer group for fiscal 2020, which was generally developed from publicly-traded companies with three primary characteristics:

 

   

a focus on software, with an emphasis on software-as-a-service and cloud business models;

 

   

revenues of 0.5 to 3.0 times our annual revenue; and

 

   

a range of 0.25 to 4.0 times our market capitalization.

Where appropriate, we further refined our peer group by focusing on companies with strong one- and three-year revenue growth (where possible), strong market cap-to-revenue multiples and on companies based in the San Francisco Bay Area or in other regional centers of technology. Based on the foregoing review, the compensation committee removed Arista Networks, Gigamon and Yelp from the peer group and added Coupa Software,

 

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Paycom Software and Zscaler for fiscal 2020. Our compensation committee reviews our compensation peer group at least annually and makes adjustments to its composition, if warranted, taking into account changes in both our business and the businesses of our peers.

Our compensation committee uses data drawn from the public filings of our compensation peer group to evaluate the competitive market when determining the total direct compensation packages for our executive officers.

At the beginning of fiscal 2020, based on the foregoing, our compensation committee used the following compensation peer group to assist with the determination of compensation for our executive officers:

 

Box    Guidewire Software    Paycom Software    Tableau Software
Cornerstone OnDemand    HubSpot    Proofpoint    Twilio
Coupa Software    Imperva    Qualys    Veeva Systems
Ellie Mae    Medidata Solutions    RingCentral    Zendesk
FireEye    New Relic    Splunk    Zscaler

Elements of Our Executive Compensation Program

Our executive compensation program consists of the following primary components:

 

   

base salary;

 

   

short-term annual incentive bonuses;

 

   

long-term equity compensation; and

 

   

severance and change in control-related payments and benefits.

We also provide our executive officers with comprehensive employee benefit programs, such as medical, dental and vision insurance, a 401(k) plan, life and disability insurance, flexible spending accounts, an employee stock purchase plan and other plans and programs made available to all our eligible employees.

We believe these elements provide a compensation package that attracts and retains qualified individuals, links individual performance to company performance, focuses the efforts of our named executive officers on the achievement of both our short-term and long-term objectives and further aligns the interests of our executive officers with those of our stockholders.

Base Salaries

We provide base salary as a fixed source of compensation for each of our named executive officers, allowing them a degree of certainty relative to the significant majority of their compensation that is based on equity awards, the value of which varies and, in the case of stock options, is contingent on our stock price appreciation. Our compensation committee recognizes the importance of base salaries as an element of compensation that helps to attract and retain highly qualified executive talent.

Other than with respect to our co-founders, the initial base salary of each executive officer is established through arm’s-length negotiation at the time the executive officer is hired, taking into account a variety of factors, including the executive’s qualifications, experience, and compensation expectations and comparable market data. At the beginning of each year, our compensation committee reviews, and adjusts as necessary, base salaries for each of our named executive officers, including our co-founders. Our compensation committee does not apply specific formulas in setting base salary levels or determining adjustments from year to year. However, in completing its annual review and adjustment, our compensation committee targets paying our named executive officers base salaries that are competitive with current market practice (as reflected by our compensation peer group).

 

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The base salaries of our named executive officers prior to and following the fiscal 2020 increase approved by our compensation committee were as follows:

Base Salaries

 

Named Executive Officer   Fiscal 2019
Base Salary
($)
    Fiscal 2020
Base Salary
($)(1)
    Increase from
Fiscal 2019
(%)
 

Todd McKinnon

    306,000       306,000       0.0

William E. Losch

    326,400       350,900       7.5

J. Frederic Kerrest

    300,400       362,585       20.7

Charles Race

    322,500       346,700       7.5

Jonathan T. Runyan

    308,700       331,900       7.5

 

(1)

Base salary adjustments were approved in the first quarter of fiscal 2020, effective as of February 1, 2019, the first day of fiscal 2020.

Annual Performance-Based Incentives

We use performance-based incentives to motivate our named executive officers to achieve our annual financial and operational objectives, while making progress towards our longer-term strategic and growth goals. Typically, near the beginning of each fiscal year, our compensation committee adopts the performance criteria and targets for our Bonus Plan for that fiscal year, and establishes the target annual incentive opportunity for each plan participant based on a percentage of each participant’s base salary, the performance measures and the associated target levels for each measure, and the potential payouts based on actual performance for the fiscal year. In addition, our compensation committee considered the factors described in “Oversight of Executive Compensation Program—Compensation-Setting Process” above.

Overview & Structure

In March 2019, our compensation committee adopted and approved the performance criteria and targets for fiscal 2020 under our Bonus Plan, as set forth in “Corporate Performance Measures” below. The Bonus Plan provides opportunities for incentive compensation payouts based on our actual achievement of pre-established corporate financial objectives. The target levels for the financial objectives were set at levels determined to be challenging and requiring substantial skill and effort by our named executive officers. The Bonus Plan provided for an annual performance period with annual cash payouts, in order to align the committee’s assessment of our named executive officers’ performance to our achievement of our annual operating plan.

 

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Target Annual Incentive Compensation Opportunities

In March 2019, in connection with its review of our executive compensation program, our compensation committee approved the target annual incentive opportunities of our named executive officers, as set forth in the table below.

Target Performance-Based Incentives for Fiscal 2020

 

Named Executive Officer   Base Salary
($)
    Target
Performance-Based
Incentive as
Percent of Base
Salary
    Target
Performance-Based
Incentive Under the
Bonus Plan
($)
 

Todd McKinnon

    306,000       65     198,900  

William E. Losch

    350,900       60     210,540  

J. Frederic Kerrest

    362,585       60     217,551  

Charles Race

    346,700       100     346,700  

Jonathan T. Runyan

    331,900       50     165,950  

Corporate Performance Measures and Bonus Plan Funding Methodology

To measure performance for purposes of the Bonus Plan, our compensation committee selected revenue (weighted 70%) and non-GAAP operating income (weighted 30%) as the corporate performance measures that best support our annual operating plan and enhanced long-term value creation for our stockholders. For this purpose:

revenue means GAAP revenue as reflected in our quarterly and annual financial statements; and

non-GAAP operating income means GAAP operating income as reflected in our quarterly and annual financial statements, adjusted to exclude expenses related to stock-based compensation expense, charitable contributions, amortization of acquired intangibles and acquisition-related expenses.

The target levels required for 100% achievement for the corporate performance measures under our Bonus Plan were $570.3 million for revenue and negative $58.5 million for non-GAAP operating income. As a threshold matter, our named executive officers were eligible for annual incentive compensation payouts for fiscal 2020 only if we met or exceeded 95% with respect to the revenue target and 87.5% with respect to the non-GAAP operating income target. The compensation committee set high thresholds to ensure that incentive payments would only follow significant achievement. On the other end of the spectrum, revenue achievement of 106% of target would result in a maximum payout of 150%, and non-GAAP operating income achievement of 120% of target would result in a maximum payout of 150%. Total payouts were capped at 150% of the target annual cash incentive opportunities to manage potential incentive compensation costs and avoid incentivizing undue risk in our executive compensation program, while still maintaining appropriate incentives for our named executive officers.

With respect to the revenue component, 95% achievement would result in 25% of payment funding. For each additional 1% achievement between 95% and 100% of target, payment funding would increase an additional 15% of payment funding. Each additional 1% achievement between 100% and 102% of target would result in an additional 1% payment funding and each additional 1% achievement between 102% and 106% of target would result in an additional 12% payment funding, with a maximum funding of 150% at 106% achievement or greater.

