Cloudflare Inc

The Board seeks an advisory affirmation of its executive pay practices (Say-on-Pay), asking shareholders to approve compensation of named executive officers as disclosed in the proxy. Management emphasizes alignment with long-term value creation through predominantly equity-based, performance-linked pay and cites the Compensation Committee’s process, use of independent consultant Compensia, and pay-for-performance philosophy. The vote is non-binding but the Board and Compensation Committee will consider the outcome when setting future pay. A FOR recommendation reflects the Board’s view that the disclosure demonstrates appropriate compensation philosophy, retention and incentive design, and responsiveness to shareholder feedback. The proposal does not change pay directly but provides shareholder feedback; a significant negative vote would prompt engagement and possible program changes. Broker non-votes do not affect the result; the measure requires a majority of votes cast for approval; abstentions act as votes against.

Proposal Four is a package of six interlocked charter amendments (4A–4F) that together authorize a new non-voting Class C common stock, increase authorized share counts and preferred shares, implement a forward split that reconstitutes each existing Class A and Class B share into a voting share plus a non-voting Class C share (the “Class C Split”), provide equal-treatment provisions for distributions and certain transactions, and require independent-director approval for large issuances of Class C as acquisition currency. The Board and a Special Committee of disinterested directors negotiated the structure and substantial founder concessions (service-based conditions, capital-at-risk requirements, transfer restrictions and enhanced independent governance protections) in connection with a Rollover/Preferred Exchange in which founder Class B shares will convert into Series FF non-economic preferred stock (with super-voting) and Class A shares; the Preferred Exchange and Series FF terms do not require stockholder approval. The Special Committee retained independent counsel and Centerview as financial advisor, engaged in multiple rounds of negotiation and obtained founder commitments on service conditions, minimum retained economic interest, transfer restrictions and enhanced independent director oversight. The Board argues the package aligns founders’ long-term incentives, creates a non-voting equity currency for employee awards and M&A, addresses founder liquidity while preserving Board oversight, and maintains broadly similar founder voting power. Risks include potential discounting of the Class C security in market trading, perceived entrenchment of founder control, reduced unaffiliated stockholder influence on director elections and certain transactions, and execution risks around integrating the new capital structure and using Class C as acquisition or compensation currency. Implementation is cross-conditioned: none of 4A–4F will be effective unless all of 4A–4F are approved; Proposals 5 and 6 (plan restatements) are conditioned on approval of Proposal Four. The founders control a majority of voting power and intend to vote in favor, so Proposal Four may pass without the unaffiliated holder approval. The board recommends a FOR vote for each sub-proposal based on Special Committee findings and negotiated concessions.”

Proposal Five seeks stockholder approval to amend and restate the Company’s long-term equity plan to accommodate the new capital structure created by Proposal Four. The amendment merges the post-split share reserves for Class A and Class C into a single pool at the adjusted post-split quantity, enabling the administrator to grant awards denominated in either voting or non-voting shares at its discretion; removes a historical fixed numerical cap on the annual “evergreen” reserve (replacing it with a continuing annual addition equal to 5% of outstanding shares beginning in 2027); adds an explicit cap on shares that may be issued as Incentive Stock Options; and clarifies lapsed award treatment and adjustment mechanics for the Class C Split. Adoption is conditioned on approval of Proposal Four. Management argues the changes enable operational flexibility to use Class C shares for employee awards and transactions while preserving shareholder-approved aggregate dilution limits and standard anti-dilution adjustments; the Special Committee negotiated these updates contemporaneously with the capitalization changes to align plan mechanics with the new stock structure. The principal risks are additional long-term dilution risk if the combined share reserve is utilized heavily for grants—including potential market perception issues if non-voting Class C shares trade at a discount—and the potential governance concerns shareholders may have regarding expanded non-voting share issuance. However, limitations in the plan (share reserves and adjustment mechanics) and board oversight, management says, mitigate those risks. The Board recommends a FOR vote, subject to approval of Proposal Four.

Proposal Six requests approval to amend the Employee Stock Purchase Plan to align with the new Class C non-voting security by: (1) collapsing post-split share reserves for Class A and Class C into a single pool usable to support option grants for purchases under the ESPP (with Administrator discretion over which class will be offered in a given offering period); (2) updating the purchase-per-period limit to 3,000 shares post-split (instead of separate 1,500/1,500 limits for A and C under pro rata adjustments); (3) adjusting automatic annual reserve increases (including reflecting previously accrued increases) and other technical and conforming changes. Adoption is conditioned on approval of Proposal Four. Management contends the amendments are necessary to administer the ESPP after the planned split, maintains longstanding employee participation mechanics and limits, and aims to preserve the ESPP’s attractiveness to employees while providing administrative flexibility. Risks include potential dilution and the possibility that non-voting Class C shares are less attractive to employees than voting Class A shares (which could reduce ESPP participation or effectiveness), and possible market perception of expanded non-voting share issuance. The Board recommends a FOR vote, contingent on approval of Proposal Four.

Proposal Seven asks stockholders to authorize the Board to adjourn the Annual Meeting one or more times if there are insufficient votes to approve one or more proposals at the meeting, allowing additional time to solicit proxies and potentially convert votes. The measure covers routine logistics (quorum and proxy solicitation) and is considered customary; the Board indicates it may use the authority to seek additional votes if any of the other proposals are short of the requisite level for approval. The Board recommends FOR. While such adjournments can be used to persuade shareholders and change outcomes post-announcement, they are commonly used for practical reasons and typically considered routine by broker-dealers.