We provide our materials pursuant to the full set delivery option in connection with the ExtraordinaryAnnual Meeting. Under the full set delivery option, a company delivers all proxy materials to its shareholders. The approximate date on which the proxy statement and proxy card are intended to be first sent or given to the Company’s shareholders is February 14,September 13, 2022. This delivery can be by mail or, if a shareholder has previously agreed, by e-mail. In addition to delivering proxy materials to shareholders, the Company must also post all proxy materials on a publicly accessible website and provide information to shareholders about how to access that website. Accordingly, you should have received our proxy materials by mail or, if you previously agreed, by e-mail. These proxy materials include this Notice of ExtraordinaryAnnual General Meeting of Shareholders, proxy statement, and proxy card. These materials are available free of charge on our website at ir.elastic.co and at www.proxyvote.com.
Your vote is important regardless of the number of Elastic ordinary shares that you own. If you do not plan on attending the ExtraordinaryAnnual Meeting and if you are a shareholder of record, please vote via the Internet or, if you are a holder of shares in street name (“Beneficial Owner”), please submit the voting instruction form you receive from your broker or nominee as soon as possible so your shares can be voted at the ExtraordinaryAnnual Meeting. You may submit your voting instruction form by mail. If you are a shareholder of record, you also may vote by telephone or by submitting a proxy card by mail. If you are a Beneficial Owner, you will receive instructions from your broker or other nominee explaining how to vote your shares, and you also may have the choice of instructing the record holder as to the voting of your shares over the
Internet or by telephone. Follow the instructions on the voting instruction form you receive from your broker or nominee. You do not need to affix postage to the enclosed reply envelope if you mail it within the United States. If you attend the ExtraordinaryAnnual Meeting, you may withdraw your proxy and vote your shares personally.
All proxies submitted to us will be tabulated by Broadridge Financial Solutions, Inc. All shares voted by shareholders of record present in person at the ExtraordinaryAnnual Meeting will be tabulated by the secretary designated by the chairperson of the ExtraordinaryAnnual Meeting.
If you have any questions concerning this proxy statement, would like additional copies of this proxy statement or need help voting your shares of Elastic ordinary shares, please contact our Investor Relations department at ir@elastic.co.
Thank you for your ongoing support of Elastic.
ELASTIC N.V.
The information provided in the “question and answer” format below is for your convenience only and is merely a summary of the information contained in this proxy statement. You should read this entire proxy statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references only.
The board of directors of the Company is responsible for establishing broad corporate policies and monitoring the overall performance of the Company. The board of directors selects the Company’s senior management, delegates authority for the conduct of the Company’s day-to-day operations to those senior managers, and monitors their performance. Members of the board of directors are kept informed of the Company’s business by, among other things, participating in meetings of the board of directors and committees and by reviewing analyses and reports provided to them.
Table of our board of directors since January 2013 and as our Vice-Chairman since June 2018. Mr. Volpi has served as a Partner and Co-President of Index Ventures, a venture capital firm, since July 2009. He currently serves as a director of Aurora Innovation Inc., a self-driving vehicle technology company, Confluent, a data infrastructure company, Tishman Speyer Innovation Corp. II, a publicly traded special purpose acquisition company, and Sonos, Inc., a consumer electronics company, and previously served as a director of TS Innovation Acquisitions Corp., a publicly traded special purpose acquisition company, from November 2020 to June 2021, Fiat Chrysler Automobiles N.V., an automobile company, from April 2017 to January 2021, Zuora, Inc., an enterprise software company that designs and sells SaaS applications, from November 2011 to June 2020, Hortonworks, Inc. (now a wholly owned subsidiary of Cloudera, Inc.), a data software company, from October 2011 to January 2019, Pure Storage, Inc., an all-flash data storage company, from April 2014 to October 2018, and Exor N.V., a holding company, from April 2012 to May 2018. Mr. Volpi also serves on the boards of various private companies. Mr. Volpi holds a B.S. in Mechanical Engineering and an M.S. in Manufacturing Systems Engineering from Stanford University, and an M.B.A. from the Stanford University Graduate School of Business. We believe that Mr. Volpi is qualified to serve as a member of our board of directors because of his extensive experience in the venture capital industry and his knowledge of technology companies.Contents Board of Directors
We currently have a one-tier board of directors, consisting of executive and non-executive directors. The number of executive and non-executive directors is to be determined by the board of directors.
Our one-tier board structure consists of onetwo executive directordirectors and seven non-executive directors. Chetan Puttagunta serves as our Chairman and Lead Independent Director. In the event that Mr. Kulkarni is appointed to our board of directors, our board of directors will remain a one-tier board of directors and be comprised of nine directors, consisting of two executive directors and seven non-executive directors. For more information regarding our board leadership structure, please see “Board of Directors and Corporate Governance—Board Leadership Structure and Role of Independent Chairman and the Lead Independent Director.”
Pursuant to our articles of association, our executive and non-executive directors may be appointed for a maximum term of three years.years (unless such director has resigned at an earlier date). A director may be reappointed, and the three-year maximum term may be deviated from by resolution of the general meeting of shareholders upon a proposal of the board of directors.
The members of our board of directors have been appointed to staggered terms. The current terms of Ms. Marooney and Messrs. Puttagunta and Schuurman will expire at the annual general meeting of shareholders to be held in 2022;this Annual Meeting; the terms of Ms. Gleeson and Messrs.Mr. Chadwick and Volpi will expire at the annual general meeting of shareholders to be held in 2023; and the terms of Mr. Banon and Ms. Leibowitz and Mr. Banon will expire at the annual general meeting of shareholders to be held in 2024.2024; and the term of Mr. Kulkarni will expire at the annual general meeting of shareholders to be held in 2025. Mr. Abbasi was appointed to our board of directors to temporarily fill the vacancy resulting from Mr. Volpi’s resignation, such appointment and resignation both effective as of July 13, 2022. The term of Mr. Abbasi’s temporary appointment will expire upon the earlier of (i) the vacancy created by Mr. Volpi’s resignation being filled, which will occur if Mr. Abbasi is appointed upon conclusion of the Annual Meeting in accordance with voting proposal no. 1, (ii) the board appointing another person to temporarily fill such vacancy or (iii) the vacancy has been cancelled.
Director Independence
Under the rules of the New York Stock Exchange (“NYSE”), independent directors must comprise a majority of a listed company’s board of directors. In addition, the rules of the NYSE require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees must be independent. Under the rules of the NYSE, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Compensation committee members must not have a relationship with us that is material to the director’s ability to be independent
from management in connection with the duties of a compensation committee member. Additionally, audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.
In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or hertheir capacity as a member of the audit committee, the board of directors or any other board committee, accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or be an affiliated person of the listed company or any of its subsidiaries.
Our board of directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his or hertheir ability to exercise independent judgment in carrying out his or hertheir responsibilities. Based upon information requested from and provided by each director concerning his or hertheir background, employment and affiliations, including family relationships, and as a result of this review, our board of directors determined that each of Messrs. Abbasi, Chadwick, Puttagunta, Schuurman and Volpi,Schuurman, and Mses. Gleeson, Leibowitz, and Marooney,Marooney, representing seven of our eightnine continuing directors and director nominees standing for appointment at the Annual Meeting, does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and is an “independent director” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the NYSE. In making this determination, our board of directors considered the current and prior relationships that each non-executive director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our shares by each non-executive director.
In addition to the independence requirements under the NYSE rules, the Dutch Corporate Governance Code (the “DCGC”) requires a majority of the non-executive directors of our board of directors, a majority of the members of each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance
Committee, and the Lead Independent Director to be independent. The DCGC provides for a different definition of an “independent director” and only assesses independence of non-executive directors. A non-executive director is considered not independent under the DCGC if the director or the director’s spouse, registered partner or life companion, foster child or relative by blood or marriage up to the second degree (i) has been an employee, managing director or executive director of the company in the five years prior to appointment, (ii) has received personal financial compensation from us for work not in keeping with the normal course of business, (iii) has had an important business relationship with the company in the years prior to the appointment, (iv) is a member of the management board of a company in which an executive director of the company is a supervisory board member, (v) has temporarily performed management duties for us, (vi) is a major shareholder of the company (holding at least 10%), or (vii) represents one or more major shareholders. The criteria under (i) through (v) should only apply to at most one non-executive director. The total number of non-executive directors who are not independent under this definition should account for less than half of the total number of non-executive directors. There can be at most one non-executive director who can be considered to be affiliated with or representing any shareholder, or group of affiliated shareholders, who directly or indirectly holds more than ten percent of the shares in the company. Our board of directors has determined that Mr. Schuurman is not considered independent under the DCGC. Our board of directors has determined that it complies with the independence requirements of the DCGC.
Corporate Governance Guidelines and Code of Business Conduct and Ethics
Our board of directors has adopted corporate governance guidelines that address items such as the qualifications and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. In addition, our board of directors adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including our CEO, CFO and other executive and senior financial officers. The full text of our corporate governance guidelines and our code of business conduct and ethics are available on our website at ir.elastic.co. We intend to post any amendment to our corporate governance guidelines and our code of business conduct and ethics, and any waivers of such guidelines or code for directors and executive officers, on the same website.
Board Leadership Structure and Role of the Independent Chairman and Lead Independent Director
As noted above, our one-tier board structure consists of onetwo executive directordirectors and seven non-executive directors. Additionally, our articles of association provide for one of our independent, non-executive directors to be designated as Lead Independent Director by our board of directors. The role of Chairman and Lead Independent Director can, but is not required to, be fulfilled by the same individual. Our board of directors has designated Mr. Puttagunta to serve as our Chairman and Lead Independent Director. As Chairman of the Boardour board of directors and Lead Independent Director, Mr. Puttagunta presides at all meetings of the board of directors, presides over executive sessions of our independent
directors, as chairperson of our general meeting (if the Lead Independent Director is not present, he may designate one of the other non-executive directors for that purpose), serves as a liaison between the Company’s managementour executive directors and our independent directors and performs such additional duties as our board of directors may otherwise determine and delegate and as required by the DCGC and our articles of association and board rules governing the internal proceedings of the board of directors. Our articles of association also provide for one of our independent, non-executive directors to be designed as vice-chairperson by our board of directors. Our board of directors has designated Mr. VolpiAbbasi to serve as our Vice-Chairman. As Vice-Chairman, Mr. VolpiAbbasi is entrusted with the duties of Lead Independent Director if the Lead Independent Director is absent or unwilling to take the chair. Mr. Abbasi will continue to serve as our Vice-Chairman if he is appointed by the general meeting of shareholders in accordance with voting proposal no. 1.
The DCGC requires that the Lead Independent Director may not be a former executive director of our Company, in addition to the DCGC independence requirements.
The board of directors believes that its current leadership structure, in which the positions of Chairman and Lead Independent Director (currently held by the same person) are held by an independent, non-executive director with broad authority and a Vice Chairman,Vice-Chairman, is appropriate at this time and currently provides the most effective leadership for Elastic in a highly competitive and rapidly-changingrapidly changing technology industry. We believe that separation of the positions of our Chairman from the CEO reinforces the independence of the board of directors in its oversight of the business and affairs of the Company. Specifically, the balance of powers among our CEO and our Chairman facilitates the active participation of our independent directors and enables our Board to provide more effective oversight of management. Non-executive directors and management sometimes have different perspectives and roles in strategy development. Our non-executive directors bring experience, oversight and expertise from outside of our Company, while our CEO brings company-specific experience and expertise. In addition, we believe that having an independent Chairman creates an environment that is more conducive to objective evaluation and oversight of
management’s performance, increasing management accountability and improving the ability of the board of directors to monitor whether management’s actions are in the best interests of the Company and its stakeholders.
Risk Management
Risk is inherent with every business, and we face a number of risks, including strategic, financial, business and operational, legal and compliance, and reputational. We have designed and implemented processes to manage risk in our operations. Management is responsible for the day-to-day management of risks the Company faces, while our board of directors, as a whole and assisted by its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are appropriate and functioning as designed.
Our board of directors believes that open communication between management and our board of directors is essential for effective risk management and oversight. Our board of directors meets with our CEO and other members of the senior management team at quarterly meetings of our board of directors, as well as at such other times as they deem appropriate, where, among other topics, they discuss strategy and risks facing the Company.
While our board of directors is ultimately responsible for risk oversight, our board committees assist our board of directors in fulfilling its oversight responsibilities in certain areas of risk.
Our Audit Committee assists our board of directors 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, and discusses with management and the independent auditor guidelines and policies with respect to risk assessment and risk management. Our Audit Committee also reviews our major financial risk exposures and the steps management has taken to monitor and control these exposures. Our Audit Committee also monitors certain key risks on a regular basis throughout the fiscal year, such as risk associated with internal control over financial reporting and liquidity risk.
Our Compensation Committee, in consultation with management and Compensia, Inc. (“Compensia”), a national compensation consulting firm that serves as compensation consultant to the Compensation Committee, assesses risks created by the incentives inherent in our compensation programs, policies and practices. Specifically, at least annually the Compensation Committee assesses and considers potential risks when reviewing and approving our compensation programs, policies and practices for all employees, including our executive officers. Based on its most recent assessment, our Compensation Committee believes that our compensation programs, policies and practices do not encourage excessive and unnecessary risk-taking or create risks that are reasonably likely to have a material adverse effect on the Company or its operations.
Our Nominating and Corporate Governance Committee assists our board of directors in fulfilling its oversight responsibilities with respect to the management of risk associated with board organization, membership and structure, and corporate governance.
Finally, our full board of directors reviews strategic and operational risk in the context of reports from the management team, regularly receives reports regularly on all significant committee activities, evaluates the risks inherent in significant transactions, and provides guidance to management.
Management Succession Planning
Our board of directors and the Nominating and Corporate Governance Committee review the risks associated with our executive management team to ensure adequate succession plans are in place. Pursuant to our Corporate Governance Guidelines and the Nominating and Corporate Governance Committee charter, the Nominating and Corporate Governance Committee, in consultation with the full board of directors, is primarily responsible for succession planning for the role of CEO, including developing plans for interim succession for the CEO in the event of an unexpected occurrence. In addition, the Nominating and Corporate Governance Committee works with the CEO and the board of directors to plan for succession of executive directors and non-executive directors and other members of the Company’s executive management team, as well as to develop plans for interim succession of each of the other executive directors and non-executive directors or other members of the Company’s executive management team, in the event of an unexpected occurrence. The Nominating and Corporate Governance Committee also periodically reviews the succession planning process for the CEO, executive directors, non-executive directors and any other members of our executive management team, reports its findings and recommendations to the board of directors, and assists the board of directors in evaluating potential successors.
Board Meetings and Committees of Our Board of Directors
During our fiscal year ended April 30, 20212022 (“fiscal year 2021”2022”), the board of directors held foursix meetings (including regularly scheduled and special meetings), and each director attended at least 75% of the aggregate of (i) the total number of meetings of our board of directors held during the period for which he or she hasthey have been a director and (ii) the total number of meetings held by all committees of our board of directors on which he or shethey served during the periods that he or shethey served. During fiscal year 2021,2022, the board of directors also acted by written consent.
Although we do not have a formal policy regarding attendance by members of our board of directors at annual general meetings of shareholders, we encourage, but do not require, our directors to attend. The Company held an annual general meeting of shareholders on October 1, 2021 (the “2021 Annual Meeting”). Messrs. Banon, Chadwick, Puttagunta and Schuurman and Mses. Gleeson, Leibowitz and Marooney attended the 2021 Annual Meeting.
Our board of directors has the authority to appoint committees to perform certain management and administrative functions. Our board of directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which has the composition and responsibilities described below. Members will serve on these committees until their resignation or until otherwise determined by our board of directors. Executive directors may not be members of the Audit Committee, Compensation Committee or the Nominating and Corporate Governance Committee. Our board of directors may from time to time establish ad hoc committees.
Audit Committee
Our Audit Committee is currently composed of Messrs. Chadwick and Puttagunta and Ms. Leibowitz, each of whom is a non-executive member of our board of directors. The Audit Committee may not be chaired by the Lead Independent Director or by a former executive director. Mr. Chadwick is the chair of our Audit Committee. Our board of directors has determined that each member of our Audit Committee, including the chair of our Audit Committee, satisfy the requirements for independence and financial literacy under the rules and regulations of the NYSE and the SEC. Our board of directors has also determined that each of Messrs. Chadwick and Puttagunta and Ms. Leibowitz qualifies as an “audit committee financial expert” as defined in the SEC rules and satisfies the financial sophistication requirements of the NYSE. Mr. Chadwick currently serves on the audit committees of five public companies, including our company. Given Mr. Chadwick’s extensive experience as a CFO, his nearly perfect attendance to our board and Audit Committee meetings, proficiency in accounting, high level of engagement with management and other members of the board of directors, significant contributions to discussions and decision-making of the Audit Committee, experience as a finance professional and his knowledge of, and dedication to, our Company, our Nominating and Corporate Governance Committee has recommended, and our board of directors has determined, that Mr. Chadwick’s simultaneous service on the audit committees of more than three public companies does not impair his ability to effectively serve on our Audit Committee. The Audit Committee is responsible for, among other things:
•review of all related partyperson transactions in accordance with our related partyperson transactions policy;
•overseeing our accounting and financial reporting processes;
•the integrity and audits of our consolidated financial statements and financial reporting process;
•our systems of disclosure controls and procedures and internal control over financial reporting;
•our compliance with financial, legal and regulatory requirements related to our financial statements and other public disclosures, our compliance with our policies related thereto, and our policy in respect of tax planning;
•the engagement and retention of the registered independent public accounting firm to audit our U.S. generally accepted accounting principles (“GAAP”) financial statements and the recommendation for nomination by our board of directors for the instruction (appointment) by our general meeting of an external auditor to audit the Dutch Statutory Annual Accounts and board report, and the evaluation of the qualifications, independence, and performance of the independent public accounting firm, including the provision of non-audit services;
•the application of information and communication technology;
•the role and performance of our internal audit function;
•reviewing significant cybersecurity matters and concerns, including information security, data protection, and related regulatory matters and compliance;
•overseeing significant tax and treasury matters, including, among others, tax planning and compliance, cash management, investing activities and currency exposures and approving policies related thereto;
•our overall risk profile; and
•attending to such other matters as are specifically delegated to our Audit Committee by our board of directors from time to time.
During fiscal year 2021,2022, our Audit Committee held sevensix meetings and also acted by unanimous written consent.
Compensation Committee
Our Compensation Committee is currently composed of Messrs. Chadwick and Volpi and Ms. Gleeson and Messrs. Abbasi and Chadwick, each of whom is a non-executive member of our board of directors. The Compensation Committee may not be chaired by the Lead Independent Director or by a former executive director. Ms. Gleeson is currently the chair of our Compensation Committee. Our board of directors has determined that each member of our Compensation Committee meets the requirements for independence under the rules of the NYSE and the SEC and is a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act. The Compensation Committee is responsible for, among other things:
•reviewing and approving the compensation, including equity compensation, change-in-control benefits and severance arrangements, of our executive officers (other than the executive directors) and overseeing their performance;
•reviewing and making recommendations to our board of directors with respect to the compensation of our directors;
•reviewing and making recommendations to our board of directors with respect to our executive compensation policies and plans;
•implementing and administering our incentive and equity-based compensation plans;
•determining or, with respect to our CEO,executive directors, recommending to the board of directors the number of shares underlying, and the terms of, restricted share awards and options to be granted to our directors, executive officers, and other employees pursuant to these plans;
•assisting management in complying with our proxy statement and annual report disclosure requirements;
•producing a report on executive compensation to be included in our annual proxy statement;
•assisting our board of directors in producing the compensation report to be included in our annual report filed in the Netherlands and to be posted on our website in accordance with best practice of the DCGC;
•reviewing and monitoring matters related to human capital management, including corporate culture, diversity, equity and inclusion, recruiting, retention, attrition, talent acquisitionmanagement, and retention;career development and progression; and
•attending to such other matters as are specifically delegated to our Compensation Committee by our board of directors from time to time.