With respect to the non-GAAP operating income component, 87.5% achievement would result in 50% of payment funding. For each additional 1% of achievement between 87.5% and 100% of target, payment funding

 

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would increase an additional 4% of payment funding. Each additional 1% achievement between 100% and 120% of target would result in an additional 2.5% payment funding, with a maximum funding of 150% at 120% achievement or greater.

Performance in Fiscal 2020 and Payouts

Our compensation committee assessed performance and determined payouts under our Bonus Plan in a two-part process. First, our compensation committee measured actual performance against the pre-established target levels for the performance period. Second, after the end of the performance period, our compensation committee exercised its negative discretion to determine the actual payout. For fiscal 2020, we exceeded the target performance levels under the Bonus Plan as follows:

 

Performance Measure   Target
($ in millions)
    Result
($ in millions)
    Actual Achievement
of Target

(%)
 

Revenue

    570.3       586.1       103

Non-GAAP Operating Income

    -58.5       -48.5       117

As achievement of the revenue metric resulted in payment funding of 103% and achievement of the non-GAAP operating income metric resulted in payment funding of 117%, the resulting total achievement percentage was 120.7%. After considering the recommendation of our CEO, our compensation committee exercised negative discretion and reduced our named executive officer bonus payouts to 106.5% for internal pay equity purposes. As a result, the total payouts to our named executive officers under the Bonus Plan in fiscal 2020 were as follows:

 

Named Executive Officer   Fiscal 2020 Target Annual
Performance-Based
Incentive Compensation
Opportunity

($)
    Fiscal 2020 Actual
Performance-Based
Incentive Compensation
($)
 

Todd McKinnon

    198,900       211,829  

William E. Losch

    210,540       224,225  

J. Frederic Kerrest

    217,551       231,692  

Charles Race

    346,700       369,236  

Jonathan T. Runyan

    165,950       176,737  

In March 2019, our compensation committee amended the Bonus Plan to provide that the incentive compensation payouts may be made in fully vested RSUs, instead of cash, and determined that any bonuses awarded for achievement in future years would be paid in fully vested RSUs, in order to further align the interests of our executive officers with those of our stockholders. The number of fully-vested RSUs granted to the applicable named executive officer in satisfaction of the amount payable under the Bonus Plan was determined by dividing the earned incentive compensation amount payable (expressed as a dollar value) by the trailing average closing price of our common stock on the NASDAQ during the month prior to the date of grant, consistent with our Equity Award Grant Policy.

The RSUs earned by our named executive officers during fiscal 2020 under the Bonus Plan are set forth in the “Fiscal 2020 Summary Compensation Table” below.

Long-Term Equity Incentives

We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. The realized value of these equity awards has a direct relationship to our stock

 

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price; therefore, these awards are an incentive for our named executive officers to create value for our stockholders. Equity awards also help us retain qualified executive officers in a competitive market.

Long-term incentive compensation opportunities in the form of equity awards are granted by our compensation committee on a regularly-scheduled basis, as described in “Other Compensation Policies—Equity Award Grant Policy” below.

For fiscal 2020, our compensation committee determined that the equity awards to be granted to our executive officers should be divided equally to deliver half of the intended aggregate fair value in stock options and the remaining half in RSUs. The equity awards granted to our named executive officers in fiscal 2020 are set forth in the “Fiscal 2020 Summary Compensation Table” and the “Fiscal 2020 Grants of Plan-Based Awards Table” below.

Stock Options

We believe that stock options provide a strong reward for growth in the market price of our common stock, as their entire value depends on stock price appreciation over the exercise price on the grant date. In addition, stock options provide a strong incentive for our named executive officers to remain employed with us as they require continued employment through the multi-year vesting period.

In fiscal 2020, we granted our named executive officers stock options to purchase shares of our Class A common stock. These options have a 10-year term and generally vest as to one-quarter of such shares on the first anniversary of the “vesting commencement date” and in 36 approximately equal monthly installments thereafter, so long as the option holder remains employed with us through the applicable vesting date. Consistent with our compensation objectives, we believe this approach further aligns our executive officers’ efforts and contributions with our long-term interests and allows them to participate in any future appreciation in the value of our common stock.

RSUs

We believe RSUs provide a strong retention incentive for our named executive officers, provide a reward for growth in the value of our common stock, and are less dilutive than stock options to our stockholders. All RSUs are granted under our 2017 Plan and are settled for shares of our Class A common stock. In fiscal 2020, we granted our named executive officers RSUs that generally vest as to one-quarter of such shares on the first anniversary of the applicable “vesting commencement date,” and in 12 approximately equal quarterly installments thereafter, so long as the named executive officer remains employed with us through the applicable vesting date.

Employee Benefit Programs

Our named executive officers are eligible to participate in all of our employee benefit plans offered to U.S. employees, including our 401(k) plan, employee stock purchase plan, and medical, dental, life and disability insurance plans, in each case on the same basis as other U.S. employees.

Perquisites and Other Personal Benefits

We typically provide limited or no perquisites or personal benefits to our named executive officers. During fiscal 2020, none of our named executive officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual, except our CEO, for whom we paid the filing fee under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (“HSR”) as well as a tax gross-up related to such fee. We believe that reimbursing our CEO for the HSR filing fee and its related tax consequences was consistent with our decision to continue to compensate him primarily through equity-compensation arrangements. Absent this

 

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regulatory filing, our CEO would not be able to participate in our long-term incentive compensation program and, therefore, we determined that it was appropriate for us to reimburse him for this filing fee and related tax liabilities. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual in the performance of his duties, to make our executive team more efficient and effective, or for recruitment or retention purposes. All future practices with respect to perquisites or other benefits for our named executive officers will be subject to review and approval by our compensation committee.

401(k) Plan

We maintain a tax-qualified retirement plan that provides all regular U.S. employees, including our executive officers, with an opportunity to save for retirement on a tax-advantaged basis. Under our 401(k) plan, participants may elect to defer a portion of their compensation on a pre-tax basis and have it contributed to the plan, subject to applicable annual limits under the U.S. Internal Revenue Code of 1984, as amended (the “Code”). Pre-tax contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employee elective deferrals are 100% vested at all times. As a U.S. tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan, and all contributions are deductible by us when made.

Post-Employment Compensation Arrangements

Our Executive Severance Plan provides that upon the termination of employment of an eligible participant by us for any reason other than for “cause” (as defined in the Executive Severance Plan), death or disability outside of the “change in control period” (defined as the period beginning three months prior to and ending 12 months after a “change in control,” as defined in the Executive Severance Plan), an eligible participant will be entitled to receive, subject to the execution and delivery of an effective release of claims in favor of the company, (i) a lump sum cash payment equal to 12 months of base salary for our CEO, nine months of base salary for our other executive officers, and six months of base salary for the other participants, and (ii) a monthly cash payment equal to our contribution toward health insurance for 12 months for our CEO, nine months for our other executive officers, and six months for the other participants.

