UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

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Palo Alto Networks Inc.

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Letter from the Chair and the Lead Independent Director

At Palo Alto Networks, we are rebuilding cybersecurity based on the principles of Zero Trust, fueled by rigorous analytics and automation. We are here to secure the way forward by making cyber security stronger yet simpler so that each day is safer than the one before. We’ve Got Next and so will you.

Dear Fellow Stockholders:

Fiscal 2022 was another year of achievement at Palo Alto Networks. Our billings exceeded $7.4 billion, reflecting a growth rate of 37% year over year, and our revenues exceeded $5.5 billion – 29% year-over-year growth. In July, we celebrated our 10th anniversary as a public company. At the close of trading on the day of our initial public offering, our market capitalization was $3.5 billion, reflecting the value of a company that pioneered a new era of security through its groundbreaking firewall technology. Today, as our market capitalization exceeds $51 billion (at the close of trading on October 28, 2022), we are confident in the strong foundation we have built and eager to tackle the challenges of the next ten years.

As always, innovation drives our success. During the past year, we deployed 49 major product releases as compared to 29 in fiscal 2021, including advancements in next generation cloud access security broker (CASB), cloud code security, cloud next generation firewall and, in an industry first, agent and agentless cloud security posture management (CSPM) – just to name a few. We deliver to our customers best-of-breed capabilities across a platform of network security, cloud security and security operations. Simply put, we remain the cybersecurity leader, serving tens of thousands of customers worldwide, many of whom are still in the early stages of their cybersecurity transformations.

Of course, none of these accomplishments would have been possible without the dedication and engagement of our employees. We continue to prioritize their health, safety and professional fulfillment through FLEXWORK, an employee-centric strategy that offers over 12,500 employees an expanded set of choices. These choices include where individual work is completed, time spent in the office, personalized learning paths, and flexibility of benefits. We are proud of the workplace recognitions that the company received in fiscal 2022, including Most Loved Workplaces (Newsweek), Top 100 of America’s Most JUST Companies (Just Capital), Next Gen honoree (Ripplematch), and Best Company in Bay Area (Comparably).

Finally, we recognize the contributions and character of Mark McLaughlin and Asheem Chandna, neither of whom will stand for reelection to the Board of Directors when their terms expire at the conclusion of our 2022 Annual Meeting of Stockholders. Mark’s leadership as the company’s chief executive officer from August 2011 until June 2018, and his continued service on our Board of Directors since then, have been instrumental in driving the company’s growth and nurturing our unique culture. Likewise, without Asheem’s technical expertise, financial acumen and, most notably, keen discernment of emerging technology trends, our transformation into the company we are today would have been less complete and consequential. On behalf of our employees and the entire Board of Directors, we express our deep appreciation to Mark and Asheem for their profound impacts on Palo Alto Networks.

* * * * *

As in the past, this year’s Proxy Statement is constructed to maximize clarity and understanding about the company’s strategies, successes and challenges. Several of our key initiatives are worth prefacing here.

Stockholder Engagement. We remain guided by, and appreciative of, the perspectives of our stockholders as expressed through their engagement with us. Throughout fiscal 2022, we once again executed an extensive stockholder outreach program. In total, we engaged in discussions with stockholders holding approximately 60% of our outstanding shares as of June 30, 2022. John, as our Lead Independent Director, remained at the forefront of our engagement efforts and participated in 30 meetings with stockholders holding approximately 39% of our outstanding shares as of June 30, 2022. In addition to our financial outlook, our stockholders conversed with us about our executive compensation, sustainability, corporate governance practices, inclusion and diversity, as well as other topics of import to them. We will continue this valuable dialogue with our investors in the coming year, and are committed to maintaining outreach that is truly a dialogue with our stockholders.

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	Palo Alto Networks, Inc.
Notice of 2022 Annual Meeting of Stockholders

DATE AND TIME		VIRTUAL MEETING SITE		WHO CAN VOTE
Tuesday, December 13, 2022 12:15 PM Pacific Time		www.virtualshareholdermeeting.com/ PANW2022		Stockholders of record as of October 14, 2022 are entitled to vote

Voting Items

Proposals			Board Vote Recommendation	For Further Details
1.	To elect two Class II directors named in the accompanying proxy statement to serve until our 2025 annual meeting of stockholders and until their successors are duly elected and qualified.		“FOR” each director nominee	Page 40
2.	To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending July 31, 2023.		“FOR”	Page 57
3.	To approve, on an advisory basis, the compensation of our named executive officers.		“FOR”	Page 60
4.	To approve an amendment to the 2021 Palo Alto Networks, Inc. Equity Incentive Plan to increase the number of plan shares reserved for issuance.		“FOR”	Page 98

Stockholders will also act on such other business that may properly come before the Annual Meeting or any adjournments or postponements thereof.

YOUR VOTE IS IMPORTANT. Please act as soon as possible to vote your shares, even if you plan to attend the annual meeting online. For instructions to vote your shares and more information, see “About the Annual Meeting” on page 112.

We appreciate your continued support of Palo Alto Networks and look forward to receiving your proxy.

By Order of the Board of Directors,

Bruce Byrd
Executive Vice President, General Counsel and Corporate Secretary
November 3, 2022

HOW TO VOTE

ONLINE	BY PHONE	BY MAIL
Visit www.proxyvote.com. prior to the Annual Meeting, 24 hours a day, seven days a week.	Call the phone number located on the accompanying proxy card or voting instruction form.	Complete, sign, date and return the accompanying proxy card or voting instruction form in the envelope provided.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON DECEMBER 13, 2022: THE NOTICE OF 2022 ANNUAL STOCKHOLDERS’ MEETING AND PROXY STATEMENT AND THE 2022 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.PROXYVOTE.COM.

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1.

Total billings is a key financial metric calculated as total revenue plus change in total deferred revenue, net of total acquired deferred revenue. Appendix A includes a calculation of total billings.

2.

Next-Gen Security ARR is annualized allocated revenue of all active contracts as of the final day of the reporting period for Prisma and Cortex offerings inclusive of the VM-Series and related services, and certain cloud-delivered security services.

3.

Major product release is defined as full or dot release with significant new capability, new or add-on modules, or subscription services, new software or hardware appliance models, significant PAN-OS, acquired capabilities and significant new platform support.

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About Us

Stockholder Engagement

We are proud of our investor engagement program, and committed to maintaining outreach that is truly a dialogue with our stockholders. Our relationship with our stockholders is an important part of our Company’s success. In fiscal 2022, we once again engaged in robust stockholder engagement, with a focus on executive compensation, environmental sustainability, social responsibility, and corporate governance (ESG), and other matters of particular import to our stockholders. Our Lead Independent Director played a central role in developing and implementing our program, and once again actively participated in our stockholder engagement efforts in fiscal 2022.

Our Lead Independent Director and management team regularly update our Board and Board committees on our engagement efforts, providing summaries and analyses of our stockholders’ feedback. The feedback that we received from our stockholders resulted in significant improvement in our compensation and corporate governance practices, as described in detail in this proxy statement, including our adoption of majority voting for uncontested elections of our directors in May 2022.

We believe that our approach to engaging directly and openly with our investors drives increased corporate accountability, improves decision making, and ultimately creates long-term value.

We reached out to stockholders representing 68% of our outstanding shares.	We engaged in discussions with investors representing 60% of our outstanding shares (which is all stockholders that indicated a willingness to engage with us).	Our Lead Independent Director participated in discussions (30 meetings) with investors representing 39% of our outstanding shares.
* Stockholder ownership, to our knowledge, as of June 30, 2022.

Below are the key elements of our stockholder engagement cycle:

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About Us

Executive Compensation

Our Compensation Best Practices

In fiscal 2022, we implemented our redesigned executive compensation programs, meeting the commitments we made to our stockholders in our 2021 proxy statement. Our compensation programs reflect recognized best practices and principles that align the compensation of our named executive officers with the long-term interests of our stockholders, and are supported by market benchmarks.

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About Us

Significant At-Risk Compensation

Our executive compensation program is tied to our financial and operational performance. The graphs below illustrate the predominance of at-risk and performance-based components of our fiscal 2022 compensation program for our Chief Executive Officer and other named executive officers.

CEO	AVERAGE OF OTHER NEOs(2)

(1)	Graph reflects Mr. Arora’s target base salary of $1 million, a significant portion of which he elected to forgo.
(2)	Excludes Mr. Jenkins’ new hire RSUs which were granted to compensate him for a portion of our estimated value of the unvested equity that he forfeited upon joining us.

 

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Our Board at a Glance

 

Our Board consists of a diverse group of highly qualified leaders in their respective fields who bring unique perspectives to the Board. All directors have either held senior leadership positions at large companies or otherwise gained significant and wide-ranging management experience in their respective fields (including strategic, financial, public company financial reporting, compliance, risk management, and leadership development). Many of our directors also have public company experience (serving as chief executive officer, chief operating officer, or chief financial officer, or on boards of directors and board committees), and as a result have a deep understanding of corporate governance practices, including risk and management oversight.

 

 

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Our Board at a Glance

 

 

 

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Our Corporate Governance at a Glance

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ESG at Palo Alto Networks 

An Overview of Our ESG Strategies 

Our values of execution, disruption, collaboration, inclusion and integrity are the foundation of everything we do—which extend into our approach to environmental, social and corporate governance (“ESG”) practices. From our climate commitments, our people strategy based on FLEXWORK, and our supplier responsibility initiatives, to our social impact programs and our dedication to integrity, ethics, security and privacy, we believe we are executing meaningful outcomes that reinforce our intention to respect our planet, uplift our communities and advance our industry. The content that follows summarizes the actions we have taken, the impact we believe we have had and our ongoing journey to demonstrate leadership in ESG.

 

ESG Oversight and Governance

 

ESG at Palo Alto Networks is overseen and governed at the highest levels and includes Board and committee oversight, executive-level leadership, and subject-matter experts who lead our ESG efforts across our business.

 

Board Oversight. The Board and its applicable committees provide guidance and oversight to management with respect to ESG matters. During fiscal 2022, we reconstituted our Nominating and Corporate Governance Committee as the ESG and Nominating Committee to enhance the Board’s oversight of ESG matters and reinforce the important role that ESG practices play in our business. The ESG and Nominating Committee is responsible for setting our ESG priorities and monitoring our performance. Our Compensation and People Committee, Audit Committee and Security Committee also serve an important role in ESG oversight. Our Lead Independent Director and management team share feedback received from our stockholders with the Board. 

 

 

 

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ESG at Palo Alto Networks

 

Management Leadership. A cross-functional, executive-level ESG leadership team sets our overall ESG strategy, objectives and initiatives, provides guidance on program implementation, and oversees the continuing enhancement of our approach to ESG. This committee which is led by our Chief Executive Officer and includes our General Counsel, Chief People Officer and Chief Financial Officer, receives analysis and presentations regarding current and emerging ESG-related risk topics and the status of our ESG programs.

 

Our executive-level ESG leadership team also empowers our ESG steering committee to implement our ESG programs and to pursue activities to achieve our objective and goals. The ESG steering committee is a cross functional team of employees, consisting of representatives from our accounting, internal audit, corporate responsibility, legal, investor relations and operations teams, and oversees the work of our subject matter experts in the implementation of our ESG programs.

 

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ESG at Palo Alto Networks

 

Environmental

Climate change is a global crisis and we are committed to doing our part to reduce our environmental impacts. Aligned to the Climate Commitments we declared in early 2021, in fiscal 2022 we evolved our comprehensive Sustainability Strategy focused on three pillars: operational excellence (Sustainable Operations), a Sustainable Value Chain, and a Sustainable Ecosystem. In fiscal 2022, we engaged with external consultancies, conducted a comprehensive analysis of our global environmental footprint, and obtained third party assurance of our analysis and related emissions data, across all three pillars.

SUSTAINABLE OPERATIONS   Accelerate carbon and waste free growth across our FLEXWORK footprint through energy efficiency, decarbonization, renewable energy and science-based targets.

 

SUSTAINABLE VALUE CHAIN   Collaborate and partner with stakeholders throughout our value chain to drive to zero carbon, zero waste, 100% renewable energy and 100% circular cybersecurity products.

 

SUSTAINABLE ECOSYSTEM   Drive leading public commitments, policy advocacy and partnerships to elevate our thought leadership position in sustainable cybersecurity.

 

Raising Our Ambition

We raised the ambition of our Climate Commitments through developing and setting Science-Based Targets (“SBTs”) aligned to a climate scenario of 1.5° celsius. They are:

 

•	Scope 1 and 2: Sustainable Operations

Palo Alto Networks commits to reduce Scope 1 and 2 GHG emissions by 35% by the end of fiscal 2027, as compared to fiscal 2021.

 

•	Scope 3: Sustainable Supply Chain

Palo Alto Networks commits to get 65% of our suppliers (measured by total spend) to set Science-Based Targets by the end of fiscal 2027.

 

•	Scope 3: Sustainable Customers (Use of Sold Products)

Palo Alto Networks commits to reduce emissions from our customers’ use of our products by 40% by the end of fiscal 2027.

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ESG at Palo Alto Networks

 

Our SBTs were submitted to the Science-Based Targets Initiative for verification, which we expect to obtain in 2023.

 

In fiscal 2022, in line with the most reputable non-governmental organizations (“NGOs”), we refined and elevated our Carbon Neutral goal to be defined as “Net Zero” targets:

 

•	We intend to achieve Net Zero across our Scope 1 and 2 emissions by fiscal 2030, by reducing emissions by 90%, as compared to fiscal 2021, and mitigating any remaining emissions through carbon removal investments.

•	We intend to achieve Net Zero across all Scope 1, 2 and 3 emissions by fiscal 2040, aligned with The Climate Pledge, by reducing emissions by 90%, as compared to fiscal 2021, and mitigating any remaining emissions through carbon removal investments.

Through our climate ambition across our operations, value chain and ecosystem, we are confident that we can achieve these goals by the dates above.

Sustainable Operations

Early in fiscal 2022, we elevated our operational goals by committing to purchasing 100% true renewable energy, expanding operational excellence through deep energy efficiency, and driving decarbonization throughout our real estate footprint.

We continued to execute our sustainable approach to real estate and opened new LEED certified offices in multiple cities, including London and Bangalore, and expanded our LEED footprint through certifications in Tel Aviv, Bangalore and San Francisco. We launched multiple sustainability work groups to evaluate and act on implementing green packaging, waste reduction and resource conservation. To address the digital divide, promote reuse and reduce our e-waste, we engaged in an external partnership to efficiently donate obsolete equipment, accessories and furnishings for social benefit. 

Sustainable Value Chain

Through our carbon footprint assessment, we gained a complete understanding of where our greatest impacts - and best opportunities - are, and we set 1.5° Celsius aligned Science-Based Targets to effectively address them. We set critical Scope 1 and 2 SBTs, but we know that our greatest impact is in our Scope 3 emissions. Because of this, we have set what we believe are ambitious SBTs to drive a Sustainable Value Chain across our purchased goods and services and the use by our customers of the products we sell to them.

Achieved a Supplier Engagement Rating of A- from CDP (2021)

Throughout fiscal 2022, we began the journey to engage stakeholders throughout our value chain, from suppliers to customers, to drive to zero carbon, zero waste, 100% renewable energy and 100% circularity in our cybersecurity products.

Sustainable Ecosystem
Recognizing that addressing climate change will require collaboration on systemic issues, we increased and expanded our engagements with environmental coalitions. By joining The Climate Pledge, formally committing to emissions reductions through the Science-Based Target initiative, our ongoing participation in the World Economic Forum’s Alliance of CEO Climate Leaders and other partnerships, we continued to demonstrate our eagerness to engage with others on this critical issue.	Achieved an Environmental QualityScore of 1 by Institutional Shareholder Services (2022) Highest score available, corresponding to the top decile

We believe thoughtful and ardent policy advocacy is one of the most effective tools for addressing climate change. In fiscal 2022, we signed on to a letter from Ceres supporting the Securities and Exchange Commission’s proposed rule mandating climate disclosure. We also engaged directly with several policy makers to reinforce the importance of climate action and its intersectionality with cybersecurity.

We remained committed to transparency by submitting our 2022 CDP Climate and Supply Chain disclosures for the third year in a row.

