Michael Xie
FortinetAbout Michael Xie
Michael Xie (age 56) is Fortinet’s President, Chief Technology Officer, Co‑founder, and a Director (on the Board since February 2001). He holds an M.S. in Electrical Engineering from the University of Manitoba and B.S./M.S. in Automobile Engineering from Tsinghua University. He brings 25+ years of network security engineering and product leadership to Fortinet; he sits on the Board’s Cybersecurity Committee and is not an independent director (management director) . Performance context: Fortinet’s 2024 revenue was $5.96B (+12% y/y) with operating income up 45% y/y; 2024 PSUs (Tranche 1) paid at the 96th percentile TSR vs S&P 500 (200% multiplier), evidencing strong recent stock performance linkage .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| ServGate Technologies | VP of Engineering | — | Led engineering at network security provider (acquired by Amarium Technologies) |
| NetScreen Technologies | Software Director and Architect | — | Early security product architecture at a leading firewall/VPN vendor |
| Milkyway Networks | Senior Software Engineer | — | Development of network security solutions |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| The Xie Foundation | Co‑President and Director | — | Philanthropic governance; also a beneficial holder of FTNT shares linked to Xie family trusts |
Fixed Compensation
| Metric | 2023 | 2024 |
|---|---|---|
| Base Salary ($) | 445,000 | 445,000 |
| Target Bonus (% of Salary) | 75% | 75% |
| Target Bonus ($) | 333,750 | 333,750 |
| Actual Bonus Paid (SCT, $) | 271,402 | 278,245 |
Notes: Fortinet reports an “aggregate bonuses during 2024” figure of $303,753 for Michael Xie (program payout basis), which differs from the SCT non‑equity incentive line; SCT is the primary SEC-reported figure .
Performance Compensation
Annual Incentive (2024)
| Metric | Weighting | Funding Scale | 2024 Actual vs Target | Payout Context |
|---|---|---|---|---|
| Revenue | 35% | 90%→40%; 100%→100%; 140%→140% | 99%–102% | Component funded near target range |
| Billings | 35% | 90%→40%; 100%→100%; 140%→140% | 90%–94% | Component funded between threshold and target |
| Operating Income (non‑GAAP) | 30% | 90%→40%; 100%→100%; 140%→140% | 115%–151% | Over‑achievement; higher multiplier |
| Result | — | — | — | Executives earned ~92% of target annual incentives on average |
Program mechanics: quarterly payout; no bonuses are paid if results are below guidance that cause pre‑announcement .
Long‑Term Incentives (Equity)
| Grant Type | Grant Date | Shares Granted | Vesting / Performance | Grant Date Fair Value ($) |
|---|---|---|---|---|
| RSU | 2/21/2024 | 35,876 | 25% on 2/1/2025; quarterly thereafter over 4 years | 2,344,138 |
| PSU (Relative TSR vs S&P 500) | 2/21/2024 | 35,876 target | 4 tranches: 1/2/3/4‑yr (20/20/20/40% weights); 25th→50% payout; 50th→100%; 75th+→200% | 3,530,058 |
2024 Performance Outcome: TSR 96th percentile for Tranche 1 → 200% payout; Michael earned 14,350 PSUs for the 2024 one‑year tranche, vesting 2/1/2025 if in service . 2023 PSU grant (Tranche 2 two‑year period ending 12/31/2024) paid at 200% (86th percentile TSR), with 17,684 PSUs earned for Michael for that tranche .
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total Beneficial Ownership | 69,683,338 shares (9.0% of outstanding) including family trusts and GRATs; also co‑president/director of The Xie Foundation which holds shares (no pecuniary interest) |
| Options – Exercisable within 60 days | 866,430 shares |
| Unvested RSUs (12/31/2024) | 35,876 RSUs; FMV $3,389,564 at $94.48 |
| Unearned PSUs (12/31/2024) | 35,876 target PSUs; FMV $3,389,564 at $94.48 (subject to performance) |
| 2024 Equity Vest/Exercise Activity | Options exercised: none; RSUs vested: 60,410 shares ($4,015,954) |
| Hedging/Pledging | Prohibited for directors/officers/employees (no hedging, no pledging, no margin) |
| Insider Trading Windows | Sales only via Rule 10b5‑1 trading plans; policy in place |
Employment Terms
| Term | Outside Change in Control (CiC) | Within CiC Period (12 months post‑CiC; CEO also 3 months pre‑CiC) |
|---|---|---|
| Cash Severance | 12 months base salary (Michael: $445,000) | 12 months base salary + target annual bonus (Michael: $445,000 + $333,750) |
| Equity Acceleration | 12 months of time‑based vesting acceleration; in‑progress PSU tranche vests at target; remaining PSUs forfeited | 100% acceleration of unvested time‑based and performance‑based awards, with PSUs at target unless award agreement specifies deal‑price TSR treatment |
| COBRA | 12 months medical benefits | 12 months medical benefits |
| Estimated Equity Value (12/31/2024) | $8,087,296 accelerated value | $15,327,685 accelerated value |
| Clawback | SEC‑compliant policy (Rule 10D‑1) for incentive compensation; applies to PSUs and bonuses | |
| Non‑Compete/Non‑Solicit | 12 months post‑termination covenant under severance agreements | |
| Tax Gross‑Ups | None for change‑in‑control benefits (shareholder‑friendly) | |
| Perquisites | Personal security services for Ken and Michael beginning in 2025 |
Board Governance
- Director since 2001; current committee: Cybersecurity Committee (member). Prior Board committee service included chairing the Social Responsibility Committee in 2024 before formation of the Cybersecurity Committee in July 2024 .