The Executive Severance Plan also provides that upon the (i) termination of employment of an eligible participant by us other than for cause, death or disability or (ii) the resignation of an eligible participant for “good reason” (as defined in the Executive Severance Plan), in each case within the change in control period, an eligible participant will be entitled to receive, in lieu of the payments and benefits above and subject to the execution and delivery of an effective release of claims in favor of the company, (i) a lump sum cash payment equal to 18 months of base salary for our CEO, 12 months of base salary for our other executive officers, and nine months of base salary for the other participants, (ii) a lump sum cash payment equal to the eligible participant’s annual target bonus, (iii) a monthly cash payment equal to our contribution toward health insurance for 18 months for our CEO, 12 months for our other executive officers, and nine months for the other participants, and (iv) full accelerated vesting of all outstanding and unvested equity awards held by such participant, provided that any unvested and outstanding equity awards subject to performance conditions will be deemed satisfied at the target levels specified in the applicable award agreements.

The payments and benefits provided under the Executive Severance Plan in connection with a change in control may not be eligible for a federal income tax deduction by us pursuant to Section 280G of the Code. These payments and benefits may subject an eligible participant to an excise tax under Section 4999 of the Code. If the payments or benefits payable in connection with a change in control would be subject to the excise tax imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to the recipient. We have not provided any named executive officer with any tax reimbursement or gross-up, either in connection with these change in control arrangements, or otherwise.

 

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Other Compensation Policies

Equity Award Grant Policy

Our compensation committee has adopted an “Equity Award Grant Policy.” Under this policy, we generally grant equity awards on a regularly-scheduled basis to enhance the effectiveness of our internal control over our equity award grant process. Pursuant to the Equity Award Grant Policy, which was most recently amended in December 2019, our compensation committee has delegated certain limited authority to an equity committee, made up of our CEO, Chief People Officer, Chief Financial Officer and General Counsel, to grant routine new hire, promotion, refresh and certain other equity awards to employees within equity guidelines reviewed and approved from time to time by our compensation committee and subject to other limitations and requirements. The equity committee may not grant equity awards to its members, to employees who are subject to the reporting and other provisions of Section 16 of the Exchange Act, or to employees with titles more senior than vice president. Grants of equity awards are generally made monthly and will be effective on the date such grant is approved by our compensation committee or equity committee, as applicable.

Compensation Recovery Policy

Our 2017 Plan provides that awards under such plan will be subject to our compensation recovery (“clawback”) policy, if and when we adopt one. We intend to adopt a general compensation recovery policy covering our short- and long-term incentive award plans and arrangements once the SEC adopts final rules implementing the requirement of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Policy Prohibiting Hedging and Pledging of Company Securities

Our insider trading policies prohibit the members of our board and all employees, including our executive officers, from engaging in derivative securities transactions, including hedging, with respect to our securities, and from pledging our securities as collateral for a loan or holding company securities in a margin account. Our insider trading policies require that our executive officers may trade in our securities only pursuant to trading plans that comply with Rule 10b5-1 under the Exchange Act. Certain other employees and our directors are subject to certain pre-clearance procedures in order to trade in our securities or may trade pursuant to trading plans that comply with Rule 10b5-1.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Section 162(m) of the Code generally places a $1 million limit on the amount of compensation a public company can deduct in any one year for certain executive officers. While our compensation committee considers tax deductibility as one factor in determining executive compensation, our compensation committee also looks at other factors in making its decisions, as noted above, and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program, even if the awards are not deductible by us for tax purposes. The former exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our named executive officers and certain other individuals in excess of $1 million will not be deductible unless it qualifies for the limited transition relief applicable to certain arrangements in place as of November 2, 2017. We expect that a portion of the cash compensation and equity awards to our executive officers will not be deductible under Section 162(m).

Despite our compensation committee’s efforts to structure certain performance-based awards that were granted prior to November 2, 2017, in a manner intended to be exempt from Section 162(m) and therefore not subject to its deduction limits, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under

 

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the legislation repealing the performance-based compensation exemption from the deduction limit, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) in fact will. Further, our compensation committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with our business needs. Our compensation committee believes that stockholder interests are best served if its discretion and flexibility in awarding compensation is not restricted, even though some compensation awards may result in non-deductible compensation expenses.

Taxation of “Parachute” Payments

Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of the company that exceed certain prescribed limits, and that the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We have not agreed to provide any executive officer, including any named executive officer, with a “gross-up” or other reimbursement payment for any tax liability that the executive officer might owe as a result of the application of Sections 280G or 4999 of the Code.

Section 409A of the Code

Section 409A of the Code imposes additional significant taxes in the event that an executive officer, director or service provider receives “deferred compensation” that does not satisfy the requirements of Section 409A of the Code. Although we do not maintain a traditional nonqualified deferred compensation plan for our executive officers, Section 409A of the Code does apply to certain severance arrangements, bonus arrangements and equity awards. We have structured all such arrangements and awards in a manner to either avoid or comply with the applicable requirements of Section 409A of the Code.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and non-employee members of our board, including options to purchase shares of our common stock and other stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the executive compensation tables required by the federal securities laws, even though the recipient may never realize any value from such awards.

 

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Fiscal 2020 Summary Compensation Table

The following table presents information regarding the compensation awarded to, earned by and paid to each individual who served as one of our named executive officers during fiscal 2020, 2019 and 2018.

 

Name and Principal Position   Fiscal
Year
    Salary
($)
    Stock
Awards
($)(1)
    Option
Awards
($)(2)
    Non-Equity
Incentive
Plan

Compensation
($)(3)
    All Other
Compensation
($)(4)
    Total ($)  

Todd McKinnon

    2020       306,000       4,180,794       4,123,267       171,342       247,917       9,029,320  

CEO(5)

    2019       306,000       2,215,365       2,245,905       290,011       0       5,057,281  
    2018       284,625       0       0       132,649       0       417,274  

William E. Losch

    2020       350,900       1,721,498       1,697,814       181,427       0       3,951,639  

Chief Financial Officer

    2019       326,400       1,384,113       1,402,615       285,545       0       3,398,673  
    2018       303,600       0       0       117,912       0       421,512  

J. Frederic Kerrest

    2020       362,585       2,705,200       2,667,988       187,436       0       5,923,209  

Chief Operating

    2019       300,400       1,936,974       1,961,940       262,812       0       4,462,126  

Officer(5)

    2018       279,450       0       0       119,385       0       398,835  

Charles Race

    2020       346,700       1,475,511       1,455,205       298,803       0       3,576,219  

President, Worldwide

    2019       322,500       992,013       1,006,785       470,252       0       2,791,550  

Field Operations

    2018       300,000       0       0       223,500       0       523,500  

Jonathan T. Runyan

    2020       331,900       1,229,607       1,212,671       143,018       0       2,917,196  

General Counsel(6)

    2019       308,700       882,225       894,920       225,059       0       2,310,904  

 

(1)

The amounts reported represent the aggregate grant date fair value of the RSUs granted to our named executive officers in fiscal 2020 and 2019, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value are set forth in the notes to our consolidated financial statements included in our 2020 Annual Report. These amounts do not necessarily correspond to the actual value recognized by our named executive officers.

(2)

The amounts reported represent the aggregate grant date fair value of the stock options granted to our named executive officers in fiscal 2020 and 2019, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value are set forth in the notes to our consolidated financial statements included in our 2020 Annual Report. These amounts do not necessarily correspond to the actual value recognized by the named executive officers.