During fiscal year 2021,2022, our Compensation Committee held four meetings and also acted by unanimous written consent.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee is currently composed of Mr. Puttagunta and Mses. MarooneyLeibowitz and Leibowitz,Marooney, each of whom is a non-executive member of our board of directors. Mr. Puttagunta is the chair of our Nominating and Corporate Governance Committee. Our board of directors has determined that each member and prospective member of our nominating and corporate committee meets the requirements for independence under the rules of the NYSE. The Nominating and Corporate Governance Committee is responsible for, among other things:
•identifying, recruiting, and recommending to our board of directors qualified candidates for electionappointment as directors and recommending a slate of nominees for electionappointment as directors at our annual general meeting of shareholders;
•developing and recommending to our board of directors corporate governance guidelines as set forth in our rules of the board of directors, including the committee’sNominating and Corporate Governance Committee’s selection criteria for director nominees, and implementing and monitoring such guidelines;
•overseeing compliance with legal and regulatory requirements applicable to us;
•reviewing and making recommendations on matters involving the general operation of our board of directors, including board size and composition, and committee composition and structure;
•recommending to our board of directors nominees for each committee of our board of directors;
•annually facilitating the assessment of our board of directors’ performance as a whole and of the individual directors, and the performance of our committees of the board of directors as required by applicable law, regulations, corporate governance guidelines and exchange listing standardsstandards;
•overseeing, and periodically reviewing, our environmental, social and governance activities, programs and public disclosure, including in light of any feedback received from shareholders of the Company; and
•overseeing our board of directors’ evaluation of executive officers.
During fiscal year 2021,2022, our Nominating and Corporate Governance Committee held two meetings and also acted by unanimous written consent. On July 7, 2022, the Nominating and Corporate Governance Committee recommended to the board of directors to appoint Mr. Abbasi to temporarily fill the vacancy resulting from Mr. Volpi’s resignation as non-executive director and to nominate Mr. Abbasi for appointment as a non-executive director at the Annual Meeting. Mr. Abbasi was identified by a third-party director search firm engaged by the Nominating and Corporate Governance Committee to assist in the search for a new member of the board of directors.
We have posted the charters of our Audit, Compensation, and Nominating and Corporate Governance Committees, and any amendments thereto that may be adopted from time to time, on our website at ir.elastic.co. Information on or that can be accessed through our website is not part of this proxy statement.
Environmental, Social and Governance Matters
our employees, customers, and society at large, and it also reviews our progress against the Sustainability Accounting Standards Board (SASB) standards for the Software and IT Services industry. We also align with select United Nations Sustainable Development Goals (UN SDGs), where we believe we can have the greatest impact. We rally around four core ESG pillars: social impact, governance, environmental impact, and our products' societal impact. We believe that operating Elastic in an environmentally and socially responsible manner, while employing principled, effective and transparent governance practices, will help drive long-term value for all of our stakeholders, including our shareholders, employees, customers, creditors and communities. Consistent with this belief, Elastic has taken the following steps in pursuit of those objectives.
Governance
Our board of directors sets high standards for itself and the officers and employees of the Company. Implicit in this philosophyESG report is the importance of sound corporate governance. We believe it is the duty of the board of directors to serve allavailable on our stakeholders, including our shareholders, and to oversee the management of the Company’s business. To fulfill its responsibilities, the board of directors follows the procedures and standards set forth in our corporate governance guidelines, board rules, code of business conduct and ethics and other governance policies. To further promote better governance and a higher standard of ethical and professional conduct across the entire company, we have mandatory trainings and policy acknowledgments for employees with respect to our code of business conduct and ethics and other significant compliance policies. We also maintain an ethics hotline where employees and third parties can confidentially report any concerns about possible violations of our code of business conduct and ethics and compliance policies. We thoroughly investigate any compliance-related reports we receive through the hotline or other reporting channels and take appropriate remedial action when warranted. You can find certain of our governance documents and compliance policieswebsite. Nothing on our website, at www.elastic.co.
We believe that good corporate governance provides a strong foundation for operatingincluding our business in a manner that is fair, ethical and responsible and is therefore essential to the long-term success of our company. Our board of directors and its committees participate in setting the tone for our company inESG report or sections thereof, shall be deemed incorporated by reference into this regard, as they regularly review and, as appropriate, update various corporate governance andproxy statement or any other key policy documents in light of current regulations and best practices, and monitor and strive to ensure compliance with such corporate governance and key policy documents.
We recognize the importance of diversity within our board of directors and we believe that our business benefits from a board of directors with a wide range of skills and a variety of different backgrounds and that a diverse composition contributes to a well-balanced decision-making process by the board of directors. As such, we have a diversity policy that identifies the importance of considering potential director candidates’ diversity, including nationality, age, gender, race, ethnicity, education and experience. Currently, 37.5% of our directors are female, and our board of directors is compliantfiling with the State of California’s rules requiring certain publicly traded companies to have a minimum number of female directorsSEC. Our initiatives and directors from underrepresented communities. In the event that Mr. Kulkarni is appointed togoals are aspirational and may change. Statements regarding our board of directors, 33.3% of our directors will be female.
We believe that our efforts for effective corporate governancegoals are illustrated by the following practices:
•Seven out of eight current directors are, and, in the event that Mr. Kulkarni is appointed, seven out of nine directors will be, independent under the applicable rules and regulations of the SEC and the listing requirements and rules of the NYSE.
•The Chairman of our board of directors is independent.
•Our board of directors has both a Lead Independent Director and a Vice-Chairman, both of whom are independent.
•All of our board committees are comprised of independent directors.
•The functioning of our board of directors and board committees is evaluated at least annually.
•The leadership structure of our board of directors is reviewed regularly.
•Our key corporate governance and compliance policies are reviewed regularly.
•Our board of directors and its committees may hire outside advisors independently of management.
•Our insider trading policy contains anti-hedging and anti-pledging provisions.not guarantees or
Investingpromises that they will be met. All statements other than statements of historical or current facts, including statements regarding our environmental and other sustainability plans and goals, made herein or in Peopleour ESG report are forward-looking. These statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons. Risks and uncertainties that could cause our actual results to differ significantly from management’s expectations are described in our Annual Report on Form 10-K for fiscal year 2022.
ESG Oversight
The Nominating and Corporate Governance Committee of the Board oversees our ESG activities, programs, and public disclosure. Additionally, we established an ESG steering committee consisting of our CFO and COO; Senior Vice President, Global Human Resources; Chief Legal Officer; and Chief Marketing Officer. The ESG steering committee’s responsibility is to provide applicable approvals and strategic direction to our cross-functional ESG working group, which implements ESG initiatives throughout Elastic and contributes to developing ESG disclosures. The ESG steering committee also provides updates to the Nominating and Corporate Governance Committee and the Board.
Environment
We believe that environmentally responsible operating practices are important to generating value for our stakeholders, being a good partner to our customers, and being a good employer to our employees.
As a company distributed by design we have a distributed workforce, which helps reduce our environmental footprint by decreasing long commutes and the corresponding environmental impact, energy usage and waste that can come with operating numerous large physical offices that would typically be needed to house a traditional in-office workforce. While we do have physical office spaces throughout the world, the space is limited (as shown by our in-office people-to-desk ratio of 3:1) and we strive to limit the amount of space used to what is necessary to support our operations globally, and as noted previously, we support a distributed workforce by providing reimbursements for home office equipment. Additionally, our workplace team runs several in-office initiatives to positively impact our environmental efforts on a daily basis, including plastic water bottle removal, packaging reduction, in-office recycling, bio-waste reduction and water management.
Social Impact
Our employees (whom we call “Elasticians”) and our culture are vital to Elastic’s long-term success. We invest in our people by focusing on:
•Attracting, engaging and retaining talent;
•Maintaining our strong company culture;
•Enhancing our diversity, equity and inclusion (“DEI”);
•Continuing strong employee engagement;
•Facilitating continuous employee learning and development; and
•Offering effective total rewards, including employee well-being.
Our management regularly updates our board of directors and its committees on human capital trends and employee-focused activities and initiatives.
Our Culture
We describe our culture by the Elastic “source code,” the things that make Elastic, Elastic. Our source code guides our culture, business, product development, people practices and brand. The guiding ideas are:
•Home, Dinner. There is no such thing as work-life balance. We are successful if we find balance in life. Elastic empowers its employees with the flexibility to do so. Be home for dinner, go for a run
midday, care for a sick child, or visit a parent. Finding balance means being more innovative and efficient at work. Which makes for a better Elastic.
•Space, Time. It’s easy to get stuck in a day-to-day work pattern. Allowing for the space and time to dream requires conscious effort. Embracing a high failure rate does, too. Fulfillment comes from doing the obvious and dreaming up the un-obvious. Both are foundations of Elastic.
•IT, Depends. It’s pretty complicated to make some things simple, and even more complicated to make other things possible. We embrace and value the knowledge required to do both. When a question is asked, buckle up. Sh*t is about to get real. Your journey will likely start with “it depends.”
•Progress, SIMPLE Perfection. Perfection is not a destination. Color inside the lines or color outside the lines. Just pick a color. It’s as simple as 2048. An Elastic that moves is an Elastic that survives, thrives, and stands the test of time.
•01.02, /FORMAT. Our products are distributed by design, our company is distributed by intention. With many languages, perspectives, and cultures, it’s easy to lose something in translation. Over email and chat, doubly so. Until we get a perpetual empathy machine, don’t assume malice. A distributed Elastic makes for a diverse Elastic, which makes for a better Elastic.
•As YOU, Are. We all come in different shapes with different interests and skills. We all have an accent. Celebrate it. Just come as you are. No need to invest neurons trying to fit an arbitrary mold. We’d rather you put them to work shaping Elastic.
•HUMBLE, Ambitious. Ambition drives us to challenge ourselves and the people around us to do better. It is not an excuse to be an *sshole. Be humble. Be ambitious. At Elastic, we are both.
•Speed, SCALE, Relevance. Elastic is a search company. We focus on value to users by producing fast results that operate at scale and are relevant. This is our DNA. We believe search is an experience. It is what defines us, binds us, and makes us unique.
Elastic was born a distributed company and continues to be distributed by design. We have designed our processes, systems, and teams so that employees can generally perform their jobs without needing to be physically
present in the same room or even in the same time zone. Just as distributed systems are more resilient, we believe that being distributed helps build a strong company that can scale and adapt as new challenges arise. Having a distributed workforce gives us a global candidate pool, which gives us the opportunity to cast a wider recruiting net, a critical aspect of helping open our pipelines to a broader set of diverse talent.
Diversity, Equity and Inclusion
Our focus on DEI is critical to how we develop, strengthen and sustain a sense of belonging and inclusion among all Elasticians.
•Balanced Teams. We strive to be an employer of choice for a diverse and inclusive workforce through our talent brand, talent attraction, development, and retention efforts. Our recruiting approach is underpinned by the desire to create balanced teams at Elastic, which includes considering broad aspects of diversity from race and gender mix as well as diversity of thought, experience and tenure when recruiting new team members. In fiscal year 2021,2022, the created-by-women-for-women workplace review site, Fairygodboss, once again recognized Elastic as number one in the Best Technology Company for Women category, and as one of the best workplaces for women in two additional categories: Best Company for Women, and Best Company Where CEOs Support Gender Diversity.
•Elastician Resource Groups. We strive to embed DEI deep within our culture through various initiatives, projects and programs, the centerpiece of which is the Elastician Resource Groups, which are organizationally sponsored, self-organized, Elastician-run groups. Aligned to specific shared identities, interests, affinity or allyship, such as Latinx, parent(s), disability or accessibility, Black, LGBTQ+ and others, each group identifies goals and objectives with executive sponsorship to ensure that they provide tangible benefits and result in all Elasticians feeling a sense of belonging.
Code of Conduct. All of our employees must adhere to a code of business conduct and ethics that sets standards for appropriate behavior and, as mentioned above, are required to complete annual training on the code of business conduct and ethics and training to help prevent, identify and report any type of discrimination and harassment.
Employee Engagement
We are committed to ensuring that Elasticians have a voice in how we can collectively make Elastic a better place to work.
New Employee Onboarding. Our new employee onboarding experience is centered around attending “X-School”, our extensive new-hire orientation program, which enables new Elasticians to meet and collaborate with other new Elasticians from around the globe and to learn about our products and solutions.
Engagement Surveys. We maintain a regular pulse on how our employees are feeling through two primary feedback mechanisms – an annual employee engagement survey and a mid-year pulse survey check-in. The results of these surveys are reviewed at the company, functional, team and manager level, with action plans put in place annually. Elasticians were highly engaged in providing feedback in fiscal year 2021, with very high participation rates for the mid-year and annual surveys as well as high engagement scores across a spectrum of questions.
Learning and Development
Our Learning & Organizational Development team’s mission to enable Elasticians to pursue their purpose, in work and life, makes for a better Elastic. To that end, we have a variety of ways in which we support the continuous learning and development of all Elasticians, including access to on-demand video based learning.
We also conduct specific programs to develop managers and leaders at Elastic, including our flagship Leadership Performance Program, an externally-led program focused on high-performing leaders who have the potential to have a significant strategic impact on the achievement of our long-term objectives.
Total Rewards
Compensation, Benefits and Well-being. We provide market competitive compensation which typically includes cash compensation as well as equity awards. Reflecting our interest in the whole person, we provide programs designed to enable Elasticians to meet their well-being goals, from starting a family to being at their
physical and emotional best. These programs include market competitive medical and dental programs, in addition to focus on mental health and holistic well-being. We provide market competitive paid time off programs, including offering 16 weeks of paid leave to all new parents. In addition, we also provide retirement and income protection plans, which include a 401k plan with a dollar-for-dollar match by Elastic up to 6% of eligible earnings up to a plan-limit maximum for U.S.-based Elasticians as well as similar competitive plans outside of the United States.
•Fair Pay. We have fair and consistent compensation practices through our use of local third-party market data specific to each country, where available, so that we understand local compensation and cost of labor levels. We retain external experts to review our compensation outcomes on an ongoing basis to ensure they are bias-free and fairly reward employee performance and contributions. We take great pride in our focus on fair pay and the positive results we’ve established. Our external review continues to validate that we have gender-based pay parity between male and female Elasticians globally.
•Code of Conduct. All of our employees must adhere to a code of business conduct and ethics that sets standards for appropriate behavior and, as mentioned above, are required to complete annual training on the code of business conduct and ethics and training to help prevent, identify and report any type of discrimination and harassment.
Employee Engagement
We are committed to ensuring that Elasticians have a voice in how we can collectively make Elastic a better place to work.
•New Employee Onboarding. Our new employee onboarding experience is centered around attending “X-School”, our extensive new-hire orientation program, which enables new Elasticians to meet and collaborate with other new Elasticians from around the globe and to learn about our products and solutions.
•Engagement Surveys. We maintain a regular pulse on how our employees are feeling through two primary feedback mechanisms – an annual employee engagement survey and a mid-year pulse survey check-in. The results of these surveys are reviewed at the company, functional, team and manager level, with action plans put in place annually. Elasticians were highly engaged in providing feedback in fiscal years 2022 and 2021, with very high participation rates for the mid-year and annual surveys as well as high engagement scores across a spectrum of questions.
Learning and Development
Our Learning & Organizational Development team’s mission to enable Elasticians to pursue their purpose, in work and life, makes for a better Elastic. To that end, we have a variety of ways in which we support the continuous learning and development of all Elasticians, including access to on-demand video based learning.
We also conduct specific programs to develop managers and leaders at Elastic, including our flagship leadership development program - Leading Strategically, an externally-led program focused on high-performing leaders who have the potential to have a significant strategic impact on the achievement of our long-term objectives.
Total Rewards
•Compensation, Benefits and Well-being. We provide market competitive compensation which typically includes cash compensation as well as equity awards. Reflecting our interest in the whole person, we provide programs designed to enable Elasticians to meet their well-being goals, from starting a family to being at their physical and emotional best. These programs include market competitive medical and dental programs, in addition to focus on mental health and holistic well-being. We provide market competitive paid time off programs, including offering 16 weeks of paid leave to all new parents, life-planning benefits and other travel reimbursements for certain healthcare services. In addition, we provide retirement and income protection plans, which include a 401k plan with a dollar-for-dollar match by Elastic up to 6% of eligible earnings up to a plan-limit maximum for U.S.-based Elasticians as well as similar competitive plans outside of the United States.
•Flexible Work Environment.Since inception, we have provided most Elasticians with the ability to work from where they are and as they are. We know that being face-to-face is important too, and we have physical offices around the world to provide a space for employees to work from if they wish.
•Involvement in the Community. Through Elastic Cares, employees can support the charitable organizations that matter the most to them on a local and global level. Elastic Cares is a program consisting of donation matching, our nonprofit organization program which provides our technology for
free to certain nonprofit organizations, and our volunteer time off (“VTO”) initiative. Employees are encouraged to volunteer for thesecharitable organizations throughout the year using our VTO program which provides our employees with 40 hours of volunteer time each year.
COVID-19 Response
During the COVID-19 pandemic, our primary focus was and continues to be on the safety and well-being of our employees and their families. Infamilies, while also providing them with the fourth quarter of fiscal 2020, we closed our offices globallyflexibility and required our employees to work remotely. Additionally, due to concerns over risks related to travel and large gatherings, we have replaced many of our in-person events, including our 2020 and 2021 internal global all-hands, annual flagship conference and other in-person marketing events, with web-based virtual events.support needed for the frequently-changing COVID-19 landscape. Given the significant personal and professional impact of the COVID-19 pandemic, we provided reimbursements for home office equipment, and established specificpandemic-specific learning opportunities for our employees that allowed teams to better connect to each other, includingand fun virtual activities to help teams bond. To allow employees to deal with and alleviate the physical, mental, and emotional effects of the pandemic on themselves and loved ones, we offered two weeks ofcontinued offering digital mental health services, COVID leave and implemented company-wide days off called “Shut It Down Days”Days,” generally twice per month. During fiscal 2022, we gradually reopened offices and invited our employees to return to work on a voluntary basis if they wished to do so, reduced travel restrictions, and opened up small in-person events, determined on a regional basis.
Governance
Our board of directors sets high standards for itself and the officers and employees of the Company. Implicit in this philosophy is the importance of sound corporate governance. We believe it is the duty of the board of directors to serve all our stakeholders, including our shareholders, and to oversee the management of the Company’s business. To fulfill its responsibilities, the board of directors follows the procedures and standards set forth in our corporate governance guidelines, board rules, code of business conduct and ethics and other governance policies. To further promote better governance and a higher standard of ethical and professional conduct across the entire company, we have mandatory trainings and policy acknowledgments for employees with respect to our code of business conduct and ethics and other significant compliance policies. We also maintain an ethics hotline where employees and third parties can confidentially report any concerns about possible violations of our code of business conduct and ethics and compliance policies. We thoroughly investigate any compliance-related reports we receive through the hotline or other reporting channels and take appropriate remedial action when warranted. You can find certain of our governance documents and compliance policies on our website at www.elastic.co.
We believe that good corporate governance provides a strong foundation for operating our business in a manner that is fair, ethical and responsible and is therefore essential to the long-term success of our company. Our board of directors and its committees participate in setting the tone for our company in this regard, as they regularly review and, as appropriate, update various corporate governance and other key policy documents in light of current regulations and best practices, and monitor and strive to ensure compliance with such corporate governance and key policy documents.
