After Nutanix CEO Rajiv Ramaswami was “approached” about a role with a competitor, the Nutanix board responded with an “off-cycle” stock award worth nearly $50 million, citing “immediate retention concerns,” according to a recent filing with the SEC.

Nutanix President and CEO – and a former VMware C-level executive – Rajiv Ramaswami won a massive pay day this year with the company’s board crafting its “key architect” an “off-cycle” compensation package valued at $51.1 million in stock and cash to keep him, after he was approached by a competitor with a job offer, the company said last month.

“Against the backdrop of the highly competitive market for CEO talent, the Committee became aware that (Ramaswami) had been approached regarding a potential competitive opportunity outside Nutanix,” wrote board member Max de Groen, compensation committee chair, in a regulatory filing on Oct. 22. “In these extraordinary circumstances, the Committee determined that a long-term performance-based equity award would address the immediate retention concerns and provide a strong performance incentive for Rajiv to continue driving long-term value for stockholders.”

The Nutanix board said after it was made aware of the job offer in January 2024, it had “immediate retention concerns” and needed to provide Ramaswami with a “strong incentive” to stay at the company.

“After a series of meetings in consultation with its external advisors, (the board determined) that a supplemental long-term performance-based equity award was necessary to address the immediate retention concerns and provide a strong incentive for Mr. Ramaswami to continue to drive significant long-term value for stockholders,” the company stated in its annual report.

CRN reached out to Nutanix asking for the name of the competitor that approached Ramaswami and the nature of the “opportunity” that Ramaswami was presented. A Nutanix spokesperson responded with a statement.

“Rajiv remains committed to Nutanix. He remains focused on driving long-term company growth and profitability, including leading Nutanix toward its goal of becoming the leading platform for running applications and managing data, anywhere,” the spokesperson stated. “And as discussed in Nutanix’s proxy statement, the Compensation Committee believes Rajiv’s supplemental long-term performance-based equity award helps secure his strategic vision and leadership through the next phase of Nutanix’s growth.”

In order to keep Ramaswami following the January “opportunity,” Nutanix created a $49.7 million, performance-driven compensation plan that only kicks in if he can deliver “meaningful outperformance,” on several operational goals.

“While the specific targets are not disclosed for competitive reasons, the performance levels required to achieve a payout for each metric are anchored to the high-end of our long-range targets,” the company said.

The company that approached Ramaswami was not named. However, de Groen said in his letter that Nutanix’s board feels it cannot lose Ramaswami. Ramaswami had previously held executive roles at VMware and Broadcom. Broadcom acquired Nutanix’s chief rival, VMware, last year for $69 billion.

“Rajiv is a proven strategic leader. He has been the key architect of our company’s transformation. Under Rajiv’s leadership, Nutanix has achieved profitable growth while nearly doubling its stock price from his start date through fiscal year 2024,” wrote de Groen.

While the board of directors is recommending that shareholders vote in favor of the compensation at the company’s annual shareholder meeting on Dec. 13, it has needed to lobby some of them beforehand to win hearts and minds. Nutanix said it has held six meetings with shareholders that represent 27 percent of its outstanding stock to convince them.

“The Compensation Committee appreciates many stockholders’ skepticism of supplemental, off-cycle equity awards and engaged extensively to provide stockholders with an understanding of the extraordinary circumstances that necessitated the award,” Nutanix wrote. “Further, the Committee discussed with stockholders its efforts to develop an award structure that addressed these unique circumstances while furthering alignment of Mr. Ramaswami’s pay opportunities with long-term value creation for stockholders. “

Ramaswami joined Nutanix in December 2020, leaving his role as VMware’s chief operating officer, products and cloud services. Ramaswami replaced Nutanix’s former CEO and co-founder, Dheeraj Pandey, as the company’s leader. VMware sued Nutanix a month later and accused Ramaswami of “material ongoing breaches” of his employment contract with the virtualization leader. The suit was dismissed after the two companies reached a settlement in January 2021.

“Rajiv is instrumental to Nutanix’s next stage of growth, including capitalizing on recent industry disruption and progressing toward the goal of becoming the leading platform for running applications and managing data, anywhere,” de Groen wrote in the letter to investors. “Rajiv has already continued to drive achievements since the award was granted.”

Last year, the company achieved $1.91 billion in annual recurring revenue, up 22 percent over the year before. It reached $597.7 million in free cash compared to $390.7 a year ago, and overall revenue for the year exceeded $2 billion for the first time.

Nutanix’s market cap has increased nearly 500 percent since Broadcom announced its intention to buy VMware in May 2022. Nutanix shares traded today at $68.42, with a market cap of $18.31 billion. Nutanix stock closed at $16.88 with a market cap of $3.78 billion on May 27, 2022.

San Jose, Calif.-based Nutanix specializes in hybrid-cloud infrastructure, and has a hypervisor that competes with Broadcom’s vSphere. Nutanix sells its products primarily through the channel.

In the company’s annual report, Nutanix told investors it seeks “deepening” relationships with key resellers and distributors in each geographic region in which it operated, and it plans to continue to put cash behind partners to drive sales into larger enterprise customers.