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ESG at Palo Alto Networks

 

Social

During fiscal 2022, we continued to execute our People strategy and philosophy of FLEXWORK, engaged with our supply chain to reinforce our Code of Conduct expectations and invested in our Communities.

Our People

We believe our ongoing success depends on our employees. Development and investment in our people is, and will always be, central to who we are. Our People Strategy, built upon our philosophy of FLEXWORK, is a comprehensive approach to source, hire, onboard, integrate, develop, engage and reward employees. Caring for our global workforce of over 12,500, and inspiring them to do the best work of their careers is a critical element of our overall Company strategy and a demonstration of our values in action. 

FLEXWORK

Throughout the COVID-19 pandemic, while prioritizing the health and safety of our employees, we have learned how to collaborate in a distributed hybrid work reality and to create opportunities for employees to maintain a sense of belonging and focus on well-being. Moving into the future, we aim to continue to disrupt the nature of work. Our philosophy is simple: place our employees at the center of their working life by providing them with flexibility, personalization, and choice regarding how they work, the benefits they choose, the way they consume learning and, where possible, when and where they work. We truly believe that the more our employees have choice and demonstrate mutual trust and respect, the more engaged they will be. We believe that FLEXWORK is a significant factor in positioning Palo Alto Networks as the cybersecurity workplace of choice.

Recognized by Newsweek among 100 of America’s “Most Loved Workplaces”

FLEXWORK adds even more opportunity to scale our efforts to improve inclusion and diversity. It further enables us to recognize each individual as unique, with their own priorities and needs, and gives the employee greater agency to personalize their decisions and utilize our programs and initiatives to meet those interests and desires.

Source & Hire

Sourcing and hiring diverse talent and enabling them to create and execute is central to our comprehensive approach to talent acquisition, which we refer to as “The Way We Hire.” Our talent acquisition team utilizes a number of methods to find subject experts in their respective fields, including the use of a variety of channels that focus on reaching underrepresented talents. Our university relations team partners with hundreds of academic institutions, including colleges and universities that focus on serving diverse populations, to provide career pathways for early-in-career candidates. Current employees also provide qualified candidates through our Employee Referral Program. During fiscal 2022, we “welcomed home” numerous employees who voluntarily left Palo Alto Networks and found they wanted to return. Through our Internal Mobility program, numerous hires during fiscal 2022 were internal, and many of those internal hires resulted in promotions for those individuals. We equip hiring managers with training so that they are made aware of potential unconscious biases and interview for the values and competencies that we believe enhance our culture. We require diverse interview panels to deliver a quality interview experience to a diverse slate of candidates.

Onboard & Integrate

We believe that a positive onboarding experience results in employees thriving and therefore rapid productivity. During the COVID-19 pandemic, we built and utilized virtual learning platforms and employee communication channels to provide new employees with inspirational, often personalized, onboarding experiences. For every employee, onboarding is a journey of integration that extends through the first year at Palo Alto Networks. In addition, we have built specialist learning tracks for interns and new graduates that have been recognized as best in class externally. As part of our merger and acquisition strategy, we have also established a robust integration program with the goal to enable individuals joining our teams to feel part of our culture at speed.

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ESG at Palo Alto Networks 

Develop & Motivate

Because we value disruption and innovation, we created FLEXLearn—a unique approach to personalized employee development. FLEXLearn is a learning experience platform that provides employees with a path based on their needs, interests, style, and career journey. Through FLEXLearn employees have full agency to direct their growth at their pace and choosing. Development information about core business elements, professional skill sets, working in a distributed hybrid environment, as well as required compliance training, such as Code of Conduct, privacy and security, anti-discrimination, anti-harassment, and anti-bribery training, is also deployed through the FLEXLearn platform for all employees. In addition, FLEXLearn provides employees with events and activities that motivate and spark critical thinking, on topics ranging from inclusion, to well-being and collaboration. On average, employees had completed 16 hours of development through the FLEXLearn platform during fiscal 2022.

Recognized among the “Top Workplaces for the Next Generation of Talent” as evaluated by Ripplematch (2021)

Because we know that business leaders have unique learning and development needs and interests, we also created FLEXLead. Focused on providing tools and resources to those who manage teams and drive business functions, FLEXLead aims to increase the awareness of inclusion and diversity, coaching and mentorship, and the capacity for leaders to align employee priorities with our strategic business priorities.

Engage & Reward

We conduct regular executive listening sessions and “pulse surveys” to better understand employee engagement, sentiment, well-being, and the agility to transition to a distributed work model. These sessions and surveys, including employee feedback to external surveys and crowdsourcing platforms, have informed our holistic People Strategy and influenced our FLEXWORK philosophy, inclusion and diversity strategies, and Internal Mobility program. For example, our FLEXCircle program is the result of employee input, requesting new opportunities to meet and interact with employees who share common interests. And our FLEXAssist program was developed based on suggestions from employees looking for tools that help them identify key employee milestones and facilitate increased communication and collaboration.

Employee sentiment has continued to be highly positive, and we are proud of the external recognition we have received about our culture. We continue to use insights from an anonymous global employee engagement survey we conducted in fiscal 2021 to execute action plans that reinforce our culture of engagement. The survey indicated that employees have a strong sense of belonging, confidence in leadership, and an understanding of how their work contributes to the Company’s goals. Equally important, our internal pulse surveys and other feedback mechanisms, including insights from external employee sentiment sources and employer brand recognition, indicate that employees continue to view Palo Alto Networks as a great place to work, with strong benefits, a commitment to inclusion and diversity and respected leadership.

Our comprehensive compensation program includes competitive base pay. In addition, all employees participate in one of two variable pay programs our sales incentive plans or our variable incentive program. All employees are also eligible to participate in our stock-based offerings through a generous Employee Stock Purchase Plan and a competitive Equity Incentive Plan, both of which are available to all of our employees where regulations permit. We conduct annual external audits of our pay practices. Our fairness and equity analysis includes gender for all global employees and race and ethnicity for employees in the U.S. As a result of these measures and corrections, we believe that our employees are paid fairly and equitably regardless of race/ethnicity (in the U.S.) or gender (globally).

Recognized by Comparably in 7 “Best of ” categories including “Best Compensation” (#9)(2022)

 

As a global employer with a diverse employee population, we understand everyone’s benefit needs are different. Our benefit plans include a variety of health, time-off, wellness and voluntary options. And, our FLEXBenefits program provides all employees with a funding allowance from which they can choose to obtain additional benefits.

Recognized by Comparably in 7 “Best of ” categories including “Perks & Benefits” (#75)(2022)

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ESG at Palo Alto Networks

We believe in an always-on feedback and rewards philosophy. From recurring 1:1 sessions and multiple feedback channels to use of our Cheers for Peers peer recognition program, employees get regular input about the value they bring to the organization. And while always-on practices are useful in providing real-time feedback, we also execute a Company-wide semi-annual performance review process so that leaders and employees have recurring constructive conversations aimed at elevating performance, increasing capability and executing with excellence.

Inclusion & Diversity

We are intentional about including diverse points of view, perspectives, experiences, backgrounds and ideas in our decision-making processes. We deeply believe that true diversity exists when we have representation of all ethnicities, genders, orientations and identities, and cultures in our workforce. Our inclusion and diversity (“I&D”) programs continue to advance those visions.

The diversity of our Board, with women representing 33% of the Board is an example of that vision in action. We have nine employee network groups (“ENGs”) which are employee-led groups that play a vital role in building understanding and awareness. Our ENGs are provided with a budget to fund activities for their communities and to make charitable grants to organizations advancing their causes. We involve our ENGs in listening sessions with executive teams and we work in partnership to develop our annual I&D plans, because we believe employee involvement is critical.

As referenced above, our I&D philosophy is fully embedded in our talent acquisition, learning and development and rewards and recognition programs. We believe that outcomes such as increases in gender and ethnic diversity, no differential in attrition based on gender or ethnicity, equity in performance evaluation and internal mobility are indicators that our efforts are making the desired progress. Further, the awards and recognition the Company has received during fiscal 2022, most of which are the direct result of employee input, reinforce our growth in this crucial topic.

Recognized by Comparably in 7 “Best of ” categories including “Best CEOs for Diversity ” (#15)(2022)	Achieved a perfect score of 100% on the Human Rights Campaign Corporate Equality Index (2022, 2021 & 2020)	Achieved a perfect score of 100% on the Disability Equality Index as evaluated by Disability:IN (2022)	Achieved “Gold” status as a Military Friendly Employer as evaluated by Military Friendly (2022)

Our Supply Chain

Through the deployment of our Global Supplier Code of Conduct, we continued to reach across our supply chain to communicate our expectations regarding labor standards, business practices and workplace health and safety conditions. During fiscal 2022, we maintained our affiliate membership in the Responsible Business Alliance and maintained our commitment to Supplier Diversity.

Our codes of conduct are useful in documenting our expectations that materials suppliers honor our commitment to human rights. That said, beyond communicating our expectations, we follow industry best practices when assessing risks for incidents of human rights violations within our supply chain. We take a risk-based and business impact approach and leverage the risk assessment resources of the Responsible Business Alliance to help identify suppliers who may be at high risk for child, forced or compulsory labor issues. If we believe additional research into a suppliers’ ethical practices is necessary, we take action to do so.

We focus our risk assessments on suppliers where we have large annual spend, where Palo Alto Networks is a significant portion of their annual revenue, where the supplier’s technology impacts our business, and where we have an overall strategic partnership with a supplier. Understanding risks related to human rights, among others, that these suppliers may pose is critical, from both a socially conscious and business impact perspective.

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ESG at Palo Alto Networks 

In addition, suppliers who may provide commodities or be within industries historically known to have high risks for labor incidents are subject to additional vetting processes. Lastly, suppliers who may be located in countries or regions where labor conditions have historically not been prioritized within those countries or regions are also considered high risk and managed appropriately. 

We believe our strength as a company comes from building an inclusive environment and collaborating with individuals who bring diverse experiences. This extends to our global supply chain and our commitment to increase our awareness of and engagement with women- and minority-owned businesses. A cross-functional working group continues to explore best practices and is working with partners such as Western Regional Minority Supplier Development Council, to support our work to enhance our procurement policies and establish metrics to measure our progress in growing the diversity of our supply chain.  

Our Communities

We value our role as a good corporate citizen and in fiscal 2022 continued to execute our social impact programs. In addition to ongoing efforts to help colleagues and communities impacted by the COVID-19 pandemic, we invested in cybersecurity awareness, education programs, scholarships, diversity and basic needs. Our employees continue to actively support the communities in which we live and work.

Recognized by Just Capital among Top 100 Companies Supporting Families and Communities (2022 & 2021)

Investing in Education and Key Cause Areas

We expanded our work to provide cybersecurity activities and curriculum to schools, universities and nonprofit organizations to help youth protect their digital way of life and to prepare diverse adults for careers in cybersecurity. Through our ongoing partnership with Girl Scouts of the USA hundreds of thousands of cybersecurity badges have been earned, including troops in Singapore through USA Girl Scouts Overseas. Moreover, our Cyber A.C.E.S. program continues to grow—not only reaching youth in the U.S. and Canada but now being used in Australia, Japan, Scotland, Singapore, and elsewhere. Our Cybersecurity Academy is now providing curriculum to thousands of high schools, colleges and universities in hundreds of countries around the world. In addition, by partnering with the IIT (BHU) Foundation and the Thurgood Marshall College Fund, we are funding scholarships to help make higher education more accessible to those in need.

Because inclusion and diversity is important to Palo Alto Networks, we allocate charitable funding to our ENGs to enable them to support non-profit organizations committed to reaching the needs of underrepresented communities. In fiscal 2022, we supported dozens of organizations to help them achieve their respective missions.

In addition to making charitable grants to support causes like mental health and wellness, hunger and basic needs, we invested in expanding the talent pipeline to underrepresented communities. We also supported environmental and social justice causes. Lastly, to address the digital divide, promote reuse, and reduce our e-waste we engaged in an external partnership to efficiently donate obsolete equipment, accessories and furnishings for social benefit.

Engaging Employees to Increase Impact 

Employees continued to participate in our giving, matching and volunteer programs to make impacts in their local communities. 

Aligned with our FLEXWORK philosophy, we continued to offer virtual volunteer projects so that employees had choice in how they support their communities, while at the same time supporting in-person volunteer activities. Employees volunteered as individuals and often in groups to make a meaningful difference. While employees always have choice in the causes they support, on occasion we also highlight causes through “drives” such as our Annual Hunger Campaign as well as relief for natural disasters and humanitarian efforts. Between our “Dollar-for-Doers” volunteer and matching gift programs, thousands of causes received funding. 

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ESG at Palo Alto Networks

 

Corporate Behavior 

Ethics & Compliance

Palo Alto Networks is committed to conducting business with high degrees of honesty and integrity wherever we operate. Integrity is one of our core values and we respect our customers, partners, employees and stockholders. 

Our Code of Business Conduct and Ethics summarizes the ethical standards and key policies that guide the business conduct of the directors, officers and employees of the Company, and we have a public Global Supplier Code of Conduct, both available on our corporate website. All employees, contractors and suppliers are informed about our governance expectations through our Codes of Conduct and compliance training programs. 

We also have a policy focused on respect in the workplace and a corresponding training through our FLEXLearn platform. All new hires must complete the training and existing global employees are required to complete the training every other year. The training includes anti-discrimination, antiharassment and anti-retaliation lessons and hypotheticals. Our Audit Committee and ESG and Nominating Committee of the Board are responsible for oversight of our Code of Business Conduct and Ethics compliance program. Our Ethics Hotline is also publicly available.

Information Security & Privacy

Palo Alto Networks maintains a written information security program that is managed by our Chief Information Security Officer, who is responsible for overseeing and implementing the program; includes administrative, technical and physical safeguards reasonably designed to protect the confidentiality, integrity, and availability of end user data; and is appropriate to the nature, size and complexity of Palo Alto Networks’ business operations. The Security Committee of our Board of Directors reviews data privacy and cybersecurity strategies and risks and provides oversight over risk mitigation related to cyber threats. Eight of our 12 Board Directors have cybersecurity and IT technology expertise. We provide annual information security and compliance training to all of our employees.

We engage external agencies to conduct background checks for personnel. We also maintain a security process to conduct appropriate due diligence prior to engaging contractors; assess the security capabilities of subcontractors on a periodic basis; and require subcontractors to adhere to our key information security policies and standards. We also restrict access to, control and monitor physical areas where we process end user data. Data centers that we operate are in alignment with industry standards such as ISO 27001 and SSAE 16 or ISAE 3402.

We deploy firewall technology and an intrusion detection system to generate, monitor and respond to alerts which could indicate potential compromise of our network. We also apply security by design principles throughout the software development lifecycle, track vulnerabilities of open-source software, and run internal and external network scans at least quarterly and after any material change in the network configuration. We conduct application security assessments using a qualified third party, such as our annual assessment for internet-facing applications that collect, transmit or display end user data.

Palo Alto Networks also develops, implements and maintains a business continuity management program to address the needs of the business and the products we provide to customers. To that end, we complete a minimum level of business impact analysis, crisis management, business continuity and disaster recovery planning.

Privacy is important to our customers and helps us build trust. Our privacy practices are informed by several key principles including: 

•	Accountability. We are responsible for the protection of personal information entrusted to us.

•	Transparency and Control. We inform customers about our collection of their personal information and honor their preferences.

•	Third Parties Processing Our Information. We choose trustworthy vendors and suppliers to process personal information and we require them to commit to adequate privacy and data security standards.

•	Privacy by Design. We continue to build on this principle when designing and implementing products.

 

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25

ESG at Palo Alto Networks

 

•	Data Integrity and Proportionality. We collect personal information for specific and legitimate business purposes and store it safely and accurately.

•	Customer Benefit/Value for Customers. We share with our customers the benefits and value we derive from processing their personal information.

•	Security. We implement technical, organizational and physical security measures to confirm an appropriate level of security of the personal information we process. This includes employee training.

Our ESG Journey 

Palo Alto Networks has always been a values-based company, and the core principles of ESG have been part of our day-to-day operations. Still, the Company has made a dedicated focus to continuously improve and further integrate ESG into the business. From elevated environmental initiatives, such as setting emissions reduction goals aligned to Science-Based Targets and constantly evolving social strategies like FLEXWORK to increased transparency in our governance and disclosures, including our fiscal 2021 ESG Supplement released in October 2021, we have made strides to advance our ESG journey. 