We recognize the importance of diversity within our board of directors and we believe that our business benefits from a board of directors with a wide range of skills and a variety of different backgrounds and that a diverse composition contributes to a well-balanced decision-making process by the board of directors. As such, we have a diversity policy that identifies the importance of considering potential director candidates’ diversity, including nationality, age, gender, race, ethnicity, education and experience. Currently, 33.3% of our directors are female and 33.3% of our directors self-identify as being racially, ethnically, or nationally diverse.
We believe that our efforts for effective corporate governance are illustrated by, among others, the following practices:
•Seven out of nine continuing directors and director nominees standing for appointment at the Annual Meeting are independent under the applicable rules and regulations of the SEC and the listing requirements and rules of the NYSE.
•The Chairman of our board of directors is independent.
•Our board of directors has both a Lead Independent Director and a Vice-Chairman, both of whom are independent.
•All of our board committees are comprised of independent directors.
•The functioning of our board of directors and board committees is evaluated at least annually.
•The leadership structure of our board of directors is reviewed regularly.
•Our key corporate governance and compliance policies are reviewed regularly.
•Our board of directors and its committees may hire outside advisors independently of management.
•Our insider trading policy contains anti-hedging and anti-pledging provisions.
Global Data Privacy
We are committed to the highest ethical standards and dedicated to complying with all applicable laws and safeguarding all data entrusted to us. Working to maintain the trust and confidence of our customers is at the center of our global privacy and information security program. Elastic’s data protection program and policies (i.e. global privacy statement and cookie policy) leverage technology and robust governance practices in an effort to protect data. We have dedicated teams that include privacy and compliance counsel, our chief information security officer, our European data protection officer, and experienced security operations teams working to protect data. We invest in technical, organizational, and administrative measures throughout our infrastructure, including our cloud offerings. Elastic’s program includes transparency, physical and logical controls, vulnerability monitoring, data availability, supply-chain risk management and a legal compliance framework designed to address applicable laws and regulations relating to privacy and information security. Further, our services have been independently audited and are the subject of numerous certifications and attestations relating to specified privacy and security standards.
Vendor Code of Conduct
We also recognize the foundational value that promoting an ethical business environment brings to all market participants and strive to support a business environment that allows us and our suppliers to flourish. We have adopted and make publicly available a global vendor code of conduct and are working to develop programs using several industry standards such as, among others, International Standards Organization and Organization for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises.
Product Societal Impact
Elastic is committed to building products that create a positive societal impact. The Elastic Search Platform is built on the Elastic Stack, a powerful set of software products that ingest data from any source, in any format, and perform search, analysis, and visualization of that data. The company’s open source roots allow Elastic to provide its solutions to a large community of users for free. This encourages innovation and efficiency to operate at scale for both non-profit organizations and for-profit customers. Elastic’s solutions have allowed our customers to positively impact society in various ways, including but not limited to enabling human security and combating trafficking, reducing carbon footprint, and providing energy-savings through efficient and reduced power consumption.
Elastic Community Engagement
At Elastic, community matters. We recognize that our team extends beyond our employees to our community of users, which includes all the users who download our software. Our users interact with us on our website and forums and on Twitter, GitHub, Stack Overflow, Quora, Facebook, Weibo, WeChat, and more. In order to build products that best meet our users’ needs, we focus on, and invest in, continuing to build a strong community. Each download of the Elastic Stack is a new opportunity to educate our next contributor, hear about a new use case, explore the need for a new feature, or meet a future member of the team. Community is more than code and it is core to our identity, binding our products closely together with our users.
To recognize the contributions of our community members, we have an Elastic Contributor Program to recognize the hard work of our awesome contributors, encourage knowledge sharing within the Elastic community and to build friendly competition around contributions. Further, we created the Elastic Excellence Awards program, which celebrates philanthropic, innovative and transformative projects and the people behind them. Through our engagement with our community through programs such as the Elastic Contributor Program and Elastic Excellence Awards, we aim to acknowledge and recognize our valued community members who have brought us to where we are now.
Working to maintain the trust and confidence of our customers is at the center of our global privacy and information security program. Elastic’s data protection program leverages technology and robust governance practices in an effort to protect data. We have dedicated teams that include seasoned privacy and compliance counsel, our chief information security officer, our data protection officer, and experienced security operations teams working to protect data. We invest in technical, organizational, and administrative measures throughout our infrastructure, including our cloud offerings. Elastic’s program includes transparency, physical and logical controls, vulnerability monitoring, data availability, supply-chain risk management and a legal compliance framework designed to address applicable laws and regulations relating to privacy and information security. Further, our
services have been independently audited and are the subject of numerous certifications and attestations relating to specified privacy and security standards.
Environmental Impact and Sustainability
Although greenhouse gas emissions and water and energy usage are not material factors to the day-to-day operations of our business as a provider of software solutions, we believe that environmentally responsible operating practices are important to generating value for our stakeholders, being a good partner to our customers, and being a good employer to our employees.
As a company distributed by design we have a distributed workforce, which helps reduce our environmental footprint by decreasing long commutes and the environmental impact, energy usage and waste that can come with operating numerous large physical offices that would typically be needed to house a traditional in-office workforce. While we do have physical office spaces throughout the world, the space is limited and we strive to limit the amount of space used to what is necessary to support our operations globally, and as noted previously, we support a distributed workforce by providing reimbursements for home office equipment.
We also recognize the foundational value that promoting an ethical business environment brings to all market participants and strive to support a business environment that allows us and our suppliers to flourish. We have adopted and make publicly available a global vendor code of conduct and are working to develop programs using several industry standards such as, among others, International Standards Organization and Responsible Business Alliance (formerly Electronic Industry Citizenship Coalition).
Company goals are aspirational and may change. Statements regarding the Company’s goals are not guarantees or promises that they will be met.
Policies Governing Director Nominations
Director Nomination Process
Our board of directors is responsible for selecting its own members. Our board of directors delegates the selection and nomination process to the Nominating and Corporate Governance Committee, with the expectation that other members of the board of directors, and of management, will be requested to take part in the process as appropriate. The Nominating and Corporate Governance Committee makes recommendations to the board of directors regarding the size and composition of the board of directors. The Nominating and Corporate Governance Committee is responsible for ensuring that the composition of the board of directors accurately reflects the needs of the Company’s business and, in furtherance of this goal, for proposing the addition of members and the necessary resignation of members for purposes of obtaining the appropriate members and skills. The Nominating and Corporate Governance Committee recommends, and our board of directors providesmakes a binding nomination for a candidate to stand for appointment as director by the meeting of shareholders.
Generally, our Nominating and Corporate Governance Committee identifies candidates for director nominees in consultation with management, through the use of other advisors, through the recommendations submitted by shareholders or through such other methods as the Nominating and Corporate Governance Committee deems to be helpful to identify candidates. Candidates recommended by shareholders and other stakeholders are given appropriate consideration in the same manner as other candidates. Once candidates have been identified, our Nominating and Corporate Governance Committee confirms that the candidates meet all of the minimum qualifications for director nominees established by the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee may gather information about the candidates through interviews, detailed questionnaires, background checks or any other means that the Nominating and Corporate Governance Committee deems to be appropriate in the evaluation process. The Nominating and Corporate Governance Committee then meets as a group to discuss and evaluate the qualifications and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the board of directors. Based on the results of the evaluation process, the Nominating and Corporate Governance Committee recommends candidates as director nominees to our board of directors in order for the board of directors to draw up a binding nomination for appointment by the meeting of shareholders.
Shareholders may submit proposals related to the composition of the board of directors as provided in our articles of association and by Dutch law. Such proposals are forwarded to the chairperson of the Nominating and Corporate Governance Committee for consideration. All directorsDirectors are appointed by the annual general meeting of
shareholders (or an extraordinary meeting of shareholders) at the binding nomination of the board of directors. Additionally, if a binding nomination of the board of directors has been overruled and a subsequent non-binding nomination by the board of directors has been rejected, shareholders may propose a resolution to appoint a board member that was not nominated by the board of directors, and any such resolution requires at least a two-thirds majority of the votes cast at the annual general meeting, provided such majority represents more than half the issued share capital.
Qualifications
In recommending candidates to the board of directors, the Nominating and Corporate Governance Committee takes into consideration the board of directors’ criteria for selecting new directors, including, but not limited to, integrity, past achievements, judgment, intelligence, relevant experience and the ability of the candidate to devote adequate time to duties of the board of directors. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria, and no particular criterion is a prerequisite for any candidate. We do however consider diversity in reviewing director candidates and do not discriminate on the basis of race, religion, sexual orientation, sex or national origin. In order for the board of directors to fulfill its responsibilities, our Nominating and Corporate Governance Committee believes that the board of directors should include directors possessing a blend of experience, knowledge and ability, regardless of other characteristics.
Shareholder Communications
The Company has a process for shareholders and other interested parties who wish to communicate with our board of directors, or with an individual member or members of our board of directors. Shareholders and other interested parties who wish to communicate with our board of directors may write to our board of directors at the address of the Company’s registered office at Keizersgracht 281, 1016 ED Amsterdam, the Netherlands. These communications will be received by our General Counsel and will be presented to our board of directors at the
discretion of our General Counsel, in consultation with appropriate directors, as necessary. Certain items that are unrelated to our board of directors’ duties and responsibilities may be excluded, such as mass mailings, product complaints or inquiries, job inquiries, business solicitations and patently offensive or otherwise inappropriate material. The full text of our policies and procedures for bilateral contacts with shareholders, including information regarding how to contact our non-management directors, is available on our website at ir.elastic.co.
Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee during our fiscal year 20212022 was or has formerly been an officer or employee of our Company. None of our executive officers currently serves, or in the past year has served, as a member of the Compensation Committee or director (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of any entity that has one or more executive officers serving on our Compensation Committee or our board of directors.
Non-Executive Director Compensation
Each non-executive director is eligible to receive compensation for his or hertheir service consisting of annual cash retainers and equity awards. Our board of directors has the discretion to revise non-executive director compensation as it deems necessary or appropriate, in accordance with our remuneration policy as previously adopted by an annual general meeting of shareholders (the “Remuneration Policy”).
Cash Compensation. In fiscal 2021,year 2022, all non-executive directors were eligible to receive the following cash compensation for their services:
•$30,000 per year for service as a board member;
•$10,00019,000 per year additionally for service as Lead Independent Director;
•$20,000 per year additionally for service as chairperson of the Audit Committee;
•$8,50010,000 per year additionally for service as an Audit Committee member;
•$12,00015,000 per year additionally for service as chairperson of the Compensation Committee;
•$5,0007,500 per year additionally for service as a Compensation Committee member;
•$7,5008,500 per year additionally for service as chairperson of the Nominating and Corporate Governance Committee; and
•$4,000 per year additionally for service as a Nominating and Corporate Governance Committee member.
All cash payments to non-executive directors, or the retainer cash payments, are paid quarterly in arrears on a prorated basis.
Equity Compensation. In fiscal year 2021,2022, our non-executive directors were eligible for nondiscretionary, automatic grants of restricted stock units, except for any non-employee director who either (i) beneficially owns more than 2% of the outstanding and issued share capital of the Company, or (ii) is a partner or a member of any venture capital firm that owns securities of the Company representing more than 2% of the outstanding and issued share capital of the Company.
•Initial award. Any person who would have first became an eligible non-executive director would have been granted an award of restricted stock units covering a number of shares having a grant date fair value equal to $170,000$200,000 pro-rated for the amount of time that remains in the 12-month period prior to the next scheduled annual general meeting of the Company’s shareholders (and if the date of such annual general meeting of the Company’s shareholders is not known, the one-year anniversary of the most recent Annual Award granted to non-executive directors), rounded down to the nearest whole share (the “Initial Award”). The shares underlying the Initial Award will settle on the earlier of (i) the one-year anniversary of the date the Initial Award is granted or (ii) the day prior to the date of the
annual general meeting of the Company’s shareholders next following the date the Initial Award is granted, subject to continued service through the applicable vesting date.
•Annual award. For fiscal year 2021,2022, on the date of the general meeting of the Company’s shareholders, each eligible non-executive director was eligible to be granted an award of restricted stock units covering a number of shares having a grant date fair value equal to $170,000$200,000 (the “Annual Award”). The shares underlying the Annual Award will settle on the earlier of (i) the one-year anniversary of the date the Annual Award is granted or (ii) the day prior to the date of the annual general meeting of our shareholders next following the date the Annual Award is granted, subject to continued service through the applicable vesting date.
The grant date fair value is computed in accordance with GAAP.
Any award of restricted stock units granted under our non-executive director compensation policy will fully vest and become exercisable in the event of a change in control, as defined in our amended and restated 2012 Stock Option Plan (the “2012 Plan”) provided that the director remains a director through such change in control. Further, our 2012 Plan provides that in the event of a merger or change in control, as defined in our 2012 Plan, each outstanding equity award granted under our 2012 Plan that is held by a non-executive director will fully vest, all restrictions on the shares subject to such award will lapse, and with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and all of the shares subject to such award will become fully exercisable, if applicable, provided such director remains a director through such merger or change in control.
Fiscal 20212022 Non-Executive Director Compensation Table
The table below shows the total compensation awarded to those serving as non-executive directors during fiscal year 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or
Paid in Cash ($) | | Stock Awards
($)(1) | | | | Total
($) |
| Jonathan Chadwick(2) | | 55,000 | | | 169,890 | | (3) | | | 224,890 | |
| Peter Fenton(4)(5) | | 46,000 | | | 169,890 | | (3) | | | 215,890 | |
| Alison Gleeson(4) | | 35,000 | | | 169,890 | | (3) | | | 204,890 | |
| Caryn Marooney(4) | | 34,000 | | | 169,890 | | (3) | | | 203,890 | |
| Chetan Puttagunta(4) | | 56,000 | | | 169,890 | | (3) | | | 225,890 | |
| Steven Schuurman(6) | | 30,000 | | | — | | | | | 30,000 | |
| Michelangelo Volpi(7) | | — | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or
Paid in Cash ($) | | Stock Awards
($)(1) | | | | Total
($) |
| Jonathan Chadwick (2) | | 57,500 | | | 199,852 | | (3) | | | 257,352 | |
| Peter Fenton (4) | | 24,500 | | | — | | | | | 24,500 | |
| Alison Gleeson (5) | | 41,875 | | | 199,852 | | (3) | | | 241,727 | |
| Shelley Leibowitz (5) | | 25,667 | | | 199,852 | | (3) | | | 225,519 | |
| Caryn Marooney (5) | | 34,000 | | | 199,852 | | (3) | | | 233,852 | |
| Chetan Puttagunta (5) | | 67,500 | | | 199,852 | | (3) | | | 267,352 | |
| Steven Schuurman (6) | | 30,000 | | | — | | | | | 30,000 | |
| Michelangelo Volpi (7) | | — | | | — | | | | | — | |
(1)The amounts shown represent the grant date fair value of restricted stock unit (“RSU”) awards granted in fiscal year 20212022 for financial reporting purposes pursuant to the provisions of Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). Such amounts do not represent amounts paid to or realized by the non-executive director. See Note 11, “Equity Incentive Plans” of the notes to our consolidated financial statements in the Company’s Annual Report on Form 10-K for fiscal year 20212022 regarding assumptions underlying valuation of equity awards. Additional information regarding the RSUs awarded to each non-executive director during fiscal year 20212022 is set forth in the footnotes below.
(2)As of April 30, 2021,2022, Mr. Chadwick held 1,4871,323 RSUs and 162,500137,500 options to purchase ordinary shares.
(3)Represents the aggregate grant date fair value of RSUs granted to the incumbent non-executive directors on October 1, 2021, under the terms of our non-executive director compensation policy for fiscal year 20212022 and the 2012 Plan, and calculated in accordance with ASC 718 based on the closing market price of our ordinary shares on the grant date.
(4)As of April 30, 2021, the non-executive director held 1,487 RSUs and no options to purchase ordinary shares.
(5)PeterMr. Fenton’s term as a member of our board of directors expired at our 2021 Annual Meeting. As of April 30, 2022, Mr. Fenton did not hold any RSUs or options to purchase ordinary shares.
(5)As of April 30, 2022, the non-executive director held 1,323 RSUs and no options to purchase ordinary shares.
(6)The non-executive directorMr. Schuurman did not receive any grants of RSUs or options to purchase ordinary shares in fiscal year 20212022 in accordance with our non-executive director compensation policy, which provides that non-employee directors
who, at the time of appointment or the date of the annual general meeting, either (i) beneficially owned more than 2% of the outstanding and issued share capital of the Company, or (ii) was a partner or a member of any venture capital firm that owns securities of the Company representing more than 2% of the outstanding and issued share capital of the Company, are not eligible to receive equity awards. As of April 30, 2021, the director2022, Mr. Schuurman held no RSUs or options to purchase ordinary shares.
(7)Mr. Volpi has waived his right to receive payments of director fees and the annual equity grant to directors. He would have been eligible to receive $38,500$39,875 in fees and an RSU award with a grant date fair value of $169,890$199,852 calculated in accordance with ASC 718 for his service as a director in fiscal year 2021.2022.
BOARD APPOINTMENTS—VOTING PROPOSAL NO. 1
The board of directors of the Company is responsible for establishing broad corporate policies and monitoring the overall performance of the Company. The board of directors selects the Company’s senior management, delegates authority for the conduct of the Company’s day-to-day operations to those senior managers, and monitors their performance. Members of the board of directors are kept informed of the Company’s business by, among other things, participating in meetings of the board of directors and committees and by reviewing analyses and reports provided to them.
The board of directors is currently made up of nine directors. We have a one-tier board of directors, consisting of two executive directors and seven non-executive directors. Under the Company’s articles of association, all directors may hold office for a maximum term of three years provided that such term shall lapse ultimately immediately after the close of the first annual general meeting held after three years have lapsed since the appointment, or until their earlier death, resignation or removal. A director may be reappointed, and the three-year maximum term may be deviated from by resolution of the general meeting of shareholders upon a proposal of the board of directors.
The members of our board of directors have been appointed to staggered terms. The terms of Ms. Marooney and Messrs. Puttagunta and Schuurman will expire at the Annual Meeting; the terms of Ms. Gleeson and Mr. Chadwick will expire at the annual general meeting of shareholders to be held in 2023; the terms of Mr. Banon and Ms. Leibowitz will expire at the annual general meeting of shareholders to be held in 2024; and the term of Mr. Kulkarni will expire at the annual general meeting of shareholders to be held in 2025. Mr. Abbasi was appointed to our board of directors to temporarily fill the vacancy resulting from Michael Volpi’s resignation, such appointment and resignation both effective as of July 13, 2022. The term of Mr. Abbasi’s temporary appointment will expire upon the earlier of (i) the vacancy created by Mr. Volpi’s resignation being filled, which will occur if Mr. Abbasi is appointed upon conclusion of the Annual Meeting in accordance with voting proposal no. 1, (ii) the board appointing another person to temporarily fill such vacancy or (iii) the vacancy has been cancelled.
The board of directors, following the recommendation of the Nominating and Corporate Governance Committee, has made a binding nomination to elect Mr. Abbasi and to re-elect Ms. Marooney and Messrs. Puttagunta and Schuurman as non-executive directors, in accordance with article 7.2 of the Company’s articles of association.
The board of directors recommends a vote “FOR” the appointment of each of Ms. Marooney and Messrs. Abbasi, Puttagunta and Schuurman.
If appointed, the term of office for Ms. Marooney will expire at the end of the 2023 annual general meeting of shareholders, the term of office for Mr. Puttagunta will expire at the end of the 2024 annual general meeting of shareholders, and the terms of office for Messrs. Abbasi and Schuurman will expire at the end of the 2025 annual general meeting of shareholders.
