REITs Executive Compensation Guide

Executive Compensation Design Process Overview

Setting executive compensation is a dynamic and iterative process that requires a team of experts with a wide array of functional expertise, particularly given that a properly designed executive compensation program requires a balance of financial, human resources, legal, strategic, sustainability and governance considerations. Accordingly, it is important to understand the role of the board of directors, management and outside advisors, along with SEC and stock exchange requirements, to ensure that the process both meets legal standards and represents an effective process that supports the implementation of a well-designed program. A public REIT’s board of directors is responsible for all director and officer compensation, including compensation plans, policies and programs. To develop and maintain a sustainable compensation structure, the board of directors delegates its authority to establish and administer compensation matters to an independent compensation committee. The board of directors, in consultation with the nominating and corporate governance committee, as applicable, is responsible for appointing and, if necessary or appropriate, removing compensation committee members, and is responsible for affirmatively determining the independence of compensation committee members. The additional independence requirements for compensation committee members is discussed below under “Stock Exchange and SEC Independence Rules.” The board of directors is also responsible for ensuring that the compensation Role of Various Parties Board of Directors

committee is provided the funding and resources it needs to satisfy its responsibilities. As described below under “Compensation Committee,” the compensation committee typically has the exclusive authority under its charter to approve CEO compensation and the authority to approve and/or recommend to the full board of directors the compensation for the company’s other NEOs. See “Proxy Statements— Determination of Named Executive Officers” for more information on determining a company’s NEOs. Then, if applicable, upon recommendation from the compensation committee, the company’s full board of directors will then vote on whether to approve the recommendations. When voting to approve director and executive compensation, board members should keep the statutory duties owed to the company’s stockholders under applicable state law at the forefront of their decision-making. The board of directors must also ensure that their compensation is set to attract, retain and incentivize talent best suited for their organization. Executive compensation matters are increasingly important to institutional investors and proxy advisory firms, and a company’s compensation practices can draw positive or negative feedback from the investor community. In light of the scrutiny placed on compensation matters, the board of directors and compensation committee should make all compensation decisions only after thoughtful deliberations and processes. Boards of directors and compensation committees should also consider engaging consultants and independent legal counsel to assist in the determination of compensation policies in order to demonstrate the integrity of the decision-making process.

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