We have made improvements and yet we recognize that we have more work to do, particularly as stakeholders become more and more interested in our efforts and as regulatory matters and ESG frameworks evolve. During fiscal 2022, our overall ESG performance improved across all of the rating institutions we measure against. We monitor these ratings so that we remain diligent in our practices and execute a path to achieve our place as industry leaders in ESG.

 

Recognized by Sustainalytics as “Industry Top Rated” for our overall ES performance (2022, 2021)	Recognized by Institutional Shareholder Services (ISS) as Prime (2022)	Achieved “Gold” rating by EcoVadis (2021)	Recognized by JUST Capital as a “Top 100 Most JUST Company in America” (2022)

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Corporate Governance

Board of Directors Corporate

Governance Highlights

Our Board is governed by our Corporate Governance Guidelines, which are amended from time to time to incorporate certain current best practices in corporate governance. Our Corporate Governance Guidelines may be found on our website at https://investors.paloaltonetworks.com.

In addition to a strong, independent Board, we are committed to corporate governance structures that promote long-term stockholder value creation through a sound leadership structure and by providing our stockholders with both the opportunity to provide direct feedback, and substantive rights and policies to ensure accountability.

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Corporate Governance

Board Responsiveness to Investors in FY2022

Our Board is committed to actively engaging with our stockholders, and committed to maintaining outreach that is truly a dialogue with our stockholders. Through year-round engagement and outreach, we regularly provide stockholders with opportunities to deliver feedback on our corporate governance, executive and director compensation, and environmental and sustainability practices. We regularly meet with investors, prospective investors, and investment analysts. These meetings can include participation by our Chair and Chief Executive Officer, Chief Financial Officer, Chief Products Officer, General Counsel and Corporate Secretary or other business leaders, and are often focused on company strategy, financial performance, product strategy and ESG philosophy. Members of our Investor Relations team also participate in meetings with our stockholders and, on occasion, members of the Board participate as appropriate. In fiscal 2022, our Lead Independent Director participated in 30 meetings with our stockholders.

Following our 2021 annual meeting of stockholders, we reinvigorated our approach and practices to stockholder engagement and implemented a strategy that focused on extensive engagement on a wide range of topics. Our Lead Independent Director played an active and central role in our stockholder engagement efforts in fiscal 2022, and our management team regularly communicated topics discussed and stockholder feedback to the Board and our Board committees for consideration in their decision-making.

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Corporate Governance

WHAT WE HEARD	HOW WE RESPONDED
Board Governance Plurality voting for directors, dual role of CEO and Chairman and annual election of all Board members	•Adopted a majority voting requirement for uncontested elections of directors, including a resignation policy in the event a director does not receive a majority of the vote. •Committed to maintaining our practice of annually reviewing our Board leadership structure, including whether an independent director should be the Chair of our Board. •Committed to maintaining our practice of annually reviewing whether maintaining a classified Board is appropriate for our Company.
Board Oversight of Risks, Including Cybersecurity and ESG Risks How the Board is addressing oversight of increased, varied and new risks.	•Formed the Security Committee of our Board to enhance oversight over security issues facing our Company, including cybersecurity. •Reconstituted our Nominating and Corporate Governance Committee as the ESG and Nominating Committee to enhance the Board’s oversight of ESG matters. •Reallocated ESG responsibilities among our Board Committees, clearly identifying the responsibilities of each Committee. •Added additional disclosure in this proxy statement relating to Board oversight.
Board Diversity and Refreshment The duration of Board service by certain long-standing directors, and the makeup of the Board and the rationale therefore.	•The Board appointed Ms. Bawa and Dr. Gayle to our Board during fiscal 2021, increasing the gender, racial and ethnic diversity of the Board. Presently, four of our twelve directors are women. •During the period between April 2019 and May 2021, we appointed four new independent directors: Ms. Bawa, Dr. Gayle, Ms. Twohill and Rt Hon Sir John Key. •Expanded disclosure in this proxy statement of the rationales as to why each of our directors continue to serve on our Board.
Stockholder Engagement Continued 1:1 investor outreach on compensation, ESG and other matters of interest to our stockholders.	•Conducted extensive stockholder and investor outreach. •Engaged in discussion with stockholders holding 60% of our outstanding shares. •Our Lead Independent Director participated in 30 investor meetings and engaged in discussion with stockholders holding 39% of our outstanding shares.

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Corporate Governance

WHAT WE HEARD	HOW WE RESPONDED
ESG Initiatives, Disclosure and Governance Would like to see more information about how we develop and manage environmental, social and governance initiatives.	• Published our first ESG report in fiscal 2022, in which we report on our carbon emissions. • Added more disclosure in our annual report on Form 10-K and this proxy statement describing our ESG initiatives and our ESG governance. • Adopted a set of Climate Commitments that include our strategies to be carbon neutral by 2030, use 100% renewable energy, reduce emissions aligned to Science-Based Targets and advocate for climate action. • Increased our social impact programs, to leverage our core competency in cybersecurity and align those efforts to help develop a diverse talent pipeline while uplifting communities. • Formed the Palo Alto Networks Cybersecurity Education Fund with a mission to fund education programs focused on cybersecurity that inspire youth. • Reconstituted our Nominating and Corporate Governance Committee as the ESG and Nominating Committee to enhance our focus on ESG matters. • Formalized our ESG governance structure by forming an ESG Steering Committee, with employees from accounting, internal audit, operations, legal and corporate responsibility to recommend strategies and lead implementation of ESG programs, which reports regularly to our ESG Executive Leadership Team and the Board.
Executive Compensation Modifications to the structure of our executive compensation program and enhanced disclosure.	• 100% of our NEOs’ equity compensation (aside from new hire awards) is performance-based, with different performance targets than the cash incentive plan awards. • Increased our stock ownership guidelines for our NEOs, including our Chief Executive Officer. • Added an ESG modifier to our cash incentive plan. • Established a one-year post-vesting holding period for all NEOs, including our Chief Executive Officer.

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Corporate Governance

Leadership Structure

Our Corporate Governance Guidelines provide that our Board is free to choose its chairperson (the “Chair”) based on our Board’s view of what is in the best interest of the Company and our stockholders. The Chair and the Chief Executive Officer may, but need not be, the same person.

Annual Evaluation of Leadership Structure and Annual Election of Lead Independent Director

As part of its annual review and evaluation process, the Board reviews its leadership structure and whether combining or separating the roles of Chair and Chief Executive Officer is in the best interests of the Company and our stockholders. The Board also considers:

•	The effectiveness of the policies, practices, and people in place at the Company to help ensure strong, independent Board oversight.
•	The importance of consistent, unified leadership to execute and oversee the Company’s strategy.
•	The strength of Mr. Arora’s vision for the Company and the quality of his leadership.
•	Our performance and the effect the leadership structure could have on our performance.
•	The Board’s performance and the effect the leadership structure could have on the Board’s performance.
•	The meaningful and robust responsibilities and the performance of our Lead Independent Director.
•	The views of our stockholders through our ongoing engagement efforts.
•	The practices at other companies and trends in governance.
•	The current state of our Company.

In the circumstance that the Board determines that it remains in the best interests of the Company and its stockholders that our Chief Executive Officer serve as our Chair, the independent members of the Board then elect a Lead Independent Director as provided in our Corporate Governance Guidelines.

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Corporate Governance

Why Our Leaders Are Ideally Suited For Their Roles

The Board believes that the independent Board members should have the flexibility to respond to changing circumstances and choose the Board leadership structure that best fits the then-current situation. As it does annually, in August 2022, the Board reviewed our leadership structure. Following that review, the Board determined that the combination of the Chairman and Chief Executive Officer roles, along with the robust authority given to our experienced Lead Independent Director, effectively maintains independent oversight of management. The Board consists of nine independent directors, and exercises a strong, independent oversight function through frequent executive sessions, independent Board committees and by having a strong Lead Independent Director with clearly delineated and comprehensive duties. 

The Board strongly believes that its leadership structure strikes the right balance of allowing our Chair and Chief Executive Officer to promote a clear, unified vision of the Company’s strategies, while ensuring robust, independent oversight by the Board and our Lead Independent Director. The Board also believes there is value in presenting a single face to our customers through combining the Chair and Chief Executive Officer roles, and that this structure of having the Board and management operate under the unified leadership of a highly experienced Chief Executive Officer best positions the Company to successfully implement its next phase of growth. 

Accordingly, in August 2022, the Board determined that it is in the best interests of our stockholders for Mr. Arora to serve as Chair and John Donovan to serve as Lead Independent Director. 

 

	Nikesh Arora  Chief Executive Officer and Chairman		John M. Donovan  Lead Independent Director
•   Substantial knowledge and deep understanding of our business and the challenges we face  •   Substantial international business experience and business acumen and valued strategic, financial and operational insights  •   Day-to-day insight into our prospects, opportunities, strategies and challenges facilitates the timely deliberation by the Board of the most important matters  •   Brings a unique, stockholder-focused insight to assist the Company to most effectively execute its strategy and business plans to maximize stockholder value  •   Serves as an important bridge between the Board and management, and provides critical leadership for carrying out our strategic initiatives and confronting our challenges  •   Provides the Board with more complete and timely information about the Company  •   Provides a unified structure and consistent leadership direction internally and externally  •   Proven success in leading Palo Alto Networks since joining the Company		•   Independence, confidence and gravitas, enabling strong oversight of executive leadership  •   Deep understanding of our business  •   Strong working relationship with our Chair and Chief Executive Officer  •   Strong working relationship with other management and our independent directors  •   Substantial experience leading large multinational companies  •   Strong background in corporate governance  •   Dedicated to his service as Lead Independent Director, as demonstrated by the fact that he met with stockholders holding 39% of our outstanding shares during fiscal 2022  •   Strength and effectiveness of communication with Mr. Arora, resulting in active and visible oversight of the issues, plans and prospects of Palo Alto Networks  •   Promotes a collaborative and collegial environment for Board decision making

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Corporate Governance

In addition to the responsibilities outlined above, our Lead Independent Director also:

•	Has biennial one-on-one discussions with each independent director, as part of the Board’s annual evaluation process.
•	Has access to all committee materials.
•	Has the authority to engage independent consultants.
•	Interviews Board candidates.
•	Spends time with senior management outside of Board meetings (as necessary) to ensure a deep understanding of the business and strategy of the Company.
•	Participates in stockholder engagement planning and activities.

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Corporate Governance

Independent Directors Sessions

A meeting of the independent directors is scheduled at every regular Board meeting and the independent directors meet in an executive session. These independent sessions are organized and chaired by our Lead Independent Director, and our Lead Independent Director provides direct feedback to Mr. Arora after these executive sessions.

Independent Committee Leadership

The Audit, Compensation and People, Security, and ESG and Nominating Committees are each composed solely of, and led by, independent directors, and provide independent oversight of management. In addition:

•	Each committee chair meets with management in advance of meetings to review and refine agendas, add topics of interest, and review and comment on materials to be delivered to the committee.
•	Every independent director has access to all committee materials.
•	Each committee chair provides a report summarizing committee meetings to the full Board at each regular meeting of the Board.
•	Each committee meeting includes adequate time for executive session and the committees meet in executive session on a regular basis with no members of management present (unless otherwise requested by the committee).
•	Each committee effectively manages its Board-delegated duties and communicates regularly with the Chair, Lead Independent Director, the Board, and members of management.

 

Furthermore, the Compensation and People Committee has an effective process for monitoring and evaluating Mr. Arora’s compensation and performance, as well as succession planning.

Board’s Role in Strategy Oversight

 

Our Board is responsible for overseeing the development of the Company’s strategy (including product development roadmaps), which articulates objectives for the business, helps establish and maintain effective risk management and internal controls frameworks, and provides direction to senior management to determine which business opportunities to pursue. The Board is also actively engaged in ensuring that Palo Alto Networks culture reflects our commitment to our core values of disruption, execution, collaboration, integrity and inclusion.

 

Annually holds a strategy offsite, receiving detailed presentations from, and engagement with, senior management across the Company		Annually reviews and approves the Palo Alto Networks operating plan		Quarterly engagement with senior management on critical business matters that tie to Palo Alto Network’s overall strategy		Regularly interacts with the next generation of leadership to ensure the talent pipeline remains diverse, inclusive and up to the task

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Corporate Governance

 

Board’s Role in Risk Oversight

 

Risk is inherent with every business, 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 our Company faces, while our Board, as a whole and assisted by its committees, has responsibility for the oversight of risk management. In its risk oversight role, our Board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are appropriate and functioning as designed.

 

Our Board believes that open communication between management and our Board is essential for effective risk management and oversight.

 

While our Board is ultimately responsible for risk oversight, our Board committees assist our Board in fulfilling its oversight responsibilities in certain areas of risk.

 

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35

Corporate Governance 

Annual Board and Committee Self-Evaluations 

Our Board and each of its committees perform an annual self-assessment to evaluate the effectiveness of our Board and its committees in fulfilling their respective obligations. As part of this annual self-assessment, directors are able to provide feedback on the performance of other directors. 

Our Lead Independent Director, who is also the Chair of our ESG and Nominating Committee, leads our Board in its review of the results of the annual self-assessment and takes further action as needed. In connection with the annual evaluation, each director receives a survey to complete to evaluate the Board and separate surveys for each committee on which they serve. These surveys include detailed questions regarding: the effectiveness and performance of the Board and committees; Board and committee composition and refreshment; timing, agenda, and content of Board and committee meetings; Board dynamics and function; peer reviews of other members; access to and performance of management; and executive succession planning. At least biennially our Lead Independent Director also conducts one-on-one meetings with each director to receive their feedback and assessment of the Board and its committees. A summary of the results is presented to the Board and each committee on an anonymous basis.

In addition, all members of our Board have the opportunity to attend director education programs to assist them in remaining current with best practices and developments in corporate governance.

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Corporate Governance

Succession Planning

Our Board and management team recognize the importance of continually developing our talented employee base. Accordingly, our management team conducts an annual talent review of the current senior leadership positions. In addition, our Chief Executive Officer annually reviews a succession plan for the Chief Executive Officer position, using formal criteria to evaluate potential internal and external successors and interim candidates in the event of an emergency situation. In conducting its evaluation, our Board considers organizational needs, competitive challenges, leadership and management potential, and development and emergency situations. As a result of succession planning, BJ Jenkins became our President in August 2021 and Dipak Golechha became Executive Vice President and Chief Financial Officer in March 2021.

 

Director Independence

Our common stock is listed on The Nasdaq Stock Market (“Nasdaq”). Under Nasdaq listing standards, independent directors must comprise a majority of a listed company’s board of directors. In addition, the listing standards of Nasdaq require that, subject to specified exceptions, each member of a listed company’s audit and compensation committees be independent, and that the nomination of all directors be by either a majority of its independent directors or a committee comprised solely of independent directors. Under Nasdaq regulations, a director will only qualify as an “independent director” if, in the opinion of that listed company’s board of directors, that director does not have a relationship with the listed company, either directly or indirectly, that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Audit committee members must also satisfy the additional independence criteria set forth in Rule 10A-3 under the Exchange Act and Nasdaq listing standards. In order to be considered independent for purposes of Rule 10A-3, a member of a listed company’s audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.

Compensation committee members must also satisfy the additional independence criteria set forth in Rule 10C-1 under the Exchange Act and Nasdaq listing standards. In order for a member of a listed company’s compensation committee to be considered independent for purposes of Nasdaq listing standards, the listed company’s board of directors must consider all factors specifically relevant to determining whether a director has a relationship to the listed company that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (1) the source of compensation of such director, including any consulting, advisory, or other compensatory fee paid by the listed company to such director; and (2) whether such director is affiliated with the listed company, a subsidiary of the listed company, or an affiliate of a subsidiary of the listed company.

Our Board has undertaken a review of the independence of each of our directors. Based on information provided by each director concerning his or her background, employment, and affiliations, our Board has determined that each of Mmes. Bawa, McCarthy and Twohill, Dr. Gayle and each of Messrs. Chandna, Donovan, Eschenbach, Goetz, and the Rt Hon Sir John Key do not have a material relationship with our Company, either directly or indirectly, that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC and Nasdaq listing standards. In making these determinations, our Board considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our common stock by each non-employee director and the transactions involving them described in the section titled “Related Person Transactions.” There are no family relationships among any of the Company’s directors or executive officers.

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Corporate Governance

Communications with the Board of Directors

Interested parties wishing to communicate with our Board or with an individual member or members of our Board may do so by writing to the Board or to the particular member or members of our Board, and mailing the correspondence to our General Counsel or our Legal Department, at Palo Alto Networks, Inc., 3000 Tannery Way, Santa Clara, California 95054. Our General Counsel or our Legal Department, in consultation with appropriate members of our Board, as necessary, will review all incoming communications and, if appropriate, all such communications will be forwarded to the appropriate member or members of our Board, or if none is specified, to the Chair.

 

Corporate Governance Guidelines and Code of Business Conduct and Ethics

Our Board has adopted Corporate Governance Guidelines. These guidelines 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 has adopted a Code of Business Conduct and Ethics that applies to all our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer, and other executive and senior financial officers. Our Corporate Governance Guidelines and our Code of Business Conduct and Ethics are posted on the Investor Information portion of our website at investors.paloaltonetworks.com. We will post amendments to our Code of Business Conduct and Ethics or waivers of our Code of Business Conduct and Ethics for directors and executive officers on the same website.

 

Director Stock Ownership Guidelines

Our Board believes that our directors should hold a meaningful financial stake in our Company in order to further align their interests with those of our stockholders and therefore adopted stock ownership guidelines in fiscal 2017. Under the guidelines, each non-employee director must own Company stock with a value of five times the annual retainer for board service within five years of such director’s initial appointment or election date. All of our non-employee directors comply with our stock ownership guidelines.

 

Compensation and People Committee Interlocks and Insider Participation

None of the members of our Compensation and People Committee is, or has 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 board or compensation committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive officers serving on our Board or Compensation and People Committee.

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39

PROPOSAL NO. 1

Election of Directors

Our Board is comprised of 12 members and is divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring. Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our Board may have the effect of delaying or preventing changes in control of the Company.

The following Class II directors have been nominated for election to the Board at the Annual Meeting:

●   Dr. Helene D. Gayle

●   James J. Goetz

Mark McLaughlin and Asheem Chandna will not stand for reelection to the Board of Directors when their terms expire at the conclusion of our 2022 Annual Meeting of Stockholders. The Board recognizes the contributions and character of Mark’s leadership as the company’s chief executive officer from August 2011 until June 2018, and his continued service on our Board of Directors since then, which have been instrumental in driving the company’s growth and nurturing our unique culture. Likewise, without Asheem’s technical expertise, financial acumen and, most notably, keen discernment of emerging technology trends, our transformation into the company we are today would have been less complete and consequential. On behalf of our employees and the entire Board of Directors, we express our deep appreciation to Mark and Asheem for their profound impacts on Palo Alto Networks.

The sections titled “Board Skills and Experience Matrix” and “Directors” on pages 42 and 43 of this proxy statement contain more information about the leadership skills and other experiences that caused the ESG and Nominating Committee and our Board to determine that these nominees should serve as directors of the Company. Immediately after the Annual Meeting, it is anticipated that the Board will be comprised of ten members.

Following the Annual Meeting, we expect that our Board will reduce the number of members of the Board from twelve to ten, and will move a director, who currently serves as a Class I or Class III director, to serve as a Class II in order to distribute the number of directors among the three classes as evenly as possible.

REQUIRED VOTE

40

Proposal No. 1 Election of Directors

If you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet, but do not give instructions with respect to the voting of directors, your shares will be voted “For” the re-election of Dr. Gayle and Mr. Goetz. We expect that each of Dr. Gayle and Mr. Goetz will accept such nomination; however, in the event that a director nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by our Board to fill such vacancy. If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions on the accompanying proxy card or when you vote by telephone or over the Internet. If you are a street name stockholder and you do not give voting instructions to your broker or nominee, your shares will not be voted on this matter.

	Recommendation of the Board
	The Board recommends that you vote “FOR” each of the nominees named above.

Director Tenure and Refreshment

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Proposal No. 1 Election of Directors

Board Skills and Experience Matrix

Our Board has taken a thoughtful approach to board composition to ensure that our directors have backgrounds that collectively add significant value to the strategic decisions made by the Company and that enable them to provide oversight of management to ensure accountability to our stockholders. The Board and the ESG and Nominating Committee believe the skills, qualities, attributes, experience and diversity of backgrounds of our directors provide us with a diverse range of perspectives to effectively address our evolving needs and represent the best interests of our stockholders. 

Arora

Bawa

Chandna

Donovan

Eschenbach

Gayle

Goetz

Key

McCarthy

McLaughlin

Twohill

Zuk

Industry and IT/Technical Expertise Deep insight in the cybersecurity and IT technology industry to oversee our business and the risks we face.

Senior Leadership Experience Experience in senior leadership positions to analyze, advise and oversee management in decision making, operations and policies.

Financial Knowledge and Expertise Knowledge of financial markets, financing and accounting and financial reporting processes.

Diverse Backgrounds and Experiences Diverse backgrounds and experiences provide unique perspectives and enhance decision-making.

Cybersecurity / Information Security / Security Expertise to oversee cybersecurity, privacy, and information security management.

Sales, Marketing and Brand Management Experience Sales, marketing, and brand management experience to provide expertise and guidance to grow sales and enhance our brand.

Global/International Experience Experience and knowledge of global operations, business conditions and culture to advise and oversee our global business.

Risk Management Experience in risk oversight and management.

Emerging Technologies and Business Models Experience Experience identifying and developing emerging technologies and business models to advise, analyze and strategize regarding emerging technologies, business models and potential acquisitions.

Human Capital Management Experience attracting and retaining top talent to advise and oversee our people and compensation policies in our competitive environment.

Public Company Board Experience and Corporate Governance Experience to understand the dynamics and operation of a public company, and corporate governance requirements and compliance.

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Proposal No. 1 Election of Directors

DIRECTORS

Nominee Directors
Dr. Helene D. Gayle INDEPENDENT
Age: 66 Director Since: 2021 Skills and Experience:	Committee Membership: ESG and Nominating Committee, Security Committee Other Current Public Company Boards: Organon, The Coca-Cola Company

BACKGROUND Dr. Helene D. Gayle has served as a member of our Board since May 2021. Dr. Gayle has been President of Spelman College since July 2022. Prior to this position, Dr. Gayle served as President and Chief Executive Officer of The Chicago Community Trust, a community foundation dedicated to improving the Chicago region through strategic grant making, civic engagement and inspiring philanthropy, from 2017 to 2022. Dr. Gayle previously served as Chief Executive Officer of McKinsey Social Initiative, an independent non-profit organization, from 2015 to 2017 and as President and Chief Executive Officer of CARE USA, a leading international humanitarian organization, from 2006 to 2015. From 2001 to 2006, she was an executive in the Global Health program at the Bill & Melinda Gates Foundation. Dr. Gayle began her career in public health at the U.S. Centers for Disease Control in 1984, and held positions of increasing responsibility over her 20-year tenure there, ultimately becoming the director of the National Center for HIV, STD and TB Prevention and achieving the rank of Assistant Surgeon General and Rear Admiral in the United States Public Health Service. Dr. Gayle earned a Bachelor of Arts degree in Psychology from Barnard College of Columbia University, an M.D. from University of Pennsylvania and a Masters in Public Health from Johns Hopkins University. She currently serves as a member of the board of directors of The Coca-Cola Company, a beverage company, and Organon & Co., a pharmaceutical company. Dr. Gayle previously served as a member of the board of directors of Colgate-Palmolive Company, a global consumer products company, from 2010 to 2021.

QUALIFICATIONS AND EXPERIENCE Dr. Gayle was selected to serve on our Board because of her senior leadership and chief executive officer experience and broad international exposure and emerging market experience, as well as her governmental and non-profit expertise, risk management expertise and corporate governance experience as a director of private and public companies.

James J. Goetz INDEPENDENT
Age: 56 Director Since: 2005 Skills and Experience:	Committee Membership: Audit Committee, Security Committee Other Current Public Company Boards: Intel

BACKGROUND James J. Goetz has served as a member of our Board since April 2005. Mr. Goetz has been a managing member of Sequoia Capital Operations, LLC, a venture capital firm, since June 2004, where he focuses on cloud, mobile, and enterprise companies. Mr. Goetz currently serves on the board of directors of Intel Corporation and several privately held companies. Mr. Goetz has previously served on the boards of directors of Barracuda Networks, Inc., a data security and storage company from 2009 to 2017, Nimble Storage, Inc., a data storage company, from 2007 to 2017, Jive Software, Inc., a provider of social business software, from 2007 until 2015, and Ruckus Wireless, Inc., a manufacturer of wireless (Wi-Fi) networking equipment, from 2012 until 2015. Mr. Goetz holds an M.S. in Electrical Engineering with a concentration in Computer Networking from Stanford University and a B.S. in Electrical Engineering with a concentration in Computer Engineering from the University of Cincinnati.

QUALIFICATIONS AND EXPERIENCE Mr. Goetz was selected to serve on our Board because of his senior leadership, technology, information technology (IT), business development and cybersecurity experience, and knowledge of emerging technologies, arising from his experience as a partner of a venture capital firm, where he focuses on cloud mobile, and enterprise technology investments, as well as providing guidance and counsel to a wide variety of internet and technology companies. He also brings his experience as a senior management leader in network, data security and storage, software, and manufacturing companies, through various senior roles and other board experiences. Mr. Goetz also has extensive public company board experience.

 

Industry and IT/Technical

Senior Leadership

Financial

Diverse Backgrounds and Experiences

Cybersecurity

Sales, Marketing and Brand Management

Global/International

Governance, Risk Oversight and Compliance

Emerging Technologies and Business Models

Human Capital Management

Public Company Board Experience

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Proposal No. 1 Election of Directors

Continuing Directors
Nikesh Arora
Age: 54 Director Since: 2018 Skills and Experience:	Committee Membership: None Other Current Public Company Boards: Compagnie Financière Richemont

BACKGROUND Nikesh Arora has served as the Chair of our Board and Chief Executive Officer since June 2018. Prior to joining us, from 2016 through 2018 Mr. Arora was an angel investor and from June 2016 through December 2017, Mr. Arora served as an advisor to SoftBank Group Corp., a multinational conglomerate company (“SoftBank”). From July 2015 through June 2016, Mr. Arora served as president and chief operating officer of SoftBank and from July 2014 through June 2015, Mr. Arora served as vice chair and chief executive officer of SoftBank Internet and Media, a subsidiary of SoftBank. Prior to SoftBank, from December 2004 through July 2014, Mr. Arora held multiple senior leadership operating roles at Google, Inc., including serving as senior vice president and chief business officer, from January 2011 to June 2014. Mr. Arora also serves on the board of Compagnie Financiere Richemont S.A., a public Switzerland-based luxury goods holding company and is an advisor to Zoom Video Communications, Inc., a video communications company. Mr. Arora previously served on the boards of Sprint Corp., a communications services company, from November 2014 to June 2016, Colgate-Palmolive Company, a worldwide consumer products company focused on the production, distribution and provision of household, health care and personal care products, from March 2012 to September 2014, SoftBank from 2014 to 2016, and Yahoo! Japan, an internet company, from 2015 to 2016. Mr. Arora holds an M.S. in Business Administration from Northeastern University, an M.S. in Finance from Boston College, and a B.Tech in electrical engineering from the Institute of Technology at Banaras Hindu University.

QUALIFICATIONS AND EXPERIENCE Mr. Arora was chosen to serve on our Board due to his leadership skills and experience as the chief architect of the Company’s strategic vision, as well as his thorough knowledge of all aspects of our business. Through his extensive career in executive leadership, he brings expertise in leading and scaling technology businesses, risk management oversight, and in-depth knowledge of the cybersecurity and technology sectors.

 

Aparna Bawa INDEPENDENT
Age: 44 Director Since: 2021 Skills and Experience:	Committee Membership: Audit Committee, Security Committee, Corporate Development Committee Other Current Public Company Boards: None

BACKGROUND Aparna Bawa has served as a member of our Board since May 2021. Ms. Bawa has served as the Chief Operating Officer and Interim Chief Legal Officer of Zoom Video Communications, Inc., a video communications company, since May 2020. Ms. Bawa served as Zoom’s Chief Legal Officer from August 2019 to May 2020, its General Counsel from September 2018 to May 2020 and its Secretary from December 2018 to November 2020. Prior to Zoom Video Communications, Ms. Bawa served as Senior Vice President and General Counsel of Magento, Inc., an e-commerce platform company, from June 2017 until its acquisition by Adobe Inc. in June 2018. From November 2012 to May 2017, Ms. Bawa served as Vice President, General Counsel and Secretary of Nimble Storage, Inc., an enterprise flash storage company, which was acquired by Hewlett Packard Enterprise in April 2017. Ms. Bawa holds a B.Sc. in Accounting from Marquette University and a J.D. from Harvard Law School.

QUALIFICATIONS AND EXPERIENCE Ms. Bawa was selected to serve on our Board due to her senior leadership and management experience at public technology companies, risk management oversight expertise, and legal and business operations expertise. She has extensive experience in technology companies.

 

Industry and IT/Technical

Senior Leadership

Financial

Diverse Backgrounds and Experiences

Cybersecurity

Sales, Marketing and Brand Management

Global/International

Governance, Risk Oversight and Compliance

Emerging Technologies and Business Models

Human Capital Management

Public Company Board Experience

44

Proposal No. 1 Election of Directors

John M. Donovan LEAD INDEPENDENT DIRECTOR
Age: 61 Director Since: 2012 Skills and Experience:	Committee Membership: Compensation and People Committee, ESG and Nominating Committee (Chair), Security Committee (Chair), Corporate Development Committee (Chair) Other Current Public Company Boards: Lockheed Martin

BACKGROUND John M. Donovan has served as a member of our Board since September 2012. Since May 2019, Mr. Donovan has served as Chair of The President’s National Security Telecommunications Advisory Committee. Mr. Donovan worked at AT&T Inc., a provider of telecommunication services, since April 2008, first as Chief Technology Officer and subsequently as Chief Executive Officer—AT&T Communications until his resignation, effective October 1, 2019. From November 2006 to April 2008, Mr. Donovan was Executive Vice President of Product, Sales, Marketing and Operations at Verisign. From November 2000 to November 2006, Mr. Donovan served as Chair and CEO of inCode Telecom Group Inc., a provider of strategy and consulting services to the telecommunications industry. Prior to joining inCode, Mr. Donovan was a Partner with Deloitte Consulting where he was the Americas industry practice director for telecommunications. Mr. Donovan serves on the board of directors of Lockheed Martin Corporation, an aerospace, defense and technology company. Mr. Donovan holds a B.S. in Electrical Engineering from the University of Notre Dame and an M.B.A. from the University of Minnesota.

QUALIFICATIONS AND EXPERIENCE Mr. Donovan was selected to serve on our Board because of his technical knowledge and extensive business leadership, management, operations and risk management oversight experience, as a result of serving as the Chief Technology Officer and later the Chief Executive Officer of AT&T Communications. He is skilled in overseeing global information, software development, supply chain, network operations and big data organizations and has expertise in cybersecurity, artificial intelligence and machine learning.

 

 

Carl Eschenbach INDEPENDENT
Age: 55 Director Since: 2013 Skills and Experience:	Committee Membership: Security Committee Other Current Public Company Boards: Zoom, Workday, Snowflake, UiPath, Aurora Innovation

BACKGROUND Carl Eschenbach has served as a member of our Board since May 2013. Mr. Eschenbach has been a general partner at Sequoia Capital Operations, LLC, a venture capital firm, since April 2016. Prior to joining Sequoia Capital Operations, LLC, Mr. Eschenbach served as Chief Operating Officer and President of VMware, Inc., a provider of cloud and virtualization software and services, a role he held from December 2012 to February 2016. Mr. Eschenbach previously served as VMware’s President and Chief Operating Officer from April 2012 to December 2012, as VMware’s Co-President, Customer Operations from January 2011 to April 2012 and as VMware’s Executive Vice President of Worldwide Field Operations from May 2005 to January 2011. Prior to joining VMware in 2002, he was Vice President of North America Sales at Inktomi from 2000 to 2002. Mr. Eschenbach also held various sales management positions with 3Com Corporation, Lucent Technologies Inc. and EMC. Mr. Eschenbach also serves on the board of directors of Zoom Video Communications, Inc., a video communications company, Workday, Inc., an on-demand financial management and human capital management software vendor, UiPath, Inc., a robotic process automation software company, Snowflake Inc., a cloud data platform company, and Aurora Innovation, a self-driving vehicle technology company. Mr. Eschenbach received an electronics technician diploma from DeVry University.