Other than as disclosed in this proxy statement regarding compensation for non-executive directors, which each of the director nominees would receive if elected, there are no arrangements or understandings between the nominees, directors or executive officers and any other person pursuant to which our nominees, directors or executive officers have been selected for their respective positions.
Required Vote
Ms. Marooney and Messrs. Abbasi, Puttagunta and Schuurman will each be appointed to the board of directors unless a two-thirds majority of the votes cast for such nominee at the Annual Meeting, which votes must represent more than one-half of the issued and outstanding share capital, are cast against such nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES FOR DIRECTOR.
ADOPTION OF DUTCH STATUTORY ANNUAL ACCOUNTS—VOTING PROPOSAL NO. 2
At the Annual Meeting, shareholders will be asked to adopt the Dutch Statutory Annual Accounts for fiscal year 2022, which are prepared in accordance with International Financial Reporting Standards (“IFRS”). The report of PricewaterhouseCoopers Accountants N.V. for fiscal year 2022, is included in the Dutch Statutory Annual Accounts.
In accordance with article 10.1.4 of the Company’s articles of association, the board of directors of the Company has determined that the net loss for fiscal year 2022 is added to the other reserve-accumulated losses.
As a public company with limited liability incorporated under the laws of the Netherlands, the Company is required by Dutch law to prepare the accounts and submit them to shareholders for adoption. The Company’s Dutch Statutory Annual Accounts are different from the consolidated financial statements contained in our annual report on Form 10-K for fiscal year 2022, which were prepared in accordance with GAAP and filed with the SEC.
A copy of the Dutch Statutory Annual Accounts will be available free of charge on our website at ir.elastic.co, at our offices at 800 West El Camino Real, Suite 350 Mountain View, California 94040 and at our offices in the Netherlands at Keizersgracht 281, 1016 ED Amsterdam.
A representative of PricewaterhouseCoopers Accountants N.V. will be present at the Annual Meeting and will be available to respond to appropriate questions from shareholders, and will be given an opportunity to make a statement.
Required Vote
The adoption of the Company’s Dutch Statutory Annual Accounts for fiscal year 2022 requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one-third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF OUR DUTCH STATUTORY ANNUAL ACCOUNTS.
APPOINTMENT OF PRICEWATERHOUSECOOPERS ACCOUNTANTS N.V. AS THE EXTERNAL AUDITOR OF OUR DUTCH STATUTORY ANNUAL ACCOUNTS—VOTING PROPOSAL NO. 3
The Board has nominated PricewaterhouseCoopers Accountants N.V. for appointment to serve as the external auditor of our Dutch statutory annual accounts to be prepared in accordance with IFRS for the fiscal year ending April 30, 2023, and, in accordance with our Articles of Association, we are requesting that shareholders appoint PricewaterhouseCoopers Accountants N.V. as external auditor of such annual accounts. PricewaterhouseCoopers Accountants N.V. has acted as the auditor of our Dutch statutory annual accounts since 2018. Representatives of PricewaterhouseCoopers Accountants N.V. will be present at the meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
Required Vote
The appointment of PricewaterhouseCoopers Accountants N.V. requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one-third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPOINTMENT OF PRICEWATERHOUSECOOPERS ACCOUNTANTS N.V. AS THE EXTERNAL AUDITOR OF OUR DUTCH STATUTORY ANNUAL ACCOUNTS FOR THE FISCAL YEAR ENDING APRIL 30, 2023.
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM—VOTING PROPOSAL NO. 4
Introduction
The Audit Committee has selected PricewaterhouseCoopers LLP, an independent registered public accounting firm, to audit the GAAP consolidated financial statements of the Company for the fiscal year ending April 30, 2023. In addition, the board of directors has directed that management submit the selection of PricewaterhouseCoopers LLP as the Company’s registered public accounting firm for ratification by the shareholders at the Annual Meeting. The board of directors recommends that shareholders vote “FOR” the ratification and selection of PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP also served as the Company’s independent registered public accounting firm for fiscal year 2022. Representatives of PricewaterhouseCoopers LLP will be present at the meeting with the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
Although action by shareholders is not required by law, the board of directors has determined that it is desirable to request ratification of this selection by the shareholders. Notwithstanding the ratification of this selection by the shareholders, the Audit Committee, in its discretion, may direct the selection of a new independent registered public accounting firm at any time during the year, if the Audit Committee feels that such a change would be in the best interest of the Company and its shareholders. In the event of a negative vote on ratification, the Audit Committee will reconsider its selection.
Principal Accounting Fees and Services
The following table presents fees for professional audit services and other services rendered to the Company by its principal independent registered public accounting firm and its affiliates for fiscal years 2022 and 2021. The dollar amounts in the table and accompanying footnotes are in thousands.
| | | | | | | | | | | | | | |
| | Fiscal Year
2022 | | Fiscal Year
2021 |
| Audit Fees (1) | | $ | 3,687,337 | | | $ | 2,968,283 | |
| Audit-Related Fees (2) | | 383,000 | | | 137,450 | |
| Tax Fees (3) | | — | | | 10,316 | |
| All Other Fees (4) | | 11,838 | | | 5,781 | |
| Total | | $ | 4,082,175 | | | $ | 3,121,830 | |
(1)Audit Fees consist of fees for professional services rendered in connection with the integrated audit of our annual consolidated financial statements, management’s report on internal controls, the review of our quarterly condensed consolidated financial statements, and audit services that are normally provided by independent registered public accounting firms in connection with statutory and regulatory filings or engagements for those fiscal years, such as statutory audits.
(2)Audit-Related Fees are fees for assurance and related services that are reasonably associated to the performance of the audit or review of our consolidated financial statements or internal control over financial reporting and are not included in “Audit Fees.”
(3)Tax Fees include fees for tax compliance and advice. Tax advice fees encompass a variety of permissible tax services, including technical tax advice related to federal and state income tax matters, assistance with sales tax and assistance with tax audits.
(4)All Other Fees consist of aggregate fees billed for products and services provided by the independent registered public accounting firm other than those disclosed above. These services specifically relate to subscription fees paid for access to online accounting research software and regulatory applications.
All services provided by PricewaterhouseCoopers LLP and its affiliates for our fiscal years 2022 and 2021 were approved by our Audit Committee.
Pre-Approval of Audit and Non-Audit Services
The Audit Committee has established a policy governing the Company’s use of its principal independent registered public accounting firm for non-audit services. Under the policy, the Audit Committee must pre-approve all audit and non-audit services performed by the Company’s independent registered public accounting firm, unless subsequent approval is permitted under the rules and regulations of the SEC, in order to ensure that the provision of such services does not impair the public accountants’ independence.
Required Vote
The ratification of the selection of PricewaterhouseCoopers LLP requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one-third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING APRIL 30, 2023.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is responsible for assisting our board of directors in fulfilling its oversight responsibilities regarding the Company’s financial accounting and reporting processes, system of internal control, audit process, and process for monitoring compliance with laws and regulations.
Management of the Company has the primary responsibility for preparing the Company’s consolidated financial statements, as well as establishing and maintaining the integrity of the Company’s financial reporting process, accounting principles and internal controls. PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, is responsible for performing an audit of the Company’s consolidated financial statements and internal control over financial reporting and expressing an opinion as to the conformity of such financial statements with U.S. generally accepted accounting principles and the effectiveness of the Company’s internal control over financial reporting.
In this context, the Audit Committee reviewed and discussed the audited financial statements of the Company as of and for the year ended April 30, 20212022 with the Company’s management and PricewaterhouseCoopers LLP. The Audit Committee also discussed with PricewaterhouseCoopers LLP critical audit matters included in the firm’s audit opinion and discussed the firm’s opinion regarding the Company’s internal control over financial reporting. In addition, the Audit Committee discussed with PricewaterhouseCoopers LLP the overall scope, plans, and estimated costs of PricewaterhouseCoopers LLP’s audits. To ensure independence, the Audit Committee met separately with PricewaterhouseCoopers LLP and members of the Company’s management. These reviews included discussion with the independent registered public accounting firm of matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. In addition, the Audit Committee received the written disclosures and the letter from the independent registered public accounting firm required by the PCAOB requiring independent registered public accounting firms to annually disclose in writing all relationships that, in their professional opinion may reasonably be thought to bear on independence, to confirm their perceived independence and to engage in a discussion of independence, and it has discussed with PricewaterhouseCoopers LLP its independence from the Company. The Audit Committee also met with PricewaterhouseCoopers LLP periodically to discuss the results of their examinations, the overall quality of the Company’s financial reporting, and their reviews of the Company’s quarterly financial statements.
Based on the reviews and discussions described above, the Audit Committee recommended to the board of directors the inclusion of the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 20212022 for filing with the SEC.
Respectfully submitted by the members of the Audit Committee:
Jonathan Chadwick (Chair)
Shelley Leibowitz
Chetan Puttagunta
This report of the Audit Committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
GRANT OF FULL DISCHARGE TO EXECUTIVE DIRECTORS—VOTING PROPOSAL NO. 5
At the Annual Meeting, our shareholders will be asked to grant a discharge to the executive directors of the Company who were in office during fiscal year 2022 from their liability with respect to the performance of their duties as executive directors of the Company during fiscal year 2022. The scope of the discharge extends to the facts that are apparent from the Dutch Statutory Annual Accounts and facts that are otherwise known to the general meeting of shareholders.
Required Vote
The approval to grant the discharge to the executive directors of the Company requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one-third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE GRANTING OF FULL DISCHARGE FROM LIABILITY TO THE EXECUTIVE DIRECTORS.
GRANT OF FULL DISCHARGE TO NON-EXECUTIVE DIRECTORS—VOTING
PROPOSAL NO. 6
At the Annual Meeting, our shareholders will be asked to grant a discharge to the non-executive directors of the Company who were in office during fiscal year 2022 from their liability with respect to the performance of their duties as non-executive directors of the Company during fiscal year 2022. The scope of the discharge extends to the facts that are apparent from the Dutch Statutory Annual Accounts and facts that are otherwise known to the general meeting of shareholders.
Required Vote
The approval to grant the discharge to the non-executive directors of the Company requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one-third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE GRANTING OF FULL DISCHARGE FROM LIABILITY TO THE NON-EXECUTIVE DIRECTORS.
AUTHORIZATION OF THE BOARD OF DIRECTORS TO REPURCHASE SHARES IN THE CAPITAL OF THE COMPANY—VOTING PROPOSAL NO. 7
At the Annual Meeting, our shareholders will be asked to authorize the board of directors to, on the Company’s behalf, repurchase the Company’s ordinary shares up to a maximum of 10% of the issued share capital at the date of acquisition on a stock exchange or otherwise, at a price per share between (i) an amount equal to the nominal value of the ordinary shares and (ii) an amount equal to 110% of the market price of an ordinary share on such stock exchange, the market price being the average of the highest price on each of the five days of trading prior to the day of the acquisition, for a period of 18 months. This authorization, if given, will supersede and replace the board of directors’ existing repurchase authorization granted by shareholders on October 1, 2021.
Pursuant to Dutch law and our articles of association, our board of directors requires, subject to certain exemptions, an authorization by our shareholders to be able to repurchase shares in the Company's capital. The purpose of this proposal to renew the board’s existing authority is to give the board flexibility in repurchasing ordinary shares for, among other considerations, the return of capital to the Company’s shareholders and/or, to the extent such authorization is required, to fulfill the Company’s obligations under its 2012 Plan. This authority to repurchase shares is similar to that generally afforded under applicable state laws to many public companies domiciled in the U.S. and in accordance with market practice for Dutch listed companies.
Required Vote
The resolution to authorize the board of directors to repurchase shares in the capital of the Company requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one-third of the issued and outstanding shares are represented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE AUTHORIZATION OF THE BOARD OF DIRECTORS TO REPURCHASE SHARES IN THE CAPITAL OF THE COMPANY.
APPROVAL OF THE ELASTIC N.V. 2022 EMPLOYEE STOCK PURCHASE PLAN—VOTING PROPOSAL NO. 8
Introduction
On August 16, 2022 on the recommendation of the Compensation Committee, the board of directors unanimously adopted the Elastic N.V. 2022 Employee Stock Purchase Plan (the “ESPP”), subject to the approval of the shareholders of the Company. The ESPP is a broad-based plan that provides an opportunity for eligible employees of the Company and its designated subsidiaries and affiliates to purchase ordinary shares of the Company (referred to herein as “shares”) through periodic payroll deductions at a discount from the then-current market price. The ESPP does not provide for discretionary grants. If approved by the Company’s shareholders, a total of 6,000,000 shares will be made available for purchase under the ESPP.
Shareholder Approval Requirement
The approval of the ESPP requires an affirmative vote of a simple majority of votes cast in the Annual Meeting where at least one-third of the issued and outstanding shares are represented. Shareholders are requested in this proposal to approve the ESPP in substantially the form attached hereto as Appendix A. If shareholders do not approve this proposal, then the ESPP will not become effective.
Purpose of the Request for Approval
Approval of the ESPP by the shareholders will enable the Company to offer a current market-competitive, broad-based stock purchase plan to employees of the Company and its subsidiaries and affiliates on a global basis. The board of directors believes that the ESPP is in the best interest of the Company because it will help us to attract, retain, motivate and reward eligible employees and promote employee share ownership, which aligns employees’ interests with those of the Company. The board of directors believes that the ESPP is essential to the Company’s ability to attract, retain and motivate highly qualified employees in the current competitive labor markets in which we operate.
Key Features of the ESPP
The principal features of the ESPP are summarized below, but the summary is qualified in its entirety by reference to the full text of the ESPP. A copy of the ESPP is attached to this Proxy Statement as Appendix A, and is incorporated herein by reference. For purposes of this proposal, “Committee” means the Compensation Committee of our board of directors, and “Administrator” means the Committee or, subject to applicable law, a subcommittee of the Committee or one or more of the Company’s officers or management team appointed by the board of directors or Committee to administer the day-to-day operations of the ESPP.
Purpose of the ESPP
The purpose of the ESPP is to provide an opportunity for eligible employees of the Company and any subsidiary or affiliate of the Company that has been designated by the Administrator (each, a “Designated Company”) to purchase shares of the Company at a discount through voluntary contributions from such employees’ eligible pay, thereby attracting, retaining and rewarding such persons and strengthening the mutuality of interest between such employees and the Company’s shareholders.
The rights granted under the ESPP are intended to be treated as either (i) purchase rights granted under an “employee stock purchase plan,” as that term is defined in Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”) (i.e., rights granted under a “Section 423 Offering”), or (ii) purchase rights granted under an employee stock purchase plan that is not subject to the requirements of Section 423 of the Code (i.e., rights granted under a “Non-423 Offering”). The Administrator has discretion to grant purchase rights under either a Section 423 Offering or a Non-423 Offering.
Shares Subject to Plan and Adjustments upon Changes in Capitalization
A total of 6,000,000 of the Company’s shares will be initially authorized and reserved for issuance under the ESPP. Such shares may be authorized but unissued shares or reacquired shares. Shares withheld to satisfy tax withholding obligations arising under the ESPP will not reduce the number of shares available for purchase under the ESPP.
In the event of any change affecting the number, class, value, or terms of the shares of the Company, resulting from a recapitalization, stock split, reverse stock split, stock dividend, spinoff, split up, combination, reclassification or exchange of shares, merger, consolidation, rights offering, separation, reorganization or liquidation or any other change in the corporate structure or shares, including any extraordinary dividend or extraordinary distribution (but excluding any regular cash dividend), then the Committee, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the ESPP, will, in such manner as it may deem equitable, adjust the number and class of shares that may be delivered under the ESPP (including numerical limits), the purchase price per share and the number of shares covered by each purchase right under the ESPP that has not yet been exercised.
Administration
The ESPP will be administered by the Committee and any authority or responsibility that may be exercised by the Committee may alternatively be exercised by the board of directors. The Committee may delegate its authority to a subcommittee, one or more of the other parties comprising the Administrator or other persons or groups of persons, including to assist with the day-to-day administration of the ESPP. The Administrator will have, among other authority, the authority to interpret, reconcile any inconsistency in, correct any default in and apply the terms of the ESPP, to determine eligibility and adjudicate disputed claims under the ESPP, to determine the terms and conditions of purchase rights under the ESPP, to establish, amend, suspend or waive such rules and regulations and appoint such agents as it deems appropriate for the proper administration of the ESPP, to amend an outstanding right to purchase shares, and to make any other determination and take any other action desirable for the administration of the ESPP. For purchase rights granted under a Section 423 Offering, the Administrator is authorized to adopt such rules and regulations for administering the ESPP as it may deem necessary to comply with the requirements of Section 423 of the Code.
Non-U.S. Sub-Plans
The Administrator will also have the authority to adopt such sub-plans as are necessary or appropriate to permit the participation in the ESPP by employees who are foreign nationals or employed outside of the U.S. Such sub-plans may vary from the terms of the ESPP, other than with respect to the number of shares reserved for issuance under the ESPP, to accommodate the requirements of local laws, customs and procedures for non-U.S. jurisdictions. For this purpose, the Administrator is authorized to adopt sub-plans for non-U.S. jurisdictions that vary from the terms of the ESPP regarding, without limitation, eligibility to participate, the definition of eligible pay, the dates and duration of offering periods or other periods during which participants may make contributions towards the purchase of shares, the method of determining the purchase price and the discount at which shares may be purchased, any minimum or maximum amount of contributions a participant may make in an offering period or other specified period under the applicable sub-plan, the handling of payroll deductions and the methods for making contributions by means other than payroll deductions, the treatment of purchase rights upon a corporate transaction (as defined in the ESPP) or a change in capitalization of the Company, the establishment of bank accounts, building society accounts or trust accounts to hold contributions, the payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures, handling of share issuances and withdrawal from the ESPP.
Eligibility
Generally, any individual in an employee-employer relationship with the Company or a Designated Company is eligible to participate in the ESPP and may participate by completing the online enrollment process or other procedures specified by the Administrator. For purposes of a Non-423 Offering and subject to the Administrator’s sole discretion, individuals who are employed or engaged by a third-party agency but provide services to the Company or a Designated Company at the direction of the Company or a Designated Company may be eligible to participate in the ESPP by completing the online enrollment process or other procedures specified by the Administrator. As of August 19, 2022, approximately 2,889 employees, including three executive officers, were eligible to participate in the ESPP.
However, the Administrator, in its discretion, may determine on a uniform basis for an offering that employees will not be eligible to participate if they: (i) have not completed at least two years of service since their last hire date (or such lesser period of time determined by the Administrator), (ii) customarily work not more than 20 hours per week (or such lesser period of time determined by the Administrator), (iii) customarily work not more than five months per calendar year (or such lesser period of time determined by the Administrator), (iv) are highly compensated employees within the meaning of Section 414(q) of the Code, or (v) are highly compensated
employees within the meaning of Section 414(q) of the Code with compensation above a certain level or who are officers subject to the disclosure requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.
No employee is eligible for the grant of any purchase rights under the ESPP if, immediately after such grant, the employee would own shares possessing 5% or more of the total combined voting power or value of all classes of shares of the Company or of any subsidiary or parent of the Company (including any shares which such employee may purchase under all outstanding purchase rights), nor will any employee be granted purchase rights to buy more than $25,000 worth of shares (determined based on the fair market value of the shares on the date the purchase rights are granted) under the ESPP in any calendar year such purchase rights are outstanding.
Eligible employees who are citizens or residents of a jurisdiction outside the U.S. may be excluded from participation in the ESPP if their participation is prohibited under local laws or if complying with local laws would cause the ESPP or a Section 423 Offering to violate Section 423 of the Code. In the case of a Non-423 Offering, eligible employees may be excluded from participation in the ESPP or an offering if the Administrator has determined that participation of such eligible employees is not advisable or practicable for any reason.
