REITs Executive Compensation Guide

Independent Compensation Consultants Compensation committees or boards of directors often engage an independent compensation consultant to advise on compensation-related matters, including the following: ■ providing competitive benchmarking information for executive management and non-employee director compensation; assessing executive compensation program design features, including, but not limited to, pay levels, mix of pay and pay-for-performance and the SEC’s associated pay-versus-performance disclosure obligations; ■ providing guidance on equity incentive plan design, including plan document review and assistance with plan approval; designing and implementing short-term and long-term incentive plans to ensure proper alignment of incentives; ■ assessing accounting and tax implications of short-term and long-term incentive plan design; ■ reviewing award agreements and forecasting and/or confirming payments relating to incentive ■ compensation payable under the REIT’s executive compensation plans and policies; providing guidance on the terms and best governance practice for employment agreements, severance agreements or similar arrangements between the REIT and its executive officers; ■ reviewing and drafting, or assisting in drafting, ■ the REIT’s CD&A and tabular disclosures, including calculations for the purpose of pay-versus-performance and potential severance payment disclosures; and providing guidance on institutional investor and proxy advisor policies. ■ ■

REITs may have an internal human resources department that is tasked with handling broad-based compensation-related matters,

but executive compensation matters often require outside expertise. Compensation consultants can bring a breadth and depth of knowledge on executive compensation-related matters to assist compensation committees in efficiently and thoughtfully designing and assessing executive compensation programs. Although compensation committees are not required to engage a compensation consultant that is “independent,” they must take into consideration six independence factors when selecting a consultant (see “Stock Exchange and SEC Independence Rules—Nasdaq” and “Stock Exchange and SEC Independence Rules—NYSE” below). Companies are required to disclose if compensation consultants are engaged for purposes other than consulting on broad-based compensation matters that are generally applicable to all salaried employees. Additionally, if fees for any additional services, such as benefits administration, exceeded $120,000, companies must disclose (i) aggregate fees paid for compensation-related items or any additional services, (ii) whether the decision to engage a compensation consultant was made or recommended by management and (iii) whether the compensation committee or the board of directors approved the other services provided.

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