QUALIFICATIONS AND EXPERIENCE Mr. Eschenbach was selected to serve on our Board because of his extensive experience in the technology industry and his previous public company management experience. He brings to our Board over 30 years of operational and sales experience in the technology industry, and has extensive experience in risk management oversight and scaling large organizations, as well as a deep knowledge of high-growth companies. Mr. Eschenbach also has extensive public company board experience.

 

Industry and IT/Technical

Senior Leadership

Financial

Diverse Backgrounds and Experiences

Cybersecurity

Sales, Marketing and Brand Management

Global/International

Governance, Risk Oversight and Compliance

Emerging Technologies and Business Models

Human Capital Management

Public Company Board Experience

 

2022 Proxy Statement

45

Proposal No. 1 Election of Directors

Right Honorable Sir John Key INDEPENDENT
Age: 61 Director Since: 2019 Skills and Experience:	Committee Membership: Audit Committee, Compensation and People Committee (Chair), Security Committee Other Current Public Company Boards: ANZ Bank New Zealand Ltd, Australia & New Zealand Banking Group Ltd

BACKGROUND Right Honorable Sir John Key has served as a member of our Board since April 2019. Sir John was a Member of Parliament for Helensville in New Zealand until April 2017. Sir John served as Prime Minister of New Zealand from November 2008 to December 2016 having commenced his political career as a Member of Parliament for Helensville in July 2002. Prior to his political career, he had a nearly twenty-year career in international finance, primarily for Bankers Trust of New Zealand and Merrill Lynch in Singapore, London and Sydney. Sir John serves as the chair and member of the board of directors of ANZ Bank New Zealand Ltd and is a member of the board of directors of the parent Australia & New Zealand Banking Group Ltd, a public bank that provides various banking and financial products and services and also serves on the board of directors of several privately held companies. He previously served on the board of directors of Air New Zealand Limited, a public airline, from 2017 to 2020. Sir John has a Bachelor of Commerce in Accounting from the University of Canterbury.

QUALIFICATIONS AND EXPERIENCE Sir John was selected to serve on our Board due to his global business leadership and extensive financial, capital markets, and management expertise as former Prime Minister of New Zealand, his extensive background in foreign affairs, and his career in investment banking and finance. He brings extensive experience in policy-making and a global business perspective from his experience and service on other boards, which is especially valuable to us as we grow internationally.

Mary Pat McCarthy INDEPENDENT
Age: 67 Director Since: 2016 Skills and Experience:	Committee Membership: Audit Committee (Chair), Security Committee, Corporate Development Committee Other Current Public Company Boards: Micron Technology

BACKGROUND Mary Pat McCarthy has served as a member of our Board since October 2016. Ms. McCarthy, now retired, served as Vice Chair of KPMG LLP, the U.S. member firm of the global audit, tax and advisory services firm, until 2011 after attaining such position in 1998. She joined KPMG LLP in 1977 and became a partner in 1987. She held numerous senior leadership positions in the firm, including Executive Director of the KPMG Audit Committee Institute from 2008 to 2011, Leader of the KPMG Client Care program from 2007 to 2008, U.S. Leader, Industries and Markets from 2005 to 2006, and Global Leader, Information, Communication and Entertainment Practice from 1998 to 2004. Ms. McCarthy also served on KPMG’s Management and Operations Committees. Ms. McCarthy earned a Bachelor of Science degree in Business Administration from Creighton University and completed the University of Pennsylvania Wharton School’s KPMG International Development Program. Ms. McCarthy serves as a director of Micron Technology, Inc., a producer of semiconductor devices and previously served on the board of directors of Mutual of Omaha, an insurance company, from 2012 to 2018 and Andeavor Corporation (formerly Tesoro Corporation), a global energy corporation from 2012 to 2018.

QUALIFICATIONS AND EXPERIENCE Ms. McCarthy was selected to serve on our Board because of her deep technical expertise in financial and accounting matters from her experience as the Vice Chair of KPMG LLP, advising numerous companies on financial and accounting matters, as well as her leadership experience as a member of management at KPMG. She is an “audit committee financial expert” with over 40 years of experience in finance, operations and risk management oversight of technology companies, particularly publicly traded companies with knowledge of complex global financial and business matters. In addition, she brings a global business perspective and contributes valuable insights and perspectives to our business and operations from her service on other boards.

 

Industry and IT/Technical

Senior Leadership

Financial

Diverse Backgrounds and Experiences

Cybersecurity

Sales, Marketing and Brand Management

Global/International

Governance, Risk Oversight and Compliance

Emerging Technologies and Business Models

Human Capital Management

Public Company Board Experience

46

Proposal No. 1 Election of Directors

Lorraine Twohill INDEPENDENT
Age: 51 Director Since: 2019 Skills and Experience:	Committee Membership: Compensation and People Committee, ESG and Nominating Committee, Security Committee Other Current Public Company Boards: None

BACKGROUND Lorraine Twohill has served as a member of our Board of directors since April 2019. Ms. Twohill currently serves as Google LLC’s (formerly Google, Inc.) Chief Marketing Officer, a position she has held since June 2009. From July 2003 until June 2009, Ms. Twohill served as Google’s Head of Marketing Europe, Middle East and Africa. Ms. Twohill previously served on the board of directors of Williams-Sonoma, Inc., a consumer retail company that sells kitchenwares and home furnishings, from January 2012 until May 2017. Ms. Twohill holds joint honors degrees in International Marketing and Languages from Dublin City University.

QUALIFICATIONS AND EXPERIENCE Ms. Twohill was selected to serve on our Board due to her leadership skills and extensive marketing knowledge, with over 25 years of experience. She has deep management and business operations experience, as well as risk management oversight experience. She provides the Board with valuable insights into brand management and the global issues facing technology companies today.

Nir Zuk
Age: 51 Director Since: 2005 Skills and Experience:	Committee Membership: None Other Current Public Company Boards: None

BACKGROUND Nir Zuk is one of our founders and has served as our Chief Technology Officer and as a member of our Board since March 2005. From April 2004 to March 2005, Mr. Zuk was Chief Security Technologist at Juniper Networks, Inc., a supplier of network infrastructure products and services. From September 2002 until its acquisition by Juniper in April 2004, Mr. Zuk was Chief Technology Officer at NetScreen Technologies, Inc., a provider of ASIC-based Internet security systems. In December 1999, Mr. Zuk co-founded OneSecure, Inc., a provider of prevention and detection appliances, and was Chief Technical Officer until its acquisition by NetScreen in September 2002. From 1994 to 1999, Mr. Zuk served in several technical roles, including Principal Engineer at Check Point Software Technologies Ltd., an enterprise software security company. Mr. Zuk attended Tel Aviv University where he studied Mathematics.

QUALIFICATIONS AND EXPERIENCE Mr. Zuk is a co-founder of Palo Alto Networks, a network security expert and brings a wealth of network security knowledge and industry experience to Palo Alto Networks. He brings business leadership, operational experience, risk management oversight experience, and experience developing technology. He has an in-depth knowledge of the technology and cybersecurity industries.

 

Industry and IT/Technical

Senior Leadership

Financial

Diverse Backgrounds and Experiences

Cybersecurity

Sales, Marketing and Brand Management

 

Global/International

Governance, Risk Oversight and Compliance

Emerging Technologies and Business Models

Human Capital Management

Public Company Board Experience

2022 Proxy Statement

47

Proposal No. 1 Election of Directors

Non-Continuing Directors
Asheem Chandna
Age: 58 Director Since: 2005 Skills and Experience:	Committee Membership: ESG and Nominating Committee, Security Committee, Corporate Development Committee Other Current Public Company Boards: None

BACKGROUND Asheem Chandna has served as a member of our Board since April 2005. Mr. Chandna has been a Partner at Greylock Partners, a venture capital firm, since September 2003, where he focuses on investments in enterprise IT, including security products. From April 2003 to June 2013, Mr. Chandna was a director of Imperva, Inc., a provider of cyber security solutions. From April 1996 to December 2002, Mr. Chandna was Vice President, Business Development and Product Management at Check Point Software. Mr. Chandna currently serves on the board of directors of a number of privately held companies. Mr. Chandna holds a B.S. in Electrical Engineering and an M.S. in Computer Engineering from Case Western Reserve University.

QUALIFICATIONS AND EXPERIENCE Mr. Chandna was selected to serve on our Board because of his specific experience with enterprise IT and security products, background with information technology and cybersecurity companies, and knowledge of emerging technologies. He also brings extensive financial and investment expertise as a venture capitalist, where he focuses investments in enterprise IT. He also brings perspective from his service on other public and private company boards.

Mark D. McLaughlin
Age: 56 Director Since: 2011 Skills and Experience:	Committee Membership: Corporate Development Committee Other Current Public Company Boards: Qualcomm

BACKGROUND Mark D. McLaughlin has served as our Vice Chair since June 2018, and has been a member of our board of directors since August 2011. During that period, from April 2012 until June 2018 he served as Chair of our board of directors. Mr. McLaughlin served as our Chief Executive Officer from August 2011 until June 2018 and also served as President from August 2011 through August 2016. From August 2009 through July 2011, Mr. McLaughlin served as President and Chief Executive Officer and as a director at VeriSign, Inc., a provider of Internet infrastructure services, and from January 2009 to August 2009, Mr. McLaughlin served as President and Chief Operating Officer at VeriSign. From February 2000 through November 2007, Mr. McLaughlin served in several roles at VeriSign, including as Executive Vice President, Products and Marketing. Prior to joining VeriSign, Mr. McLaughlin was Vice President, Sales and Business Development at Signio Inc., an Internet payments company acquired by VeriSign in February 2000. In January 2011, President Barack Obama appointed Mr. McLaughlin to serve on the President’s National Security Telecommunications Advisory Committee. Mr. McLaughlin currently serves on, and is the Chair of, the board of directors of Qualcomm, Inc., a global semiconductor company that designs and markets wireless telecommunications products and services, and previously served on the board of directors of Opower, Inc., a provider of cloud based software to the utility industry, from 2013 to 2016. Mr. McLaughlin holds a B.S. from the U.S. Military Academy at West Point and a J.D. from Seattle University School of Law.

QUALIFICATIONS AND EXPERIENCE Mr. McLaughlin was selected to serve on our Board because of his perspective and experience as our former Chief Executive Officer, and his operational and management experience at several technology companies. He has an extensive background in the technology industry and risk oversight expertise. Mr. McLaughlin also served as Chair of The President’s National Security Telecommunications Advisory Committee and serves as Chair of a large global semiconductor company.

 

Industry and IT/Technical

Senior Leadership

Financial

Diverse Backgrounds and Experiences

Cybersecurity

Sales, Marketing and Brand Management

Global/International

Governance, Risk Oversight and Compliance

Emerging Technologies and Business Models

Human Capital Management

Public Company Board Experience

 

48

Proposal No. 1 Election of Directors

The demographic information presented below for our directors is based on voluntary self-identification by each director. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f). Additional biographical information of our directors and executive officers as of July 31, 2022 is set forth above.

BOARD DIVERSITY MATRIX (AS OF NOVEMBER 3, 2022) 

Total Number of Directors			12
	Female	Male	Non-Binary	Did Not Disclose Gender
Part I: Gender Identity
Directors	4	8	0	0
Part II: Demographic Background
African American or Black	1	0	0	0
Alaskan Native or Native American	0	0	0	0
Asian	1	2	0	0
Hispanic or Latinx	0	0	0	0
Native Hawaiian or Pacific Islander	0	0	0	0
White	2	6	0	0
Two or More Races or Ethnicities	0	0	0	0
LGBTQ+			0
Did Not Disclose Demographic Background			3

Board Committees and Responsibilities

Our Board has a standing Audit Committee, Compensation and People Committee, Corporate Development Committee, ESG and Nominating Committee and Security Committee, which have the composition and responsibilities described below. Directors serve on these committees until their resignation or until otherwise determined by our Board.

The membership and meetings during fiscal 2022 and the primary functions of each of the standing committees are described below. 

Board of Directors	Audit Committee	Compensation and People Committee	Corporate Development Committee	ESG and Nominating Committee	Security Committee
Nikesh Arora
Aparna Bawa*
Asheem Chandna*
John M. Donovan*
Carl Eschenbach*
Dr. Helene D. Gayle*
James J. Goetz*
Rt Hon Sir John Key*
Mary Pat McCarthy*
Mark D. McLaughlin
Lorraine Twohill*
Nir Zuk

	Member
	Committee Chair
*	Independent Director
	Financial Expert

2022 Proxy Statement

49

Proposal No. 1 Election of Directors

	Audit Committee	Our Audit Committee is responsible for, among other things:
	Chair: Mary Pat McCarthy Members: Aparna Bawa James J. Goetz Right Honorable Sir John Key Number of meetings in fiscal 2022: 7	•   selecting and hiring our independent registered public accounting firm, including leading the review and selection of the lead audit engagement partner; •   evaluating the performance and independence of our independent registered public accounting firm; •   approving the audit and pre-approving any non-audit services to be performed by our independent registered public accounting firm; •   reviewing our financial statements and related disclosures and reviewing our critical accounting policies and practices; •   reviewing and participating in the selection of our chief audit executive and periodically reviewing the activities and reports of the internal audit function and any major issues encountered in the course of the internal audit function’s work;		•   reviewing the adequacy and effectiveness of our internal control policies and procedures and our disclosure controls and procedures; •   overseeing procedures for the treatment of complaints on accounting, internal accounting controls, or audit matters; •   reviewing and discussing with management and the independent registered public accounting firm the results of our annual audit, our quarterly financial statements, and our publicly filed periodic reports; •   reviewing and approving or ratifying any proposed related person transactions; and •   preparing the Audit Committee report that the SEC requires in our annual proxy statement.

The composition of our Audit Committee meets the requirements for independence for audit committee members under the listing standards of Nasdaq and the rules and regulations of the SEC. Each member of our Audit Committee also meets the financial literacy and sophistication requirements of the listing standards of Nasdaq. In addition, our Board has determined that Ms. McCarthy is an “audit committee financial expert” within the meaning of the rules and regulations of the SEC.

Our Audit Committee operates under a written charter that was adopted by our Board and satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq. A copy of the charter of our Audit Committee is available on our website at http://investors.paloaltonetworks.com.

50

Proposal No. 1 Election of Directors

	Compensation		Our Compensation and People Committee is responsible for, among other things:
	and People Committee Chair: Right Honorable Sir John Key Members: John M. Donovan Lorraine Twohill Number of meetings in fiscal 2022: 9		•   reviewing and approving our Chief Executive Officer’s and other executive officers’ annual base salaries, incentive compensation arrangements, including the specific goals and amounts, equity compensation, employment agreements, severance arrangements and change in control agreements, and any other benefits, compensation or arrangements; •   establishing and administering our equity compensation plans; •   overseeing our overall compensation philosophy and compensation plans;		•   preparing the Compensation and People Committee report that the SEC requires to accompany the Compensation Discussion and Analysis contained in this proxy statement; •   overseeing our talent management and people management, including the Company’s inclusion and diversity initiatives and results, the Company’s pay equity reviews and results, and the Company’s FLEXLearning, FLEXBenefits and FLEXWORK initiatives; and •   reviewing and discussing with management the risks arising from the Company’s compensation philosophy and practices applicable to employees to mitigate such risks.

The composition of our Compensation and People Committee meets the requirements for independence for Compensation Committee members under the listing standards of Nasdaq and the rules and regulations of the SEC. Each member of our Compensation and People Committee is also a “non-employee director,” as defined pursuant to Rule 16b-3 promulgated under the Exchange Act, and an “outside director,” as defined pursuant to Section 162(m) of the Internal Revenue Code.

Our Compensation and People Committee operates under a written charter that was adopted by our Board and satisfies the applicable rules and regulations of the SEC and the listing standards of Nasdaq. A copy of the charter of our Compensation and People Committee is available on our website at http://investors.paloaltonetworks.com.