- Independence/dual roles: Michael is a management director (not independent). Fortinet uses a Lead Independent Director (Judith Sim) and maintains fully independent Audit, HR, and Governance committees; non‑management directors meet in executive session; only Ken and Michael are management directors .
- Director compensation: employee directors (Ken and Michael) receive no additional director pay .
- Meeting attendance: each director attended at least 75% of Board/committee meetings in 2024 .
Director Compensation (for non‑employee directors, policy reference)
- Annual cash retainers: Board $55,000; Lead Independent Director $35,000; committee member/chair retainers by committee; plus annual RSU grants at peer 50th percentile; vesting quarterly .
- Director stock ownership guidelines: 5× base retainer; 4‑year compliance period .
Compensation Peer Group (used for 2024 decisions)
Akamai; Arista; Autodesk; Cadence; Check Point; CrowdStrike; Datadog; Equinix; Marvell; NetApp; Palo Alto Networks; ServiceNow; Snowflake; Synopsys; Workday; Zoom Communications; Zscaler. NEO base salaries targeted ~50th percentile .
Say‑on‑Pay & Shareholder Feedback
- 2025 Say‑on‑Pay vote (For/Against/Abstain/Broker non‑votes): 508,754,346 / 71,888,380 / 4,699,871 / 80,287,187 .
- 2024 Say‑on‑Pay vote: 513,869,410 / 70,896,492 / 590,074 / 70,869,080 .
- Prior disclosure: “Over 87%” approval in 2024; HR Committee considers investor feedback annually .
Company Performance Context
| Metric | FY 2020 | FY 2021 | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|---|---|
| Revenues ($) | 2,594,400,000* | 3,342,200,000* | 4,417,400,000* | 5,304,800,000* | 5,955,800,000* |
| EBITDA ($) | 560,400,000* | 730,200,000* | 1,069,300,000* | 1,349,900,000* | 1,921,600,000* |
Values retrieved from S&P Global.*
Additional 2024 highlights from proxy: revenue $5.96B (+12% y/y), operating income $1.80B (+45% y/y), and strong cash from operations .
Risk Indicators & Alignment Assessment
- Alignment: Very high insider ownership (≈9% beneficial stake), sizable in‑the‑money options exercisable within 60 days (866,430), and multi‑year RSU/PSU exposure tie incentives to TSR and operating performance .
- Hedging/pledging: Strict prohibitions reduce misalignment risk .
- Incentive rigor: Annual plan uses threshold/target/max funding with a minimum performance gate (90%); PSUs benchmark to S&P 500 TSR with a 4‑tranche structure and capped at 200% .
- Governance mitigants for dual roles (CEO+Chair is Ken Xie, brother): Lead Independent Director, independent committees, regular executive sessions, and majority independent Board .
Investment Implications
- Pay‑for‑performance: A heavy mix of PSUs tied to relative TSR (with strong 2023–2024 outcomes) and rigorous annual metrics supports credible alignment. Combined with prohibitions on hedging/pledging, incentives are oriented toward long‑term TSR and profitable growth .
- Retention risk: Low. Michael’s substantial ownership, outstanding equity, and severance protections (with double‑trigger acceleration on CiC) create strong retention hooks through at least 2029 (severance agreements expire August 7, 2029) .
- Selling pressure: 2024 shows RSU vesting and no option exercises; upcoming PSU tranches vest annually (subject to TSR and service). Monitor Form 4s around Feb 1 each year for vest‑related sales and any 10b5‑1 plan updates .
- Governance watch‑items: Continued combination of CEO/Chair (Ken Xie) with family ties to Michael. However, independence structures (Lead Independent Director; independent committees; majority independent Board) partially mitigate governance concentration risk .
References:
Biography, roles, committees, independence and governance:
2024 financial highlights:
Compensation program, bonuses, and equity awards:
Severance/CiC terms and estimates:
Ownership and components:
Director compensation (policy) and guidelines:
Say‑on‑pay results: