REITs Executive Compensation Guide

Introduction Executive compensation matters for public REITs require a delicate balance of designing an effective program that incentivizes and properly rewards key employees while being mindful of external pressures. Non-binding Say-on-Pay proposals required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “ Dodd-Frank Act ”) have resulted in an increase in the influence of investors (particularly institutional investors) and proxy advisory firms, whose ever-changing preferences and priorities at times may diverge from what is necessary or advisable from the Board’s and/ or management’s perspective of achieving the company’s strategic objectives. Given the context in which REIT executive compensation is scrutinized, it is important for boards of directors, compensation committee members and senior management teams of REITs to understand their respective roles in establishing, implementing and disclosing compensation policies and to keep apprised of trends and developments relating to REIT executive compensation. Executive compensation that is viewed by external stakeholders as excessive or inconsistent with recent financial performance — or that fails to address non-financial initiatives, including relating to environmental, social and governance (“ ESG ”) matters — can have significant ramifications for public REITs and their management teams, and often leads to negative voting results for Say-on-Pay proposals and the election of directors tasked with the oversight of compensation matters. In fact, sustained investor

dissatisfaction relating to executive compensation can encourage activist stockholders — a prospect that has taken on new significance in light of the U.S. Securities and Exchange Commission (the “ SEC’s ”) new universal proxy rules, which make it easier for activists to engage in proxy contests 1 — and could result in litigation. Furthermore, in light of the SEC’s adoption of expansive new executive pay-versus-performance disclosure rules in August 2022, public REITs likely will be subject to even greater scrutiny to the extent that the new disclosures highlight misalignment between executive compensation and the REIT’s financial performance. One size certainly does not fit all when it comes to executive compensation. Compensation programs should be tailored to each REIT’s particular circumstances, competitive positioning and strategic objectives. Because matters relating to executive compensation can be challenging under even the best circumstances, REITs and their boards of directors must be thoughtful when designing and implementing executive compensation programs that create appropriate incentives for executives to achieve both short and long-term financial and other objectives. When done correctly, a REIT’s executive compensation program can be a critical tool in recruiting, motivating and retaining executive talent and achieving corporate objectives, while at the same time encouraging behavior that generates long-term value for stockholders.

1 See https://www.mofo.com/resources/insights/211214-us-sec-adopts-universal-proxy-card-rules

1 | 2023 Guide to REIT Executive Compensation