Our Compensation and People Committee may form subcommittees for any purpose and may delegate to such subcommittees such power and authority as our Compensation and People Committee deems appropriate, except such power or authority required by law, regulation or listing standard to be exercised by our Compensation and People Committee as a whole.

	Corporate Development Committee Chair: John M. Donovan Members: Aparna Bawa Asheem Chandna Mary Pat McCarthy Mark McLaughlin		Our Corporate Development Committee is responsible for, among other things: •   assisting the Board in fulfilling its responsibilities relating to the review, evaluation, and approval of certain acquisitions and strategic investment transactions; •   reviewing proposed acquisition and investment strategies with management; and •   reporting to the Board the Committee’s approval or recommendation of acquisitions or investment transactions and of such activity in general.

Our Corporate Development Committee operates under a written charter that was adopted by our Board.

2022 Proxy Statement

51

Proposal No. 1 Election of Directors

	ESG and		Our ESG and Nominating Committee is responsible for, among other things:
	Nominating Committee Chair: John M. Donovan Members: Asheem Chandna Dr. Helene D. Gayle Lorraine Twohill Number of meetings in fiscal 2022: 4		•   identifying and evaluating individuals who are qualified to become members of the board of directors and selecting and recommending to the Board individuals as director nominees and appointments to the board of directors; •   evaluating and making recommendations regarding the composition, organization, and governance of our board of directors and its committees, including issues of integrity, experience, expertise and diversity of membership; •   considering board of director leadership structure, including the separation of the chairperson and chief executive officer roles and the appointment of a lead independent director and making recommendations to the board of directors;		•   evaluating and making recommendations regarding the creation of additional committees or the change in mandate or dissolution of committees; •   reviewing and making recommendations with regard to our corporate governance guidelines and compliance with laws and regulations; •   reviewing and approving conflicts of interest of our directors and corporate officers, other than related person transactions reviewed by our Audit Committee; •   overseeing our annual board of director and committee self-assessment process; •   overseeing our succession planning process for the chief executive officer and members of the management team; and •   overseeing our ESG efforts and related policies and programs.

The composition of our ESG and Nominating Committee meets the requirements for independence under the listing standards of Nasdaq and the rules and regulations of the SEC.

In February 2022, we reconstituted our Nominating and Corporate Governance Committee as the ESG and Nominating Committee to enhance our focus on ESG matters, giving it oversight of our ESG strategies and initiatives, including our short- and long-term goals, and to reinforce the important role that ESG practices play in our business. The ESG and Nominating Committee is responsible for setting our ESG priorities, and monitors our performance. The ESG and Nominating Committee receives regular updates on priority ESG issues, including information on actions and progress toward goals.

Our ESG and Nominating Committee operates under a written charter that was adopted by our Board and satisfies the applicable listing standards of Nasdaq. A copy of the charter of our ESG and Nominating Committee is available on our website at http://investors.paloaltonetworks.com.

52

Proposal No. 1 Election of Directors

	Security		Our Security Committee is responsible for, among other things:
	Committee Chair: John M. Donovan Members: Aparna Bawa Asheem Chandna Carl Eschenbach Dr. Helene D. Gayle James J. Goetz Rt Hon Sir John Key Mary Pat McCarthy Lorraine Twohill Number of meetings in fiscal 2022: 2		•   overseeing (i) our policies, plans, metrics and programs relating to the physical security of our facilities and employees, and enterprise cybersecurity and data protection risks associated with our security-related infrastructure and related operations, and (ii) the effectiveness of our programs and practices for identifying, assessing and mitigating such risks across our business operations; •   overseeing our cyber crisis preparedness, security breach and incident response plans, communication plans, and disaster recovery and business continuity capabilities; •   overseeing the safeguards used to protect the confidentiality, integrity, availability, safety and resiliency of the Company’s employees, facilities, intellectual property and business operations; •   reviewing and discussing with management the cybersecurity risks associated with our outside partners (such as vendors, suppliers, operations partners, etc.);		•   overseeing our compliance with applicable information security and data protection laws and industry standards, new or updated legal implications of security, data privacy, or other regulatory or compliance risks to us or our employees, facilities and business operations and the threat landscape facing our business operations; •   reviewing and advising on our physical and cybersecurity strategy, crisis or incident management and security-related information technology planning processes and review strategy for investing in our security systems; and •   reviewing and discussing with management our public disclosures relating to the Company’s security of its employees, facilities and information technology systems, including privacy, network security and data security.

In November 2021, our Board formed the Security Committee to facilitate Board oversight of security issues, including product security, data security, cybersecurity, security risk management, risk exposure and related controls and enterprise risk management related to these risks.

Our Security Committee operates under a written charter that was adopted by our Board. A copy of the charter of our Security Committee is available on our website at http://investors.paloaltonetworks.com.

2022 Proxy Statement

53

Proposal No. 1 Election of Directors

Director Compensation

Our ESG and Nominating Committee has approved a policy for the compensation of the non-employee members of our Board (the “Director Compensation Policy”) to attract, retain and reward these individuals and align their financial interests with those of our stockholders. Only non-employee directors who are not affiliated with investment funds that hold shares of our common stock are eligible for compensation under the Director Compensation Policy. There is no cash compensation paid under the Director Compensation Policy.

Initial Award. Under the Director Compensation Policy, when an eligible director initially joins our Board, the eligible director receives an initial award of restricted stock units having a value of $1 million (as determined based on the average closing price of our common stock on Nasdaq during the 30 calendar days prior to fifteenth day of the month in which the grant is made). This initial award will vest as to one third of the shares covered by the restricted stock unit award on the first anniversary of the date the eligible director joined our board of directors, and the remaining shares will vest quarterly over the following two years, subject to the director’s continued service as of each such date.

Annual Award. Under the Director Compensation Policy, at each annual meeting of stockholders, each eligible director receives an annual restricted stock unit award having a value equal to $300,000 (as determined based on the average closing price of our common stock on Nasdaq during the 30 calendar days ending on the date of the annual meeting). In addition, at each annual meeting of stockholders, our Lead Independent Director receives an additional annual restricted stock unit award having a value equal to $50,000 (as determined based on the average closing price of our common stock on Nasdaq during the 30 calendar days ending on the date of the annual meeting). All annual awards, including the annual awards to the Lead Independent Director, will vest quarterly over a period of one year, subject to the director’s continued service as of each such date.

Committee Awards. At each annual meeting of stockholders, the chairpersons and members of the five standing committees of our Board will receive additional annual restricted stock unit awards for committee service having the following values (as determined based on the average closing price of our common stock on Nasdaq during the 30 calendar days ending on the date of the annual meeting):

Board Committee(1)	Chairperson Retainer	Member Retainer
Audit Committee	$35,000	$20,000
Compensation and People Committee	$25,000	$15,000
ESG and Nominating Committee	$15,000	$10,000
Security Committee	$50,000	$50,000

(1)

No additional compensation is paid for serving on the Corporate Development Committee.

Any eligible director who serves as chairperson of a committee is not entitled to a member retainer for the same committee. The committee awards will vest quarterly over a period of one year, subject to the director’s continued service as of each such date.

54

Proposal No. 1 Election of Directors

Fiscal 2022 Director Compensation Table

The following table presents summary information regarding the compensation paid to our non-employee directors for our fiscal year ended July 31, 2022.

Director	Stock Awards(1)	Total
Aparna Bawa(2)	—	—
Asheem Chandna(3)	$347,988	$347,988
John M. Donovan(3)	$415,638	$415,638
Carl Eschenbach(3)	$338,763	$338,763
Dr. Helene D. Gayle(4)	—	—
James J. Goetz(5)	—	—
Rt Hon Sir John Key(3)	$381,813	$381,813
Mary Pat McCarthy(3)	$372,588	$372,588
Mark D. McLaughlin(6)	—	—
Lorraine Twohill(3)	$362,338	$362,338

(1)

The amounts reported in this column represent the aggregate grant date fair value of these restricted stock units (“RSUs”) as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation, or ASC Topic 718. The assumptions used in the valuation of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for our fiscal year ended July 31, 2022. These amounts do not necessarily correspond to the actual value that may be recognized by the director upon the vesting of such awards.

(2)

Ms. Bawa received an initial equity award upon her appointment to the Board in May 2021, which was reported in our fiscal 2021 proxy statement. Pursuant to our director compensation policy, she will first be eligible to receive equity grants equal to the value of the annual board and committee stock awards, at the upcoming Annual Meeting. As of July 31, 2022, Ms. Bawa held 5,697 RSUs (as adjusted for the three-for-one stock split effected in the form of a stock dividend in September 2022, or the “Stock Split”).

(3)

As of July 31, 2022, Mr. Chandna held 1,017 RSUs, Mr. Donovan held 1,215 RSUs, Mr. Eschenbach held 990 RSUs, Rt Hon Sir John Key held 1,116 RSUs, Ms. McCarthy held 1,089 RSUs and Ms. Twohill held 1,059 RSUs (as adjusted for the Stock Split).

(4)

Dr. Gayle received an initial equity award upon her appointment to the Board in May 2021, which was reported in our fiscal 2021 proxy statement. Pursuant to our director compensation policy, she will first be eligible to receive equity grants equal to the value of the annual board and committee stock awards at the upcoming Annual Meeting. As of July 31, 2022, Dr. Gayle held 5,778 RSUs (as adjusted for the Stock Split).

(5)

Mr. Goetz receives no compensation under the Director Compensation Policy.

(6)

Mr. McLaughlin received no compensation for his services as a director. For the compensation paid to him as an employee, see “Related Person Transactions.”

Identification and Evaluation of Director Nominees

Our ESG and Nominating Committee uses a variety of methods for identifying and evaluating director nominees. The ESG and Nominating Committee regularly assess the appropriate size, composition and needs of our Board and its respective committees, and the qualification of candidates considering these needs. Some of the qualifications that our ESG and Nominating Committee considers include issues of character, integrity, judgment, diversity (including gender and race), experience of relevance to us and the Board, independence, age, area of expertise, potential conflicts of interest and other commitments. These factors may be weighted differently depending on the individual being considered or the needs of the Board at the time.

Nominees must also be able to offer advice and guidance to our Chief Executive Officer based on past experience in positions with a high degree of responsibility and be leaders in the companies or institutions with which they are affiliated. Director candidates must have sufficient time available in the judgment of our ESG and Nominating Committee to perform all Board and committee responsibilities. Members of our Board are expected to prepare for, attend, and actively participate in all Board and applicable committee meetings.

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Proposal No. 1 Election of Directors

Other than the foregoing, there are no stated minimum criteria for director nominees, although our ESG and Nominating Committee may also consider such other factors as it may deem, from time to time, are in our and our stockholders’ best interests. Our ESG and Nominating Committee will also seek appropriate input from our Chief Executive Officer, from time to time, in assessing the needs of our Board for relevant background, experience, diversity and skills of its members.

Our ESG and Nominating Committee considers diversity (whether based on broader principles such as diversity of perspective, experiences, and expertise, as well as factors commonly associated with diversity such as gender, race or national origin) in connection with its evaluation of director candidates, including the evaluation and determination of whether to re-nominate incumbent directors. The committee also considers these and other factors as it oversees the annual Board and committee evaluations. The committee seeks qualified and diverse director candidates, including women and individuals from minority groups, to include in the pool from which director candidates are chosen. Any search firm retained by the committee to find director candidates would be instructed to account for these considerations, including diversity.

Stockholder Recommendations for Nominations to the Board of Directors

Our ESG and Nominating Committee will consider candidates for director recommended by stockholders, so long as such recommendations comply with our certificate of incorporation, amended and restated bylaws and applicable laws, rules and regulations, including those promulgated by Nasdaq and the SEC. The ESG and Nominating Committee will evaluate the recommendations in accordance with its charter, our amended and restated bylaws, our policies and procedures for director candidates, as well as the regular director nominee criteria described above. This process is designed to ensure that our Board includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business. Eligible stockholders wishing to recommend a candidate for nomination should contact our Corporate Secretary in writing. Such recommendations must include information about the candidate, a statement of support by the recommending stockholder, evidence of the recommending stockholder’s ownership of our common stock and a signed letter from the candidate confirming willingness to serve on our Board. Our ESG and Nominating Committee has discretion to decide which individuals to recommend for nomination as directors.

Director Attendance

During our fiscal year ended July 31, 2022, the Board held five meetings (including regularly scheduled and special meetings), and no director attended fewer than 75% of the total number of meetings of the Board and the committees of which he or she was a member.

Although we do not have a formal policy regarding attendance by members of our Board at annual meetings of stockholders, we encourage, but do not require, our directors to attend. Eleven of our twelve directors attended our 2021 Annual Meeting of Stockholders, either telephonically or by video conference.

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PROPOSAL NO. 2

Ratification of Appointment of Independent Registered Public Accounting Firm

Our Audit Committee has appointed Ernst & Young LLP (“EY”), independent registered public accountants, to audit our financial statements for our fiscal year ending July 31, 2023. EY has served as our independent registered public accounting firm since 2009.

At the Annual Meeting, our stockholders are being asked to ratify the appointment of EY as our independent registered public accounting firm for our fiscal year ending July 31, 2023. Our Audit Committee is submitting the selection of EY to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Representatives of EY will be present at the Annual Meeting, and they will have an opportunity to make statements and will be available to respond to appropriate questions from our stockholders.

Notwithstanding the selection of EY and even if our stockholders ratify the selection, our Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during our fiscal year if our Audit Committee believes that such a change would be in the best interests of Palo Alto Networks and its stockholders. If our stockholders do not ratify the appointment of EY, our Audit Committee may reconsider the appointment.

Fees Paid to the Independent Registered Public Accounting Firm

The following table presents fees for professional audit services and other services rendered to our Company by EY for our fiscal years ended July 31, 2021 and 2022.

	2021	2022
Audit Fees(1)	$6,757,000	$6,139,000
Audit-Related Fees(2)	688,000	—
Tax Fees(3)	1,020,000	477,000
All Other Fees(4)	4,000	5,000
	$8,469,000	$6,621,000

(1)

Audit fees consist of professional services rendered in connection with (a) the audit of our annual consolidated financial statements, including audited financial statements presented in our Annual Report on Form 10-K, (b) review of our quarterly consolidated financial statements presented in our Quarterly Reports on Form 10-Q, (c) professional services provided for new and existing statutory audits of subsidiaries or affiliates of the Company, and (d) other regulatory filings.

(2)

Audit-Related fees consist of fees for professional services for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include acquisition due diligence services, technical accounting guidance and other attestation services.

(3)

Tax Fees consist of fees for professional services for federal, state and international tax compliance and tax planning.

(4)

All Other Fees includes fees for professional services other than these services reported above. These services specifically relate to subscriptions to an accounting regulatory database.

Auditor Independence

In our fiscal year ended July 31, 2022, there were no other professional services provided by EY that would have required our Audit Committee to consider their compatibility with maintaining the independence of EY.

2022 Proxy Statement

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Proposal No. 2 Ratification of Appointment of Independent Registered Public Accounting Firm

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

Consistent with requirements of the SEC and the Public Company Accounting Oversight Board (the “PCAOB”) regarding auditor independence, our Audit Committee is responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. In recognition of this responsibility, our Audit Committee has established a policy for the pre-approval of all audit and permissible non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services.

Before engagement of the independent registered public accounting firm for the next year’s audit, the independent registered public accounting firm submits a detailed description of services expected to be rendered during that year for each of the following categories of services to our Audit Committee for approval:

•

Audit services. Audit services include work performed for the audit of our financial statements and the review of financial statements included in our quarterly reports, as well as subsidiary audits, equity investment audits and other procedures required to be performed by the independent auditor to be able to form an opinion on our consolidated financial statements.

•

Audit-related services. Audit-related services are for assurance and related services that are (1) reasonably related to the performance of the audit or review of our financial statements (2) are traditionally performed by our independent registered public accounting firm and (3) not covered above under “audit services.”

•

Tax services. Tax services include all services performed by the independent registered public accounting firm’s tax personnel for tax compliance, tax advice and tax planning.

•

Other services. Other services are those services not described in the other categories.

