140/264 Compensation Philosophy We design the principal components of our executive compensation program to fulfill one or more of the principles and objectives described above. Compensation of our named executive officers consists of the following elements: • base salary; • equity incentive compensation; • certain severance benefits; • retirement savings plans; and • health and welfare benefits and certain limited perquisites and other personal benefits. We offer cash compensation in the form of base salaries that we believe appropriately reward our executive leadership team members for their individual contributions to our business. We have opted not to offer annual cash bonuses to our executive leadership team members, as we believe they do not incentivize the long­term growth of the Company. Instead, we incentive our executive leadership team members heavily through share­based compensation, which we believe fosters the long­term growth of the Company. We have emphasized the use of equity to incentivize our executive leadership team to focus on the growth of our overall enterprise value and, correspondingly, the creation of value for our shareholders. As a result of this compensation practice, we have tied a greater percentage of each executive leadership team member’s total compensation to shareholders returns and kept cash compensation at modest levels, while providing the opportunity to be well­rewarded through equity if we perform well over time. Except as described below, we have not adopted any policy or guidelines for allocating compensation between currently­paid and long­term compensation, between cash and non­cash compensation, or among different forms of non­cash compensation. Each of the primary elements of our executive compensation program is discussed in more detail below. We believe that, as a part of our overall executive compensation policy, each individual element serves our objectives described above. Executive Compensation Program Components The following describes the primary components of our executive compensation program for each of our named executive officers, the rationale for that component, and how compensation amounts are determined. Base Salary Generally, our named executive officer’s initial base salaries were established through arms­length negotiation at the time the individual was hired, taking into account his or her qualifications, experience, and prior salary level. Thereafter, the base salaries of our executive leadership team members, including the named executive officers, are reviewed periodically by our remuneration committee, and adjustments are made as deemed appropriate. There were no base salary increases in 2017. As of July 1, 2017, our CEO does not receive a base salary but instead receives an annual bonus subject to the fulfillment of certain milestones and/or discretionary approval by our board of directors. The first such annual bonus, in an amount up to $1,000,000, became payable in the first quarter of 2018. The board of directors considered whether Company achieved (i) more than 70,000,000 Premium Subscribers in 2017, (ii) more than 150,000,000 MAUs in 2017, and (iii) 25% in gross margin during the second half of 2017 in determining the bonus amount, but our board of directors retained the ability to pay such bonus to Mr. Ek even if such milestones 133