UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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| | Filed by the Registrant x |
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| | oPreliminary Proxy Statement |
| | o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| | xDefinitive Proxy Statement |
| | oDefinitive Additional Materials |
| | oSoliciting Material Pursuant to § 240.14a-12 |
Duke Realty Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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| | xNo fee required. |
| | oFee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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| | 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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| | 4) Proposed maximum aggregate value of transaction: |
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| | oFee paid previously with preliminary materials. |
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| | oCheck box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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600 East 96th Street
Suite 100
Indianapolis, Indiana 46240
(317) 808-6000
March 14, 2018
Dear Fellow Shareholder:
The We are focused on creating long-term value for you and all of our stakeholders. We appreciate the trust you place in us to oversee your interests in our business and would like to highlight some of the actions we took in 2019 and the beginning of this year to help ensure we create value over the long term.
Corporate Responsibility
At the end of 2019, we hired a Vice President of Corporate Responsibility, whose sole responsibility will be to lead our efforts in all facets of environmental, social, and governance (ESG) initiatives and the implementation of related strategies, policies, communications, and processes. We also committed to integrating innovative, sustainable building design features in alignment with LEED®, including constructing to LEED criteria and achieving certification in all new developments pursuant to a Sustainable Development Policy. LEED® - an acronym for Leadership in Energy and Environmental Design™ - is a registered trademark of the U.S. Green Building Council®. In addition, in November 2019, we were the first of the industrial REITs to issue a “green bond” in the United States. We are proud of our ESG efforts, but recognize that we still have opportunities to do more. We believe our new Vice President of Corporate Responsibility will help us do just that.
Board Refreshment and Diversity
We have continued our efforts to refresh and diversify our Board. Last year, we said farewell to two directors and added one new director, Mr. Warren M. Thompson, founder of DirectorsThompson Hospitality Corporation. Mr. Thompson brings business administration, corporate governance, board, financial, and officersentrepreneurship expertise to the Board. In January of Duke Realty Corporationthis year, our Board also appointed Ms. Tamara D. Fischer, President and Chief Executive Officer of National Storage Affiliates Trust, as a new director. Ms. Fischer brings auditing, business administration, capital markets, investor relations, mergers and acquisitions, public company, and risk oversight expertise to the Board. Consistent with our Board Diversity and Inclusion Policy, and based on the self-identified diversity characteristics of our directors, our Board now includes four women and two people of color.
Talent Management
At the beginning of 2020, our Board’s Executive Compensation Committee changed its name to the Compensation and Human Capital Committee. In addition to reviewing executive compensation, the Compensation and Human Capital Committee now reviews associate turnover and diversity, as well as associate development and engagement programs. Making sure this is the responsibility of a Board committee reinforces how important talent management is to us.
We hope that you will be able to join me in extending to you a cordial invitation to attendus at our 2020 Annual Meeting of shareholders. This meeting will be heldShareholders on Wednesday, April 25, 2018, at 3:00 p.m. local time, at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204. To reserve your seat at the Annual Meeting, please call 317-808-6005 or send an e-mail to ir@dukerealty.com. As in past years, we believe that both the shareholders and management of Duke Realty Corporation can gain much through participation at this meeting. Our objective is to make it as informative and interesting as possible.
This year we again are pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish29, 2020. The accompanying proxy materials to their shareholders overcontain detailed information about the Internet. We believe that this e-proxy process will expedite shareholders’ receipt of proxy materials, while lowering the costs of delivery and reducing the environmental impact of our Annual Meeting. On or about March 14, 2018, we mailed to a majority of our shareholders a notice containing instructionsmatters on how to access our proxy statement and 2017 Annual Report to shareholders and howwhich you are being asked to vote. All other shareholders will receive these materials by mail. The proxy statement contains instructions on how you can
(i) receive a paper copy of the proxy statement and 2017 Annual Report, if you only received a notice by mail, or (ii) elect to receive future proxy statements and annual reports over the Internet, if you received them by mail this year.
Whether or not you plan to attend the Annual Meeting, weWe urge you to read the materials carefully and vote promptly by mail, by telephone or onin accordance with the InternetBoard’s recommendations. Your vote is very important to ensure thatus. On behalf of our associates and our Board, we recordthank you for your votes on the business matters presented at the Annual Meeting.support of Duke Realty.
We look forward to seeing you on April 25th.Sincerely,
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| Sincerely, |
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| /s/ JAMES B. CONNOR | |
| James B. Connor |
| | David P. Stockert |
| Chairman and Chief Executive Officer | | Lead Director |
TABLE OF CONTENTS
600 East 96th Street
Suite 100
Indianapolis, Indiana 46240
(317) 808-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 25, 2018
Notice is hereby given that the 2018 Annual Meeting of Shareholders, or the Annual Meeting, of Duke Realty Corporation, or the Company, will be held at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204, on Wednesday, April 25, 2018, at 3:00 p.m. local time. At the Annual Meeting, the shareholders will be asked to act on the following:
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| 1. To elect thirteen directors to serve on the Company’s Board of Directors for a one-year term ending at the 2019 Annual Meeting of Shareholders; |
| 2. To vote on an advisory basis to approve the compensation of the Company’s named executive officers as set forth in this proxy statement; |
| 3. To ratify the reappointment of KPMG LLP as the Company’s independent registered public accountants for the fiscal year 2018; and |
| 4. To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
Only shareholders of record at the close of business on February 23, 2018 are entitled to notice of and to vote at the Annual Meeting or at any adjournments or postponements thereof. At least a majority of the outstanding shares of common stock of the Company entitled to vote at the Annual Meeting present in person or by proxy is required for a quorum.
YOUR VOTE IS IMPORTANT!
Submitting your proxy does not affect your right to vote in person if you attend the Annual Meeting. Instead, it benefits the Company by reducing the expenses of additional proxy solicitation. Therefore, you are urged to submit your proxy as soon as possible, regardless of whether or not you expect to attend the Annual Meeting. You may revoke your proxy at any time before its exercise by (i) delivering written notice of revocation to the Company’s Corporate Secretary, Ann C. Dee, at the above address, (ii) submitting to the Company a duly executed proxy card bearing a later date, (iii) voting via the Internet or by telephone at a later date, or (iv) appearing at the Annual Meeting and voting in person; provided, however, that no such revocation under clause (i) or (ii) shall be effective until written notice of revocation or a later dated proxy card is received by the Company’s Corporate Secretary at or before the Annual Meeting, and no such revocation under clause (iii) shall be effective unless received on or before 11:59 p.m., Indianapolis local time, on April 24, 2018.
When you submit your proxy, you authorize James B. Connor and Ann C. Dee or either one of them, each with full power of substitution, to vote your shares at the Annual Meeting in accordance with your instructions or, if no instructions are given, to vote for the election of the director nominees, for approval, on an advisory basis, of the compensation of the Company’s named executive officers, for ratification of the appointment of the independent auditors for 2018, and to vote in their discretion on any other business that may properly come before the Annual Meeting and any adjournments or postponements of the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting to be Held on April 25, 2018
The Company’s proxy statement, proxy card and 2017 Annual Report are available at http://www.proxyvote.com.
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| By order of the Board of Directors,
/s/ ANN C. DEE
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Indianapolis, Indiana | Ann C. Dee |
March 14, 2018 | Executive Vice President, General Counsel and Corporate Secretary
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20182020 PROXY SUMMARY
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read this entire proxy statement carefully before voting.
General
The Board of Directors of In this proxy statement, the “company,” “we,” “our” and “us” refer to Duke Realty Corporation orand its consolidated subsidiaries, unless the Company,context requires otherwise.
2019 Business Highlights
For more information regarding our 2019 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2019.
Compensation Highlights
Corporate Responsibility Highlights
Corporate Governance Highlights
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| Independence and Compliance | | Stock Guidelines |
| þ | 92% of our Board of Directors (Board) is independent: All directors, other than the Chairman, are independent | þ
| No hedging or pledging of our securities
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| Lead independent director role with significant authority and responsibilities
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| Minimum stock ownership requirements |
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| Fully independent Audit, Corporate Governance, Compensation and Human Capital, and Finance Committees | | Other Governance |
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| Annual evaluations of Board and its committees | þ
| Proxy access |
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| Annual evaluations of individual directors | þ | Shareholders can amend bylaws
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| þ | At least 75% attendance at Board and committee meetings
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| Shareholders can call a special meeting |
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| Directors are elected annually
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| No related-party transactions |
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| Majority vote standard in uncontested director elections
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| Corporate Responsibility Committee that reports to Board |
| Composition | þ
| No shareholder rights plan |
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| 31% of our Board is female | | |
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| Mix of director tenure, skills, and background that provides a balance of experience and institutional knowledge with fresh perspectives | | |
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| Board Diversity and Inclusion Policy | | |
2020 Proxy Information
Our Board is soliciting proxies to be voted at the Company’s 2018 Annual Meeting of Shareholders, or the Annual Meeting. ThisOur proxy statement provides theshareholders with information shareholders need to knowneeded to vote by proxy or in person at the Annual Meeting. Shareholders do not need to attend the Annual Meeting in person in order to vote. Voting instructions are below.
Annual Meeting of Shareholders
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• Time and Date | 3:00 p.m. local time,10 a.m. CT, April 25, 201829, 2020 |
• Place | The Conrad Indianapolis, 50 West WashingtonPeninsula Hotel, 108 East Superior Street Indianapolis, Indiana 46204(at North Michigan Avenue), Chicago, Illinois 60611 |
• Record Date | February 23, 201820, 2020 |
• Voting | All shareholders of record as of the close of business on the Record Date are entitled to vote at the Annual Meeting. Each share of common stock outstanding on the Record Date is entitled to one vote on each item submitted for consideration. |
• Quorum | In order forFor any business to be conducted, the holders of a majority of the shares of common stock entitled to vote at the Annual Meeting must be present, either in person or represented by proxy. For the purpose of determining the presence of a quorum, abstentions and broker non-votes (which occur when shares held by brokers or nominees for beneficial owners are voted on some matters but not on others) generally will be counted as present. As of the Record Date, 356,990,530368,342,908 shares of common stock were issued and outstanding. |
Meeting AgendaHow to Vote
Election of thirteen directors
Advisory vote to approve the compensation of named executive officers
Ratification of KPMG as auditors for 2018
Transaction of other business that may properly come before the meeting
Voting
Listed belowHere are the alternative methods available to shareholders of record for casting votes atvoting on the Annual Meeting.proposals in this proxy.
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| | | Vote, sign, and date your proxy card and mailcard. Mail it in the enclosed postage-paid envelope. |
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| | | Vote in person at the Annual Meeting. For driving directions to the Annual Meeting, please call 317-808-6005.317.808.6005. |
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| | | Call toll-free 1-800-690-69031.800.690.6903 and follow the instructions. You will be prompted for certain information that can be found on your proxy card. |
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| | | Log on to http:https://www.proxyvote.com and follow the on-screen instructions. You will be prompted to enter certain information that can be found on your proxy card. |
Note: Please refer to specific instructions provided on the Notice Regarding the Availability of Proxy Materials for the Annual Meeting or your printed proxy materials. If you are a beneficial holder who holds shares in “street name,” please refer to the voting instruction form provided by your bank, broker, or other nominee.
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Note: Please referProposal One: Election of 13 Directors
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| | Board Vote Recommendation | Page Reference (for more detail) |
| FOR EACH DIRECTOR NOMINEE
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| • | We are asking shareholders to elect 13 directors to serve for a one-year term that will expire at the company’s 2021 Annual Meeting or until their successors have been elected and qualified. | | |
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| Each director nominee is elected annually by the affirmative vote of a majority of shareholders present in person or represented by proxy and entitled to vote. An abstention will result in a nominee receiving fewer affirmative votes and, therefore, will have the same effect as a vote against the nominee. Brokers are not entitled to vote uninstructed shares on director elections; therefore, broker non-votes are not considered entitled to vote and will not have an impact on the election of directors. | | |
Proposal Two: Advisory Vote to Approve the specific instructions set forth on the Notice Regarding the AvailabilityCompensation of Proxy Materials for the Annual Meeting, or the Notice, or printed proxy materials.Named Executive Officers
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| | Board Vote Recommendation | Page Reference (for more detail) |
| FOR | 34 |
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| We are asking shareholders to approve, on an advisory basis, the compensation of the named executive officers as discussed and disclosed in this proxy statement, including the Compensation Discussion and Analysis beginning on page 35 and the tables and narratives that follow under Executive Compensation beginning on page 53. | | |
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| The proposal to approve, on an advisory basis, the compensation of the company’s named executive officers will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions and broker non-votes will not be treated as votes cast and, therefore, will not have an impact on the vote to approve compensation. | | |
Proposal Three: Ratification of Reappointment of Independent Registered Public Accounting Firm
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| | Board Vote Recommendation | Page Reference (for more detail) |
| FOR | 67 |
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| We are asking shareholders to ratify the reappointment of KPMG LLP as the company’s independent registered public accountants for the 2020 fiscal year. | | |
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| To ratify the selection of KPMG, votes cast in favor of the proposal must exceed votes cast against the proposal. Abstentions will not be treated as votes cast and, therefore, will not have an impact on the ratification of KPMG as our independent registered public accountants. The ratification of the selection of KPMG as the company’s independent registered public accountants for 2020 is considered a discretionary matter, and brokers will be permitted to vote uninstructed shares as to such matter. | | |
Other
If you haveare a beneficial owner (i.e., you hold your shares held bythrough a broker or other nominee), you may instruct your broker to vote your shares by following the instructions that the broker provides to you.provides. If you sign over voting rights but do not provide specific instructions, your broker will vote on your behalf only on the proposals over which it has discretionary authority (Proposal Three). For Proposals One and Two, your instructions will be counted as broker non-votes. Most brokers offer voting by mail, telephone, and on the Internet.
If you are a shareholder of record, you may vote by:
returning a properly executed proxy card;
voting in person at the Annual Meeting; or
following the instructions on the Notice to vote online or by telephone.
When you return a properly executed proxy card, the Companywe will vote the shares that the proxy card represents in accordance with your directions. If you return the signed proxy card with no direction on a proposal, the Companywe will vote your proxy “FOR”proxy:
•“FOR” each director nominee in Proposal One, “FOR”One;
•“FOR” Proposal Two,Two;
•“FOR” Proposal Three; and “FOR” Proposal Three, and
•in accordance with the proxy holder’s discretion, on any other matter that may properly come before the Annual Meeting, including any adjournments or postponements thereof.
You may revoke your proxy at any time before its exercise by:
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(i) | delivering written notice of revocation to the Company’s Corporate Secretary, Ms. Ann C. Dee, at 600 East 96postponements.th Street, Suite 100, Indianapolis, Indiana 46240;
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(ii) | submitting to the Company a duly executed proxy card bearing a later date; |
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(iii) | voting via the Internet or by telephone at a later date; or |
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(iv) | appearing at the Annual Meeting and voting in person; |
provided, however, that no such revocation under clause (i) or (ii) shall be effective until written notice of revocation or a later dated proxy card is received by the Company’s Corporate Secretary at or before the Annual Meeting, and no such revocation under clause (iii) shall be effective unless received on or before 11:59 p.m., Indianapolis local time, on April 24, 2018.
Voting Matters
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| Board Vote Recommendation | Page Reference (for more detail) |
Election of Thirteen Directors | FOR EACH DIRECTOR NOMINEE | 6 |
Advisory Vote to Approve the Compensation of Named Executive Officers | FOR | 25 |
Ratification of KPMG as Auditors for 2018 | FOR | 61 |
Board of Directors Nominees
We are asking shareholders to elect thirteen directors to serve for a one-year term that will expire at the Company’s 2019 Annual Meeting or until their successors have been elected and qualified. The biographical information of each director nominee begins on page 7. Each director nominee is elected annually by the affirmative vote of at least a majority of the shareholders present in person or represented by proxy and entitled to vote for the election of directors. An abstention will result in a nominee receiving fewer affirmative votes and therefore will have the same effect as a vote against the nominee. Brokers are not entitled to vote uninstructed shares on director elections; therefore, broker non-votes are not considered entitled to vote and will not have an impact on the election of directors.
Advisory Vote on the Compensation of Named Executive Officers
We are asking shareholders to approve, on an advisory basis, the compensation of the named executive officers as discussed and disclosed in this proxy statement, including the Compensation Discussion and Analysis beginning on page 26 and the tables and narratives that follow under Executive Compensation beginning on page 44. The proposal to
approve, on an advisory basis, the compensation of the Company’s named executive officers will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions and broker non-votes will not be treated as votes cast and therefore will not have an impact on the vote to approve the compensation.
We have designed our executive compensation program to attract and retain the highest quality executive officers, directly link their pay to the Company’s performance, and build value for our shareholders. Our program provides total compensation opportunities at levels that are competitive in our industry, ties a significant portion of each executive’s compensation to achieving our key business objectives, and closely aligns the interests of our executives with the interests of our shareholders. In sum, our compensation is designed to reward executives when the Company achieves strong financial and operational results, and likewise to provide reduced pay when financial and operating results are not as strong. We believe the compensation of the named executive officers is reflective of and consistent with that intent.
Auditors
We are asking shareholders to ratify the reappointment of KPMG LLP as the Company’s independent registered public accountants for the 2018 fiscal year. In order to ratify the selection of KPMG, the votes cast in favor of the proposal must exceed the votes cast against the proposal. Abstentions will not be treated as votes cast and therefore will not have an impact on the ratification of KPMG as our independent registered public accountants. The ratification of the selection of KPMG as the Company’s independent registered public accountants for 2018 will be deemed to be a discretionary matter and brokers will be permitted to vote uninstructed shares as to such matter. Set forth below is summary information with respect to KPMG’s fees for services provided in 2017 and 2016.
Audit Fees: $1,498,250 for 2017 and $1,354,220 for 2016.
Audit-Related Fees:$51,500 for 2017 and $43,000 for 2016. These fees include employee benefit plan audits and other accounting related consultation.
Tax Fees: $43,382 for 2017 and $169,847 for 2016. These fees are for services for various tax consulting matters and include $16,762 and $148,338 in 2017 and 2016, respectively, approved by the Audit Committee for special projects.
All Other Fees: None.
Other
Your proxy gives discretionary authority to Mr. James B. Connor, our Chairman and Chief Executive Officer (CEO), and Ms. Ann C. Dee, with respect toour Executive Vice President, General Counsel and Corporate Secretary, on any other matters that might be brought before the Annual Meeting. If you are a record owner and you sign a proxy card but do not provide instructions with respect to any proposalregarding the proposals on such card, the proxy holdercard, your shares will votebe voted in accordance with the BoardBoard’s recommendations, as noted above.
You may revoke your proxy at any time before its exercise by:
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| (i) | delivering written notice of revocation to Ms. Dee at 8711 River Crossing Blvd., Indianapolis, Indiana 46240; |
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| (ii) | submitting to the company a duly executed proxy card with a later date; |
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| (iii) | voting via the Internet or telephone at a later date; or |
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| (iv) | appearing at the Annual Meeting and voting in person. |
Written revocations will not be effective until received by Ms. Dee at or before the Annual Meeting. Telephone and Internet revocations will not be effective unless, in the case of Director’s recommendations for such proposal.shareholders who hold their shares through our 401(K) Plan, received on or before 11:59 p.m., Indianapolis local time, on April 23, 2020, and, in the case of all other shareholders, received on or before 11:59 p.m., Indianapolis local time, on April 27, 2020. If you are a beneficial owner, (i.e.,you will need to obtain a valid proxy from your broker or other nominee that is the record holder to vote in person at the Annual Meeting.
We are offering shareholders the opportunity to confirm their votes were cast in accordance with their instructions. Vote confirmation is consistent with our commitment to sound corporate governance standards and an important means to increase transparency. Beginning March 14, 2020, and for up to two months after the Annual Meeting, you may confirm your vote beginning 24 hours after your vote is received, whether it was cast by proxy card, electronically, or telephonically. You may confirm that your instructions were received and cast per your instructions included by logging onto https://www.proxyvote.com using your control number (located on your Notice Regarding the Availability of Proxy Materials or proxy card). If you hold your shares through a broker or other nominee) and you sign voting instructions but do not provide instructions with respectnominee, the ability to any proposal,confirm your vote may be affected by the rules of the broker will vote on your behalf only on such proposals over which it has discretionary authority (Proposal Three),or other nominee and for allthe confirmation may not confirm whether the broker or other proposals (Proposals One and Two), your instructions will be counted as broker non-votes.
Shareholder Proposals and Nominations for 2019 Annual Meeting
The deadline for shareholder proposalsnominee allocated the correct number of shares to be included in our proxy statement for the 2019 annual meeting of shareholders pursuant to applicable Securities and Exchange Commission, or SEC, rules is November 14, 2018. For notice of director nominations by shareholders to be included in our proxy materials for the 2019 annual meeting of shareholders pursuant to the Company’s proxy access bylaw provision to be considered timely, notice must be received no earlier than October 15, 2018 and no later than November 14, 2018.
If a shareholder wishes to present a proposal or nomination at the 2019 annual meeting, even if the proposal is not intended to be included in the Company’s 2019 proxy materials, the Company’s bylaws require that the shareholder give advance written notice to the Company’s Corporate Secretary at least 120 days prior to the one year anniversary of theyou.
date when the proxy statement was released to shareholders in connection with the previous year’s annual meeting, which for the 2019 annual meeting will also be November 14, 2018.
Shareholder proposals and nominations should be submitted in writing to the Company (Attention: Ms. Ann C. Dee, CorporateSecretary). Any such proposals and nominations must comply with all applicable SEC rules and the applicable requirements set forth in the Company’s bylaws.
Mailing Date/Internet Availability of Proxy Materials
This proxy statement, the enclosed proxy card, and our 2017Annual2019 Annual Report or a Notice Regarding the Availability of Proxy Materials (the Notice) were mailed or e-mailed to shareholders beginning on or about March 14, 2018.11, 2020. The Notice containsincludes instructions on how to access the proxy materials online. Shareholders who received the Notice by mail or e-mail will not receivebe mailed a printed copy of the proxy materials in the mail unless they request a copy in the manner described in the Notice. All shareholders will be able to access the proxy materials on the website referred to in the Notice and this proxy statement and will be able to request to receive a printed set of the proxy materials by mail or electronically, in either case, free of charge.
Duke Realty is soliciting proxies to be voted at the Annual Meeting, and has paid the cost of preparing, printing, assembling, and mailing the proxy materials, and also will bear the costs of other materials sent to shareholders in connection with this solicitation. We also may reimburse brokerage houses and other custodians, nominees, and fiduciaries for their expenses incurred in forwarding solicitation materials to the beneficial owners of shares held of record.
In addition to the solicitation of proxies by use of the mail, Duke Realty officers and regular employees of the Companyother associates may solicit proxies by telephone, facsimile, e-mail, or personal interviews without additional compensation. It isWe also contemplated thatexpect brokerage houses willto forward the proxy materials to shareholders at the request of the Company.our request. Receipt of more than one proxy card or voting instruction form indicates that a shareholder has multiple accounts at the transfer agent or with stockbrokers. Shareholders should complete and return all proxy cards and voting instruction forms received to ensure that all of their shares are voted.
Shareholders of record that desirewho want to receive future proxy statements and annual reports electronically should log on to http:https://www.proxyvote.com and follow the instructions to vote using the Internet and, when prompted, indicate that they agreewant to receive or access proxy materials electronically in future years.the future. Shareholders will need to refer to the Companycompany number and control number found on the proxy card. Shareholders may cancel this electronic enrollment if they later wishdecide to receive proxy statements and annual reports by regular mail.
Proxy Solicitation
The solicitation is being made by the Company, and the Company will bear the cost of preparing, printing, assembling, and mailing the Notice, proxy statement, proxy card, and other materials that may be sent to shareholders in connection with this solicitation. The Company also may reimburse brokerage houses and other custodians, nominees, and fiduciaries for their expenses incurred in forwarding solicitation materials to the beneficial owners of shares held of record by such persons.
Information about Communications with Duke Realty Corporation and Our Board of Directors
The Company provides a procedure for theShareholders may communicate with Duke Realty’s Board of Directors to accept communications from shareholders of the Companyon matters that are reasonably related to protectingprotect or promotingpromote legitimate shareholder interests. Such procedure can be foundFor instructions on how to deliver such communications, visit the Investor Relations/Corporate Governance section of the Company’sDuke Realty’s website at http://www.dukerealty.com.
YouShareholders and other interested parties also may also contact the Board of Directors by writing to:
Board of Directors
c/o the Corporate Secretary
600 East 96th Street, Suite 1008711 River Crossing Blvd.
Indianapolis, Indiana 46240
You may contacte-mail Duke Realty’s Lead Director at leaddirector@dukerealty.com.
In addition, shareholders and other interested parties may communicate with Duke Realty’s independent, non-management directors and/or the independententire Board, as required by the New York Stock Exchange’s (NYSE) listing standards. Written communications to non-management directors should be sent to:
Non-Management Directors
c/o Corporate Secretary
8711 River Crossing Blvd.
Indianapolis, Indiana 46240
Duke Realty’s Corporate Secretary may be contacted by writingsending correspondence to: 8711 River Crossing Blvd., Indianapolis, Indiana 46240, Attn: Corporate Secretary.
Independent Directors
c/o Corporate Secretary
600 East 96th Street, Suite 100
Indianapolis, Indiana 46240
You may also contact the Company’s Lead Director by emailing him at leaddirector@dukerealty.com.
In addition, as required by the listing standards established by the New York Stock Exchange, or NYSE, the Company provides a method for shareholders and other interested parties to communicate with the non-management directors and/or the entire Board of Directors. Such communications should be directed to the non-management directors by writing to:
Non-Management Directors
c/o Corporate Secretary
600 East 96th Street, Suite 100
Indianapolis, Indiana 46240
Shareholders and other interested parties may communicate with the entire Board of Directors by writing to the address set forth above.
The Company’s Corporate Secretary may be contacted by sending correspondence to: 600 East 96th Street, Suite 100, Indianapolis, Indiana 46240, Attn: Corporate Secretary.
Additional Information
The Company’sOur website is located at http://www.dukerealty.com.Although the Though information contained on the Company’sour website is not part of this proxy statement, you can view additionalfind company information on the website,there, such as the Company’sour Code of Conduct,Business Ethics, corporate governance guidelines, charters of the committees of the Board, of Directors and reports that the Company fileswe file and furnishesfurnish with the SEC. A copySecurities and Exchange Commission (SEC) . Copies of the Company’sour Code of Conduct,Business Ethics, corporate governance guidelines, andor charters of theBoard committees of the Board of Directors also may be obtained by written request addressed to writing to:
Duke Realty Corporation 600 East 96th Street, Suite 100,
8711 River Crossing Blvd.
Indianapolis, Indiana 46240
Attention: Investor Relations.Relations
PROPOSAL ONE: ELECTION OF THIRTEEN13 DIRECTORS TO SERVE
ON THE COMPANY’S BOARD OF DIRECTORS FOR A ONE-YEAR TERM
ENDING ON THE DATE OF THE COMPANY’S 20192021 ANNUAL MEETING
The Board of Directors currently consists of fourteen13 members. On January 31, 2018,29, 2020, based on the recommendation of the Corporate Governance Committee, the Board of Directors nominated each of the existing13 directors with the exception of Mr. Jack R. Shaw, for re-election to serve for a one-year term that will expire at the Company’s 20192021 Annual Meeting or when their successors have been elected and qualified. Mr. Shaw is not standing for re-election at the Annual Meeting, and as a result, the Board of Directors reduced the size of the Board of Directors to be thirteen members effective as of the day of the Annual Meeting.
Each nominee has agreed to be named in this proxy statement and to serve if elected. The Board of Directors believes that all of the nominees for director will be available for election. However, if a nominee is unavailable for election, the proxy holders may vote for another nominee proposed by the Board of Directors.Board. If the Board of Directors does not propose another director nominee prior to or at the Annual Meeting, the Board, of Directors, by resolution, may reduce the number of directors to be elected at the Annual Meeting.
The election of each director requires the affirmative vote of at least a majority of the shareholders present in person or represented by proxy and entitled to vote for the election of directors. An abstention will result in a nominee receiving fewer votes and, therefore, will have the same effect as a vote against the nominee. Brokers are not entitled to vote uninstructed shares in director elections; therefore, broker non-votes are not considered entitled to vote and will not have an impact on the election of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL OF THE DIRECTOR NOMINEES NAMED ON THE FOLLOWING PAGES.IN THIS PROXY STATEMENT.
BOARD EVALUATIONS AND MEMBERSHIP CRITERIA
The Corporate Governance Committee, whose responsibilities are described in “Board Committees,” evaluates the effectiveness of the Board and each of its committees annually. As part of this evaluation, each director fills out an assessment of the entire Board as well as the committees on which he or she serves. The Corporate Governance Committee then reviews a compilation of the results of the various self-assessments. In addition, each year the General Counsel also conducts a candid, in-person self-assessment interview with each Board member, designed to enhance his or her participation and role as a director, as well as to assess the competencies and skills each individual director is expected to bring to the Board.
The Corporate Governance Committee believes that though the company can benefit from experienced directors, periodic refreshment of the Board is important. The Corporate Governance Committee, therefore, regularly discusses director succession and reviews potential candidates. The Corporate Governance Committee may employ a search firm to identify director candidates. In 2019, we hired Ferguson Partners Ltd. to review potential director candidates. Key factors that the Corporate Governance Committee considers when determining whether to appoint directors include:
In nominating members for election to the Board, the Corporate Governance Committee will consider written nominations by shareholders. Our bylaws state that the Corporate Governance Committee must consider these nominees as long as the recommendation is submitted to our Corporate Secretary in a timely manner and the nomination complies with the requirements in our bylaws. Timing requirements are described in “Shareholder Proposals and Nominations for 2021 Annual Meeting.” The Corporate Governance Committee screens all potential candidates in the same manner regardless of the source of recommendation. However, the Corporate Governance Committee may, in its sole discretion, reject any recommendation for any reason. The complete set of requirements for the submission of a shareholder nomination is included in our bylaws. The Board has also adopted a proxy access bylaw, which allows certain eligible shareholders to nominate director candidates and requires us to include such candidates in our proxy materials for an annual meeting of shareholders that involves the election of directors. For more information about the eligibility and other requirements to submit director nominees pursuant to our proxy access bylaw, see “Nominees for Election of Directors-Proxy Access Policy” and “Shareholder Proposals and Nominations for 2021 Annual Meeting.”
Diversity is an important strategic initiative at Duke Realty and has relevance to our associates, suppliers, and shareholders. We also are committed to diversity at the Board level. Having a Board composed of men, women, and people of color with different perspectives facilitates more balanced, wide-ranging discussion in the boardroom. The Board also is committed to inclusion--ensuring that all directors feel welcomed, valued, and able to contribute their opinions. Accordingly, the Board has adopted a Board Diversity and Inclusion Policy, which is available on the Investor Relations/Corporate Governance section of our website at http://www.dukerealty.com. Pursuant to the Board Diversity and Inclusion Policy, our Board considers director nominees from diverse backgrounds, and the Corporate Governance Committee periodically reviews the director selection process to ensure that women and people of color are included. Pursuant to this policy, and using the self-identified diversity characteristics of our directors, our Corporate Governance Committee nominated four women and two people of color to the Board this year.
The Board believes that it is important to have directors with strong leadership experience as well as experience in the real estate industry and operations. A balance of perspectives from other industries also is critical to well-rounded oversight. The chart below highlights the industry experience and qualifications of our nominees to the Board as more fully described in “Nominees for Election as Directors.”