Offering Periods
The ESPP will be implemented by consecutive or overlapping offering periods, as specified by the Administrator, with a new offering period commencing on the first trading day of the relevant offering period and terminating on the last trading day of the relevant offering period. The Administrator will specify prior to the scheduled beginning of the applicable offering period (which may not have a duration exceeding 27 months): (i) the length of the offering period, (ii) the number of purchase periods that will be contained in an offering period, (iii) the length of each purchase period, and (iv) the dates on which an offering period and purchase period will commence and conclude.
The Administrator has the authority to establish the terms that will apply to the offering periods in accordance with the provisions described in the paragraph above without shareholder approval. Additionally, to the extent that the Administrator establishes an offering period with multiple purchase periods or overlapping offering periods, the Administrator will have discretion to structure an offering period so that if the fair market value of a share on the first trading day of the offering period in which a participant is currently enrolled is higher than the fair market value of a share on the first trading day of any subsequent offering period, the Company will automatically enroll the participant in the subsequent offering period and will terminate their participation in the original offering period.
Payroll Deductions
Except as otherwise provided by the Administrator, up to a maximum of 15% of a participant’s “eligible pay” (as defined in the ESPP) may be contributed by payroll deductions or other payments that the Administrator may permit a participant to make toward the purchase of shares during each purchase period. Once an eligible employee elects to participate in an offering period, then the participant will automatically participate in subsequent offering periods at the same contribution rate as was in effect in the prior offering period unless the participant elects to increase or decrease the contribution rate with respect to a subsequent offering period or withdraw, or is deemed to withdraw, from this Plan. A participant who is automatically enrolled in a subsequent offering period is not required to file any additional documentation in order to continue participation; provided, however, that participation in the subsequent offering period will be governed by the terms and conditions of the ESPP in effect at the beginning of such offering period, subject to the participant’s right to withdraw from the ESPP. A participant may elect to increase or decrease the rate of such contributions during any subsequent enrollment period, and any such new rate of contribution will become effective on the first day of the first purchase period following the completion of such form. Unless otherwise determined by the Administrator, during an offering period, a participant may decrease their rate of contributions applicable to such offering period once. A participant may also reduce the rate of their contributions to zero percent (0%) at any time during the offering period, provided that any such reduction will result in the automatic withdrawal of the participant from the ESPP, and the participant will not be eligible to participate in the ESPP again until the next enrollment period. Once an offering period has commenced, a participant may not increase their rate of contributions applicable to such offering period.
Purchase Price
Unless otherwise determined by the Administrator prior to the commencement of an offering period and subject to adjustment in the event of certain changes in our capitalization, the purchase price per share at which shares are sold in an offering period under the ESPP will not be less than 85% of the lesser of (i) the fair market
value of the shares on the first trading day of the offering period, or (ii) the fair market value of the shares on the purchase date (i.e., the last trading day of the purchase period). The Administrator has authority to establish a different purchase price for any Section 423 Offering or Non-423 Offering, provided that the purchase price applicable to a Section 423 Offering complies with the provisions of Section 423 of the Code. As of August 12, 2022, the closing price of a share of the Company on the New York Stock Exchange was $83.78.
Purchase of Shares
Each purchase right will be automatically exercised on the applicable purchase date, and shares will be purchased on behalf of each participant by applying the participant’s contributions for the applicable purchase period to the purchase of shares at the purchase price in effect for that purchase date.
The maximum number of shares purchasable per participant during any single offering period may not exceed the limit imposed by the Administrator, subject to adjustments in the event of certain changes in our capitalization.
Any amount remaining in a participant’s account that was not applied to the purchase of shares because it was insufficient to purchase a whole share will be carried forward for the purchase of shares during the following offering period. However, any amounts not applied to the purchase of shares during an offering period for any reason other than as described above will not be carried forward to any subsequent offering periods, and will instead by refunded, without interest, as soon as practicable after the purchase date, except as otherwise determined by the Administrator or required by applicable law.
Transferability
Purchase rights granted under the ESPP are not transferable by a participant other than by will or by the laws of descent and distribution, and are exercisable during the participant’s lifetime only by the participant.
Withdrawals
A participant may withdraw from an offering period and receive a refund of contributions by submitting a notice of withdrawal, which must be received no later than the last day of the month immediately preceding the month of the purchase date or by such other deadline as may be prescribed by the Administrator. Upon receipt of such notice, deductions of contributions on behalf of the participant will be discontinued commencing with the payroll period immediately following the effective date of the notice of withdrawal, and such participant will not be eligible to participate in the ESPP until the next enrollment period. Amounts credited to the account of any participant who withdraws from an offering period, according to the procedures set forth in the ESPP, within the time period prescribed by the Administrator will be refunded as soon as practicable, without interest, except as otherwise determined by the Administrator or required by applicable law.
Termination of Employment; Leave of Absence
If a participant ceases to be an eligible employee prior to a purchase date, contributions for the participant will be discontinued and any amounts credited to the participant’s account will be refunded as soon as practicable, without interest, except as otherwise provided by the Administrator or required by applicable law.
Subject to the discretion of the Administrator, if a participant is granted a paid leave of absence, the participant’s payroll deductions will continue and amounts credited to the participant’s account may be used to purchase shares as provided under the ESPP. If a participant is granted an unpaid leave of absence, the participant’s payroll deductions will be discontinued and no other contributions will be permitted (unless otherwise determined by the Administrator on a uniform and nondiscriminatory basis for Section 423 Offerings or required by applicable law), but any amounts credited to the participant’s account may be used to purchase shares on the next applicable purchase date. Where the period of leave exceeds three months and the participant’s right to reemployment is not guaranteed by statute or by contract, for purposes of the Section 423 Offerings, the employment relationship will generally be deemed to have terminated three months and one day following the commencement of such leave, or such other period specified in Treas. Reg. § 1.421-1(h)(2) or any successor thereto.
Unless otherwise determined by the Administrator or required by applicable law, a participant whose employment transfers or whose employment terminates with an immediate rehire (with no break in service) by or between the Company and a Designated Company will not be treated as having terminated employment for purposes of participating in the ESPP or an offering. However, if a participant transfers from a Section 423 Offering to a
Non-423 Offering, the exercise of the participant’s purchase right will be qualified under the Section 423 Offering only to the extent that such exercise complies with Section 423 of the Code. If a Participant transfers from a Non-423 Offering to a Section 423 Offering, the exercise of the Participant’s purchase right will remain non-qualified under the Non-423 Offering. The Administrator may establish additional or different rules to govern transfers of employment for purposes of participation in the ESPP or an offering, consistent with the applicable requirements of Section 423 of the Code.
Corporate Transaction
In the event of a “Corporate Transaction” (as defined in the ESPP), each outstanding purchase right will be equitably adjusted and assumed or an equivalent purchase right substituted by the successor company or a parent or subsidiary of such successor corporation. In the event that the successor corporation refuses to assume or substitute the purchase right or is not a publicly traded corporation, the offering period then in progress will be shortened by setting a new purchase date before the date of the proposed Corporate Transaction, as of which date the offering period will end.
Term of the ESPP; Amendment and Termination of Plan
The ESPP will become effective upon its approval by the holders of shares in the capital of the Company and will continue in effect until its expiration on the tenth anniversary thereof, unless terminated earlier by the board of directors, as described below. Any offering periods that are outstanding as of the expiration of the ESPP will continue in effect in accordance with their terms through the final purchase period in the outstanding offering period.
The board of directors or the Committee may amend the ESPP at any time, provided that if approval of holders of shares in the capital of the Company is required under applicable law, then no such amendment will be effective unless approved by the holders of shares in the capital of the Company within such time period as may be required. The board of directors may suspend the ESPP or discontinue the ESPP at any time, including shortening an offering period in connection with a spin-off or similar corporate event. Upon termination of the ESPP, all contributions will cease, all amounts credited to a participant’s account will be equitably applied to the purchase of whole shares then available for sale, and any remaining amounts will be promptly refunded, without interest (unless required by applicable law), to the participants.
U.S. Federal Income Tax Information
The following summary briefly describes the general U.S. federal income tax consequences of purchase rights under the ESPP for participants who are tax resident in the U.S., current as of August 19, 2022, but is not a detailed or complete description of all U.S. federal tax laws or regulations that may apply, and does not address any local, state or other country laws. Therefore, no one should rely on this summary for individual tax compliance, planning or decisions. Participants in the ESPP should consult their own professional tax advisors regarding the taxation of purchase rights under the ESPP. The discussion below concerning tax deductions that may become available to the Company under U.S. federal tax law is not intended to imply that the Company will necessarily obtain a tax benefit or asset from those deductions. Taxation of equity-based payments in countries other than the U.S. does not generally correspond to U.S. federal tax laws, and is not covered by the summary below.
U.S. Federal Income Tax Information for Section 423 Offerings
Rights to purchase shares granted under a Section 423 Offering are intended to qualify for favorable federal income tax treatment available to purchase rights granted under an employee stock purchase plan that qualifies under the provisions of Section 423(b) of the Code. Under these provisions, no income will be taxable to a participant until the shares purchased under the ESPP are sold or otherwise disposed of. If the shares are disposed of within two years from the purchase right grant date (i.e., the beginning of the offering period) or within one year from the purchase date of the shares, a transaction referred to as a “disqualifying disposition,” the participant will realize ordinary income in the year of such disposition equal to the difference between the fair market value of the shares on the purchase date and the purchase price. The amount of such ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be a capital gain or loss. A capital gain or loss will be long-term if the participant holds the shares for more than one year after the purchase date.
If the shares purchased under the ESPP are sold (or otherwise disposed of) more than two years after the purchase right grant date and more than one year after the shares are transferred to the participant, then the lesser of (i) the excess of the sale price of the shares at the time of disposition over the purchase price, and (ii) the excess of the fair market value of the shares as of the purchase right grant date over the purchase price (determined as of the first day of the offering period) will be treated as ordinary income. If the sale price is less than the purchase price, no ordinary income will be reported. The amount of any such ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be long-term capital gain or loss.
The Company (or applicable Designated Company) generally will be entitled to a deduction in the year of a disqualifying disposition equal to the amount of ordinary income realized by the participant as a result of such disposition, subject to any applicable limitations under the Code. In other cases, no deduction is allowed.
U.S. Federal Income Tax Information for Non-423 Offerings
If the purchase right is granted under a Non-423 Offering, then the amount equal to the difference between the fair market value of the shares on the purchase date and the purchase price will be treated as ordinary income at the time of such purchase. In such instances, the amount of such ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares after such basis adjustment will be a capital gain or loss. A capital gain or loss will be long-term if the participant holds the shares for more than one year after the purchase date.
The Company (or applicable Designated Company) generally will be entitled to a deduction in the year of purchase equal to the amount of ordinary income recognized by the participant as a result of such disposition, subject to any applicable limitations under the Code. For U.S. participants, FICA/FUTA taxes will generally be due in relation to ordinary income earned as a result of participation in a Non-423 Offering.
New Plan Benefits
The benefits to be received pursuant to the ESPP by the Company’s officers and employees are not currently determinable as they will depend on the purchase price of our shares in offering periods after the implementation of the ESPP, the market value of our shares on various future dates, the amount of contributions that eligible officers and employees elect to make under the ESPP and similar factors. As of the date of this Proxy Statement, no officer or employee has been granted any purchase rights under the proposed ESPP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE ELASTIC N.V. 2022 EMPLOYEE STOCK PURCHASE PLAN.
NON-BINDING ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS—VOTING PROPOSAL NO. 9
At the Annual Meeting, our shareholders will be asked to approve, on a non-binding and advisory basis, the compensation of our Named Executive Officers. You are encouraged to review the section titled “Executive Compensation” and, in particular, the section titled “Executive Compensation—Compensation Discussion and Analysis” in this proxy statement, which provides a comprehensive review of our executive compensation program and its elements, objectives and rationale.
The vote on this resolution is not intended to address any specific element of compensation, rather the vote relates to the compensation of our Named Executive Officers in its totality, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC.
In accordance with Section 14A of the Exchange Act rules, our shareholders are asked to approve the following non-binding resolution:
“RESOLVED, that the Company’s shareholders hereby approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 2022 annual meeting of shareholders, pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative.”
As this is an advisory vote, you are not voting to approve or disapprove of the board of directors’ recommendation. Nevertheless, our board of directors appreciates your input as it considers the compensation of our Named Executive Officers, and our board of directors and the Compensation Committee will take into account the outcome of the advisory vote when considering future executive compensation decisions. The next advisory shareholder vote on the compensation of our named executive officers will occur at our 2023 annual general meeting of shareholders.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE NON-BINDING RESOLUTION ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
EXECUTIVE OFFICERS
The following table provides information regarding our current and appointed executive officers as of January 31,August 26, 2022. Executive officers are elected by our board of directors to hold office until their successors are elected and qualified. There are no family relationships among any of our directors or executive officers.
| | | | | | | | | | | | | | |
| Name | | Age | | Position(s) |
| Ashutosh Kulkarni | | 47 | | ActingExecutive Director and CEO |
| Janesh Moorjani | | 49 | | CFO and COO |
| Shay Banon | | 44 | | Executive Director CEO and CTO |
Janesh MoorjaniKen Exner | | 49 | | CFOCPO |
| Carolyn Herzog | | 55 | | Chief Legal Officer (“CLO”) |
For a brief biography of Mr.Messrs. Kulkarni please see “Agenda Item II - Board Appointment - Voting Proposal No. 1”and for a brief biography of Mr. Banon, please see “Board of Directors and Corporate Governance.Governance—Nominees for Director.”
Janesh Moorjani has served as our COO since May 2022 and our CFO since August 2017. Prior to joining us, he served as Executive Vice President and CFO of Infoblox Inc., an IT automation and security company, from January 2016 until August 2017. From July 20132017, prior to January 2016, Mr. Moorjani was with VMware, Inc., a provider of cloud and virtualization software and services, wherewhich he served inheld various roles, most recently as a Senior Vice President of Finance from January 2015 to January 2016. From October 2004 to June 2013, he served in a number ofsenior leadership, finance and sales rolespositions at VMware, Cisco Systems, Inc.PTC and Goldman Sachs. Mr. Moorjani holds a Bachelor of Commerce degree from Sydenham College of Commerce and Economics ofthe University of Mumbai and an M.B.A. from the Wharton School of the University of Pennsylvania.
Ken Exner was appointed as our CPO in August 2022. Prior to his appointment, he was the head of Developer Tools at Amazon from April 2013 to Aug 2022. Prior to that Mr. Exner served in other senior leadership, developer and product management roles at Amazon Web Services from 2006 to 2013. Prior to that Mr. Exner founded and managed various startup companies focused on software tools for a broad range of industries. Mr. Exner holds a bachelor of science degree from the Haas School of Business at the University of California, Berkeley.
Carolyn Herzog has served as our CLO since May 2022. Prior to joining us, she served as Executive Vice President and General Counsel of Arm, Ltd., a semiconductor and software design company, from January 2017 to February 2022. From December 2000 to January 2017 Ms. Herzog was with Symantec, a cybersecurity software and services company, in various roles, most recently as Chief Compliance Officer and Deputy General Counsel. Ms. Herzog holds a B.A. in French language and literature and music from Washington University and a J.D. from the University of Wisconsin-Madison.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Introduction
This Compensation Discussion and Analysis provides information regarding the fiscal year 20212022 compensation program for each individual who served as our principal executive officer at any time during the last completed fiscal year, our principal financial officer, and the threetwo individuals for whom disclosure would have been required but for the fact that these individuals were not serving as executive officers (other than our principal executive officer and principal financial officer)of the Company at the end of the last completed fiscal year-end who were our most highly-compensated executive officersyear (our “Named Executive Officers”). For fiscal year 2021,2022, our Named Executive Officers were:
•Ashutosh Kulkarni, our current CEO and former CPO;
•Shay Banon, our current CTO and former Chairman of the board of directors and former CEO;1
•Janesh Moorjani, our CFO;CFO and COO;
•Paul Appleby, our former President, Worldwide Field Operations;2
•Ashutosh Kulkarni, our Chief Product Officer (“CPO”);3 and
•W.H. Baird Garrett, our former Senior Vice President and General Counsel.4
This Compensation Discussion and Analysis describes the material elements of our executive compensation program during fiscal year 2021.2022. It also provides an overview of our executive compensation philosophy, including our principal compensation policies and practices. Finally, it analyzes how and why the Compensation Committee or, with regard to the compensation of our CEO, the non-executive directors serving on our board of directors arrived at the specific compensation decisions for our Named Executive Officers, or in the case of our executive directors, the CEO and CTO, how and why the non-executive directors arrived at the specific compensation decisions in fiscal year 20212022 and discusses the key factors that the Compensation Committee considered in determining their compensation or, with regard to the compensation of our CEO,executive directors, making recommendations to our board of directors.
Fiscal Year 20212022 Executive Officer Resignations, Transitions and Appointments
On October 18, 2021, Mr. Garrett provided notice of his intent to resign, effective as of December 10, 2021, from his position as our Senior Vice President and General Counsel and terminated his employment in order to pursue other career opportunities. Mr. Garrett had been with Elastic since 2015. Following the end of our fiscal year 2022 to which this Compensation Discussion and Analysis pertains, the board of directors appointed Carolyn Herzog as CLO of the Company effective as of May 2, 2022.
In January 2022, Mr. Banon transitioned from the role of Chairman of the board of directors and CEO to the role of CTO, Mr. Puttagunta, Lead Independent Director, was appointed Chairman of the board of directors, and Mr. Kulkarni transitioned from the role of CPO to acting CEO. Mr. Kulkarni was also appointed to the board of directors by shareholders at an extraordinary general shareholder meeting on March 9, 2022 (the “March 2022 EGM”), and this appointment confirmed his position as CEO. Following the end of our fiscal year 2022, the board of directors appointed Ken Exner as CPO of the Company effective as of August 24, 2020,29, 2022.
On January 12, 2022, Mr. Appleby was appointedstepped down from his position as our President, Worldwide Field Operations, while on January 4, 2021, Mr. Kulkarni was appointed our Chief Product Officer. continuing his employment with us through June 9, 2022.
For details on the initialchanges to the compensation arrangements withof Messrs. Kulkarni and Appleby resulting from these transitions, appointments and Kulkarni,resignations, please see “Executive Summary – Executive Compensation Highlights” below. We entered into an amended and restated employment agreement with Mr. Banon, but we did not make any changes to Mr. Banon’s compensation arrangement in connection with his transition from his position as our Chairman of the board of directors and CEO to our CTO. We did not enter into a separation agreement or provide any severance payments or benefits to Mr. Garrett in connection with his resignation as our Senior Vice President and General Counsel.
Executive Summary
Who We Are
Elastic is a search company. We deliver technology that enables usersdata analytics company built on the power of search. Our platform, which is available as both a hosted, managed service across public clouds as well as self-managed software, allows our customers to search through massivealmost instantly find insights from large amounts of structureddata and unstructured data for a wide range of use cases. take action. We offer three search-powered solutions – Enterprise Search, Observability, and Security – that are built into the platform. We help organizations, their employees, and their customers find what they need faster, while keeping mission-critical applications running smoothly, and protecting against cyber threats.
Our primary offeringplatform is built on the Elastic Stack, a powerful set of software products that ingest and store data from any source, and in any format, and perform search, analysis,
1 On January 9, 2022, Shay Banon provided us with notice of his intent to transition from his position as our Chairman and CEO, to our CTO, effective as of January 11, 2022. Mr. Banon will continue to serve on the board of directors and Chetan Puttagunta, currently the Lead Independent Director of the board of directors, has been appointed Chairman of the board of directors. Prior to the formal appointment of Ashutosh Kulkarni as our CEO, Mr. Banon will no longer exercise the powers of CEO.