(3) 

The amounts reported represent the aggregate annual performance-based cash incentives earned in fiscal 2020, 2019 and 2018, based upon the achievement of certain company metrics. For fiscal 2020, the amounts reported represent the ASC Topic grant date fair values of fully-vested RSUs issued in lieu of the cash incentive payable. The RSUs were granted on March 15, 2020, in the following numbers: Mr. McKinnon: 1,597 RSUs; Mr. Losch: 1,691 RSUs; Mr. Kerrest: 1,747 RSUs; Mr. Race: 2,785 RSUs; and Mr. Runyan: 1,333 RSUs. The number of RSUs granted to the applicable named executive officer in satisfaction of the amount payable under the Bonus Plan was determined by dividing the earned cash incentive payable (expressed as a dollar value) by the trailing average closing price of our common stock on the NASDAQ during the month prior to the date of grant, consistent with our Equity Award Grant Policy. As a result, the RSU ASC Topic grant date fair values differ from the dollar value of the earned cash incentive payable. The fiscal 2020 cash achievement for each named executive officer is described above in “Compensation Discussion and Analysis – Annual Performance-Based Incentives – Performance in Fiscal 2020 and Payout.”

(4) 

For Mr. McKinnon, consists of a reimbursement from us for a $125,000 HSR filing fee related to Mr. McKinnon’s stock ownership and $122,917 for the related tax gross-up.

(5) 

Mr. McKinnon and Mr. Kerrest serve on our board but are not paid compensation for such service.

(6)

Mr. Runyan was not a named executive officer in fiscal year ending January 31, 2018, or fiscal 2018.

 

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Fiscal 2020 Grants of Plan-Based Awards Table

The following table sets forth certain information with respect to all plan-based awards granted to our named executive officers during fiscal 2020.

 

   

Award Type

  Grant Date     Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units

(#)(2)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#)(2)
    Exercise
or Base
Price of
Option
Awards
($/Sh)(3)
    Grant Date
Fair Value
of Stock
and
Option
Awards
($)(4)
 
Name   Threshold
($)
    Target
($)
    Maximum
($)
 

Todd McKinnon

  FY19 Bonus RSU(5)     3/19/2019                         3,572                   290,011  
  Annual Cash           29,835       198,900       298,350                          
  Annual Option     3/25/2019                               110,573       82.16       4,123,267  
  Annual RSU     3/25/2019                         50,886                   4,180,794  

William E. Losch

  FY19 Bonus RSU(5)     3/19/2019                         3,517                   285,545  
  Annual Cash           31,581       210,540       315,810                          
  Annual Option     3/25/2019                               45,530       82.16       1,697,814  
  Annual RSU     3/25/2019                         20,953                   1,721,498  

J. Frederic Kerrest

  FY19 Bonus RSU(5)     3/19/2019                         3,237                   262,812  
  Annual Cash           32,633       217,551       326,327                          
  Annual Option     3/25/2019                               71,547       82.16       2,667,988  
  Annual RSU     3/25/2019                         32,926                   2,705,200  

Charles Race

  FY19 Bonus RSU(5)     3/19/2019                         5,792                   470,252  
  Annual Cash           52,005       346,700       520,050                          
  Annual Option     3/25/2019                               39,024       82.16       1,455,205  
  Annual RSU     3/25/2019                         17,959                   1,475,511  

Jonathan T. Runyan

  FY19 Bonus RSU(5)     3/19/2019                         2,772                   225,059  
  Annual Cash           24,893       165,950       248,925                          
  Annual Option     3/25/2019                               32,520       82.16       1,212,671  
  Annual RSU     3/25/2019                         14,966                   1,229,607  

 

(1) 

This column sets forth the fiscal 2020 target bonus amount for each of our named executive officers under our Bonus Plan. “Threshold” refers to the minimum amount payable for a certain level of performance; “Target” refers to the amount payable if specified performance targets are reached; and “Maximum” refers to the maximum payout possible. Target bonuses were set as a percentage of each named executive officer’s base salary earned for fiscal 2020 as follows: 65% for Mr. McKinnon, 60% for each of Messrs. Losch and Kerrest, 100% for Mr. Race and 50% for Mr. Runyan. The dollar values of the actual bonus awards earned by the named executive officers are set forth in the Fiscal 2020 Summary Compensation Table above. Pursuant to the Bonus Plan, the actual bonus awards were paid out in fully vested RSUs, instead of cash. The amounts set forth in this column do not represent either additional or actual compensation earned by the named executive officers for fiscal 2020. For a description of the Bonus Plan, see “Compensation Discussion and Analysis –Annual Performance-Based Incentives” above.

(2) 

Annual stock options and RSUs were granted under the 2017 Plan. Each of the annual stock option awards listed in the table above vested as to 25% of the shares of Class A common stock underlying the stock options upon the one-year anniversary of February 1, 2019, and vest as to the remainder of the shares in 36 equal monthly installments thereafter. Each of the annual RSU awards vested as to 25% of the shares of Class A common stock underlying the RSU award upon the one-year anniversary of March 15, 2019, and vest as to the remainder of the shares in 12 equal quarterly installments thereafter. Stock options and RSUs are subject to potential vesting acceleration as described under the heading “Post-Employment Compensation Arrangements” above and “Potential Payments upon Termination or Change in Control” below.

(3) 

Stock options were granted with an exercise price equal to 100% of the fair market value on the date of grant, which was $82.16 per share for the March 25, 2019 annual grants.

(4) 

The amounts reported represent the aggregate grant date fair value of equity awards granted to our named executive officers in fiscal 2020, calculated in accordance with ASC Topic 718. The assumptions used in

 

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  calculating the grant date fair value are set forth in the notes to our consolidated financial statements included in our 2020 Annual Report. These amounts do not necessarily correspond to the actual value recognized by our named executive officers.
(5) 

FY19 Bonus RSUs represent annual performance-based cash incentives earned in fiscal 2019 pursuant to the Bonus Plan but paid in the form of fully-vested RSUs granted on March 19, 2019 (fiscal 2020) in amounts as determined in accordance with our Equity Award Grant Policy. These amounts are reported above as fiscal 2019 compensation in the “Summary Compensation Table and Analysis – Non-Equity Incentive Plan Compensation” table.

Fiscal 2020 Outstanding Equity Awards at Fiscal Year-End Table

The following table provides information regarding outstanding equity awards held by our named executive officers as of January 31, 2020.

 

    Option Awards(1)(2)     Stock Awards  
    Grant
Date
    Vesting
Commencement
Date
    Number of Securities
Underlying Unexercised
Options
    Option
Exercise
Price

($)
    Option
Expiration
Date
    Number of
Shares
or Units
of Stock
That
Have Not
Vested
(#)
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(3)
 
Name   Exercisable     Unexercisable  

Todd McKinnon

    8/30/2013 (4)      8/1/2013       112,500             1.40       8/29/2023              
    8/28/2015 (4)      8/1/2015       486,053             7.17       8/27/2025              
    7/30/2016 (6)      7/29/2016       1,798,891             8.97       7/29/2026              
    3/22/2018 (7)      2/1/2018       19,031     67,969       39.21       3/21/2028              
    3/22/2018 (8)      3/15/2018                               31,782       4,069,685  
    3/25/2019 (7)      2/1/2019             110,573       82.16       3/24/2029              
    3/25/2019 (8)      3/15/2019                               50,886       6,515,952  

William E. Losch

    8/30/2013 (4)      8/1/2013       27,820             1.40       8/29/2023              
    7/30/2016 (6)      7/29/2016       204,736             8.97       7/29/2026              
    3/22/2018 (7)      2/1/2018       39,052     42,448       39.21       3/21/2028              
    3/22/2018 (8)      3/15/2018                               19,857       2,542,689  
    3/25/2019 (7)      2/1/2019             45,530       82.16       3/24/2029              
    3/25/2019 (8)      3/15/2019                               20,953       2,683,032  

J. Frederic Kerrest

    8/30/2013 (4)      8/1/2013       75,000             1.40       8/29/2023              
    8/27/2014 (4)      8/1/2014       75,000             3.11       8/26/2024              
    8/28/2015 (4)      8/1/2015       250,000             7.17       8/27/2025              
    7/30/2016 (6)      7/29/2016       1,000,000             8.97       7/29/2026              
    3/22/2018 (7)      2/1/2018       54,625     59,375       39.21       3/21/2028              
    3/22/2018 (8)      3/15/2018                               27,788       3,558,253  
    3/25/2019 (7)      2/1/2019             71,547       82.16       3/24/2029              
    3/25/2019 (8)      3/15/2019                               32,926       4,216,174  

Charles Race

    10/24/2016 (7)      10/20/2016       750,000             8.97       10/23/2026              
    3/22/2018 (7)      2/1/2018       28,031     30,469       39.21       3/21/2028              
    3/22/2018 (8)      3/15/2018                               14,232       1,822,408  
    3/25/2019 (7)      2/1/2019             39,024       82.16       3/24/2029              
    3/25/2019 (8)      3/15/2019                               17,959       2,299,650  

Jonathan T. Runyan

    8/28/2015 (4)      8/1/2015       11,000             7.17       8/27/2025              
    2/25/2016 (5)      2/1/2016       35,417             8.62       2/24/2026              
    7/30/2016 (6)      7/29/2016       195,625             8.97       7/29/2026              
    3/22/2018 (7)      2/1/2018       24,916     27,084       39.21       3/21/2028              
    3/22/2018 (8)      3/15/2018                               12,657       1,620,729  
    3/25/2019 (7)      2/1/2019             32,520       82.16       3/24/2029              
    3/25/2019 (8)      3/15/2019                               14,966       1,916,396  

 

(1) 

Stock options granted prior to 2017 were granted pursuant to our 2009 Stock Plan (the “2009 Plan”), and unless otherwise described in the footnotes below, are immediately exercisable subject to a repurchase right

 

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  in favor of the company that expires over a four-year period. Unless otherwise described in the footnotes below, the shares underlying the option will vest over a four-year period, with 25% of the shares to vest upon completion of one year of service measured from the vesting commencement date, and the balance to vest in 36 successive equal monthly installments, subject to continuous service. Stock options granted after 2017 were granted pursuant to our 2017 Plan and are not immediately exercisable.
(2) 

Upon a (i) termination of employment by us other than for cause (as defined in the Executive Severance Plan), death or disability or (ii) resignation for good reason (as defined in the Executive Severance Plan), in each case within the change in control period (as defined in the Executive Severance Plan), the vesting of the shares subject to options will fully accelerate and will become vested in full upon such termination date.

(3) 

This column represents the market value of the shares underlying the RSUs or restricted stock as of January 31, 2020, based on the closing price of our Class A common stock, as reported on NASDAQ, of $128.05 per share on January 31, 2020.

(4) 

The stock options are fully vested and exercisable.

(5) 

The shares underlying the options vest in 48 successive equal monthly installments beginning on the vesting commencement date, subject to continuous service.

(6) 

20% of the shares underlying the options vest upon completion of one year of service measured from the vesting commencement date; another 20% of the shares underlying the options vest upon completion of two years of service measured from the vesting commencement date; and the balance of shares vest in 36 successive equal monthly installments, subject to continuous service.

(7) 

25% of the shares underlying the options vest upon completion of one year of service measured from the vesting commencement date, and the balance of the shares vest in 36 successive equal monthly installments, subject to continuous service.

(8) 

25% of the shares underlying the award vest upon completion of one year of service measured from the vesting commencement date, and the balance of the shares vest in 12 successive equal quarterly installments, subject to continuous service.

Fiscal 2020 Option Exercises and Stock Vested Table

The following table presents, for each of our named executive officers, the shares of our common stock that were acquired upon the exercise of stock options and the vesting of RSUs and the related value realized upon such exercise or vesting during fiscal 2020.

 

    Option Awards     Stock Awards  
Name   Number of Shares
Acquired on Exercise

(#)
    Value Realized
on Exercise
($)(1)
    Number of Shares
Acquired on Vesting

(#)
    Value Realized
on Vesting
($)(2)
 

Todd McKinnon

    258,556       30,046,002       28,290       2,636,687  

William E. Losch

    249,000       27,970,587       18,960       1,751,666  

J. Frederic Kerrest

                24,849       2,314,600  

Charles Race

    450,000       46,586,760       16,860       1,521,017  

Jonathan T. Runyan

    47,335       5,899,423       12,615       1,159,523  

 

(1) 

The value realized on exercise is based on the difference between the closing price of our Class A common stock on the date of exercise and the applicable exercise price of those options, and does not represent actual amounts received by our named executive officers as a result of the option exercises.

(2) 

The value realized on vesting is determined by multiplying the number of vested restricted stock units by the closing price of our Class A common stock on the vesting date.

Pension Benefits

Aside from our 401(k) plan, which is described above, we do not maintain any pension plan or arrangement under which our named executive officers are entitled to participate or receive post-retirement benefits.

 

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Nonqualified Deferred Compensation

We do not maintain any nonqualified deferred compensation plans or arrangements under which our named executive officers are entitled to participate.

Potential Payments upon Termination or Change in Control

Employment Offer Letters in Place During Fiscal 2020 for Named Executive Officers

In February 2017, we entered into employment offer letters with each of our named executive officers that provided for at-will employment and set forth each executive’s annual base salary, target bonus opportunity and eligibility to participate in our benefit plans generally. Each of our named executive officers also participates in our Executive Severance Plan, as described above under the heading “Post-Employment Compensation Arrangements” and below. Each named executive officer also remains subject to our standard employment, confidential information and invention assignment agreement.

The following table presents information concerning estimated payments and benefits that would be provided pursuant to the arrangements described above for each of our named executive officers serving as of the end of fiscal 2020. The payments and benefits set forth below are estimated assuming that the termination of employment or change in control event occurred on the last business day of fiscal 2020, January 31, 2020, and a per share value of our common stock of $128.05, which is the closing market price per share of our Class A common stock on such date. Actual payments and benefits could be different if such events were to occur on any other date or at any other price or if any other assumptions are used to estimated potential payments and benefits.

 

Name  

Benefit

  Termination without
Cause Not in
Connection with a
Change in Control

($)
    Termination without Cause
or with Good Reason
in Connection with a
Change in Control

($)
 

Todd McKinnon

  Cash Severance     306,000       657,900  
  Health Benefits     28,827       43,241  
  Equity Acceleration(1)           93,146,317  
  Total     334,827       93,847,458  

William E. Losch

  Cash Severance     263,175       561,440  
  Health Benefits     15,127       20,170  
  Equity Acceleration(1)           23,589,573  
  Total     278,302       24,171,183  

J. Frederic Kerrest

  Cash Severance     271,939       580,136  
  Health Benefits     16,170       21,560  
  Equity Acceleration(1)           52,056,714  
  Total     288,109       52,658,410  

Charles Race

  Cash Severance     260,025       693,400  
  Health Benefits     6,939       9,252  
  Equity Acceleration(1)           35,412,854  
  Total     266,964       36,115,506  

Jonathan T. Runyan

  Cash Severance     248,925       497,850  
  Health Benefits     21,620       28,827  
  Equity Acceleration(1)           16,615,503  
  Total     270,545       17,142,180  

 

(1) 

The value of stock option and RSU award vesting acceleration is based on the closing price of $128.05 per share of our Class A common stock as of January 31, 2020, minus, in the case of stock options, the exercise price of the unvested stock option shares subject to acceleration.

 

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CEO Pay Ratio Disclosure

As required by SEC rules, we are providing the following information about the relationship between the annual total compensation of our CEO and the annual total compensation of our median compensated employee (our “CEO pay ratio”).

For fiscal 2020, the median of the annual total compensation of all employees of our company (other than our CEO) was $225,074 and the annual total compensation of our CEO was $9,029,320. Based on this information, for fiscal 2020 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 40 to 1. This ratio is a reasonable estimate calculated in a manner consistent with SEC rules.

To identify the median employee, we examined the compensation of all our full- and part-time employees (other than our CEO) as of January 31, 2020, the last day of our fiscal year. Our employee population consisted of individuals (other than our CEO) working at our parent company and consolidated subsidiaries both within and outside the United States. We did not include any contractors or other non-employee workers in our employee population. We did not have any temporary or seasonal employees as of January 31, 2020.

We used a consistently applied compensation measure consisting of actual annual base salary, target annual bonus or commission, and the grant date fair value of equity awards for the 12-month period from February 1, 2019 through January 31, 2020 to identify our median employee. For simplicity, we calculated annual base salary using a reasonable estimate of the hours worked during fiscal 2020 for hourly employees and actual salary paid for our remaining employees. We annualized compensation for any full-time and part-time employees who commenced work during fiscal 2020 to reflect a full year. Equity awards granted during the year were included using the same methodology we use for our named executive officers in our fiscal 2020 Summary Compensation Table. Payments not made in U.S. dollars were converted to U.S. dollars using a currency exchange rate as of Jan 31, 2020. We did not make any cost-of-living adjustment.

Using this approach, we identified the individual at the median of our employee population who was the best representative of our employee population. The individual is a full-time employee based in the United States.

We then calculated annual total compensation for this individual using the same methodology we use for our named executive officers as set forth in our fiscal 2020 Summary Compensation Table.

With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our fiscal 2020 Summary Compensation Table.

Because SEC rules for identifying the median of the annual total compensation of all employees allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their employee population and compensation practices, the pay ratio reported by other companies may not be comparable to our pay ratio, as other companies have different employee populations and compensation practices and may have used different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. As explained by the SEC when it adopted these rules, the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures.

 

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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The information contained in this compensation committee report shall not be deemed to be “soliciting material,” “filed” with the SEC, subject to Regulations 14A or 14C of the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act. No portion of this compensation committee report shall be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, through any general statement incorporating by reference in its entirety the proxy statement in which this report appears, except to the extent that Okta specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed filed under either the Securities Act or the Exchange Act.

The compensation committee has reviewed and discussed the section captioned “Executive Compensation” with the company’s management team. Based on such review and discussions, the compensation committee recommended to the board of directors that this Compensation Discussion and Analysis be included in the Proxy Statement and be included in the Annual Report on Form 10-K we filed with the SEC for the fiscal year ended January 31, 2020.

Compensation Committee

Michael Stankey (Chairperson)

Robert L. Dixon, Jr.

Rebecca Saeger

Michelle Wilson

 

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EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of January 31, 2020, regarding shares of our common stock that may be issued under our equity compensation plans, consisting of the 2009 Stock Plan, the 2017 Plan and the 2017 Employee Stock Purchase Plan (the “2017 ESPP”).

 

    Equity Compensation Plan Information  
Plan category   Number of Securities to be
Issued upon Exercise of
Outstanding Options,
Warrants and Rights
    Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
    Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plan (Excluding
Securities Referenced in
Column (a))
 
    (a)     (b)     (c)  

Equity compensation plans approved by security holders(1):

    17,252,543 (2)      11.8228 (3)      20,109,860 (4) 

Equity compensation plans not approved by security holders:

    N/A       N/A       N/A  

Total

    17,252,543       11.8228       20,109,860  

 

(1) 

The 2017 Plan provides that the number of shares of Class A common stock reserved and available for issuance under the 2017 Plan will automatically increase each February 1, beginning on February 1, 2018, by 5% of the outstanding number of shares of our Class A and Class B common stock on the immediately preceding January 31 or such lesser number of shares as determined by our compensation committee. The 2017 ESPP provides that the number of shares of Class A common stock reserved and available for issuance under the 2017 ESPP will automatically increase each February 1, beginning on February 1, 2018, by 1% of the outstanding number of shares of our Class A and Class B common stock on the immediately preceding January 31 or such lesser number of shares as determined by our compensation committee. As of January 31, 2020, a total of 25,194,622 shares of our Class A common stock had been reserved for issuance pursuant to the 2017 Plan, which number excludes the 6,131,892 shares that were added to the 2017 Plan as a result of the automatic annual increase on February 1, 2020. This number will be subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. The shares of Class A and Class B common stock underlying any awards that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated, other than by exercise, under the 2017 Plan and the 2009 Plan will be added back to the shares of Class A common stock available for issuance under the 2017 Plan (provided, that any such shares of Class B common stock will first be converted into shares of Class A common stock). We no longer make grants under the 2009 Plan. As of January 31, 2020, a total of 3,653,857 shares of our Class A common stock had been reserved for issuance pursuant to the 2017 ESPP, which number excludes the 1,226,378 shares that were added to the 2017 ESPP as a result of the automatic annual increase on February 1, 2020. This number will be subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization.

(2) 

Includes 12,359,302 shares of Class A and Class B common stock issuable upon the exercise of outstanding options and 5,070,041 shares of Class A common stock issuable upon the vesting of RSUs. Does not include 176,800 shares of restricted Class B common stock issued under the 2009 Plan as such shares have been reflected in our total shares outstanding.

(3) 

As RSUs do not have any exercise price, such units are not included in the weighted average exercise price calculation.

(4) 

As of January 31, 2020, there were 16,456,003 shares of Class A common stock available for grant under the 2017 Plan and 3,653,857 shares of Class A common stock available for grant under the 2017 ESPP.

 

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SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our capital stock as of April 1, 2020, for:

 

   

each person known by us to be the beneficial owner of more than five percent of the outstanding shares of our Class A or Class B common stock;

 

   

each of our executive officers;

 

   

each of our directors; and

 

   

all of our directors and executive officers as a group.

We have determined beneficial ownership in accordance with SEC rules, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable.

We have based percentage ownership of our capital stock on 115,547,783 shares of our Class A common stock and 8,530,159 shares of our Class B common stock outstanding on April 1, 2020. We have deemed shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of April 1, 2020, to be outstanding and to be beneficially owned by the person holding the option for the purpose of computing the percentage ownership of that person, but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person.

 

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Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Okta, Inc., 100 First Street, Suite 600, San Francisco, California 94105.