The gender diversity and tenure of our director nominees is as follows:
NOMINEES FOR ELECTION AS DIRECTORS
The following paragraphs give the name and age of each director nominee; the tenure of each director nominee on the Board of Directors; the committees of the Board of Directors on which each director nominee serves; the particular experience, skills, and qualifications that were instrumental in the Corporate Governance Committee’s determination that each director nominee should serve as a director of the Company; each director nominee’s business experience over the last five years or more; and the public company boards of directors on which each director nominee has served over the last five years.
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| | John P. Case, Age 5456 |
| Director Since: 2018 |
| Board Committee: N/ACompensation and Human Capital |
| Qualifications: Mr. Case brings real estate industry,auditing, business administration, capital markets, corporate development, corporate governance, human capital, international business, investor relations, marketing, mergers and acquisitions, public company, finance, and executive managementrisk oversight expertise to the Board of Directors.Board. |
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| Since 2019, Mr. Case ishas served as Chairman & Principal of Bunker Hill Group, a private non-registered investment company with primary holdings in the beverage distribution business and related real estate. Mr. Case served as Chief Executive Officer and Director of Realty Income Corporation an Sfrom 2013 to 2018. Realty Income Corporation is a Standard & Poor’s 500 Index (S&P 500500) company that invests primarily in net lease single-tenant retail assets in the United States, a position he has held since 2013.properties. Mr. Case joined Realty Income Corporation in 2010 as Executive Vice President, Chief Investment Officer and served in this capacity until 2013, when heOfficer. He was promoted to President in March 2013 and Chief Investment Officer.Executive Officer in September 2013. Prior to joining Realty Income Corporation, Mr. Case served for 19 years as a New York-based real estate investment banker. He began his investment banking career at Merrill Lynch, where he worked for 14 years, and was named a Managing Director in 2000. Following his tenure at Merrill Lynch, Mr. Case was co-head of Americas Real Estate Investment Banking at UBS and later the co-head of Real Estate Investment Banking for RBC Capital Markets, where he also served on the firm’s Global Investment Banking Management Committee. Mr. Case currently serves as a member of the Board of Trustees of Washington and Lee University. In addition, Mr. Case ishas been extensively involved in the broader real estate industry, servinghaving served on the Executive Board of the National Association of Real Estate Investment Trusts (NAREIT), The President’s Councilas a member of theThe Real Estate Roundtable, and as a member of the International Council of Shopping Centers (ICSC). |
William Cavanaugh III, Age 79
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Director Since: 1999; Lead Director |
Board Committee: Corporate Governance, Chairperson
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Qualifications: Mr. Cavanaugh, who served as the Chief Executive Officer of Progress Energy, Inc., a publicly-traded energy company, for eight years, brings corporate finance, operations, nuclear energy industry, public company, and executive leadership expertise to the Board of Directors.
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Mr. Cavanaugh served as the Chairman of the World Association of Nuclear Operators (WANO) from 2004 until 2009. He retired as Chairman and Chief Executive Officer of Progress Energy, Inc. in 2004, posts he had held since 1999 and 1996, respectively. Mr. Cavanaugh currently is a professor emeritus at the Institute for Advanced Discovery & Innovation at the University of South Florida. |
Alan H. Cohen, Age 71
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Director Since: 2011
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Board Committee: Executive Compensation, Chairperson
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Qualifications: As an attorney and co-founder of The Finish Line, Inc., a publicly-traded athletic wear retailer where he served in various executive positions including Chief Executive Officer and President, Mr. Cohen brings consumer goods industry, corporate operations, legal, and executive leadership expertise to the Board of Directors.
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Mr. Cohen is the co-founder of The Finish Line, Inc. and served as its President from 1982 to 2003 and Chief Executive Officer from 1982 to 2008. He served as Chairman of the Board of Directors of The Finish Line, Inc. from 1992 to 2010 and as one of its directors from 1976 to 2010. Mr. Cohen is an attorney and practiced law from 1973 to 1981. |
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James B. Connor, Age 5961 |
| Director Since: 2015 |
| Board Committee: N/A |
| Qualifications: Mr. Connor, who joined the Companycompany in 1998, brings real estate industry, finance, operations,business administration, capital markets, corporate development, corporate governance, human capital, investor relations, marketing, public company, and executive leadershipsustainability expertise to the Board of Directors.Board. |
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| Mr. Connor was named the Company’s Chairman and Chief Executive Officer of Duke Realty Corporation, commencing April 26, 2017, and joined the Company’scompany’s Board of Directors in 2015. Prior to being named Chairman and Chief Executive Officer, Mr. Connor held various senior management positions with the Company,company, including President and CEO of the CompanyChief Executive Officer from January 1, 2016 to April 26,25, 2017, Senior Executive Vice President and Chief Operating Officer of the Company from 2013 to 2015, Senior Regional Executive Vice President of the Company from 2011 to 2013, and Executive Vice President of the Company’s Midwest region from 2003 to 2010.2011, and Senior Vice President between 1998 and 2003. Prior to joining the Companycompany in 1998, Mr. Connor held numerous executive and brokerage positions with Cushman & Wakefield, most recently serving as Senior Managing Director for the Midwest area. In 2019, Mr. Connor joined the Board of Trustees of EPR Properties, a publicly traded real estate investment trust (REIT). Mr. Connor also serves on the Board of Trustees of Roosevelt University and is a member of the Advisory Board of Directors of the Marshall Bennett Institute of Real Estate at Roosevelt University in Chicago.University. In addition, Mr. Connor is also a member of the Executive Board of Governors of the National AssociationNAREIT and a member of The Real Estate Investment Trusts and the Real Estate Roundtable andRoundtable. Mr. Connor also serves as a director of the Central Indiana Corporate Partnership. |
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| | Ngaire E. Cuneo, Age 6769 |
| Director Since: 1995 |
| Board Committees:Committee: Audit and Finance |
| Qualifications: Ms. Cuneo brings finance, accounting,auditing, business administration, consulting, venture capital, corporate development, insurance industry, financial services industry, and executive managementmergers and acquisitions expertise to the Board of Directors.Board. |
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| Ms. Cuneo is an Executive Vice President of Silac, LLC, a private insurance company, a position she has held since July 2016. Ms. Cuneo has also served on the Board of Directors of Sterling Life Insurance Company, a private insurance company, since July 2016. In addition, Ms. Cuneo has been a partner of Red Associates, LLC, a venture capital firm in the financial services sector, since 2002. Ms. Cuneo also served as an Executive Vice President of Forethought Financial Group, an insurance holding company, from 2006 until 2010. From 1992 through 2001, Ms. Cuneo was an Executive Vice President of Conseco, Inc., an owner, operator, and provider of services to companies in the financial services industry. TheMs. Cuneo has served on the Board of Directors of Sterling Life Insurance Company, a private insurance company, since July 2016. The Board has determined that Ms. Cuneo qualifies as an “audit committee financial expert” as defined under the applicable rules established by the SEC. |
| | Charles R. Eitel, Age 6870 |
| Director Since: 1999 |
| Board Committee: Corporate Governance |
| Qualifications: Mr. Eitel brings consulting, business administration, finance, operations, manufacturing industry,capital markets, consulting, corporate development, corporate governance, entrepreneurship, human capital, international business, investor relations, marketing, mergers and executive leadershipacquisitions, public company, risk oversight, and sustainability expertise to the Board of Directors.Board. |
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| Mr. Eitel is the former Chief Executive Officer and Chairman of the Board of WS Packaging Group, Inc., a privately owned producer of printed, packaged goods. Mr. Eitel served in those positions between 2015 and February 2018. Between 2009 and 2014, Mr. Eitel was a partner of Eitel & Armstrong, LLC, which is now North Inlet Partners, a consulting practice that provides hands-on operating and financial guidance to middle market companies. Prior to forming Eitel & Armstrong in 2009, Mr. Eitel served as Vice Chairman of the Board of Directors of the Simmons Bedding Company, an Atlanta-based manufacturer of mattresses, from 2008 to 2009. Mr. Eitel served as Chairman and Chief Executive Officer of the Simmons Bedding Company from 2000 until his appointment to Vice Chairman in 2008. On November 16, 2009, the Simmons Bedding Company filed for protection under Chapter 11 of the federal bankruptcy laws, from which it emerged on January 21, 2010.Since 1999, Mr. Eitel serveshas served on the Board of Directors of American Fidelity Assurance Corporation, a provider of supplemental health insurance benefits and financial services to education employees, auto dealerships, health care providers, and municipal workers across the United States. Since 2019, Mr. Eitel has served on the Board of Directors of Flexsteel Industries, Inc., a public company manufacturer, importer, and marketer of residential and contract upholstered and wooden furniture products in the United States. Mr. Eitel currently chairs the Corporate Governance and Nominating Committee of its Board of Directors. |
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| | Tamara D. Fischer, Age 64 |
| Director Since: 2020 |
| Board Committee: N/A |
| Qualifications: Ms. Fischer brings auditing, business administration, capital markets, investor relations, mergers and acquisitions, public company, and risk oversight expertise to the Board. |
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| Ms. Fischer has served since January 1, 2020, as a member of the Board of Trustees and the President and Chief Executive Officer of National Storage Affiliates Trust, a real estate investment trust focused on the ownership, operation, and acquisition of self-storage properties. Ms. Fischer joined the company at its inception in 2013, serving as its Executive Vice President and Chief Financial Officer until she was promoted to President and Chief Financial Officer on July 1, 2018. From 2004 to 2008, Ms. Fischer served as the Executive Vice President and Chief Financial Officer of Vintage Wine Trust, Inc., a real estate investment trust created to acquire and own vineyards, wineries, and other real estate related to the wine industry. She was involved in all aspects of the company’s capital markets, investor relations, and financial reporting activities. She continued to serve Vintage Wine Trust, Inc. as a consultant through its dissolution in 2010 and served in various other consulting positions until becoming involved with National Storage Affiliates. From 1993 to 2003, Ms. Fischer served as the Executive Vice President and Chief Financial Officer of Chateau Communities, Inc., one of the largest real estate investment trusts in the manufactured home community sector. There, she was responsible for overseeing the company’s initial public offering and several mergers and acquisitions. She was also involved in capital markets activity, investor relations, financial reporting, and administrative responsibilities. Ms. Fischer remained at Chateau Communities, Inc. through its sale to Hometown America LLC in 2003. Prior to her experience at Chateau Communities, Inc., Ms. Fischer spent nine years at Coopers & Lybrand (now PricewaterhouseCoopers), initially as an accountant in the real estate practice and later as an audit manager. |
| | Norman K. Jenkins, Age 5557 |
| Director Since: 2017 |
| Board Committee: N/ACompensation and Human Capital |
| Qualifications: Mr. Jenkins brings real estate industry, asset management, finance, accounting,auditing, business administration, capital markets, entrepreneurship, human capital, mergers and executive managementacquisitions, and public company expertise to the Board of Directors.Board. |
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| Mr. Jenkins is President and Chief Executive Officer of Capstone Development, LLC, a privately-held developer of institutional-quality lodging assets. Prior to founding Capstone Development, LLC in 2009, Mr. Jenkins served in various roles for Marriott International, Inc. between 1992 and 2008, including most recently as Senior Vice President, North American Lodging Development. Mr. Jenkins began his career with McDonald’s Corporation holding finance and operating roles between 1986 and 1992. Mr. Jenkins currently serves on the BoardBoards of TrusteesThe Howard University School of Howard University,Business and the Developer Roundtable of Washington, DC, and Suburban Hospital.DC. |
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| | Melanie R. Sabelhaus, Age 6971 |
| Director Since: 2012 |
| Board Committee: Executive Compensation |
Qualifications: With business experience in both the private and public sectors, Ms. Sabelhaus brings public company, corporate governance, real estate industry, healthcare industry, and executive leadership expertise to the Board of Directors.Human Capital, Chairperson
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Qualifications: Ms. Sabelhaus has over 30 years of small business, corporatebrings consulting, entrepreneurship, human capital, and federal government experience. Since 2005, marketing expertise to the Board. |
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| Ms. Sabelhaus has been devoting her timea consultant to supporting non-profit organizations. Ms. Sabelhaus currently serves as a Senior Principal of Jerold Panas, Linzy & Partners, a consulting firm that provides philanthropicphilanthropy for several nonprofit organizations with fundraising advice. Ms. Sabelhaus also serves as a trustee of Johns Hopkins Health System.around the country since 2005. Ms. Sabelhaus was appointed by President Bush as Deputy Administrator of the U.S. Small Business Administration from 2002 to 2005, where she was responsible for policy development and program supervision. From 1998 until 2018, Ms. Sabelhaus dedicated her time to community fundraising and women’s business issues. In 1986, Ms. Sabelhaus founded Exclusive Interim Properties (EIP), a real estate company that specialized in short-term, furnished housing. Ms. Sabelhaus served as Chief Executive Officer of EIP from 1986 until the company merged with four similar firms in 1997 taking the company public and renaming it Bridgestreet Accommodations World Wide.BridgeStreet Worldwide. From 1997 until 1998, Ms. Sabelhaus served as Vice President for Global Sales of Bridgestreet Accommodations World Wide.BridgeStreet Worldwide. From 1972 to 1986, Ms. Sabelhaus worked at International Business Machine (IBM), during which time she aided in the launch of IBM’s consumer retail program. Ms. Sabelhaus co-founded the United Way’s Women United, raising $1.5 billion over 15 years, and the last 15American Red Cross Tiffany Circle, Society of Women Leaders. Ms. Sabelhaus was the Vice Chair of the National American Red Cross for 11 years. Ms. Sabelhaus currently serves as a trustee of Johns Hopkins Health System. |
| | Peter M. Scott, III, Age 6870 |
| Director Since: 2011 |
| Board Committees: Audit and Finance; ChairmanChairperson of the Audit Committee |
Qualifications: Having held various management positions with Progress Energy, Inc. including Chief Financial Officer, Mr. Scott brings energy and telecommunications industry, public company finance, accounting, auditing, and executive leadership expertise to the Board of Directors.
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| | Qualifications: Mr. Scott brings business administration, capital markets, consulting, corporate development, corporate governance, governmental and regulatory matters, human capital, investor relations, mergers and acquisitions, public company, and risk oversight expertise to the Board. |
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| Mr. Scott was Chief Financial Officer of Progress Energy, Inc. from 2000 to 2003 and from 2005 until his retirement in 2008. From 2004 to 2008, Mr. Scott was also President and Chief Executive Officer of Progress Energy Service Company LLC and had responsibility for all financial and administrative functions of Progress Energy, Inc. Mr. Scott also held various other management positions with Progress Energy, Inc. or its subsidiaries between 2000 and 2008, including responsibilities for its telecommunications and competitive energy subsidiaries. Before joining Progress Energy, Inc. in 2000, Mr. Scott was the President of Scott, Madden & Associates, Inc., a general management consulting firm that he founded in 1983. The firm served clients in a number of industries, including energy and telecommunications. From 1981 until 1983, Mr. Scott served as the Assistant to the Executive Vice President of Carolina Power & Light Company, Inc., a predecessor of Progress Energy, Inc. Prior to that, Mr. Scott was a principal and partner in Theodore Barry & Associates, Inc., a Los Angeles-based consulting firm, between 1977 and 1981. Mr. Scott serves as Chairman of the Board of Governors at Research Triangle International, a not-for-profit organization that provides research and technical services. The Board of Directors has determined that Mr. Scott qualifies as an “audit committee financial expert” as defined under the applicable rules established by the SEC. |
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| | David P. Stockert, Age 5557 |
| Director Since: 20182017 (Lead Director since 2019) |
| Board Committee: N/ACorporate Governance, Chairperson |
| Qualifications: Mr. Stockert brings real estate industry,business administration, capital markets, investor relations, mergers and acquisitions, and public company accounting, and executive management expertise to the Board of Directors.Board. |
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| In 2019, Mr. Stockert became one of three general partners of Sweetwater Opportunity Fund, L.P., a real estate opportunity fund headquartered in Atlanta, Georgia. The fund was formed to invest in commercial property in the Southeast and Texas, targeting primarily sub-institutional, opportunistic, situational, and relationship-based investments. From 2002 to 2016, Mr. Stockert served as Chief Executive Officer and President of Post Properties, Inc. from 2002 to 2016 and as President and Chief Operating Officer from 2001 to 2002. Prior to joining Post Properties, Inc., Mr. Stockert served as Executive Vice President of Duke Realty Corporation from 1999 to 2000, and as Senior Vice President and Chief Financial Officer of Weeks Corporation from 1995 to 1999. Prior to joining Weeks Corporation, Mr. Stockert was an investment banker and a certified public accountant. Since 2016, Mr. Stockert currently serveshas served on the Board of Directors of Mid-America Apartment Communities, Inc. as well as, a publicly traded REIT that invests in apartments. Mr. Stockert also serves on multiple civic and charitable boards in the Atlanta area, chairing or serving on various committees.area. |
| | Chris T. Sultemeier, Age 5557 |
| Director Since: 2018 |
| Board Committee: N/AFinance |
| Qualifications: Mr. Sultemeier brings supply chain and logistics,business administration, human capital, international business, public company, and leadershipsustainability expertise to the Board of Directors.Board. |
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| Mr. Sultemeier served as Executive Vice President Logistics of Walmart Stores, Inc. and President/Chief Executive Officer of Wal-mart Transportation LLC between 2012 and 2017. Prior to that, Mr. Sultemeier held various roles in logistics and merchandising for Walmart Stores, Inc., which he joined in 1989. Mr. Sultemeier served as a U.S. Army Captain between 1984 and 1989. Mr. Sultemeier currently serves on the U.S. Congressional Medal of Honor Foundation Board of Directors and teaches at M.I.T. in its Supply Chain/Transportation MastersMaster’s Program. |
| | Michael E. Szymanczyk, Age 6971 |
| Director Since: 2014 |
| Board Committees: Audit and Finance; Chairperson of the Finance Committee |
| Qualifications: AsMr. Szymanczyk brings auditing, business administration, capital markets, corporate development, corporate governance, governmental and regulatory matters, human capital, investor relations, marketing, mergers and acquisitions, public company, and risk oversight expertise to the formerBoard. |
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| Mr. Szymanczyk currently serves as Chief Executive Officer of Endurance Capital LLC, a Fortune 500 company, Mr. Szymanczyk brings leadership, management, and analytic skills as well as expertise in addressing governmental and regulatory matters to the Board of Directors. |
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family-owned real estate investment venture, a position he has held since 2006. Mr. Szymanczyk was the Chairman of the Board and Chief Executive Officer of Altria Group, Inc. from 2008 until 2012. From 2002 through 2008, Mr. Szymanczyk served as Chairman, President and Chief Executive Officer of Philip Morris USA Inc. Prior to that, he served in various sales and marketing roles at Proctor & Gamble, Inc. and Kraft, Inc. Mr. Szymanczyk currently serves as Chief Executive Officer of Endurance Capital LLC, a family-owned real estate investment venture. Mr. Szymanczyk also serves on the Finance and Risk Oversight Committee and the AuditCompensation, Governance, and Nominating Committee of the Board of Directors of Dominion Resources, Inc., a publicly-traded provider of electricity, natural gas and related services to customers primarily in the eastern and western regions of the U.S. Mr. Szymanczyk has served as a director of Dominion Resources, Inc. since 2012. The Board of Directors has determined that Mr. Szymanczyk qualifies as an “audit committee financial expert” as defined under the applicable rules established by the SEC. |
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| | Warren M. Thompson, Age 60 |
| Director Since: 2019 |
| Board Committee: Finance |
| Qualifications: Mr. Thompson brings business administration and entrepreneurship expertise to the Board. |
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| Mr. Thompson is Chairman of the Board and President of Thompson Hospitality, a private retail food and facilities management firm. Mr. Thompson founded Thompson Hospitality in 1992. Mr. Thompson began his career with the Marriott Corporation in 1983, where he started with the Restaurant Fast Track Management Development Program and served in 15 positions in nine years, ending as Vice President Operations for the Host Division. Mr. Thompson has served on the Board of Directors of Compass Group North American, a public food service and support services company since 1997. |
| | Lynn C. Thurber, Age 7173 |
| Director Since: 2008 |
| Board Committee: Executive CompensationCorporate Governance |
| Qualifications: Ms. Thurber brings auditing, capital markets, corporate governance, human capital, international business, asset management, investment management, finance, accounting, real estate industry, financial services industry,investor relations, mergers and executive managementacquisitions, public company, risk oversight, and sustainability expertise to the Board of Directors.Board. |
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| Ms. Thurber served as the non-executive Chairman of LaSalle Investment Management, a subsidiary of Jones Lang LaSalle Inc. and a global real estate money management firm that invests in private real estate as well as publicly-tradedpublicly traded real estate companies on behalf of institutional and individual investors, from 2006 until 2017. Prior to becoming Chairman, Ms. Thurber was the Chief Executive Officer of LaSalle Investment Management from 2000 to 2006. Since 2011, Ms. Thurber ishas served as the Chairman of the Board of Directors of Jones Lang LaSalle Income Property Trust, Inc., a non-listed REIT that owns and manages a diversified portfolio of office, retail, industrial, and apartment properties, and isproperties. In addition, since 2016, Ms. Thurber has served as a trustee of Acadia Realty Trust, a real estate investment trustpublic REIT that primarily invests in retail properties. Ms. Thurber is a Governing Trustee and former Chairman of Global Board of the Urban Land Institute, a non-profit organization that provides leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. |
The Structure of the Board of Directors and the Lead Director
The Board of Directors views the selection of the Chairman and Chief Executive Officer or CEO,(CEO) as one of its most important responsibilities. As a result, theThe Board of Directors believes that it should remain free to determine whether these positions should be combined or separated based on circumstances of the Company and the composition of the Board of Directors at any given time. The Board of Directors has determined that a combined Chairman and CEO is in the best interests of the Companycompany at this time and has chosen Mr. James B. Connor, who is our CEO, to serve also as the Chairman of the Board.
The Board of Directors believes that having the same person serve as Board Chairman and CEO is in the best interests of our shareholders because itboth positions demonstrates for our employees,associates, vendors, tenants, and other stakeholders that the Companycompany is under strong leadership, with a singleone person setting the tone and having primary responsibility for managing our operations. In order toTo ensure that thean appropriate balance of power exists between our unaffiliated directors and the CEO, the Board of Directors established the Lead Director position. The independent members of the Board of Directors have chosen Mr. William Cavanaugh III, theDavid P. Stockert, Chairperson of our Corporate Governance Committee, to serve as Lead Director. As set forthoutlined in our corporate governance guidelines, the Lead Director chairs the executive sessions of the independent directors, which are held at least quarterly. The Lead Director also serves as a liaison between the CEO and the independent directors, approves information sent to the Board, of Directors and approves meeting agendas and schedules to assureensure that there is sufficient time for discussion of all agenda items.
We firmly believe that our board structure allows for appropriate oversight by the Board of Directors in fulfilling its duties to our Companycompany and to our shareholders.
Board Oversight of Risk Management
The Board of Directors is primarily responsible for overseeing the Company’scompany’s risk management processes. A portion of this responsibility has been delegated by the Board of Directors to each of the committees of the Board of Directors with respect to the assessment of the Company’scompany’s risks and risk management in its respective areas of oversight. The focus of each of the committees with respect to risk management is as follows:
These committees and the full Board of Directors focus on the most significant risks facing the Companycompany and the Company’scompany’s general risk management strategy and also ensure that risks undertaken by the Companycompany are consistent with the Board of Directors’Board’s appetite for risk. While the Board of Directors oversees the Company’scompany’s risk management, Companycompany management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing the Companycompany and that the leadership structure of the Board of Directors supports this approach.
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Management works with the Board to assess the company’s risks as follows:
Cyber Security
Cyber security is a growing risk for companies. While the Audit Committee is tasked with overseeing cyber security, it is of particular concern to the full Board, as well. Management reports at least annually to the full Board, as well as quarterly to the Audit Committee, regarding the steps the company is taking to protect the company from cyber attacks or intrusions. Management has created a Cyber Security Committee that meets regularly to discuss the cyber risks facing the company. The Cyber Security Committee focuses on the following strategy areas: legal and compliance; operations and technology; business continuity and crisis management; leadership and governance; human factors; and information risk management.
Independent Directors
Under the Company’scompany’s articles of incorporation, at least three-fourths of the directors must be persons who are “unaffiliated directors,” which means only those persons who are not officers or employeesassociates of the Companycompany or any of its affiliates. Because none ofSince Mr. John P. Case, Mr. William Cavanaugh III, Mr. Alan H. Cohen,Case; Ms. Ngaire E. Cuneo,Cuneo; Mr. Charles R. Eitel,Eitel; Ms. Tamara D. Fischer; Mr. Norman K. Jenkins,Jenkins; Ms. Melanie R. Sabelhaus,Sabelhaus; Mr. Peter M. Scott, III,III; Mr. David P. Stockert,Stockert; Mr. Chris Sultemeier,T. Sultemeier; Mr. Michael E. Szymanczyk, orSzymanczyk; Mr. Warren M. Thompson; and Ms. Lynn C. Thurber isare not currently an officerofficers or employeeassociates of the Companycompany or any of its affiliates, 92% of the director nominees are unaffiliated directors.
In addition, under the enhanced corporate governance listing standards of the NYSE, at least a majority of the Company’scompany’s directors, and all of the members of the Company’scompany’s Audit, Committee, Executive Compensation Committeeand Human Capital, and Corporate Governance Committee,Committees, must meet the test of “independence” as defined under the listing standards of the NYSE. The NYSE listing standards provide that to qualify as an “independent” director, in addition to satisfying certain bright-line criteria, the Board of Directors must affirmatively determine that a director has no material relationship with the Companycompany (either directly or as a partner, shareholder, or officer of an organization that has a relationship with the Company)company) that would compromise suchthe director’s independence.In January 2018,2020, the Board of Directors undertook a review of director independence. During this review, the Board of Directors considered, among other things, relationships and transactions during the past three years between each director or any member of his or her immediate family, on the one hand, and the Companycompany and its subsidiaries and affiliates, on the other hand. The purpose of the review was to determine whether any such relationships or transactions
were inconsistent with a determination that the director is independentdirector’s independence as defined under the NYSE listing standards. Based on the review, the Board of Directors has determined that all of the unaffiliated director nominees as well as Mr. Shaw, are independent under the listing standards of the NYSE.
Further to the independence standard discussed above,In addition, members of the Audit Committee also must satisfy additional independence requirements established by the SEC and the NYSE. Specifically, members of the Audit Committee may not accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Companycompany or any of its subsidiaries other than their directors’ compensation, and they may not be affiliated with the Companycompany or anyits subsidiaries. All members of its subsidiaries.the Audit Committee satisfy these enhanced independence requirements.
Finally, in affirmatively determining the independence of any director who will serve on the Executive Compensation and Human Capital Committee, the Board of Directors must consider all factors specifically relevant to determining whetherregarding a director has adirector’s relationship to the Companycompany that is material tocould affect that director’s ability to be independent from management in connection with thehis or her duties, of a member of the Executive Compensation Committee, including (1) the source of such director’s compensation, of the director, including any consulting, advisory, or other compensatory fee paid by the Companycompany to suchthe director; and (2) whether the director is affiliated with the Company,company, its subsidiaries, or its affiliates. All members of the Compensation and Human Capital Committee satisfy these enhanced independence requirements.
Majority Voting Policy for Director Elections
The Company’scompany’s articles of incorporation provide that the election of directors at an annual meeting shall be by the affirmative vote of at least a majority of the shareholders present in person or by proxy and entitled to vote at such meeting. In addition, the Company’scompany’s corporate governance guidelines provide for a majority voting policy for the election of directors. Pursuant to this policy, in any non-contested election of directors, any nominee for director who does not receive the affirmative vote of at least a majority of the votes entitled to vote thereon present in person or by proxy or a “Majority(an Against Vote,”Vote) shall promptly tender his or her resignation following certification of the shareholder vote. The Corporate Governance Committee shall consider the resignation offer and recommend to the Board of Directors the action to be taken with respect to such offer of resignation. Within 90 days following certification of the shareholder vote, the Board of Directors will act on the recommendation of the Corporate Governance Committee.
Any director who tenders his or her resignation pursuant tounder this provision shall not participate in the Corporate Governance Committee recommendation or Board of Directors action regarding whether to accept the resignation offer.
If each member of the Corporate Governance Committee receives a Majorityan Against Vote in the same election, then the independent directors who did not receive a Majorityan Against Vote shall appoint a committee amongst themselves to consider the resignation offers and recommend to the Board of Directors whether to accept them.
If the only three or fewer directors who do not receive a Majorityan Against Vote in the same election, constitute three or fewer directors, all directors may participate in the action regardingdecision of whether or not to accept the resignation offers.
Proxy Access Policy
On October 25, 2017, the Board of Directors approved the amendment and restatement of the Company’scompany’s bylaws to implement proxy access. The Company’sThese bylaws as amended, providestate that whenever the Board of Directors solicits proxies with respect tofor the election of directors at an annual meeting of shareholders, subject to certain requirements, a shareholder, or a group of up to 20 shareholders, owning three percent or more of the Company’scompany’s outstanding common stock continuously for at least three years can require the Companycompany to include in its proxy materials for such annual meeting director nominations for up to the greater of (i) of:
•20% of the number of directors up for election, rounding down to nearest whole number,number; or (ii)
•two directors.
Shareholder requests to include shareholder nominees in the Company’scompany’s proxy materials for the 20192021 annual meeting of shareholders must be received by the Corporate Secretary no earlier than October 15, 201812, 2020, and no later than November 14, 201811, 2020, and must satisfy the requirements specified in the Company’scompany’s bylaws.
BOARD COMMITTEES
The Board of Directors has four standing committees, with each committee described below. The members of each committee are also listed below. The committees consist solely of independent directors.
Audit Committee
The Board of Directors has establishedcommittees: the Audit Committee, in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The AuditCorporate Governance Committee, provides assistance to the Board of Directors in fulfilling its responsibility to the shareholders relating to corporate accounting, reporting practices, the qualityCompensation and integrity of the financial reports,Human Capital Committee, and other operating controls of the Company. The Audit Committee also is responsible for the selection of the independent auditors and engagement partner and oversees the auditors’ activities. The selection of the independent auditor is made in the best interests of the Company and its shareholders.Finance Committee. All committee members are independent. In addition, the committee has responsibility for directly overseeing the Company’s enterprise and risk management and for supervising and assessing the performance of the Company’s internal audit department.
Eacheach member of the Audit Committee satisfies the enhanced independence requirements for audit committee members as defined in the NYSE listing standards of the NYSE and the rules of the SEC. The Audit Committee operates under a written charter which is available on the Investor Relations/Corporate Governance section of the Company’s website at http://www.dukerealty.com. In addition, the Investor Relations/Corporate Governance section of the Company’s website contains information regarding procedures established by the Audit Committee for the submission of complaints or concerns about the Company’s accounting, internal accounting controls or auditing matters.
The Board of Directors requires that at least oneSEC rules. Similarly, each member of the Board of Directors meet the criteria for an “audit committee financial expert” as defined under the rules of the SEC. The Board of Directors has determined that each of Ms. Cuneo, Mr. Scott,Compensation and Mr. Szymanczyk is an “audit committee financial expert” as defined under the applicable rules of the SEC.