2 Paul Appleby stepped down from his position as our President, Worldwide Field Operations, effective as of January 12, 2022, and will terminate employment by June 9, 2022.
3 On January 11, 2022, Ashutosh Kulkarni was promoted to our CEO. This title will formally and automatically be granted to him upon his appointment to our board of directors. In addition, we announced the nomination of Mr. Kulkarni to our board of directors. Pursuant to Dutch law, Mr. Kulkarni’s appointment to the board of directors is subject to the shareholder vote held at the Extraordinary Meeting. Until his appointment to the board of directors, Mr. Kulkarni will serve as acting CEO with the full powers of the CEO conferred upon him by the board of directors.
4 W.H. Baird Garrett stepped down from his position as our Senior Vice President of Legal and General Counsel, effective as of December 10, 2021, and terminated employment on that date.
and visualization in milliseconds or less. The Elastic Stack is designed for direct use by developers to power a variety of use cases. We also offer three software solutions – Enterprise Search, Observability, and Security – built onthat data. At the Elastic Stack. Our solutions are designed to be deployed everywhere: in public or private clouds, in hybrid environments, or in traditional on-premises environments. Our products are used by individual developers and organizations of all sizes across a wide range of industries.
Elasticsearch is the heart of the Elastic Stack. It is a distributed, real-time search and analytics engine and datastore for exploring all types of data including textual, numerical, geospatial, structured and unstructured. The Company was formed in 2012. Since then, we have added new products, released new features, acquired companies and created new solutions to expand the functionality of our products.
The Elastic Stack
The Elastic Stack is primarily composed of the following products:
•Elasticsearch. Elasticsearch is the heart of the Elastic Stack. It is a distributed, real-time search and analytics engine and datastore for all types of data, including textual, numerical, geospatial, structured, and unstructured.
▪Kibana. Kibana is the user interface for the Elastic Stack. It is the visualization layer for data stored in Elasticsearch. It is also the management and configuration interface for all parts of the Elastic Stack.
The Elastic Stack also supports data ingest with a number of supporting products:
▪Logstash. Logstash is the dynamic data processing pipeline for ingesting data into Elasticsearch or other storage systems from a multitude of sources simultaneously.
▪Beats. Beats is the family of lightweight, single-purpose data shippers for sending data from edge machines to Elasticsearch or Logstash.
▪Elastic Agent. Elastic Agent, currently in beta, is a single, unified way to add monitoring for logs, metrics, and other types of data to each host. Elastic Agent includes integrated host protection and central management.
Some featurescore of the Elastic Stack are freeis Elasticsearch - a highly scalable document store and open, available to users at no cost, while others require paid subscriptions. Paid proprietary features enable capabilities such as automating anomaly detection on time seriessearch engine, and the only data at scale through machine learning, facilitating compliance with data securitystore for all of our solutions and privacy regulations, supporting search across low cost cold and frozen data tiers, and allowing real-time notifications and alerts. The source codeuse cases. Another key component of both free and paid features in the Elastic Stack is visible to the public in the formKibana, which delivers a single user interface across all of “open code.”
Our Solutions
We have built a number ofour solutions, on topwith powerful drag-and-drop visual analytics, and centralized management of the Elastic Stack to make it easier for organizations to use our software for common use cases. Like the Elastic Stack, our solutions compriseplatform. Our business model is based primarily on a combination of free and open featuresa paid Elastic-managed hosted service offering and paid and free proprietary features.self-managed software. Our solutions include:
▪Enterprise Search. Our Enterprise Search solution provides powerful searchpaid offerings for documentsour platform are sold via subscription through resource-based pricing, and results living in websites, applicationsall customers and workplaces. Enterprise Search includes: Workplace Search, a unified search platform for the workplace that seamlessly connectsusers have access to the most widely used enterprise systems and tools; App Search, a flexible, API-driven tool for building search experiences to support websites and portals, e-commerce, mobile app search, and customer support; and Site Search, an easy way to bring powerful search to any website.
▪Observability. Our Observability solution enables unified analysis across the IT ecosystem of applications, networks, and infrastructure. Observability includes: Logs, to search and analyze petabytes of structured and unstructured logs; Metrics, to search and analyze numeric and time series data; application performance management, to deliver insight into application performance and health metrics and provide developers with confidence in their code; and Uptime, to easily track and monitor the availability of hosts, websites, services and applications.
▪Security. Our Security solution provides unified protection to prevent, detect, and respond to threats. Security includes: security information and event management, with integrations to network, host, user, and cloud data sources, as well as workflow and operations, shareable analytics, incident management, and investigations; and Endpoint Security, for prevention, detection and response in a single, stack-integrated agent.all solutions.
Fiscal Year 20212022 Financial Highlights
Fiscal year 20212022 was a strong year for us marked by significant growth in our business. Our fiscal year 20212022 financial highlights included the following:
•Total revenue was $608.5$862.4 million, an increase of 42% year-over-year.
•SaaSElastic Cloud revenue was $166.3$298.6 million, an increase of 80% year-over-year.
•GAAP operating loss was $129.5$173.7 million, while GAAP operating margin was -21%-20%.
•Non-GAAP operating lossprofit was $7.3$0.9 million, while non-GAAP operating margin was -1%0%.
•GAAP net loss per share was $1.48,$2.20, while non-GAAP net loss per share was $0.09.$0.33.
•Operating cash flow was $22.5$5.7 million with adjusted free cash flow of $18.3 million, or 3% free cash flow margin.$10.7 million.
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, free cash flow, and free cash flow margin. For additional information and 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 Measuressection of Item7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2021 filed with the SEC on June 25, 2021.Appendix B.
Fiscal Year 2022 Executive Compensation Highlights
Consistent with our compensation objectives and following a review of data summarizing the competitive market environment and the other factors described below, the Compensation Committee (and, in the case of our CEO,executive directors, the non-executive directors serving on our board of directors upon the recommendation of the Compensation Committee) took the following key actions with respect to the compensation of our Named Executive Officers for and during fiscal year 2021:2022:
•Base SalariesCompensation Arrangements with Mr. Kulkarni in Connection with his Transition to CEO – As part ofIn connection with his appointment as our CEO, entered into an amended employment offer letter dated January 12, 2022 (the “Kulkarni Employment Letter”) with Mr. Kulkarni. Pursuant to the annual review ofKulkarni Employment Letter, our executivenew compensation program, approved arrangements with Mr. Kulkarni were as follows:
◦a base salary increase for our CEOMr. Kulkarni of 6.7%inOctober 202020% setting his annual base salary at $600,000;
$400,000◦5.Our other incumbent Named Executive Officers did not receive ana target annual cash incentive award opportunity for fiscal year 2022 equal to the sum of (i) 60% of Mr. Kulkarni’s annual base salary increase duringfor the period beginning on the commencement of fiscal year 2021.2022 and ending on January 10, 2022, and (ii) 100% of his annual base salary for
the period between January 11, 2022 and the end of fiscal year 2022, subject to the terms and conditions of the Company’s Executive Incentive Compensation Plan (the “Bonus Plan”); and
◦in order to align the value of CEO – As partMr. Kulkarni’s unvested equity with that of similarly situated CEOs at the annual review ofcompanies in our executive compensation program, granted long-term incentive compensationpeer group, promotion equity awards in the form of an option to purchase
5 In March 2021, our CEO relocated from the United States to Israel. Accordingly, following our CEO’s relocation to Israel, all cash compensation paid to our CEO was denominated in New Israel Shekels (“ILS”). For purposes of this Compensation Discussion and Analysis, all compensation paid in ILS to our CEO has been converted into USD at an exchange rate of 0.3081 USD for each 1.00 ILS, which was the exchange rate in effect on April 30, 2021 (our fiscal year end).
ordinary shares with an award value6 of $3.75$8.0 million and a restricted stock unit (“RSU”) award that may be settled for ordinary shares with an award value of $3.75$4.0 million, to our CEOwhich were granted in December 2020.
•Long-Term Incentive Compensation of Other Incumbent Named Executive Officers – As part of the annual review of our executive compensation program, granted long-term incentive compensation in December 2020 in the form of options to purchase ordinary shares to Messrs. Moorjani and Garrett with an award value of $1.5 million and $0.75 million, respectively, and RSU awards that may be settled for ordinary shares to Messrs. Moorjani and Garrett with award values of $1.5 million and $0.75 million, respectively.
•Compensation Arrangements with Mr. Appleby7 – In connection with his appointment as our President, Worldwide Field Operations, we entered into an employment offer letter dated August 9, 2020 (the “Appleby Employment Letter”) with Mr. Appleby. Pursuant to the Employment Letter, our initial compensation arrangements with Mr. Appleby were as follows:
◦an initial annual base salary of $500,000;
◦a one-time cash sign-on bonus in the amount of $200,000 (provided, however, that if he resigns, is no longer actively providing services, or his employment with the Company is terminated at any time during his first 12 months of employment, he will be responsible for reimbursing the Company this amount pro-rated by 1/12th for every month of employment served);
6 For purposes of this Compensation Discussion and Analysis, “award value” generally means an economic target value, as distinct from the grant date fair value under ASC 718. The actual number of our ordinary shares subject to an equity award was determined by dividing the applicable award value by one of the following per share values, as applicable: (i) with respect to RSU awards granted to Messrs. Banon, Moorjani and Garrett and the RSU award with an award value of $1.5 million granted to Mr. Kulkarni, the value per share was equal to the trading average of our ordinary shares for the 15 trading days immediately prior to the applicable grant date, (ii) with respect to RSU awards granted to Messrs. Appleby and Kulkarni (other than the RSU award with an award value of $1.5 million granted to Mr. Kulkarni as noted above), the value per share was equal to the trading average of our ordinary shares for the calendar month in which the named executive officer commenced employment, (iii) with respect to stock options granted to Messrs. Banon, Moorjani and Garrett and the stock option with an award value of $0.5 million granted to Mr. Kulkarni, the value per share was calculated in accordance with the Black-Scholes option valuation methodology, which calculation assumed that the value of one of our ordinary shares was equal to the trading average of our ordinary shares for the 15 trading days immediately prior to the applicable grant date, and (iv) with respect to stock options granted to Messrs. Appleby and Kulkarni (other than the stock option with an award value of $0.5 million as noted above), the value per share was calculated in accordance with the Black-Scholes option valuation methodology, which calculation assumed that the value of one of our ordinary shares was equal to the trading average of our ordinary shares for the calendar month in which the named executive officer commenced employment.
7 In connection with his anticipated departure, Elasticsearch, Inc. and Mr. Appleby entered into a separation and transition agreement on January 28, 2022 (the “Appleby Separation Agreement”). During the period from January 12, 2022 through June 9, 2022 (the “Appleby Scheduled Separation Date”), Mr. Appleby will continue as an employee of Elasticsearch, Inc. and provide certain transition services. Under the Appleby Separation Agreement, Mr. Appleby is entitled to the following severance payments and benefits assuming that he remains employed with the Company through the Appleby Scheduled Separation Date or if he is terminated without Cause (as such term is defined in the Company’s Executive Change in Control Severance Plan) prior to the Appleby Scheduled Separation Date: (1) a lump sum cash payment equal to $250,000, which represents six months of his annual base salary; (ii) a lump sum cash payment in the amount of $150,000, which represents 50% of the annual target incentive bonus for the year of Mr. Appleby’s termination of employment under the Company’s Executive Incentive Compensation Plan; and (iii) reimbursement of the COBRA premiums of Mr. Appleby and his dependents for up to 12 months following the date Mr. Appleby and his dependents suffer a loss of health coverage under the Company’s group health plan, subject to Mr. Appleby timely electing COBRA continuation coverage. Under the Appleby Separation Agreement, Mr. Appleby’s employment will automatically terminate on the Appleby Scheduled Separation Date. The Appleby Separation Agreement also includes, among other terms, a general release of claims in favor of the Company and certain other parties, continued confidentiality obligations by Mr. Appleby, and a nondisparagement provision.
◦a target annual cash incentive award opportunity equal to 60% of his annual base salary, subject to the terms and conditions of the Company’s Executive Incentive Compensation Plan; and
◦subject to the approval of our board of directors or the Compensation Committee, new hire equity awards covering our ordinary shares with an aggregate approximate value of $8 million. Seventy-five percent of the value of Mr. Appleby’s new hire equity awards are in the form of an RSU award that may be settled for ordinary shares and 25% of the value of the awards are in the form of an option to purchase ordinary shares.March 2022. Each of Mr. Appleby’s new hireKulkarni’s promotion equity awards vest over a four-year period as described in “Long-Term“Long-Term Incentive Compensation – New HirePromotion Equity Award for Mr. Appleby.Awards.”
•Compensation Arrangements with Mr. Kulkarni8 – In connection with his appointment as our Chief Product Officer, we entered into an employment offer letter dated November 27, 2020 (the “Kulkarni Employment Letter”) with Mr. Kulkarni. Pursuant to the Kulkarni Employment Letter, our initial compensation arrangements with Mr. Kulkarni were as follows:
◦an initial annual base salary of $500,000;
◦a one-time cash sign-on bonus in the amount of $200,000 (provided, however, that if he resigns, is no longer actively providing services, or his employment with the Company is terminated at any time during his first 12 months of employment, he will be responsible for reimbursing the Company this amount pro-rated by 1/12th for every month of employment served);
◦a target annual cash incentive award opportunity equal to 60% of his annual base salary, subject to the terms and conditions of the Company’s Executive Incentive Compensation Plan; and
◦subject to the approval of our board of directors or the Compensation Committee, new hire equity awards covering our ordinary shares with an aggregate approximate value of $12 million. Seventy-five percent of the value ofestablishing Mr. Kulkarni’s new hire equity awards are in the form of an RSU award that may be settled for ordinary shares and 25% of the value of the awards are in the form of an option to purchase ordinary shares. Each of Mr. Kulkarni’s new hire equity awards vest over a four-year period as described in “Long-Term Incentive Compensation – New Hire Equity Awards for Mr. Kulkarni.”
In addition, each of Messrs. Appleby and Kulkarni entered into our standard form of Change in Control and Severance Agreement.
In establishing their initial compensation arrangements,arrangement, we took into consideration the requisite experience and skills that a qualified candidate would need to managelead a growing business in a dynamic and ever-changing environment, the competitive market for similar positions at other comparable companies based on a review of
8 In connection with his transition to CEO, Elasticsearch, Inc. and Mr. Kulkarni entered into an amended employment letter effective January 11, 2022 (the “Kulkarni Employment Letter”). The Kulkarni Employment Letter does not have a specific term and provides that Mr. Kulkarni will continue to serve as an at-will employee. Mr. Kulkarni’s annual base salary pursuant to the Kulkarni Employment Letter is $600,000, and he is eligible for an annual target cash incentive payment for fiscal year 2022 equal to the sum of (i) 60% of Mr. Kulkarni’s base salary for the period between the commencement of fiscal year 2022 and January 11, 2022, and (ii) 100% of Mr. Kulkarni’s base salary for the period between January 11, 2022 and the end of fiscal year 2022. In addition, subject to approval of Mr. Kulkarni’s appointment as CEO at the Extraordinary Meeting, Mr. Kulkarni will be granted equity awards covering our ordinary shares with an aggregate approximate value of $12,000,000; one-third of the value of the equity awards will be in the form of a restricted stock unit award, and two-thirds of the value of the equity awards will be in the form of a stock option award to purchase our ordinary shares. The restricted stock unit award and stock option award will each vest over a four-year period ratably on designated vesting dates following the applicable vesting commencement date in accordance with our equity grant practices, subject to Mr. Kulkarni’s continuous service with us or our affiliates through each vesting date. The restricted stock unit award and stock option award will be subject to such other terms as set forth in the 2012 Plan, the applicable award agreement under the 2012 Plan, and our equity grant practices in effect from time to time.
compensation survey data, the need to integrate each of them into the executive compensation structure that we had developed since our IPO, balancing both competitive and internal equity considerations, as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” below. For a summary
•Base Salaries – As part of the material termsannual review of our executive compensation program, approved a base salary increase for Mr. Banon1, our then-CEO, of 25.0% effective November 2021setting his annual base salary at$500,000,2 and conditionsapproved a base salary increase for Mr. Moorjani, our CFO and COO, of 37.0% in November 2021 setting his annual base salary at $500,000. These salary increases were approved to be more competitive with the base salaries of similarly-situated executive officers at companies of comparable size and stage of maturity, as well as the base salaries of our other executive officers, and to compensate Messrs. Appleby’sBanon and Kulkarni’s employment offer letters, see “Executive Compensation Tables –Moorjani for not having received market-based adjustments in prior years. Our other Named Executive Officer Employment LettersOfficers did not receive an annual base salary increase during fiscal year 2022.” below.
•Annual Cash Incentive (Bonus) Plan – Finally, the Compensation Committee (and, in the case of our CEO, the non-executive directors serving on our board of directors upon the recommendation of the Compensation Committee) approvedApproved annual cash incentive awards under our Executive Incentive CompensationBonus Plan to our each of our CEO, CFO, President, Worldwide Field OperationsMessrs. Kulkarni, Moorjani, Banon and CPOAppleby in the amount of $291,827, $275,825, $259,058,$376,635, $251,252, $248,728, and $125,191,$307,281, respectively. As discussed in greater detail below, Mr. Garrett was not eligible to receive an annual cash incentive award under our Executive Incentive CompensationBonus Plan, which is consistent with our historical compensation practices. See “Compensation Elements – Annual Cash Incentives” below for a summary of the terms of our Bonus Plan.
1 Mr. Banon’s compensation was reviewed and increased effective November 1, 2021 as part of the Board’s annual review of his executive compensation package as our then-current CEO. This was before Mr. Banon provided notice of his intent to transition from his position as Chairman of the Board and CEO to the role of CTO in January 2022. Mr. Banon’s compensation package was left unchanged following his transition because the Compensation Committee determined that Mr. Banon’s compensation was fair considering that (i) hiring a new executive in the role of CTO would require a comparable level of compensation based on a general analysis of the compensation levels of senior technical officers in the Company’s peer group, and (ii) maintaining Mr. Banon’s compensation package was internally consistent.
2 All cash compensation paid to Mr. Banon was denominated in New Israel Shekels (“ILS”). For purposes of this Compensation Discussion and Analysis, all compensation paid in ILS to Mr. Banon has been converted into USD at an exchange rate of 0.2991 USD for each 1.00 ILS, which was the exchange rate in effect on April 30, 2022 (our fiscal year end).
•Long-Term Incentive Compensation
◦Granted long-term incentive compensation in the form of options to purchase ordinary shares to Messrs. Banon, Moorjani, Kulkarni and Appleby with aggregate award values3 of $4.0 million, $4.5 million, $2.0 million, and $2.5 million, respectively, and RSU awards that may be settled for ordinary shares to Messrs. Banon, Moorjani, Kulkarni and Appleby with aggregate award values of $4.0 million, $4.5 million, $4.0 million and $2.5 million, respectively. These awards consist of annual awards approved as part of the annual review of our executive compensation program in December 2021, and with respect to Messrs. Kulkarni and Moorjani, this also included supplemental awards intended to incentivize key employees.