 

    Shares Beneficially Owned  
    Class A     Class B     Total
Voting %
    Total
Ownership %
 
    Shares     %     Shares     %  

5% Stockholders:

           

Entities affiliated with Morgan Stanley(1)

    10,383,867       9.0                 5.2     8.4

Entities affiliated with The Vanguard Group(2)

    10,062,934       8.7                 5.0     8.1

Entities affiliated with FMR(3)

    9,943,831       8.6                 5.0     8.0

Entities affiliated with Blackrock(4)

    7,665,809       6.6                 3.8     6.2

Entities affiliated with T. Rowe Price Associates(5)

    6,806,003       5.9                 3.4     5.5

Named Executive Officers and Directors:

         

Todd McKinnon(6)

    77,604       *       7,723,472       70.7     34.4     6.2

J. Frederic Kerrest(7)

    94,024       *       3,321,787       33.5     15.5     2.7

William E. Losch(8)

    76,796       *       692,442       7.9     3.4     *  

Christopher K. Kramer(9)

    6,914       *       36,043       *       *       *  

Charles Race(10)

    60,502       *       650,000       7.1     3.2     *  

Jonathan T. Runyan(11)

    87,065       *       222,042       2.5     1.1     *  

Shellye Archambeau(12)

    1,734       *                   *       *  

Robert L. Dixon, Jr.

                                   

Patrick Grady(13)

    205,209       *                   *       *  

Ben Horowitz(14)

    1,096,550       *                   *       *  

Michael Kourey(15)

    15,680       *       140,000       1.6     *       *  

Rebecca Saeger(16)

    1,511       *                   *       *  

Michael Stankey(17)

    15,735       *       190,000       2.2     *       *  

Michelle Wilson(18)

    15,735       *       180,000       2.1     *       *  

All directors and executive officers as a
group (14 persons)(19)

    1,755,059       1.5     13,155,786       95.6     52.6     11.5

 

*

Represents less than one percent (1%).

Percentage of total voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, as a single class. The holders of our Class A common stock are entitled to one vote per share, and holders of our Class B common stock are entitled to ten votes per share.

(1) 

Based on information reported by Morgan Stanley on Schedule 13G filed with the SEC on February 12, 2020. Of the shares of Class A common stock beneficially owned, Morgan Stanley reported that it has shared dispositive power with respect to all of the shares and shared voting power with respect to 9,306,584 shares. Morgan Stanley, as a parent holding company, may be deemed to beneficially own the indicated shares which are held by Morgan Stanley Investment Management Inc., a wholly-owned subsidiary of Morgan Stanley. Morgan Stanley listed its address as 1585 Broadway New York, NY 10036.

(2) 

Based on information reported by The Vanguard Group on Schedule 13G/A filed with the SEC on February 12, 2020. Of the shares of Class A common stock beneficially owned, The Vanguard Group reported that it has sole dispositive power with respect to 9,958,640 shares, shared dispositive power with respect to 104,294 shares, sole voting power with respect to 86,183 shares and shared voting power with

 

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  respect to 29,558 shares. The Vanguard Group listed its address as 100 Vanguard Blvd., Malvern, PA 19355.
(3) 

Based on information reported by FMR LLC on Schedule 13G/A filed with the SEC on February 7, 2020. Of the shares of Class A common stock beneficially owned, FMR LLC reported that it has sole dispositive power with respect to all of the shares and sole voting power with respect to 2,074,980 shares. Abigail P. Johnson, Director, Chairman and Chief Executive Officer of FMR LLC, and members of the Johnson family, through their ownership of voting common shares and the execution of a shareholders’ voting agreement with respect to FMR LLC, may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & Research Company (“FMR Co”), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. FMR LLC listed its address as 245 Summer Street, Boston, Massachusetts 02210.

(4) 

Based on information reported by Blackrock, Inc. on Schedule 13G filed with the SEC on February 10, 2020. BlackRock, as a parent holding company or control person, may be deemed to beneficially own the indicated shares and has sole dispositive power over all of the shares and sole voting power over 6,877,739 shares. BlackRock reported its beneficial ownership on behalf of itself and the following: BlackRock Life Limited, BlackRock International Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors, BlackRock Asset Management North Asia Limited, BlackRock (Singapore) Limited, BlackRock Fund Managers Ltd. Blackrock, Inc. listed its address as 55 East 52nd Street, New York, NY 10055.

(5) 

Based on information reported by T. Rowe Price Associates, Inc. on Schedule 13G filed with the SEC on February 14, 2020. Of the shares of Class A common stock beneficially owned, T. Rowe Price Associates, Inc. reported that it has sole dispositive power with respect to all of the shares and sole voting power with respect to 1,979,902 shares. T. Rowe Price Associates, Inc. listed its address as 100 E. Pratt Street, Baltimore, MD 21202.

(6) 

Consists of (i) 13,145 shares of Class A common stock held of record by Mr. McKinnon, (ii) 5,197,781 shares of Class B common stock held of record by Mr. McKinnon, as trustee of the McKinnon Stachon Family Trust, (iii) 128,247 shares of Class B common stock held of record by Mr. McKinnon’s brother-in-law, as trustee of the McKinnon Irrevocable Trust, (iv) 64,459 shares of Class A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020 and (v) 2,397,444 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020. Mr. McKinnon and Ms. Stachon share voting and dispositive power over the McKinnon Stachon Family Trust. Mr. McKinnon holds sole voting and dispositive power over the McKinnon 2014 GRAT dated March 25, 2014. Mr. McKinnon has shared voting power and shared dispositive power with respect to shares held in trust; provided, however, that Mr. McKinnon’s wife, in her role as the sole member of the investment committee of the McKinnon Irrevocable Trust, has voting and dispositive power with respect to the shares held of record by Mr. McKinnon’s brother-in-law, as trustee of the McKinnon Irrevocable Trust, and Mr. McKinnon has no voting and dispositive power with respect to such shares.

(7) 

Consists of (i) 7,542 shares of Class A common stock held of record by Mr. Kerrest in an individual capacity, (ii) 86,482 shares of Class A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020, (iii) 1,400,000 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020, (iv) 1,622,745 shares of Class B common stock held of record by Mr. Kerrest and his wife, as trustees of the Kerrest Family Revocable Trust and (v) 299,042 shares of Class B common stock held of record by the Commonwealth Trust Company, as trustee of the Kerrest Irrevocable Trust. Mr. Kerrest has sole voting power and sole dispositive power with

 

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  respect to the shares described in (i) through (iii). Mr. Kerrest has shared voting power and shared dispositive power with respect to the shares described in (iv) through (v); provided, however, that Mr. Kerrest’s wife, in her role as the sole member of the investment committee of the Kerrest Irrevocable Trust, has voting and dispositive power with respect to the shares held of record by the Commonwealth Trust Company, as trustee of the Kerrest Irrevocable Trust, and Mr. Kerrest has no voting and dispositive power with respect to such shares.
(8) 

Consists of (i) 16,726 shares of Class A common stock held of record by Mr. Losch, (ii) 489,886 shares of Class B common stock held of record by William Losch and Susanne Losch, Trustees of the Losch 2006 Trust, (iii) 60,070 shares of Class A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020 and (iv) 202,556 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020. Mr. Losch and Mrs. Losch share voting and dispositive power over the Losch 2006 Trust.

(9) 

Consists of (i) 6,914 shares of Class A common stock held of record by Mr. Kramer, (ii) 36,043 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020.

(10) 

Consists of (i) 15,401 shares of Class A common stock held of record by Mr. Race, (ii) 45,101 shares of Class A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020 and (iii) 650,000 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020.