Corporate Governance Committee
The purpose of the Corporate Governance Committee is to make recommendations to the Board of Directors regarding corporate governance policies and practices; oversee succession planning for senior management and the Board of Directors; recommend criteria for membership on the Board of Directors; nominate members for election to the Board of Directors; and make recommendations to the Board of Directors concerning the members, size, and responsibilities of each of the committees.
In determining appropriate candidates to nominate for election to the Board of Directors and in considering shareholder nominees, the Corporate Governance Committee generally considers the age, expertise, business experience, character, and other board memberships of the candidate. The Corporate Governance Committee considers director candidates with a view to bringing to the Board of Directors a variety of experience and backgrounds, including geographic, ethnic, and gender diversity. Directors should have familiarity with the Company’s business and industry, a high level of managerial experience in a relatively complex organization, and/or be accustomed to addressing complex issues. The committee seeks candidates of the highest character and integrity, and who have experience at or demonstrated understanding of strategy/policy setting and a reputation for working collegially. In addition, candidates should have sufficient time available to devote to the Company in order to carry out their duties as directors. The Corporate Governance Committee may employ a search firm to identify director candidates.
Diversity is an important strategic initiative at the Company and has relevance with respect to our employees, our suppliers, and our shareholders. Accordingly, the Corporate Governance Committee also recognizes the importance of diversity in identifying its director nominees and has a Board Diversity Policy, which is available on the Investor Relations/Corporate Governance section of the Company’s website at http://www.dukerealty.com.
In nominating members for election to the Board of Directors, the Corporate Governance Committee will consider nominees recommended by shareholders if such recommendations are made in writing to the committee. The Company’s bylaws state that the committee must consider such nominees so long as the recommendation is submitted to the Company’s Corporate Secretary at least 120 calendar days before the first anniversary of the date that the Company’s proxy statement was released to shareholders in connection with the previous year’s annual meeting of shareholders. However, if no annual meeting of shareholders was held in the previous year or if the date of the annual meeting of shareholders changed by more than 30 calendar days from the date contemplated at the time of the previous year’s proxy statement, the notice must be received by the Company’s Corporate Secretary not fewer than the later of (i) 150 calendar days prior to the date of the contemplated annual meeting or (ii) the date which is 10 calendar days after the date of the first public announcement or other notification to the shareholders of the date of the contemplated annual meeting. The Corporate Governance Committee screens all potential candidates in the same manner regardless of the source of recommendation. However, the Corporate Governance Committee may, in its sole discretion, reject any such recommendation for any reason. Shareholder nominations should contain a brief biographical sketch of the candidate, a document indicating the candidate’s willingness to be named in the proxy statement as a nominee and to serve if elected, and evidence of the nominating person’s share ownership. The complete set of requirements for any such nomination is included in the Company’s bylaws. The Board of Directors has also adopted a proxy access bylaw, which allows certain eligible shareholders to nominate director candidates and require the Company to include such candidates in its proxy materials for an annual meeting of shareholders that involves the election of directors. For more information about the eligibility and other requirements to submit director nominees pursuant to the Company’s proxy access bylaw, see “Nominees for Election as Directors-Proxy Access Policy” and “Shareholder Proposals and Nominations for 2019 Annual Meeting.”
The Corporate Governance Committee operates under a written charter, which is available on the Investor Relations/Corporate Governance section of the Company’s website athttp://www.dukerealty.com.
Executive Compensation Committee
The Executive Compensation Committee reviews and approves the compensation of the Board of Directors, CEO, and other executive officers of the Company and its affiliates (as designated by the Board of Directors from time to time). In addition, it oversees the Company’s compensation strategies, programs, plans, and policies to assure that the Board of Directors, CEO, other executive officers, and key management employees of the Company and its affiliates are compensated effectively and in a manner consistent with the stated compensation strategy of the Company. It also oversees the administration of all Company benefit plans. In addition, the committee reviews and approves the individual elements of compensation for the executive officers and directors of the Company. The Executive Compensation Committee may delegate authority to sub-committees as appropriate.
Each member of the Executive CompensationHuman Capital Committee satisfies the enhanced independence standards for compensation committee members as defined in the NYSE listing standards and SEC rules. The Board has adopted written charters for each of the NYSE and the rules of the SEC.these committees. The Executive Compensation Committee operates under a written charter, which ischarters are available on the Investor Relations/Corporate Governance section of the Company’sour website athttp://www.dukerealty.com.
The Executive Compensation Committee regularly uses independent compensation advisers to provide advice regarding our executive compensation program. For additional information regarding the role of the Executive Compensation Committee and its advisers, see “Compensation Discussion and Analysis—Our Executive Compensation Practices” and “—How We Make Compensation Decisions” later in this proxy statement.
Finance Committee
The Finance Committee reviews and evaluates the financial policies, plans, and structure of the Company, its subsidiaries and affiliates. In this role, the Finance Committee reviews the capital structure, investment decisions, financial commitments, and relationships with external sources of financing and rating agencies. The committee also reviews and authorizes asset acquisitions, asset dispositions, and development transactions exceeding certain threshold amounts established by the Board of Directors. The Finance Committee operates under a written charter, which is available onaddition, the Investor Relations/Corporate Governance section of our website contains procedures established by the Company’s website atAudit Committee for submitting complaints or concerns about our accounting, internal accounting controls, or auditing matters. The following table summarizes the primary responsibilities of the committees.http://www.dukerealty.com.
|
| |
| Committee | Primary Responsibilities |
| Audit | • provides assistance to the Board in fulfilling its responsibility to shareholders related to corporate accounting, reporting practices, the quality and integrity of financial reports, cyber security, and other operating controls of the company |
| • selects the company’s independent auditors and engagement partner in the best interests of the company and its shareholders |
| • oversees the independent auditors’ activities |
| • supervises and assesses the performance of the company’s internal audit department |
| Corporate Governance | • makes recommendations to the Board regarding corporate governance policies and practices and oversees compliance with such policies and practices |
| • oversees succession planning for senior management and the Board |
| • recommends criteria for membership on the Board |
| • nominates members for election to the Board |
| • makes recommendations to the Board concerning the members, size, and responsibilities of each of the committees |
| • periodically reviews our corporate responsibility practices
|
| Compensation and Human Capital | • reviews and approves the compensation of the Board, CEO, and other executive officers of the company and its affiliates |
| • oversees the company’s compensation strategies, programs, plans, and policies to ensure that the Board, CEO, other executive officers, and key management associates of the company and its affiliates are compensated effectively and in a manner consistent with the stated compensation strategy of the company |
| • oversees the administration of all company benefit plans |
| • reviews and approves the individual elements of compensation for the executive officers and directors of the company |
| • reviews associate turnover and diversity, as well as associate development and engagement programs |
| Finance | • reviews and evaluates the financial policies, plans, and structure of the company, its subsidiaries and affiliates |
| • reviews the capital structure, investment decisions, financial commitments, and relationships with external sources of financing and rating agencies |
| • reviews and authorizes asset acquisitions, asset dispositions, and development transactions exceeding threshold amounts established by the Board |
2019 BOARD COMMITTEE MEMBERSHIP AND MEETINGS
The following table provides membership and meeting information for each of the committees of the Board of Directors during 2017.
2019.(1)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Executive | | | | Corporate |
| | Board | | Audit | | Compensation | | Finance | | Governance |
| Thomas J. Baltimore, Jr.(1) | | Former Member | | | | | | | | | | | | | | | | Member | |
| William Cavanaugh III | | Lead Director | | | | | | | | | | | | | | | | Chairperson | |
| Alan H. Cohen | | Member | | | | | | | | Chairperson | | | | | | | | | |
| James B. Connor(2) | | Chairman | | | | | | | | | | | | | | | | | |
| Ngaire E. Cuneo | | Member | | | | Member | | | | | | | | Member | | | | | |
| Charles R. Eitel | | Member | | | | | | | | | | | | | | | | Member | |
| Norman K. Jenkins(3) | | Member | | | | | | | | | | | | | | | | | |
| Dennis D. Oklak(2) | | Former Chairman | | | | | | | | | | | | | | | | | |
| Melanie R. Sabelhaus | | Member | | | | | | | | Member | | | | | | | | | |
| Peter M. Scott, III(4) | | Member | | | | Chairman | | | | | | | | Member | | | | | |
| Jack R. Shaw(4) | | Member | | | | | | | | | | | | | | | | Member | |
| David P. Stockert(3) | | Member | | | | | | | | | | | | | | | | | |
| Michael E. Szymanczyk | | Member | | | | Member | | | | | | | | Chairperson | | | | | |
| Lynn C. Thurber | | Member | | | | | | | | Member | | | | | | | | | |
| Number of 2017 Meetings | | 8 | | | | 7 | | | | 4 | | | | 10 | | | | 6 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Board | Audit | Compensation and Human Capital | Finance | | Corporate Governance |
| John P. Case | | Member | | | | | | Member | | | | | | | | | |
William Cavanaugh III(2) | | Former Member | | | | | | | | | | | | | | Former Chairperson | |
Alan H. Cohen(2) | | Former Member | | | | | | | | | | Former Member | | | | | |
| James B. Connor | | Chairman | | | | | | | | | | | | | | | |
| Ngaire E. Cuneo | | Member | | | Member | | | | | | | | | | | | |
| Charles R. Eitel | | Member | | | | | | | | | | | | | | Member | |
| Norman K. Jenkins | | Member | | | | | | Member | | | | | | | | | |
| Melanie R. Sabelhaus | | Member | | | | | | Chairperson | | | | | | | | | |
| Peter M. Scott, III | | Member | | | Chairperson | | | | | | Member | | | | | |
| David P. Stockert | | Lead Director | | | | | | | | | | | | | | Chairperson | |
| Chris T. Sultemeier | | Member | | | | | | | | | | Member | | | | | |
| Michael E. Szymanczyk | | Member | | | Member | | | | | | | Chairperson | | | | |
| Warren M. Thompson | | Member | | | | | | | | | | Member | | | | | |
| Lynn C. Thurber | | Member | | | | | | | | | | | | | | Member | |
| Number of 2019 Meetings | | 6 | | | 4 | | | 5 | | | | 9 | | | | 4 | |
|
| |
(1) | Mr. BaltimoreAll directors, with the exception of Messrs. William Cavanaugh III and Alan H. Cohen, have served on the respective committee(s) listed above since May 1, 2019. |
(2) | Messrs. Cavanaugh and Cohen served as a directordirectors until the annual meeting of shareholders held on April 26, 2017,24, 2019, when hethey did not stand for re-election to the Board of Directors.re-election. |
| |
(2) | Mr. Oklak served as Chairman of the Board until the annual meeting of shareholders held on April 26, 2017, when he did not stand for re-election to the Board of Directors. Mr. Connor has been serving as Chairman of the Board since that time. |
| |
(3) | Messrs. Jenkins and Stockert were elected to the Board of Directors on July 26, 2017 and October 25, 2017, respectively. They did not serve on any committees of the Board of Directors during 2017. |
| |
(4) | Mr. Scott was appointed Chairman of the Audit Committee, effective May 1, 2017. Mr. Shaw served as Chairman of the Audit Committee and as a member of the Finance Committee until May 1, 2017. |
The independentIndependent directors met separately in executive sessions four times in 2017,2019, in addition to the committee meetings noted above. As Lead Director, Mr. Cavanaugh presided over eachthe first of these executive sessions.sessions, and Mr. David P. Stockert presided over the last three.