Our Audit Committee pre-approves particular services or categories of services on a case-by-case basis. The fees are budgeted, and our Audit Committee requires our independent registered public accounting firm and management to report actual fees versus budgeted fees periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, (a) if the additional services do not require specific approval by the Audit Committee, a detailed description of the services will be submitted to the Chief Financial Officer or Chief Accounting Officer, who will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee and the Audit Committee will be informed on a timely basis of any such services rendered by the independent auditor, or (b) if the additional services require specific approval by the Audit Committee, they will be submitted for pre-approval to the Audit Committee by both the independent auditor and the Chief Financial Officer or Chief Accounting Officer, and shall only be submitted if the independent auditor and such officer mutually agree that the request or application is consistent with the SEC’s rules on auditor independence. All fees paid to EY for our fiscal year ended July 31, 2022 were pre-approved by our Audit Committee.

Required Vote

The ratification of the appointment of EY as our independent registered public accounting firm requires the affirmative vote of a majority of the shares of our common stock present virtually or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are treated as shares present virtually or by proxy and entitled to vote at the Annual Meeting and, therefore, will have the same effect as a vote “Against” this proposal. Any broker non-votes will have no effect on the outcome of the vote.

	Recommendation of the Board
	The Board recommends that you vote “FOR” the ratification of the appointment of Ernst & Young LLP.

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Proposal No. 2 Ratification of Appointment of Independent Registered Public Accounting Firm

Report of the Audit Committee

The Audit Committee consists of Mmes. Bawa and McCarthy, Mr. Goetz and the Rt Hon Sir John Key. Each member of the committee is an independent director as required by the listing standards of Nasdaq and rules and regulations of the SEC. The Audit Committee operates under a written charter approved by the Board, which is available on the Investor Information portion of our website at https://investors.paloaltonetworks.com/. The composition of the Audit Committee, the attributes of its members and the responsibilities of the Audit Committee, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter and the Audit Committee’s performance on an annual basis.

The Audit Committee assists our Board in the Board’s oversight and monitoring of:

•

our accounting and financial reporting processes and internal controls as well as the audit and integrity of our financial statements;

•

the qualifications, independence and performance of our independent registered public accounting firm;

•

the performance of our internal audit function;

•

our compliance with applicable law; and

•

risk assessment and risk management pertaining to financial, accounting and tax matters of the Company.

With respect to the Company’s financial reporting process, the management of the Company is responsible for (1) establishing and maintaining internal controls and (2) preparing the Company’s consolidated financial statements. Our independent registered public accounting firm, EY, is responsible for auditing these financial statements. It is the responsibility of the Audit Committee to oversee these activities. It is not the responsibility of the Audit Committee to prepare or certify our financial statements or guarantee the audits or reports of the independent auditors. These are the fundamental responsibilities of management and our independent registered public accounting firm.

The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the work performed by EY. In fulfilling its oversight responsibility, the Audit Committee carefully reviews the policies and procedures for the engagement of the independent registered public accounting firm, including the scope of the audit, audit fees, auditor independence matters, performance of the independent auditors, and the extent to which the independent registered public accounting firm may be retained to perform non-audit services.

In the performance of its oversight function, the Audit Committee has:

•

reviewed and discussed the audited financial statements with management and EY;

•

discussed with EY the applicable requirements of the PCAOB and the SEC; and

•

received the written disclosures and the letter from EY required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with EY its independence.

Based on the Audit Committee’s review and discussions with management and EY, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended July 31, 2022, for filing with the Securities and Exchange Commission.

Respectfully submitted by the members of the Audit Committee of the Board:

Mary Pat McCarthy (Chair)
Aparna Bawa
James J. Goetz
Rt Hon Sir John Key

2022 Proxy Statement

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PROPOSAL NO. 3

Advisory Vote on the Compensation of our Named Executive Officers

We are providing our stockholders with the opportunity to vote to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in accordance with the rules and regulations of the SEC in the “Executive Compensation” section of this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement.

The say-on-pay vote is advisory, and therefore is not binding on us, our Compensation and People Committee or our Board. The say-on-pay vote will, however, provide information to us regarding stockholder sentiment about our executive compensation philosophy, policies and practices, which our Compensation and People Committee will be able to consider when determining executive compensation for the remainder of the current fiscal year and beyond. Our Board and our Compensation and People Committee value the opinions of our stockholders and to the extent there is any significant vote against the compensation of our named executive officers as disclosed in this proxy statement, we will endeavor to communicate with stockholders to better understand the concerns that influenced the vote and our Compensation and People Committee will evaluate whether any actions are necessary to address those concerns. We currently conduct advisory votes on our named executive officer compensation on an annual basis, and we expect to conduct our next advisory vote at our 2023 annual meeting of stockholders.

As a result of the feedback that we received from our stockholders through our extensive engagement efforts, our Compensation and People Committee made extensive changes to our executive compensation program. We believe that the information we have provided in this “Executive Compensation” section, and in particular the information discussed in the sections titled “Executive Compensation—Letter from our Compensation and People Committee” and “Executive Compensation—Compensation Discussion and Analysis,” which describe these changes in detail, demonstrates that our executive compensation program has been designed appropriately and is working to ensure management’s interests are aligned with our stockholders’ interests to support long-term value creation. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that Palo Alto Networks, Inc.’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in Palo Alto Networks, Inc.’s proxy statement for the 2022 Annual Meeting of Stockholders pursuant to the compensation disclosure rules and regulations of the SEC, including the compensation discussion and analysis, the compensation tables and narrative discussion, and other related disclosure.”

Required Vote

The approval, on an advisory basis, of the compensation of our named executive officers requires the affirmative vote of a majority of the shares of our common stock present virtually or by proxy at the virtual Annual Meeting and entitled to vote thereon to be approved. You may vote “for,” “against,” or “abstain” with respect to this proposal. Abstentions are considered votes present and entitled to vote on this proposal, and thus will have the same effect as votes “against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.

Although the advisory vote is non-binding, our Board values our stockholders’ opinions. The Compensation and People Committee will review the results of the vote and, consistent with our record of stockholder responsiveness, consider stockholders’ concerns and take into account the outcome of the vote when considering future decisions concerning our executive compensation program.

	Recommendation of the Board
	The Board recommends that you vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers.

 

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Letter from our Compensation and People Committee

November 3, 2022

Dear Fellow Stockholders,

The Compensation and People Committee of the Palo Alto Networks Board of Directors is committed to ensuring that we have the right leadership team in place, and that our compensation programs appropriately compensate our executives, allowing us to retain and attract individuals of outstanding character and ability who are champions of our culture and mission. As a committee, we strongly believe in, and are committed to, executing a pay-for-performance compensation philosophy that closely aligns executive compensation to our financial and operational performance.

Fiscal 2022 was once again a year marked by disruption and uncertainty. The COVID-19 pandemic continued to create significant global economic and social uncertainty, as new variants of the disease disrupted workplaces and contributed to organizational disruption. Russia’s invasion of Ukraine and other geopolitical tensions disrupted the global economy, and contributed to global economic uncertainty. Our management team once again embraced these challenges by mobilizing our people and resources to keep our employees healthy, safe and professionally fulfilled, while delivering very strong financial and operational performance.

We believe that Palo Alto Networks is at an inflection point in our mission to be the cybersecurity partner of choice. In speaking for the entire Board, we believe that Nikesh Arora is one of only a few leaders who can deliver the level of performance critical to our successful accomplishment of the next phase of our growth. Further, we believe that Nikesh has built a strong management team that we are committed to retaining because we also believe that continuity of our leadership team is critical to reaching our goals.

Consistent with our pay-for-performance philosophy, we designed our fiscal 2022 executive compensation program to provide strong rewards for strong performance. In designing the program, we sought the advice of independent compensation consultants, and carefully evaluated and tied program parameters to metrics that we believe significantly impact long-term value and return for our stockholders and other stakeholders.

•

Paid For Performance Based on Aggressive Targets: We set our executive cash incentive and performance stock unit (“PSU”) award targets above the guidance we provided in our August 23, 2021 earnings release, which aligns with our pay-for-performance philosophy of requiring strong performance for strong rewards.

•

Adopted Multiple Year Measurement Period: 100% of fiscal 2022 named executive officer equity awards are performance based, require sustained performance over multiple years for any payout, and include a relative total stockholder return multiplier in addition to financial metrics, which aligns a significant portion of our executive compensation to long-term financial performance.

•

Eliminated Duplicative Metrics: We eliminated duplicative performance metrics in our cash incentive plan and PSU awards, ensuring alignment of compensation with a broader set of financial performance metrics.

•

Tied Compensation to ESG Goals: We added an ESG modifier to our cash incentive plan to ensure a linkage between compensation and our ESG goals, which provided for the calculated result to be adjusted up or down by up to 10% based on an ESG scorecard with climate, inclusion and diversity, and human capital metrics.

•

Implemented a One Year Holding Policy: We implemented a policy requiring our name executive officers to hold all net shares for one year following vesting, subject to certain exceptions.

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Executive Compensation

We are confident that our 2022 executive compensation program delivers on the commitments we made to our stockholders in our 2021 proxy statement.

We are again asking for your support of our executive compensation program. After gathering extensive feedback from stockholders and engaging an independent consulting firm, we believe that our Compensation and People Committee has implemented a sustainable, best-in-class program that is supported by market benchmarks aligned with best practices and the interests of our shareholders.

Thank you for your continued support and investment in Palo Alto Networks.

Sincerely,

The Compensation and People Committee

Rt Hon Sir John Key (Chair)
John Donovan
Lorraine Twohill

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Executive Compensation

Compensation Discussion and Analysis

This Compensation Discussion and Analysis (“CD&A”) describes in detail our executive compensation programs and the resulting pay decisions for our named executive officers (“NEOs”).

Our Compensation and People Committee believes that the fiscal 2022 compensation of our NEOs is commensurate with our size and performance, the significant scope of their roles and responsibilities, and their strong leadership in a manner consistent with our corporate values of disruption, collaboration, execution, integrity and inclusion.

Named Executive Officers

	Nikesh Arora Chief Executive Officer, Chair of the Board		Dipak Golechha Executive Vice President, Chief Financial Officer		William “BJ” Jenkins President*		Lee Klarich Executive Vice President, Chief Product Officer		Nir Zuk Executive Vice President, Founder, Chief Technology Officer

*

Mr. Jenkins was appointed President in August 2021.

	CD&A HIGHLIGHTS •   Our employees, led by our NEOs, continued to deliver strong financial results for our stockholders in fiscal 2022. •   Our financial performance has led to strong financial returns, a one-year total shareholder return (“TSR”) of 25.07% (or at the 92nd percentile of our compensation peer group), and a return of capital through our stock buyback program. •   We engaged in discussions with stockholders holding 60% of our outstanding shares (as of June 30, 2022), with a concentrated focus on the issues that mattered to them, including our executive compensation program. •   We followed through on the commitments we made to our stockholders in the proxy statement for our 2021 annual meeting of stockholders. •   Our fiscal 2022 executive compensation programs align with recognized best practices.

Philosophy and Objectives

As a global cybersecurity provider based in the San Francisco Bay Area, we operate in a highly competitive and rapidly evolving market, and we expect competition among companies in our market to continue to increase. We compete with many other technology companies in seeking to attract and retain highly skilled top talent. Our continued success has made our employees and executives more attractive as candidates for employment with other companies, and we are intently focused on maintaining competitive compensation programs, in part, to address recruiting efforts by other companies in the technology industry.

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Executive Compensation

As a result, our compensation philosophy is designed to establish and maintain a compensation program that attracts and rewards talented individuals who possess the skills necessary to support our near-term objectives and create long-term value for our stockholders, grow our business and assist in the achievement of our strategic goals. We believe that a performance-based culture is crucial to our growth and success.

The specific objectives of our executive compensation program are to:

			Drive the development of a successful and profitable business through our next phase of growth.
			Create sustainable long-term value for our stockholders by aligning the interests of our executive officers with those of our stockholders.
			Reward our executive officers for the successful achievement of our financial and strategic growth objectives.
			Attract, motivate and retain highly qualified executives who possess the skills and leadership necessary to continue to grow our business, and provide compensation packages that are comparable to our peers and the overall competitive market and that are heavily weighted to be based on our performance.

While remaining true to our compensation objectives, as well as sound compensation policies and practices, our compensation program also has the flexibility to incorporate feedback and evolving compensation practices that are important to us and our stockholders, such as the addition of an ESG modifier to our NEOs’ cash incentive plan ensuring a linkage between NEO compensation and our ESG commitments.

Stockholder Engagement in Fiscal 2022

In fiscal 2022, we once again undertook extensive engagement efforts to obtain our stockholders’ views on executive compensation, corporate governance and other matters, and to determine how best to respond to that feedback. Our Lead Independent Director once again played a central role in our stockholder engagement efforts in fiscal 2022. The Chair of our Compensation and People Committee also met with numerous stockholders to discuss their views regarding our executive compensation program.

Our Lead Independent Director and management team regularly update our Board on our engagement efforts, providing summaries of our stockholders’ feedback. The continuous feedback that we receive from our stockholders has shaped the executive compensation program and practices implemented by our Compensation and People Committee.

The discussions with our stockholders also provided valuable insights into the concerns that led to the low say-on-pay support that we received at our 2020 annual meeting of stockholders, and provided the foundation of our executive compensation program in fiscal 2021 and 2022. At our 2021 annual meeting of stockholders, we were pleased that approximately 81% of votes were cast in favor of our say-on-pay proposal, which was significantly higher than the approximately 40% support we received the prior year.

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Executive Compensation

	We reached out to stockholders representing 68% of our outstanding shares.		We engaged in discussions with investors representing 60% of our outstanding shares (which is all stockholders that indicated a willingness to engage with us).		Our Lead Independent Director participated in discussions (30 meetings) with investors representing 39% of our outstanding shares.
	*   Stockholder ownership, to our knowledge, as of June 30, 2022.

WHAT WE HEARD	HOW WE RESPONDED
Executive Compensation Modifications to the structure of our executive compensation program and enhanced disclosure.	•   100% of our NEOs’ equity compensation (aside from new hire awards) is performance-based, with different performance targets than the cash incentive plan awards. •   We increased our stock ownership guidelines for our NEOs, including our Chief Executive Officer. •   We added an ESG modifier to our cash incentive plan. •   We established a one-year post-vesting holding period for all NEOs, including our Chief Executive Officer.

2022 Proxy Statement

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Executive Compensation

Our Compensation Best Practices

In line with the feedback that we received from our stockholders and our independent compensation consultants, we implemented extensive changes to our executive compensation program in fiscal 2021, and maintained these compensation practices in fiscal 2022.

We believe our executive compensation program represents recognized best practice and reflects principles that align the compensation of our NEOs with the long-term interests of our stockholders.

		NEW FOR 2022
		100% of equity compensation (aside from new hire awards) is performance-based, with different performance targets than the cash incentive plan   Addition of ESG modifier to cash incentive plan, which modifies the annual incentive cash compensation (plus or minus 10%), based on our performance relative to an ESG scorecard with climate, inclusion and human capital metrics		Increase to stock ownership guidelines   One-year post-vesting holding period for all NEOs, including our Chief Executive Officer
		ROBUST AND INDEPENDENT COMPENSATION DECISION-MAKING, ALIGNED WITH OUR CORPORATE VALUES
		100% independent Compensation and People Committee   Independent compensation consultants		Annual review of compensation strategy   Consideration of annual say-on-pay vote
		COMPENSATION BEST PRACTICES
		Majority of compensation is performance-based and at-risk   100% short-term incentive cash compensation is performance-based and at-risk   No single trigger vesting of equity awards on occurrence of a change in control   No dividends paid on unvested equity   Robust stock ownership guidelines		No hedging or pledging, except limited pledging permitted with the prior approval of the ESG and Nominating Committee   Meaningful clawback policy   Limited perquisites and personal benefits   No defined benefit plans or SERPs   Implementing the advice of independent compensation consultants

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Executive Compensation

We Followed Through On Our Commitments

In the proxy statement for our 2021 annual meeting of stockholders, we made several commitments with respect to the design of our executive compensation program and related policies. We made these commitments following receipt of extensive feedback from our stockholders and advice from two independent compensation consultants, Pay Governance and Meridian Compensation Partners.

Summarized below are our fiscal 2022 commitments, and our follow through in meeting those commitments. 

