REITs Executive Compensation Guide

Although the Company-Selected Measure need not be a measure that is disclosed in the company’s financial statements, to the extent that REITs use a non-GAAP measure as their Company-Selected Measure (which we would expect given the limited utility of GAAP performance measures in assessing REIT performance), the company must disclose how the Company-Selected Measure is calculated from the company’s audited financial statements. However, disclosure of a non-GAAP Company-Selected Measure would not require a reconciliation to the most directly comparable GAAP measure or otherwise be subject to Regulation G and Item 10(e) of Regulation S-K, which regulate the use of non-GAAP measures.

Companies also will be required to provide an unranked list of the most important financial performance measures used by the company to link executive compensation actually paid to the company’s NEOs during the last fiscal year to company performance. While companies may include non-financial performance measures in this list, they must select the Company-Selected Measure from the financial performance measures included in this list, and it must be the financial performance measure that, in the company’s assessment, represents the most important performance measure (that is not otherwise required to be disclosed in the table) used by the company to link compensation actually paid to the company’s NEOs, for the most recently completed fiscal year, to company performance.

PRACTICE POINT: Item 402(v) permits companies to voluntarily provide supplemental measures of compensation or financial performance (in the table or in other disclosure), and other supplemental disclosures, so long as any such measure or disclosure is clearly identified as supplemental, not misleading, and not presented with greater prominence than the required disclosure.

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