(11) 

Consists of (i) 47,653 shares of Class A common stock held of record by the Runyan 2017 Trust dtd 07/11/2017, Jonathan Runyan & Kimberly Runyan TTEE, (ii) 39,412 shares of Class A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020 and (iii) 222,042 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020. Mr. Runyan and Mrs. Runyan share voting and dispositive power over the Runyan 2017 Trust dtd 07/11/2017.

(12) 

Consists of 1,734 shares of Class A common stock held of record by Ms. Archambeau.

(13) 

Consists of 205,209 shares of Class A common stock held of record by Mr. Grady.

(14) 

Consists of (i) 15,735 shares of Class A common stock held of record by Mr. Horowitz and (ii) 1,080,815 shares of Class A common stock held of record by a family trust for which Mr. Horowitz is a trustee.

(15) 

Consists of (i) 15,680 shares of Class A common stock held of record by the Kourey Living Trust and (ii) 140,000 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020. Mr. Kourey has sole voting and dispositive power over the Kourey Living Trust.

(16) 

Consists of 1,511 shares of Class A common stock held of record by Ms. Saeger.

(17) 

Consists of (i) 15,735 shares of Class A common stock held of record by Mr. Stankey and (ii) 190,000 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020.

(18) 

Consists of (i) 15,735 shares of Class A common stock held of record by Ms. Wilson and (ii) 180,000 shares of Class B common stock held of record by Ms. Wilson.

(19) 

Consists of (i) 1,459,535 shares of Class A common stock beneficially owned by our current directors and executive officers, (ii) 7,917,701 shares of Class B common stock beneficially owned by our current directors and executive officers, (iii) 295,524 shares of Class A common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020 and (iv) 5,238,085 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of April 1, 2020.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Certain Relationships and Transactions

In addition to the compensation arrangements, including employment, termination of employment and change in control arrangements and indemnification arrangements, the following is a description of each transaction since February 1, 2019, and each currently proposed transaction in which:

 

   

Okta was or will be a participant;

 

   

the amount involved exceeded or exceeds $120,000; and

 

   

any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.

Other Transactions

We have granted stock options to our executive officers and certain of our directors, and we have granted RSUs to our directors and our executive officers. See the sections titled “Executive Compensation” and “Corporate Governance—Non-Employee Director Compensation” for a description of these options and RSUs.

We have entered into change in control arrangements with certain of our executive officers that, among other things, provide for certain severance and change in control benefits. See the section titled “Executive Compensation—Compensation Discussion and Analysis—Post-Employment Compensation Arrangements” for more information regarding these agreements.

Limitation of Liability and Indemnification of Officers and Directors

Our certificate of incorporation contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for the following:

 

   

any breach of their duty of loyalty to our company or our stockholders;

 

   

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

 

   

unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

 

   

any transaction from which they derived an improper personal benefit.

Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law.

In addition, our bylaws provide that we will indemnify, to the fullest extent permitted by law, any person who is or was a party or is threatened to be made a party to any action, suit or proceeding by reason of the fact that he or she is or was one of our directors or officers or is or was serving at our request as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise. Our bylaws also provide that we may indemnify to the fullest extent permitted by law any person who is or was a party or is threatened to be made a party to any action, suit, or proceeding by reason of the fact that he or she is or was one of our employees or

 

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agents or is or was serving at our request as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise. Our bylaws provide that we must advance expenses incurred by or on behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to very limited exceptions.

Further, we have entered into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.

The limitation of liability and indemnification provisions that are included in our certificate of incorporation, bylaws and in indemnification agreements that we enter into with our directors and executive officers may discourage stockholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and executive officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be harmed to the extent that we pay the costs of settlement and damage awards against directors and executive officers as required by these indemnification provisions.

We have obtained insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and executive officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or executive officer, including, without limitation, claims relating to public securities matters, and coverage is provided to us with respect to payments that may be made by us to these directors and executive officers pursuant to our indemnification obligations or otherwise as a matter of law.

Certain of our non-employee directors may, through their relationships with their employers or affiliated entities, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our board.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Procedures for Approval of Related Party Transactions

Our audit committee charter provides that our audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person is defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed fiscal year, and their immediate family members.

 

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DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC and the NASDAQ. Such executive officers, directors and stockholders also are required by SEC rules to furnish us with copies of all Section 16(a) forms that they file.

Based solely on our review of the copies of such reports furnished to us and written representations that no other reports were required to be filed during fiscal 2020, we are not aware of any late Section 16(a) filings, except for one late report on Form 4 due to a an inadvertent administrative error, relating to a pro rata, in-kind distribution, and not a purchase or sale, of securities without consideration, by a limited partnership to Mr. Kourey, one of its partners.

ADDITIONAL INFORMATION

Our board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the persons appointed in the accompanying proxy intend to vote the shares represented thereby in accordance with their best judgment on such matters, under applicable laws.

 

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OKTA, INC.

100 FIRST STREET

SUITE 600

SAN FRANCISCO, CALIFORNIA 94105

  

VOTE BY INTERNET

Before The Meeting - Go to www.proxyvote.com

 

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

 

During The Meeting - Go to www.virtualshareholdermeeting.com/OKTA2020

 

You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.

 

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

 

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

 

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:

  
E76007-P23575                        KEEP THIS PORTION FOR YOUR RECORDS    

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

DETACH AND RETURN THIS PORTION ONLY    

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

 

 

 

OKTA, INC.

     

 

 

For

All

 

 

 

Withhold

All

 

 

 

For All

Except

     

 

To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

             

 

LOGO     

    The Board of Directors recommends you vote FOR the following:                    
           

                                                                      

         
   

1.   To elect four Class III directors to serve until the 2023 Annual Meeting of Stockholders or until their successors are duly elected and qualified:

 

                   
   

Nominees:

 

        01  Shellye Archambeau

                   
   

        02  Robert L. Dixon, Jr.

        03  Patrick Grady

        04  Ben Horowitz

 

                   
   

       

 

                 
   

The Board of Directors recommends you vote FOR proposals 2 and 3:

 

  For   Against   Abstain              
   

2.   A proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021.

 

         

NOTE: The proxies may vote in their discretion upon any other matters as may properly come before the meeting or any adjournments, continuations or postponements thereof.

       
   

3.   To approve, on an advisory non-binding basis, the compensation of our named executive officers.

                   
   

 

 

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.

             
                           
             
 

  

 

                                                         

 

                                

            

 

       
 

     Signature [PLEASE SIGN WITHIN BOX]                    Date

 

 

         

 Signature (Joint Owners)                                            Date

       


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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.

 

— — — — — — — — — — — — — — — — — — — — — — — — — — — — —— — — — — — — — — — — — — —

E76008-P23575        

 

Okta, Inc.

Annual Meeting of Stockholders

June 16, 2020 9:00 AM PDT

This proxy is solicited by the Board of Directors

 

  

The stockholder(s) hereby appoint(s) Todd McKinnon, J. Frederic Kerrest, William E. Losch and Jonathan T. Runyan, or any of them, as proxies and attorneys-in-fact, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Class A common stock and Class B common stock of Okta, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 AM, PDT, on June 16, 2020, at www.virtualshareholdermeeting.com/OKTA2020, and any adjournment, continuation or postponement thereof.

 

This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted (i) FOR the election of each of the nominees for director, (ii) FOR Proposals 2 and 3, and (iii) in the discretion of the proxies, upon any other matters as may properly come before the meeting or any adjournment, continuation or postponement thereof.

 

Continued and to be signed on reverse side

  

 

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