OUR FISCAL 2022 COMMITMENTS		OUR FOLLOW THROUGH
Maintain a robust stockholder outreach program
Provide more transparency in our executive compensation disclosures, as well as more robust CD&A disclosures
Disclose the target value of equity grants to our NEOs for the completed fiscal year in the CD&A
Increase the CEO stock ownership guidelines to 10x base salary
Make any one-time awards to NEOs a majority performance based and only make such grants in exceptional circumstances
Annual equity grants to our NEOs to be at least 75% performance-based in line with market best practices
Require a one year minimum vesting period for all grants to our Chief Executive Officer and other NEOs going forward, and implement a policy to require our Chief Executive Officer and other NEOs to hold all net shares for one year after vesting subject to certain exceptions
Use a PSU award design that requires sustained performance over multiple years for any payout
Include a relative TSR multiplier to our executive PSU awards
Ensure that ongoing incentive goals are considered “challenging” with targets set at or above management guidance
Disclose performance targets compared to actual results and corresponding payout scale
Eliminate duplicate performance metrics in our cash incentive plan and PSU awards
No upward discretion except for extraordinary circumstances (such as the COVID-19 pandemic)
Incorporate an ESG metric into fiscal 2022 cash incentive plan to ensure linkage between compensation and our ESG goals

2022 Proxy Statement

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Executive Compensation

Compensation-Setting Process

Compensation Timeline and Process

The compensation setting timeline and process of our Compensation and People Committee is summarized below.

Our Compensation and People Committee makes compensation decisions after considering factors that include:

•

The performance and experience of each executive officer;

•

The scope and strategic impact of the executive officer’s responsibilities;

•

Our past business performance and future expectations;

•

Our long-term goals and strategies;

•

The performance of our executive team as a whole;

•

An analysis of competitive market conditions, with the assistance of its external compensation consultant(s);

•

The incentives provided to our executives to remain with the Company and drive the Company’s continued growth;

•

The value of each executive’s unvested equity holdings;

•

For each executive officer, other than our CEO, the recommendation of our CEO based on an evaluation of his performance;

•

The challenge and cost of replacing high-performing leaders with in-demand skills; and

•

The internal parity of compensation among our executive officers.

Our Compensation and People Committee does not apply a formula or assign relative weights to specific compensation elements.

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Executive Compensation

Roles and Responsibilities 

PARTICIPANT	ROLE IN COMPENSATION DETERMINATION PROCESS
Compensation and People Committee	•   Review, evaluate and approve the compensation arrangements, plans, policies, and practices for our NEOs •   Oversee and administer cash-based and equity-based compensation plans •   Review our executive compensation program, from time to time, to determine whether they are appropriate, properly coordinated, achieve their intended purposes and to make any modifications to existing plans and arrangements or to adopt new plans or arrangements •   Retain the services of external advisors, including compensation consultants, legal counsel and other advisors, from time to time, as it sees fit, in connection with carrying out its duties
Management	•   Together with our independent compensation consultants, the Chief Executive Officer and the Chief People Officer assist the Compensation and People Committee in the execution of its responsibilities by providing information on corporate and individual performance, market data with respect to compensation and management’s perspective and recommendations on compensation matters •   Chief Executive Officer makes recommendations to the Compensation and People Committee regarding compensation matters, including the compensation of executive officers (other than himself) •   Chief Executive Officer participates in meetings of the Compensation and People Committee (other than portions of meetings that involve discussions of his own compensation) While our Compensation and People Committee solicits the recommendations and proposals of our Chief Executive Officer with respect to compensation-related matters, these recommendations and proposals are only one factor in our Compensation and People Committee’s decision-making process.
Independent Compensation Consultants For fiscal 2022 advice, the Compensation and People Committee engaged Pay Governance and Meridian Compensation Partners, national compensation consulting firms	•   Assist the Compensation and People Committee in executing the executive compensation strategy and guiding principles, assessing the current target total direct compensation opportunities of our executive officers, including comparing them against competitive market practices, developing a compensation peer group and advising on executive compensation decisions •   Pay Governance and Meridian Compensation Partners did not provide any services to the Company other than the services provided to our Compensation and People Committee •   Our Compensation and People Committee assessed the independence of Pay Governance and Meridian Partners taking into account, among other things, the factors set forth in Exchange Act Rule 10C-1 and the listing standards of Nasdaq and has concluded that no conflict of interest exists with respect to the work that Pay Governance and Meridian Compensation Partners perform for our Compensation and People Committee

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Executive Compensation

Use of Competitive Data

To assess the competitiveness of our executive compensation program and to assist in setting compensation levels, at the Compensation and People Committee’s request, Compensia, Inc., our prior independent compensation consultant, compiled market data from a compensation peer group approved by our Compensation and People Committee and industry surveys, including the Radford Global Technology Executive Compensation Survey. The Compensation and People Committee, with the assistance of Pay Governance and Meridian Partners, then analyzed the market and survey data when making fiscal 2022 compensation decisions.

Competitive Positioning

For fiscal 2022, our Compensation and People Committee continued to compare and analyze our executive compensation program and each component of executive compensation against data from a formal compensation peer group of companies.

In the context of our annual executive compensation review, with assistance from Compensia and input from management, in February 2021, our Compensation and People Committee reviewed the peer group of publicly-traded technology companies used to provide information regarding compensation practices for fiscal 2021 to determine if any changes were appropriate for use for fiscal 2022 pay decisions. In determining which companies to include in the peer group, our Compensation and People Committee considered companies that met some or all of the following updated criteria: (i) operated in a high-technology industry; (ii) had annual revenue between approximately $1.8 billion and $7.2 billion; (iii) had revenue growth greater than 20%; (iv) had a market capitalization between approximately $8.6 billion and $103.1 billion; and (v) had a market capitalization that was at least three times annual revenue. Based on our Compensation and People Committee’s review of this updated criteria, no changes were made to the peer group, and the Company was at the 61st percentile of the peer group in terms of revenue and 51st percentile in terms of market capitalization.

The following publicly-traded companies made up our compensation peer group for fiscal 2022:

Akamai Technologies, Inc. Arista Networks Inc. Autodesk, Inc. Cadence Design Systems F5 Networks Inc.

Fortinet Inc. Norton LifeLock Okta, Inc. PayChex, Inc.

ServiceNow, Inc. Snap, Inc. Splunk Inc. Square, Inc. (now Block)

SS&C Technologies Holdings, Inc. Synopsys, Inc. Twitter, Inc. Workday, Inc.

CEO and NEO Pay for Performance Alignment For Fiscal 2022

Pay for performance is a cornerstone of our compensation philosophy. We balance our strong pay-for-performance compensation philosophy – where the vast majority of our Chief Executive Officer and other NEO compensation is at-risk and performance-based – with our need to recruit, incentivize, and retain talented executives in a highly competitive market. The result is an executive compensation program that is significantly weighted toward at-risk compensation tied to our financial and operational performance.

 

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Executive Compensation 

The graphs below illustrate the predominance of at-risk and performance-based components of our fiscal 2022 compensation program for our Chief Executive Officer and other named executive officers.

CEO		AVERAGE OF OTHER NEOs**

*	Graph reflects Mr. Arora’s target base salary of $1 million, a significant portion of which he elected to forego.

**	Excludes Mr. Jenkins’ new hire RSUs which were granted to compensate him for a portion of our estimated value of the unvested equity that he forfeited upon joining us.

In line with our pay for performance compensation philosophy, our Compensation and People Committee also focuses on awarding compensation commensurate with the position and responsibilities held by our NEOs. If an NEO’s position or responsibilities change, our Compensation and People Committee undertakes a review of that NEO’s compensation to ensure that it remains commensurate with the new position and responsibilities.

How We Compensate Our Chief Executive Officer

As a result of feedback from our stockholders requesting detailed insights into the compensation of our Chief Executive Officer, we include in this section a summary of the rationale for the decisions reached by our Board and Compensation and People Committee regarding Mr. Arora’s compensation since he joined the Company in June 2018.

MR. ARORA’S LEADERSHIP TRANSFORMED OUR COMPANY

After Mr. Arora joined the Company, we set an ambition to become the cybersecurity partner of choice, to innovate and to stay ahead of the curve. To make this a reality, Mr. Arora established three strategic priorities critical to our long-term success: transforming network security, delivering comprehensive cloud native security and revolutionizing security operations. Under Mr. Arora’s leadership, our successful implementation of this strategy has led to:

•	A $27.8 billion increase in market capitalization (as measured by our market capitalization as of July 31, 2019 and July 31, 2022).

•	$3.6 billion returned to our stockholders in fiscal 2019 through fiscal 2022 through our stock repurchase program.

•	Compound annual growth rates of 24% and 29% in revenue and billings, respectively, over fiscal 2019 through fiscal 2022, culminating in fiscal year 2022 with record revenue of $5.5 billion and record billings of $7.5 billion.

•	An acceleration of our product development efforts, from 22 major product introductions in fiscal 2020 to 49 in fiscal 2022.

Additionally, Mr. Arora successfully steered the Company through the unprecedented global impact of the COVID-19 pandemic, without laying off a single employee, and personally forgoing $1 million in salary to donate to our COVID-19 pandemic relief fund in fiscal 2021. Mr. Arora subsequently forwent an additional $1 million in salary.

2022 Proxy Statement

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Executive Compensation  

	Transformed Our Business Through Innovation
	A transformation that has born a differentiated position that spans our three platforms •  Network Security – Comprehensive SASE capability, market-leading VM position, and innovation through advanced subscriptions •  Cloud Security – 9 modules, broadest cloud security portfolio, and strong consumption •  Security Operations – Pioneered XDR category, XSOAR and Xpanse point product		Became an innovation leader by delivering •  49 product releases across our three platforms in fiscal 2022 •  Next generation cloud access security broker (CASB) •  Cloud next generation firewall (NGFW) •  Cloud code security •  Industry first agent and agentless cloud security posture management (CSPM)
	Delivered Zero Trust Security

 

	Delivered Strong Financial Performance and Stockholder Return
	ACCELERATING REVENUE GROWTH		DELIVERING TOTAL SHAREHOLDER RETURN 1-Year TSR Palo Alto Networks vs. Percentiles of Peer Group
	ACCELERATING NEXT-GEN SECURITY ARR GROWTH		3-Year TSR Palo Alto Networks vs. Percentiles of Peer Group

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Executive Compensation 

MARKET COMPETITIVE PAY LEVELS AND EVOLVING COMPENSATION IN DIRECT RESPONSE TO STOCKHOLDER FEEDBACK

Our Board believes that Mr. Arora is uniquely qualified to lead our Company. In designing Mr. Arora’s compensation packages since he joined the Company in 2018, our Board and Compensation and People Committee sought to deliver market-competitive compensation commensurate with Mr. Arora’s capabilities and experience and reflective of the considerable challenge of leading the Company’s transformation from a provider of hardware delivered security to a provider of security delivered through the cloud, with multiple products to protect our customers’ enterprise, cloud, endpoints, security operation centers and more.

After a disappointing “say-on-pay” vote at our 2020 annual meeting of stockholders, we conducted a comprehensive review of our executive compensation practices. Mr. Arora, in his capacity as Chair of the Board, gave his full support to this process and encouraged our Board and Compensation and People Committee to look at all aspects of our executive compensation program and make the necessary changes to respond to stockholder feedback and further align our program with best practices. As a result of this root and branch examination, our Compensation and People Committee significantly reduced the size of the target value of Mr. Arora’s annual equity grant to $15.0 million in fiscal 2022, from $21.0 million in fiscal 2021 and $22.0 million in fiscal 2020. Mr. Arora’s fiscal 2022 target direct compensation is at the 75th percentile of Company’s compensation peer group. We delivered TSR at the 92nd percentile of our compensation peer group for fiscal 2022.

Our Compensation and People Committee also made other significant changes to Mr. Arora’s compensation structure for fiscal 2022:

•	A new design for PSUs featuring multi-year financial measures and a relative TSR modifier that requires sustained performance above target, for multiple years, to receive an above target payout.

•	An increase in his stock ownership requirement to 10x base salary.

•	A one-year post-vesting holding period for equity awards.

 

CEO COMPENSATION

 

	FY21 Target	FY22 Target
Annual Salary(1)	$1.0M	$1.0M
Target Bonus	$1.0M	$1.0M
Time-Based RSUs	n/a	n/a
Performance Stock Units	$21.0M vesting over 4 years	$15.0M
Total Target	$23M	$17M
Year-Over-Year Change (total compensation)	-4.2%	-26.1%
Performance-Based (total compensation)	95.7%	94.1%

 

(1)

Mr. Arora forwent a portion of his annual salary (in the case of fiscal 2021, in connection with our funding efforts to support colleagues and communities impacted by the COVID-19 pandemic). He opted to receive only approximately $0.3 million of his salary in fiscal 2021, approximately $0.25 million of his salary in fiscal 2022, and approximately $0.75 million of his salary in fiscal 2023.

2022 Proxy Statement

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Executive Compensation

Fiscal 2022 Executive Compensation Program

Our executive compensation programs are tied to the Company’s financial and operational performance, support our commitment to good compensation governance and provide market-based opportunities to attract, retain and motivate our executives in an intensely competitive market for qualified talent. 

	FISCAL 2022 PROGRAM HIGHLIGHTS

	•	No base salary or target annual incentive opportunity increases in fiscal 2022 for continuing NEOs.
	•	Equity compensation granted in fiscal 2022 was 100% performance-based PSUs (aside from new hire RSUs).
	•	Performance measures aligned with business strategy.
	•	Chief Executive Officer donated 75% of his fiscal 2022 base salary and 25% of his fiscal 2023 base salary.
	•	Mr. Jenkins appointed President.
	•	Outstanding performance resulted in 150% achievement for our NEOs for cash incentive plan and 100% performance for the portion of the PSUs granted to our NEOs in July 2019 that were eligible to vest based on fiscal 2022 annual revenue growth.

The following table lists the pay elements of our fiscal 2022 programs and the purpose they served:

	Pay Element	Purpose	Performance Period	Performance Metric
Fixed Pay	Base Salary	Designed to be market-competitive and attract and retain talent	n/a	n/a
At Risk Pay	Annual Cash Incentive Opportunity	Incentivize achievement of near-term financial and operational objectives, consistent with longer-term goals	Annual	Annual normalized billings for fiscal 2022 Annual organic operating margin for fiscal 2022
	Revenue/TSR Performance Stock Units (PSU)	Reward long-term profitability and long-term performance relative to peers Create alignment with stockholders Facilitate executive retention	Two years and three years	Annual revenue growth for fiscal 2022, 2023, and 2024 and TSR of the Company relative to indexed companies for fiscal 2022 through 2024 (“rTSR”)

Quantum of Compensation

Palo Alto Networks delivered another year of outstanding results for our stockholders in fiscal 2022, with a strong year of financial performance and execution. Our TSR for fiscal 2022 was 25.07%, placing us at the 92nd percentile of our compensation peer group.

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Executive Compensation 

The table below shows the targeted value of total compensation to our Chief Executive Officer and each other NEO for fiscal 2022, as compared to fiscal 2021.

Name	Targeted Value of Total Compensation for fiscal 2021	Targeted Value of Total Compensation for fiscal 2022	Percentage Change
Mr. Arora	$ 23,000,000	$ 17,000,000	-26.1%
Mr. Golechha*	$   5,200,000	$   5,200,000	0
Mr. Jenkins**	n/a	$ 15,500,000	n/a
Mr. Klarich	$ 11,100,000	$ 11,100,000	0
Mr. Zuk	$   3,900,000	$   4,400,000	12.8%

 

*

Mr. Golechha joined the Company in December 2020 and was promoted to CFO in March 2021. Targeted value of total compensation for fiscal 2021 includes (a) annualized base salary and cash incentive compensation as CFO for fiscal 2021 and (b) PSUs with a target value of $4,000,000, but excludes RSUs with a target value of $4,000,000 that he received in connection with his hire, which are not reflected in the table.

**

Mr. Jenkins joined the Company as President in August 2021. Targeted value of total compensation for fiscal 2022 includes (a) annualized base salary and cash incentive compensation as President for fiscal 2022 and (b) PSUs with a target value of $14,000,000, but excludes RSUs with a target value of $10,000,000 that he received in connection with his hire, which are not reflected in the table. See “BJ Jenkins Compensation Arrangements” below for further detail.

Fiscal 2022 Executive Compensation Program Components

BASE SALARY