REITs Executive Compensation Guide

Say-on-Frequency In addition to the Say-on-Pay proposal, Rule 14a-21 under the Exchange Act requires companies subject to the SEC’s proxy rules to provide their stockholders with a non-binding, advisory vote on the frequency with which the company should present a Say-on-Pay vote to its stockholders. This “Say-on-Frequency” proposal must be presented to the company’s stockholders at least once every six years and must give stockholders four voting options for the frequency of Say-on-Pay votes: every year, every two years, every three years or to abstain. As a result, a company could elect to hold Say-on-Pay votes every year, but only hold Say-on-Frequency votes every six years. Furthermore, because the Say-on-Frequency vote is non-binding, the company’s board of directors could elect to hold Say-on-Pay votes every three years, for instance, notwithstanding that a majority of the stockholders voting on the Say-on-Frequency proposal voted for annual Say-on-Pay votes. Companies are required to disclose in their proxy statements the current frequency of Say-on-Pay votes and when the next scheduled Say-on-Pay vote will occur.

After the completion of the annual meeting, companies are required to file an Item 5.07 Form 8-K briefly describing the matters that were voted upon by stockholders and the number of votes cast for, against or withheld. In addition, Item 5.07(d) of Form 8-K requires companies to disclose their decision with respect to the frequency of Say-on-Pay votes within 150 days of the meeting. Most companies elect to disclose the board of director’s determination with respect to the frequency of Say-on-Pay votes at the time the initial Item 5.07 Form 8-K is filed, although some companies defer the decision. The SEC allows some flexibility with respect to the wording of the proposal. For instance, instead of saying “every year,” “every two years,” “every three years” or “abstain,” companies may use “every 1, 2 or 3 years, or abstain.” THE FOLLOWING IS SAMPLE DISCLOSURE THAT A COMPANY MAY USE IN CONNECTION WITH A SAY-ON-FREQUENCY PROPOSAL: “RESOLVED, that the stockholders of REIT X determine, on an advisory basis, whether the stockholders of REIT X shall conduct an advisory vote every one year, every two years or every three years regarding the compensation of REIT X’s NEOs as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, executive compensation tables and narrative discussion, as set forth in REIT X’s annualproxy statements.”

Say-on-Frequency among REITs*

One Year

93%

Two Years

0%

Three Years

7%

Say-on-Frequency Vote among REITs*

% of REITs with >1 Frequency Vote Since Dodd-Frank Enacted

74%

Years between Frequency Votes (most prevalent)

6 years

*Excludes emerging-growth and micro-cap companies

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