•Compensation Arrangements with Mr. Appleby in Connection with his Separation– In connection with stepping down as our President, Worldwide Field Operations, we entered into a separation and transition agreement letter dated as of January 12, 2022 (the “Appleby Separation Letter”) with Mr. Appleby under substantially the same terms of Mr. Appleby’s severance agreement that is part of his employment agreement from August 2020. Pursuant to the Appleby Separation Letter, if Mr. Appleby remained employed with us through June 9, 2022, his scheduled separation date, or was terminated without “Cause” (as defined in the Appleby Separation Letter) prior to June 9, 2022, and Mr. Appleby executed a supplemental separation agreement that became effective and irrevocable within 60 days of his separation date, Mr. Appleby would be eligible to receive the following:
◦a lump sum payment equal to $250,000, less applicable withholdings, which is equal to 6 months of Mr. Appleby’s annual base salary;
◦a lump sum payment equal to $150,000, less applicable withholdings, which is equal to 50% of Mr. Appleby’s annual target bonus amount under our Bonus Plan for fiscal year 2022; and
◦if Mr. Appleby timely elects continued group health plan continuation coverage under COBRA, we will pay the full amount of Mr. Appleby’s premiums on his behalf for continued coverage under our group health plans, including coverage for Mr. Appleby’s eligible dependents, for 12 months from the date Mr. Appleby or his dependents suffer a loss of health coverage under our group health plan or until such earlier date on which he becomes eligible for health coverage from another employer.
Other than being permitted to continue vesting with respect to Mr. Appleby’s outstanding and unvested equity awards through the period he remained employed with us through his scheduled separation date, June 9, 2022, Mr. Appleby did not receive any accelerated or additional vesting with respect to his outstanding and unvested equity awards.Mr. Appleby’s remaining outstanding and unvested equity awards were forfeited as of his actual separation date on June 9, 2022.
Relationship Between Pay and Performance
We strive to design our executive compensation program to balance the goals of attracting, motivating, rewarding and retaining our Named Executive Officers with the goal of promoting the interests of our stakeholders, such as our users, customers, employees, creditors, shareholders and other stakeholders. To ensure this balance and to motivate and reward individual initiative and effort, we seek to ensure that our program is designed so that a meaningful portion of our Named Executive Officers’ annual target total direct compensation is both “at-risk” and variable in nature. While we do not determine either “variable” or “fixed” pay for each Named Executive Officer
3 For purposes of this Compensation Discussion and Analysis, “award value” generally means an economic target value, as distinct from the grant date fair value under Financial Accounting Standard Board’s Accounting Standards Codification Topic 718. The actual number of our ordinary shares subject to an equity award was determined by dividing the applicable award value by one of the following per share values, as applicable: (i) with respect to RSU awards granted to our Named Executive Officers, the value per share was equal to the trading average of our ordinary shares for the 15 trading days immediately prior to the applicable grant date, and (ii) with respect to stock options granted to our Named Executive Officers, the value per share was calculated in accordance with the Black-Scholes option valuation methodology, which calculation assumed that the value of one of our ordinary shares was equal to the trading average of our ordinary shares for the 15 trading days immediately prior to the applicable grant date.
with reference to a specific percentage of target total direct compensation, consistent with our “pay-for-performance” philosophy, generally, we seek to emphasize variable pay over fixed pay.
Generally, this philosophy is reflected in the target total direct compensation opportunities of our Named Executive Officers. In fiscal year 2021,2022, the majority of the target total direct compensation granted to Mr. Banon and Mr. Kulkarni in the position of CEO consisted of variable pay in the form of a target annual cash incentive award and long-term incentive compensation in the form of an optionoptions to purchase ordinary shares and an RSU awardawards that may be settled for ordinary shares. As granted by the non-executive directors on our board of directors, fixed pay, primarily consisting of base salary, made up only 4.8%5.2% of Mr. Banon’s target total direct compensation and 2.8% of Mr. Kulkarni’s target total direct compensation, while variable pay, consisting of his target annual cash incentive awardawards and long-term incentive compensation in the form of equity awards, made up 95.2%94.8% of hisMr. Banon’s target total direct compensation and 97.2% of Mr. Kulkarni’s target total direct compensation.
In the case of Messrs. Moorjani Appleby and Kulkarni,Appleby, their target total direct compensation packages were similar to that of Mr.Messrs. Banon and Kulkarni, consisting of “at risk” variable pay in the form of a target annual cash incentive award and long-term incentive compensation in the form of both an optionoptions to purchase ordinary shares and an RSU awardawards that may be settled for ordinary shares. Given the modest levels of their base salaries, variableVariable pay made up 89.8%, 94.3%95.5% and 96.1%91.4% of the target total direct compensation of Messrs. Moorjani Appleby and Kulkarni,Appleby, respectively, on an annualized basis, exclusive of signing bonuses of $200,000 received by each of Messrs. Appleby and Kulkarni during fiscal year 2021 (but inclusive of new hire equity awards).basis.
Similarly,Generally, Mr. Garrett’s target total direct compensation package was considered to be largely comprised of “at risk” variable pay even though he did not participate in our Executive Incentive Compensation Plan. EvenBonus Plan, because even without a target annual cash incentive award, Mr. Garrett’s equity award generally made up 78.9%the vast majority of his target total direct compensation for fiscal year 2021.2022. However, because Mr. Garrett resigned prior to when the annual equity awards were granted to our executive officers, he received no annual equity award in fiscal 2022 and his total direct compensation for fiscal year 2022 was entirely fixed pay in the form of base salary.
As we continue to mature as a public company, we believe that the compensation elements provided to all of our Named Executive Officers will continue to emphasize “at risk” and variable pay that should enable us to provide a balanced set of incentives for our Named Executive Officers to meet our business objectives and drive long-term growth.
Executive Compensation Policies and Practices
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee reviews our executive compensation program on an annual basis to ensure consistency with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following summarizes our executive compensation-related policies and practices that were in effect during fiscal year 2021:
What We Do:
•Maintain Independent Compensation Committee. The Compensation Committee is composed solely of independent directors who determine our compensation policies and practices (or, with regard to our CEO,executive directors, recommend compensation policies and practices to our board of directors, who determine such policies and practices for our CEO)executive directors) and who have established effective means for communicating with our shareholders regarding their executive compensation views and concerns, as described in this proxy statement.
•Periodic Executive Compensation Review. The Compensation Committee reviews and approves our compensation strategy periodically (or, with regard to the compensation strategy for our CEO,executive directors, reviews and recommends to our board of directors to approve such strategy), including a review of our compensation peer group used for comparative purposes.
•Maintain Independent Compensation Advisor. The Compensation Committee has engaged its own compensation consultant to assist with the annual executive compensation review. This consultant performed only compensation-related services for us in fiscal year 2021.2022.
•Compensation At-Risk. Our executive compensation program is designed so that in setting or recommending our Named Executive Officers’ compensation in a given year, the Compensation
Committee considers whether a sufficient portion of their compensation is “at risk” based on corporate performance to align the interests of our Named Executive Officers and shareholders.
•Multi-Year Vesting Requirements. The annual equity awards granted to our Named Executive Officers vest over multi-year periods, consistent with current market practice and our retention objectives.
•“Double-Trigger” Change-in-Control Arrangements. Under our severance arrangements with our Named Executive Officers, all change-in-control payments and benefits are based on a “double-trigger” arrangement (that is, they require both a change-in-control of the Company plus a qualifying termination of employment before payments and benefits are paid).
•Health or Welfare Benefits. Our Named Executive Officers participate in broad-based Company-sponsored health and welfare benefit programs on the same basis as our other employees in the country of their employment.
•Succession Planning. Our board of directors and the Nominating and Corporate Governance Committee review the risks associated with our executive officer positions to ensure adequate succession plans are in place.
What We Don’t Do:
•No Executive Retirement Plans. We do not currently offer, nor do we have plans to offer, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our Named Executive Officers other than the plans and arrangements that are available to all employees in the jurisdiction where the Named Executive Officer is located. Our Named Executive Officers in the United States are eligible to participate in our Section 401(k) plan on the same basis as our other employees in the United States, and our Named Executive Officer in Israel is covered by a Section 14 Arrangement under Israel Severance Pay Law, as are all other employees in Israel.
•Limited Perquisites. We provide minimal perquisites and other personal benefits to our Named Executive Officers.
•No Tax Payments on Perquisites. We do not provide any tax reimbursement payments (including “gross-ups”) on any perquisites or other personal benefits, other than on standard relocation benefits.
•No “Golden Parachute” Tax Payments on Change-in-Control Arrangements. We do not provide any excise tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a change in control of the Company that our Named Executive Officers might owe as a result of the application of Sections 280G or 4999 of the Internal Revenue Code (the “Code”).
•No Hedging or Pledging of our Securities. We prohibit our employees, including our officers, and the members of our board of directors from engaging in hedging transactions or pledging our securities as collateral for a loan or holding our securities in a margin account.
Shareholder Advisory Vote on Named Executive Officer Compensation
At the 2021 Annual Meeting, our advisory vote on the compensation of our Named Executive Officers (the “Say-on-Pay” vote) received 84.7% support from our shareholders. The board of directors and the Compensation Committee believe the 2021 Say-on-Pay vote result indicates support for the design of our current compensation program and our overall compensation philosophy and decisions for fiscal year 2022. Accordingly, the Compensation Committee did not make any material changes to the underlying structure of our executive compensation program. The Compensation Committee regularly reviews and adjusts our executive compensation program to ensure it remains competitive and aligned with our shareholders’ interests.
We value our shareholders’ opinions and feedback and are committed to maintaining an active dialogue to understand the priorities and concerns of our shareholders. We believe that ongoing engagement builds mutual trust and alignment with our shareholders and is essential to our long-term success.
At our 2020 annual general meeting of shareholders, our shareholders indicated their approval of the recommendation that we solicit a Say-on-Pay vote on an annual basis. In accordance with that preference, our board
of directors has determined that the Company will conduct a Say-on-Pay vote every year until the next shareholder advisory vote on the frequency of Say-on-Pay votes (the “Say-When-on-Pay” vote). The next required Say-When-on-Pay vote will take place no later than at the Company’s 2026 annual general meeting of shareholders.
At the Annual Meeting to which this proxy statement relates, we will continue to hold an annual Say-on-Pay vote. Our board of directors and the Compensation Committee will consider the outcome of the 2022 Say-on-Pay vote, as well as feedback received throughout the year, when making compensation decisions for our Named Executive Officers in the future.
Executive Compensation Philosophy and Objectives
Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. We strive to provide an executive compensation program that is competitive, rewards achievement of our business objectives and aligns our Named Executive Officers’ interests with those of our shareholders. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:
•provide market competitive compensation and benefit levels that will attract, motivate, reward and retain a highly talented team of executives within the context of responsible cost management;
•establish a direct link between our financial and operational results and strategic objectives and the compensation of our executives;
•align the interests and objectives of our executives with those of our shareholders by linking their long-term incentive compensation opportunities to shareholder value creation and their cash incentives to our annual performance; and
•offer total compensation opportunities to our executives that, while competitive, are internally consistent and fair.
We structure the annual compensation of our Named Executive Officers using base salary and long-term incentive compensation in the form of equity awards. In addition, for fiscal year 2022, each of our CEO, CFO, President, Worldwide Field Operations and CPO areNamed Executive Officers (other than Mr. Garrett) were eligible to earn annual cash incentive awards. The design of our executive compensation program is influenced by a variety of factors, with the primary goals being to align the interests of our Named Executive Officers and shareholders and to link pay with performance.
We have not adopted policies or employed guidelines for allocating compensation between current and long-term compensation, between cash and non-cash compensation or among different forms of non-cash compensation. As described below, the Compensation Committee considers a variety of factors in determining the appropriate yearly mix among such compensatory elements, including our compensation philosophy and the value of unvested equity awards granted previously.
Compensation-Setting Process
Role of the Compensation Committee
The Compensation Committee discharges many of the responsibilities of our board of directors relating to the compensation of our Named Executive Officers, and periodically reviews and makes recommendations to our board of directors regarding their compensation, subject to the terms of our Remuneration Policy (as required by Dutch corporate law). Notwithstanding the responsibility of our board of directors, the Compensation Committee has the overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans, policies and practices applicable to our Named Executive Officers. Our board of directors has delegated express authority to the Compensation Committee to serve as the administrator of the 2012 Plan.
The Compensation Committee has authority to make decisions regarding the compensation of our Named Executive Officers (other than our CEO)executive directors) and makes recommendations to our board of directors regarding the compensation of our CEO.executive directors. The non-executive directors on our board of directors make all final decisions regarding the compensation of our CEOexecutive directors with due observance to the Remuneration Policy adopted by our general meeting of shareholders in 2018.
In carrying out its responsibilities, the Compensation Committee evaluates our compensation policies and practices with a focus on the degree to which these policies and practices reflect our executive compensation philosophy, develops strategies and makes decisions that it believes further our philosophy or align with
developments in best compensation practices, and reviews the performance of our Named Executive Officers when making decisions and recommendations with respect to their compensation.
The Compensation Committee’s authority, duties and responsibilities are further described in its charter, which is reviewed annually and revised and updated as warranted. The charter is available in the “Investor Relations” section of our website, which is located at ir.elastic.co by clicking on “Corporate Governance” under “Governance.”
The Compensation Committee retains a compensation consultant to provide support in its review and assessment of our executive compensation program; however, the Compensation Committee exercises its own judgment in making its decisions and recommendations with respect to the compensation of our Named Executive Officers.
Setting Target Total Direct Compensation
Each year, the Compensation Committee conducts an annual review of the compensation arrangements of our Named Executive Officers, typically during the first quarter of the fiscal year. As part of this review, the Compensation Committee evaluates the base salary levels and long-term incentive compensation of our Named Executive Officers, as well as the annual cash incentive awards for our Named Executive Officers who are eligible to receive such awards, and all related performance criteria.
The Compensation Committee does not establish a specific target for formulating the target total direct compensation of our Named Executive Officers. In making decisions and recommendations about the compensation of our Named Executive Officers, the members of the Compensation Committee are initially presented with a competitive market analysis prepared by its compensation consultant based on data gathered from the companies in our compensation peer group and considerations from broader executive compensation trends for its review and consideration. Drawing on this data, the members of the Compensation Committee then apply their professional experience to consider the following factors as applicable:
•our executive compensation program objectives;
•our performance against the financial, operational and strategic objectives established by the Compensation Committee and our board of directors;
•each individual Named Executive Officer’s knowledge, skills, experience, qualifications and tenure relative to other similarly-situated executives at the companies in our compensation peer group and/or selected broad-based compensation surveys;
•the scope of each Named Executive Officer’s role and responsibilities compared to other similarly situated executives at the companies in our compensation peer group and/or selected broad-based compensation surveys;
•the prior performance of each individual Named Executive Officer, based on a subjective assessment of his or hertheir contributions to our overall performance, ability to lead his or hertheir business unit or function and work as part of a team;
•the potential of each individual Named Executive Officer to contribute to our long-term financial, operational and strategic objectives;
•our CEO’sexecutive directors’ compensation relative to that of our other Named Executive Officers, and compensation parity among our Named Executive Officers;
•the compensation practices of our compensation peer group and broader executive compensation trends and the positioning of each Named Executive Officer’s compensation in a ranking of executive officer compensation levels based on an analysis of competitive market data; and
•the recommendations of our CEO with respect to the compensation of our Named Executive Officers (except with respect to his own compensation)compensation of our executive directors).
These factors provide the framework for compensation decision-making regarding the compensation opportunity for each Named Executive Officer. No single factor is determinative in setting compensation levels, nor is the impact of any individual factor on the determination of pay levels quantifiable.
The Compensation Committee does not weigh these factors in any predetermined manner, nor does it apply any formulas in developing its compensation decisions and recommendations. The members of the Compensation Committee consider this information in view of their individual experience, knowledge of the Company, knowledge of the competitive market, knowledge of each Named Executive Officer and business judgment in making their decisions and recommendations.
The Compensation Committee does not engage in formal benchmarking against other companies’ compensation programs or practices to establish our compensation levels or make specific compensation decisions and recommendations with respect to our Named Executive Officers. Instead, in making its determinations and recommendations, the Compensation Committee reviews information summarizing the compensation paid at a representative group of peer companies, to the extent that the executive positions at these companies are considered comparable to our positions and informative of the competitive environment, as well as from more broad-based compensation surveys to gain a general understanding of market compensation levels.
Role of Management
In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO. Our management assists the Compensation Committee by providing information on corporate and individual performance and management’s perspective on compensation matters. Our management also provides certain compensation data about our executive officers to Compensia, the Compensation Committee’s compensation consultant, which presents such information to the Compensation Committee as part of its review and analysis of our executive compensation program. The Compensation Committee solicits and reviews our CEO’s proposals with respect to program structures, as well as his recommendations for adjustments to annual cash compensation, long-term incentive compensation and other compensation-related matters for our Named Executive Officers (except with respect to his own compensation)compensation of our executive directors) based on his evaluation of their performance for the prior year.
The Compensation Committee reviews and discusses such proposals and recommendations with our CEO and considers them as one factor in determining and approving the compensation of our Named Executive Officers. Our CEO also attends meetings of our board of directors and the Compensation Committee at which executive compensation matters are addressed, except with respect to discussions involving his own compensation.compensation of our executive directors.
Role of the Compensation Consultant
The Compensation Committee has the sole authority to retain an external compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review, including the authority to approve the consultant’s reasonable fees and other retention terms. The compensation consultant reports directly to the Compensation Committee and its chair, and serves at the discretion of the Compensation Committee, which reviews the engagement annually.
In fiscal year 2021,2022, the Compensation Committee engaged Compensia to serve as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for our Named Executive Officers, and with the data analysis and selection of the compensation peer group.
During fiscal year 2021,2022, Compensia attended meetings of the Compensation Committee as requested and provided various services including the following:
•the review, analysis and updating of our compensation peer group;
•an assessment and review of executive officer and director stock ownership guidelines and peer company practices and considerations of implementing such guidelines;
•a review and analysis of our non-executive director compensation program and methodology, including an assessment against competitive market data based on the companies in our compensation peer group;
•review of the Compensation Discussion and Analysis for our definitive proxy statement for our 2021 Annual Meeting;
•the review and analysis of the base salary levels, target annual cash incentive awards and long-term incentive compensation of our Named Executive Officers and other senior leadership team members against competitive market data based on the companies in our compensation peer group and/or selected broad-based compensation surveys;
•an assessmentthe review and analysis of executive compensation trends withinfor Mr. Kulkarni, our industry, and updating on corporate governance and regulatory issues and developments;current CEO;
•the review and analysis of the compensation package for our new CPO;2021 Say-on-Pay vote results;
•the review of performance-based equity award alternatives,and assessment on market practice for executive bonus plan design terms and other considerations;practices;
•assisting in the risk assessmentreview and analysis of our compensation programs;for the Chief Sales Officer position; and
•support on other ad hoc matters throughout the year.
The terms of Compensia’s engagement includes reporting directly to the Compensation Committee chair. Compensia also coordinated with our management for data collection and job matching for our executive officers. In fiscal year 2021,2022, Compensia provided only compensation-related services for us.
The Compensation Committee has evaluated its relationship with Compensia to ensure that it believes that such firm is independent from management. This review process included a review of the services that such compensation consultant provided, the quality of those services and the fees associated with the services provided during fiscal year 2021.2022. Based on this review, as well as consideration of the factors affecting independence set forth in Exchange Act Rule 10C-1(b)(4), Section 303A.05(c)(iv) of the rules of the NYSE relating to the independence of the Compensation Committee’s compensation advisors and such other factors as were deemed relevant under the circumstances, the Compensation Committee has determined that no conflict of interest was raised as a result of the work performed by Compensia.
Competitive Positioning
The Compensation Committee believes that peer group comparisons are useful guides to measure the competitiveness of our executive compensation program and related policies and practices. For purposes of assessing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a select group of peer companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization and industry focus. The competitive data drawn from this compensation peer group is one of several factors that the Compensation Committee considers in making its decisions and recommendations with respect to the compensation of our Named Executive Officers.
