Why is Equinix changing its executive bonus payout from cash to RSUs?

Equinix is changing the payout from cash to fully vested RSUs primarily to retain more cash within the business for investment purposes. This also serves to align the incentives of executives more directly with the interests of shareholders, as their compensation is now directly tied to the company's stock performance and value.

What are the key performance metrics for the 2019 incentive plan?

The 2019 incentive plan is based on two key performance metrics, each weighted at 50%: company revenue and adjusted funds from operations per share (AFFO/Share). The shift to AFFO/Share from the previous AFFO metric is intended to provide a more direct alignment with shareholder value.

What happens if Equinix doesn't meet its performance targets?

The plan includes specific penalties for underperformance. For every 1% that revenue falls below the set goal, the revenue portion of the bonus pool is reduced by 20%. Similarly, for every 1% that AFFO/Share falls below its goal, that portion of the bonus pool is reduced by 20%. If both revenue and AFFO/Share performance are at 95% or less of their respective goals, no bonuses will be paid.

Are there any caps on executive bonuses under the new plan?

Yes, for executives, awards under the 2019 plan are capped at the target payout. This means there is no opportunity for executives to earn a payout greater than their target bonus, even if the company significantly over-performs on its goals.

EQIX 8-K: Leadership Changes

Summary

Equinix Inc. (EQIX) announced on February 25, 2019, a significant update to its executive compensation structure for 2019. The company's Compensation Committee approved the 2019 Annual Incentive Plan, which fundamentally changes how annual bonuses are awarded to eligible employees, including executive officers. Instead of cash, annual bonuses will be paid in fully vested restricted stock units (RSUs), aligning executive incentives more closely with shareholder value creation and allowing Equinix to retain more cash for investment. The performance metrics for these bonuses have also been refined, with a 50/50 weighting between revenue and adjusted funds from operations per share (AFFO/Share). Notably, AFFO/Share replaces the previously used adjusted funds from operations (AFFO) metric. This shift is intended to further align executive targets with shareholder interests. The plan outlines specific payout reductions and a threshold below which no bonuses will be paid, ensuring accountability to performance goals.

Key Highlights

1Equinix introduced the 2019 Annual Incentive Plan, altering executive bonus payments.
2Annual bonuses for executives will be paid in fully vested Restricted Stock Units (RSUs) instead of cash.
3This RSU payout structure aims to conserve cash for company investments and align executive interests with shareholders.
4Performance metrics for bonuses are equally weighted between Revenue (50%) and Adjusted Funds From Operations Per Share (AFFO/Share) (50%).
5The AFFO/Share metric replaces AFFO in the incentive plan, a change intended to better align with shareholder interests.
6The plan includes specific clawback provisions: a 20% reduction in the bonus pool for every 1% revenue or AFFO/Share performance falls below target.
7No bonuses will be paid if Revenue and AFFO/Share are 95% or less of the set goals.

EQUINIX INC 8-K Report, Executive Changes (Feb 25, 2019)

Summary

Key Highlights

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