REITs Executive Compensation Guide

PRACTICE POINT: The new pay-for-performance disclosure is expected to require a fair amount of additional preparation, especially for the 2023 proxy season. Key items that need to be addressed to prepare include: ■ Calculate “compensation actually paid” which may require new fair value estimates with third-party appraisers. ■ Determine the appropriate peer group to use for TSR – most REITS are expected to use a published industry index from the 10-K for simplicity purposes. ■ Carefully consider the most appropriate “Company-Selected Measure” for the table – must REITs expect to use a per share earnings metric like FFO, AFFO, Core FFO, etc.

New Incentive Compensation Clawback Rules On October 26, 2022, the SEC adopted final rules that direct the national securities exchanges to establish listing standards that require each listed company to develop and implement a policy (i.e., a clawback policy) providing for the recovery, in the event of a required accounting restatement (both “big R” and “little r” restatements, as discussed below), of incentive-based compensation received by current or former executive officers where that compensation was based on the erroneously

reported financial information. In addition, the listing standards will require listed companies to (i) disclose their clawback policy, (ii) file their clawback policy as an exhibit to their annual report, and (iii) provide disclosure in their filings with the SEC if recovery of erroneously awarded incentive compensation is triggered by the clawback policy. A company that does not develop, implement and comply with a clawback policy would be subject to delisting.

2023 Guide to REIT Executive Compensation | 4