The compensation peer group for fiscal year 2021,2022, which was developed in January 2020May 2021 with the assistance of Compensia to analyze the compensation of our Named Executive Officers, was composed of publicly-traded technology companies against which we compete for executive talent. In identifying and selecting the companies for the compensation peer group, Compensia considered the following primary criteria:
•publicly-traded companies in the software and internet services sectors identified on a national basis, with a focus on California-based companies;
•similar revenues – within a range of ~0.5x to ~2.0x our trailing four fiscal quarters’ revenue; and
•similar market capitalization – within a range of ~0.33x to ~3.0x our then-market capitalization.
After consultation with Compensia, the Compensation Committee approved the following compensation peer group for use when making its fiscal year 20212022 executive compensation decisions:
| | | | | | | | |
| Alarm.com Holdings | HubSpotFive9 | Smartsheet |
| Alteryx | MongoDBHubSpot | Tenable Holdings |
| Anaplan | New RelicMongoDB | The Trade Desk |
| Avalara | OktaNew Relic | Zendesk |
| Cloudera | Paylocity HoldingOkta | Zscaler |
Coupa SoftwareCloudflare | QualysPaylocity Holding | |
Five9Coupa Software | SailPoint Technologies | |
The Compensation Committee used data gathered by Compensia from the public filings of the companies in our compensation peer group, as well as data from a custom data cutscut of the peer companies (other than Zscaler) drawn from the Radford Global Technology
Survey and Radford Global Sales Survey databasesdatabase that are similar to us in revenue, market capitalization and industry for purposes of providing additional perspective in the case of executive positions where the compensation peer group offered a limited number of relevant data points. This data permitted us to evaluate the competitive market when determining the total direct compensation packages for our Named Executive Officers, including base salary, target annual cash incentive awards and long-term incentive compensation.
The 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 the companies in the peer group.
Compensation Elements
Our executive compensation program consists principally of base salary and long-term incentive compensation in the form of equity awards. In addition, our CEO, CFO, President, Worldwide Field Operationsfor fiscal year 2022, Messrs. Kulkarni, Banon, Moorjani and CPO areAppleby were also eligible to receive annual cash incentive awards.
Base Salary
Base salary represents the fixed portion of the compensation of our Named Executive Officers and is an important element of compensation intended to attract and retain highly talented individuals. Generally, we use base salary to provide each Named Executive Officer with a specified level of cash compensation during the year with the expectation that he or shethey will perform his or hertheir responsibilities to the best of his or hertheir ability and in our best interests.
Generally, we establish the initial base salaries of our Named Executive Officers through arm’s-length negotiation at the time we hire the individual, taking into account his or hertheir position, qualifications, and experience, the market compensation for such role, and the base salaries of our other executive officers. Thereafter, the Compensation Committee reviews the base salaries of our Named Executive Officers each year as part of its annual review of our executive compensation program, with input from our CEO (except with respect to his ownthe base salary)salary of executive directors), and makes adjustments (other than with respect to our CEO)executive directors) that it determines are reasonable and necessary to reflect the scope of a Named Executive Officer’s performance, individual contributions and responsibilities, position in the case of a promotion and market conditions. With respect to our CEO,executive directors, the non-executive directors serving on our board of directors determine any base salary adjustments upon the recommendation of the Compensation Committee.
In August 2020,November 2021, the Compensation Committee reviewed the base salaries of our Named Executive Officers employed by the Company at such time. The Compensation Committee recommended to our board of directors that the base salary of Mr. Banon, our CEOthen-CEO, be increased, and approved an increase in the base salary of Mr. Moorjani, in each instance, to be more competitive with the base salaries of similarly-situated chief executive officers at companies of comparable size and stage of maturity.maturity, as well as the base salaries of our other executive officers, and to compensate Messrs. Banon and Moorjani for not having received market-based adjustments in prior years. The Compensation Committee also determined not to increase the base salaries of the other Named Executive Officers employed by the Company at such time. In making this recommendation and these decisions, the Compensation Committee took into consideration a competitive market analysis prepared by Compensia, the recommendations of our CEOthen-CEO (except with respect to his own base salary) and the current retention risks and challenges facing us,
as well as the other factors described in “Compensation-Setting“Compensation-Setting Process – Setting Target Total Direct Compensation”Compensation” above. Subsequently, in October 2020,December 2021, the non-executive directors serving on our board of directors increased the base salary of our CEO,Mr. Banon, effective as of November 1, 2020,2021, upon the recommendation of the Compensation Committee.
The base salaries of our incumbent Named Executive Officers as determined in August 2020November 2021 for fiscal year 20212022 were as follows:
| | Named Executive Officer | Named Executive Officer | | Fiscal Year 2020 Base Salary | | Fiscal Year 2021
Base Salary (1) | | Percentage Change | Named Executive Officer | | Fiscal Year 2021 Base Salary | | Fiscal Year 2022 Base Salary (1) | | Percentage Change |
| Shay Banon | Shay Banon | | $375,000 | | $400,000 | | 6.7% | Shay Banon | | $400,000 | | $500,000 | | 25.0% |
| Ashutosh Kulkarni | | Ashutosh Kulkarni | | $500,000 | | $500,000 | | —% |
| Janesh Moorjani | Janesh Moorjani | | $365,000 | | $365,000 | | —% | Janesh Moorjani | | $365,000 | | $500,000 | | 37.0% |
| Paul Appleby | | Paul Appleby | | $500,000 | | $500,000 | | —% |
| W.H. Baird Garrett | W.H. Baird Garrett | | $400,000 | | $400,000 | | —% | W.H. Baird Garrett | | $400,000 | | $400,000 | | —% |
Our board of directors has adopted, and our general meeting of shareholders has approved, the Executive Incentive Compensation Plan (the “Bonus Plan”).Bonus Plan. The Bonus Plan is administered by the Compensation Committee. The Bonus Plan enables the Compensation Committee to provide cash incentive awards to selected employees, including our Named Executive Officers (other than our CEO)executive directors), based upon our actual achievement as measured against performance metrics established by the Compensation Committee. In the case of our CEO,executive directors, the performance metrics for histheir cash incentive awards and the actual payment of the awards are established by the non-executive directors serving on our board of directors, upon the recommendation from the Compensation Committee. The Compensation Committee believes that the financial performance measures used in the Bonus Plan contribute to driving the creation of long-term stakeholder value, including shareholder value, and play an important role in influencing the performance of our Named Executive Officers who participate in the plan, who are most directly responsible for our overall success.
The Compensation Committee may, in its sole discretion and at any time, increase, reduce or eliminate a participant’s actual award. In the case of our CEOexecutive directors the non-executive directors serving on our board of directors determine whether our CEO’san executive director’s actual award is increased, reduced or eliminated, taking into consideration the recommendation of the Compensation Committee. The actual award may be below, at or above a participant’s target annual cash incentive award, as determined at the Compensation Committee’s discretion or, in the case of our CEO,executive directors, as recommended by the Compensation Committee to our board of directors for their discretionary action. The Compensation Committee may determine the amount of any change (or recommendation for any change in the case of our CEO)executive directors) on the basis of such factors as it deems relevant, and it is not required to establish any allocation or weighting with respect to the factors it considers. In fiscal year 2021,2022, neither the Compensation Committee nor, in the case of our CEO,executive directors, the non-executive
directors serving on our board of directors, exercised their discretion with respect to any of the actual cash incentive award payments made under the Bonus Plan.
To the extent that performance for either metric was below the threshold performance level, there would be no payout with respect to that metric. In addition, the potential payment for any metric was capped at the maximum performance level. Achievement levels and payout percentages for performance between the threshold and maximum performance levels were set forth in tables approved by the Compensation Committee.
In the case of Mr. Banon, our former CEO, the non-executive directors serving on our board of directors determined the annual cash incentive award payout for the first half of fiscal year 20212022 in December 20202021 and determined the annual cash incentive award payout for the second half of fiscal year 20212022 in June 2021.2022. In the case of Mr. Kulkarni, our current CEO, the non-executive directors serving on our board of directors determined the annual cash incentive award payout for the second half of fiscal year 2022 in June 2022. The annual cash incentive award payouts for Messrs. Banon, Kulkarni, Moorjani and Appleby for the first half of the fiscal year were paid in the third fiscal
We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. We use equity awards to incentivize and reward our Named Executive Officers for long-term corporate performance based on the value of our ordinary shares and, thereby, to align their interests with the interests of our stakeholders. The realized value of these equity awards bears a direct relationship to our stock price, and, therefore, these awards are an incentive for our Named Executive Officers to create value for our shareholders. Equity awards also help us retain our Named Executive Officers in a highly competitive market and as such contribute to the long-term value creation for all our stakeholders.
Currently, we use options to purchase ordinary shares and RSU awards with time-based vesting requirements that may be settled for ordinary shares to motivate, reward and retain our Named Executive Officers for long-term increases in the value of our ordinary shares. The Compensation Committee believes that because stock options provide for an economic benefit only in the event that our stock price increases over the exercise price of the option, these awards effectively align the interests of our Named Executive Officers with the interests of our stakeholders and provide our Named Executive Officers with a significant incentive to manage our business from the perspective of a person with an equity stake in the business. In addition, because RSU awards have value to the recipient even in the absence of stock price appreciation, the Compensation Committee believes that we are able to incentivize and retain our Named Executive Officers using fewer ordinary shares than would be necessary if we used stock options exclusively to provide an equity stake in the Company. Since the value of RSU awards increases or decreases with any increase or decrease in the value of the underlying ordinary shares, RSU awards also provide incentives to our Named Executive Officers that are aligned with the interests of our stakeholders.
The aggregate equity awards granted to our Named Executive Officers for fiscal year 20212022 were as follows:
Our Named Executive Officers are eligible to participate in the same employee benefit plans, and on the same terms and conditions, as all other full-time, salaried employees in the jurisdiction where the Named Executive Officer is located. These benefits include medical, dental, and vision insurance, business travel insurance, an
employee assistance program, health and dependent care flexible spending accounts, basic life insurance, accidental death and dismemberment insurance, short-term and long-term disability insurance and commuter benefits.
We maintain a Section 401(k) plan for our employees, including our Named Executive Officers. The Section 401(k) plan is intended to qualify under Section 401(k) of the Code, so that contributions to the plan by employees or by us, and the investment earnings thereon, are not taxable to the employees until withdrawn, and so that contributions made by us, if any, will be deductible by us when made. Employees may elect to reduce their current compensation by up to the statutorily prescribed annual limits and to have the amount of such reduction contributed to their accounts under the Section 401(k) plan. The Section 401(k) plan permits us to make contributions up to the limits allowed by law on behalf of all eligible employees. Typically, we make matching contributions to the plan up to 6% of a participating employee’s eligible compensation, to a maximum match of $18,300 for calendar year 2022, $17,400 for calendar year 2021, and $17,100 for calendar year 2020 and $15,600 for calendar year 2019.2020. All participating employees’ interests in our matching contributions, if any, vest immediately at the time of contribution. The Section 401(k) plan also contains a Roth component.
We also maintain defined-contribution plans for employees in certain other countries.
We do not offer any retirement benefits to our executive officer located in Israel, except to the extent certain social benefits are required pursuant to Israeli labor laws or are common practice in Israel, and such social benefits are applicable to all Israeli employees. Specifically, based on Israeli labor laws, an Israeli employee is entitled to severance pay upon termination of employment for any reason, including retirement, equal to the most recent monthly salary of such employee multiplied by the number of years of employment of such employee. We make a payment of 8.333% of each employee’s monthly base salary to an insurance or pension fund to pay for this future liability payable to our employees upon termination of their employment. In addition, we make a payment of up to 7.5% of each employee’s monthly base salary to another insurance or pension fund, and this accrued amount may be withdrawn by the employee only upon retirement (to the extent either the statutory severance or retirement amounts become payable to Mr. Banon, they will offset amounts otherwise payable to Mr. Banon under his employment agreement, as noted below). We generally provide all of our Israeli employees with a fixed travel allowance for commuting costs, except that we provide Mr. Banon with reimbursements for such costs, up to a maximum amount of ILS 550 per month. Also, as is customary in Israel applicable to all Israeli employees, we provide our Israeli employees with a certain amount of monthly contributions (7.5% of their base salary) to a savings fund designed for employee’s study and training purposes. The amounts of the above referenced benefits contributed by us to Mr. Banon in fiscal year 20212022 are specified in the Fiscal 20212022 Summary Compensation Table of this proxy statement.
We design our employee benefits programs to be affordable and competitive in relation to the market as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our Named Executive Officers except as generally made available to our employees or in situations where we believe it is appropriate to assist an individual in the performance of his or hertheir duties, to make him or herthem more efficient and effective, and for recruitment and retention purposes. During fiscal year 2021,2022, none of our Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual.
In the future, we may provide perquisites or other personal benefits in limited circumstances, such as those described in the preceding paragraph. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee. In the case of our CEO,executive directors, the non-executive directors serving on our board of directors will approve all perquisites or other personal benefits and subject them to periodic review upon the recommendation of the Compensation Committee.
In addition to the severance provisions contained in the Banon Employment Agreement, we have entered into change in control and severance agreements with each of our other Named Executive OfficersMessrs. Kulkarni and Moorjani (collectively, the severance provisions in the Banon Employment Agreement and the change in control and severance agreements are referred to as the “Severance Arrangements”). We had also entered into change in control and severance agreements with Messrs. Appleby and Garrett, but these change in control and severance agreements were terminated in connection with the separation and resignation of Mr. Appleby and Mr. Garrett, respectively. The Severance Arrangements provide for certain protections in the event of specified involuntary terminations of employment, including an involuntary termination of employment in connection with a change in control of the Company, in exchange for executing a separation agreement and release
of claims in our favor that becomes effective and irrevocable and resigning from all positions the Named Executive Officer may hold as an officer or director.
The Severance Arrangements provide reasonable compensation in the form of severance pay and certain limited benefits to a Named Executive Officer if he or she leavesthey leave our employ under certain circumstances to facilitate his or hertheir transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing Named Executive Officer to sign a separation agreement and release of claims in a form and with terms acceptable to us providing for a general release of all claims as a condition to receiving post-employment compensation payments or benefits. We also believe that the Severance Arrangements help maintain our Named Executive Officers’ continued focus and dedication to their assigned duties to maximize stakeholder value if there is a potential transaction that could involve a change in control of the Company.
Under the Severance Arrangements, all payments and benefits in the event of a change in control of the Company are payable only if there is a connected involuntary loss of employment by a Named Executive Officer (a so-called “double-trigger” arrangement). In the case of the acceleration of vesting of outstanding equity awards, we use this double-trigger arrangement to protect against the loss of retention value following a change in control of the Company and to avoid windfalls, both of which could occur if vesting of either equity or cash-based awards accelerated automatically as a result of the transaction.
In the event of a change in control of the Company, to the extent that any of the amounts provided for under the Severance Arrangements would constitute a “parachute payment” within the meaning of Section 280G of the Code and could be subject to the related excise tax under Section 4999 of the Code, a Named Executive Officer will receive such payment as would entitle him or herthem to receive the greatest after-tax benefit, even if it means that we pay the
Named Executive Officer a lower aggregate payment so as to minimize or eliminate the potential excise tax imposed by Section 4999 of the Code.
We do not provide any tax reimbursement payments (or “gross-ups”) on excise taxes relating to a change in control of the Company and have no such obligations in place with respect to any of our executive officers, including our Named Executive Officers.
We believe that having in place reasonable and competitive post-employment compensation arrangements, including in the event of a change in control of the Company, are essential to attracting and retaining highly qualified executive officers. The Compensation Committee does not consider the specific amounts payable under the post-employment compensation arrangements when determining the annual compensation for our Named Executive Officers. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive.
Our equity award grant policy governs our grant of equity awards under our 2012 Plan and such other equity compensation plans as we may adopt from time to time. Pursuant to our equity award grant policy, duly authorized equity awards are granted to employees on predetermined grant dates in a manner that is consistent with the terms set forth in the policy. Consistent with our policy:
Pursuant to Dutch corporate law, our Remuneration Policy provides that the short-term and long-term variable remuneration of the executive and non-executive directors of the Company, including our Chairman of our board of directors and CEO, whether payable in cash or equity, may be adjusted or partly or fully clawed back to the extent it was paid on the basis of incorrect information (i) underlying the targets to be achieved or (ii) regarding the circumstances on which the variable remuneration was made conditional.
As a public company, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws as a result of misconduct, the CEOChief Executive Officer and CFOChief Financial Officer may be legally required to reimburse Elastic for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of section 304 of the Sarbanes-Oxley Act of 2002. Additionally, we intend to implement a Dodd-Frank Wall Street Reform and Consumer Protection Act-compliant clawback policy to the extent thatonce the requirements of such policy are finalized by the SEC.
Under our Insider Trading Policy, our employees, including officers, and the members of our board of directors are prohibited from engaging in transactions in publicly-traded options, such as puts and calls, and other
derivative securities with respect to our securities (other than share options, share appreciation rights and other securities issued pursuant to Company benefit plans or other compensatory arrangements with the Company), and debt securities (such as debentures, bonds and notes). This includes any hedging or similar transaction designed to decrease the risks associated with holding our securities. In addition, our employees, including officers, and the members of our board of directors may not engage in short sales (that is, the sale of a security that must be borrowed to make delivery) or “sell short against the box” (that is, a sale with a delayed delivery) involving our securities.
The Compensation Committee takes the applicable tax and accounting requirements into consideration in designing and overseeing our executive compensation program.
Section 162(m) of the Code generally limits the amount we may deduct from our federal income taxes for compensation paid to our CEO and certain other current and former executive officers that are “covered employees” within the meaning of Section 162(m) to $1 million per individual per year, subject to certain exceptions. The regulations promulgated under Section 162(m) contain a transition rule that applies to companies that become subject to Section 162(m) by reason of becoming publicly held. Pursuant to this rule, certain compensation granted during a transition period (and, with respect to RSU awards, that are paid out before the end of the transition period) currently is not counted toward the deduction limitations of Section 162(m) if the compensation is paid under a compensation arrangement that was in existence before the effective date of the initial public offering and certain other requirements are met. We currently expect our transition period to expire at our annual general meeting of shareholders to be held in 2022, although it could expire earlier in certain circumstances.
Although the Compensation Committee may consider the tax implications as one factor in making compensation decisions for our covered employees, the Compensation Committee also considers other factors in making such decisions, including ensuring that our executive compensation program supports our business strategy. Consequently, the Compensation Committee retains the discretion and flexibility to compensate our Named Executive Officers in a manner consistent with the objectives of our executive compensation program and the best interests of the Company and our shareholders, which may include providing for compensation that is not deductible by the Company due to the deduction limit of Section 162(m). While the transition relief for newly-public companies may help to minimize the effect of the Section 162(m) deduction limit under Section 162(m) in the short-term, we expect that, going forward, some portion of our Named Executive Officers’ compensation will not be fully deductible by the Company for federal income tax purposes.
The Compensation Committee takes accounting considerations into account in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), the standard which governs the accounting treatment of certain stock-based compensation. Among other things, ASC Topic 718 requires us to record a compensation expense in our income statement for all equity awards granted to our executive officers and other employees. This compensation expense is based on the grant date “fair value” of the equity award and, in most cases, will be recognized ratably over the award’s requisite service period (which, generally, will correspond to the award’s vesting schedule). This compensation expense is also reported in the compensation tables below, even though recipients may never realize any value from their equity awards.
The following table provides information concerning compensation awarded to, earned by or paid to each of our Named Executive Officers for all services rendered in all capacities during the last three fiscal years during which such individuals were Named Executive Officers. The amounts reported reflect rounding, which may result in slight variations between amounts shown in the Total column and the sum of its components as reflected in the table.