Attendance at Board Meetings and the Annual Meeting
All of our directors attended at least 75% of the meetings of the Board of Directors in 20172019 during the term of their tenure, including meetings of the committees of which they were members. The Companycompany encourages all of its directors to attend the annual meeting and, in 2017,2019, all directors, attended such meeting with the exception of Mr. Eitel.Warren M. Thompson, attended the meeting.
DIRECTOR COMPENSATION
The Companycompany does not pay additional compensation to directors who are also employees of the Company. The non-employeecompany. Non-employee directors received the following compensation in 2017:2019:
an annual retainer of $100,000, payable in cash unless otherwise elected to be paid in shares of our common stock.stock
an annual supplemental retainer for the directors serving in the roles indicated in the following table:
|
| | | |
| Service Description | Annual Amount |
|
Lead Director/Corporate Governance Committee Chairperson(1)Chairperson(1) |
| $30,000 |
|
Audit Committee ChairmanChairperson |
| $20,000 |
|
Executive Compensation and Human Capital Committee Chairperson |
| $15,00017,500 |
|
| Finance Committee Chairperson |
| $15,00017,500 |
|
| Director on more than one committee |
| $5,000 |
|
| |
(1) | The positions of Lead Director and Corporate Governance Committee Chairperson are currently held by the sameone individual, who receivedand in 2019, there was only one supplemental annual retainer infor the amount of $30,000 for 2017.two positions. |
an annual grant of restricted stock units or RSUs,(RSUs), pursuant to the Duke Realty Corporation 2015 Non-Employee Directors’ Compensation Plan or the 2015(2015 Directors’ Plan.Plan). These RSUs were granted on February 10, 2017,2019, and with the exception of Messrs. Cavanaugh and Cohen, all such RSUs vested in full on the first anniversary of the grant date. The RSUs granted to Messrs. Cavanaugh and Cohen on February 10, 2019, vested upon their retirement from the Board. The number of RSUs awarded was determined by dividing the grant value of $125,000 by the closing stock price on the grant date.
Newly appointed non-employee directors are entitled to a one-time grant of RSUs valued at $50,000. These awards vest in full on the second anniversary of the grant date of grant.assuming the recipient remains a director at such time. All retainers are paid on a quarterly basis in arrears, for the previous quarter’s service.
On an annual basis, the Executive Compensation and Human Capital Committee of the Board of Directors conducts a competitive review of our non-employee director compensation program using the same peer group of similarly-sized REITs that are used for executive compensation comparisons. Based on these reviews, the Executive Compensation and Human Capital Committee may recommendmake changes to the non-employee director compensation program for the upcoming year for the Board of Director’s consideration.year. The last such review was conducted in September 20172019 and indicated that our non-employee director compensation levels generally approximate the peer group median, with the exception of the annual grant of RSUs for non-employee directors and that our program designthe retainer for the Chairpersons of the Audit Committee and structure are consistent with marketthe Corporate Governance Committee, which were below the median. Effective January 1, 2020, the annual grant of RSUs was increased to $135,000, the supplemental retainer for the Chairperson of the Audit Committee was increased to $25,000, and “best” practices. Therefore,a supplemental retainer of $15,000 for the Executive CompensationChairperson of the Corporate Governance Committee recommendedwas added. The new supplemental retainer for the Chairperson of the Corporate Governance Committee is in addition to the Board of Directors that$30,000 supplemental retainer for the 2017 program be continued for 2018.Lead Director.
TheNon-employee directors also are also reimbursed for reasonable travel expenses incurred in connection with attendance at meetings of the Board, of Directors and its committees or other Companycompany functions in which non-employee directors participate at whichthe request of the Chairman of the Board of Directors and CEO request the non-employee directors to participate.CEO. In addition, the Company matches dollar for dollar,we match dollar-for-dollar donations made by eligible associates and directors, up to $1,000 per associate/director per calendar year, to the eligible nonprofit organization of their choice. The Company doesWe do not provide any perquisites, or other personal benefits, or property to directors for which the aggregate value would exceed $10,000 per director.
Non-employee directors may elect to defer receipt of all or a portion of their director compensation payable in cash, stock, or RSUs pursuant to the Directors’ Deferred Compensation Plan. The deferredDeferred compensation and earnings thereon are towill be paid to the directors after they cease to be members of the Board of Directors.Board. Deferred compensation that otherwise is otherwise payable in shares of common stock is invested in a “deferred stock account” under the Directors’ Deferred
of common stock is invested in a “deferred stock account” under the Directors’ Deferred Compensation Plan. Deferred compensation that is payable in cash may be invested in either a deferred stock account or an “interest account” under suchthis plan. Each of these types ofThese deferral accounts isare described below.
Deferred Stock Account. This account allows the director, in effect, to invest his or her deferred compensation in shares of the Company’scompany’s common stock. Funds in this account are credited as hypothetical shares of the Company’scompany’s common stock based on the market price at the time the compensation would otherwise have been paid. Dividends on these hypothetical shares are deemed to be reinvested in additional hypothetical shares based upon the market price of the Company’scompany’s common stock on the date dividends are paid. Actual shares are issued only when a director ends his or her service on the Board of Directors.Board.
Interest Account. Through December 31, 2017,2019, amounts in this account earned interest at a rate equal to 120% of the long-term applicable federal rate, as published by the Internal Revenue Service.
Stock Ownership Policies
Pursuant to the Company’sour Director and Executive Stock Ownership Guidelines or the Stock(Stock Ownership Guidelines,Guidelines), a stock ownership goal for each director is determined on an individual basis, first in dollars equal to five times the director’s annual retainer, and then by converting that amount to a fixed number of shares. Each director has five years to attain the target number of shares. A copy of these Stock Ownership Guidelines can be found on the Investor Relations/Corporate Governance section of the Company’sour website at http://www.dukerealty.com.
Stock Retention Requirements.
Until directors reach their targeted share ownership, they are required to retain any shares that they owned on the date they became subject to the Stock Ownership Guidelines and at least 75% of “net shares” delivered through the Company’sour director compensation programs. For this purpose, “net shares” means the number of shares obtained by exercising stock options or through the vesting of awards, less the number of shares the director sells or trades to pay for any exercise costs. If the director transfers an award to a family member who resides in the same household, the transferee will be subject to the same retention requirements and the shares will still be counted toward satisfaction of the ownership requirements.
The following table sets forth compensation information for all of the Company’s non-employee directors for the fiscal year ended December 31, 2017.
The following table sets forth compensation information for all of our non-employee directors for the fiscal year ended December 31, 2019.
Director Compensation Table for 20172019
| | | Name | | Fees Earned or Paid in Cash (1) | Stock Awards
(2)(3) | All Other Compensation (4) | Total | | Fees Earned or Paid in Cash (1) | Stock Awards
(2)(3) | All Other Compensation (4) | Total |
| Thomas J. Baltimore, Jr.(5) | | $72,500 | $125,000 | - | $197,500 | |
| John P. Case | | | $100,000 | $125,000 | – | $225,000 |
William Cavanaugh III | | $126,250 | $125,000 | - | $251,250 | | $97,500 | $125,000 | – | $222,500 |
| Alan H. Cohen | | $111,875 | $125,000 | - | $236,875 | | $75,000 | $125,000 | – | $200,000 |
| Ngaire E. Cuneo | | $102,500 | $125,000 | - | $227,500 | | $100,000 | $125,000 | – | $225,000 |
| Charles R. Eitel | | $97,500 | $125,000 | $1,000 | $223,500 | | $100,000 | $125,000 | $1,000 | $226,000 |
| Norman K. Jenkins | | $25,000 | $50,000 | - | $75,000 | | $100,000 | $125,000 | – | $225,000 |
| Dennis D. Oklak | | $50,000 | $125,000 | - | $175,000 | |
| Melanie R. Sabelhaus | | $97,500 | $125,000 | $1,000 | $223,500 | | $116,875 | $125,000 | $1,000 | $242,875 |
| Peter M. Scott, III | | $112,500 | $125,000 | - | $237,500 | | $125,000 | $125,000 | – | $250,000 |
| Jack R. Shaw | | $116,250 | $125,000 | - | $241,250 | |
| David P. Stockert | | - | $50,000 | $1,000 | $51,000 | |
David P. Stockert(5) | | | $115,000 | $125,000 | $1,000 | $241,000 |
| Chris T. Sultemeier | | | $100,000 | $125,000 | – | $225,000 |
| Michael E. Szymanczyk | | $116,875 | $125,000 | - | $241,875 | | $121,875 | $125,000 | – | $246,875 |
Warren M. Thompson(5) | | | $75,000 | $175,000 | - | $250,000 |
| Lynn C. Thurber | | $97,500 | $125,000 | $1,000 | $223,500 | | $100,000 | $125,000 | $1,000 | $226,000 |
| |
(1) | Because we pay director fees in arrears on a quarterly basis, a portion of the cash fees paid to directors in 20172019 was based on the prior year’s annual and supplemental retainer amount.amounts. Messrs. Baltimore, Cavanaugh, Jenkins, Stockert, and Cohen,Szymanczyk and Mses. Cuneo and Thurber each elected to receive payment of their annual cash retainer in shares of common stock as indicated in the following table. Furthermore, Mr.Messrs. Cavanaugh, Jenkins, and Szymanczyk and Ms. Cuneo elected to defer receipt of their shares for their annual retainer and any supplemental retainer pursuant to the Directors’ Deferred Compensation Plan. The number of shares was determined by dividing the amount of the applicable retainer by the closing stock price on the date the retainer was earned. |
|
| | |
| Name | | Total Number of Shares Received in 20172019 for Annual Cash Retainer |
Thomas J. Baltimore, Jr. | | 2,693 |
| William Cavanaugh III | | 4,608 |
Alan H. Cohen | | 8473,333 |
| Ngaire E. Cuneo | | 3,7433,306 |
| Norman K. Jenkins | | 3,306 |
| David P. Stockert | | 3,765 |
| Michael E. Szymanczyk | | 4,026 |
| Lynn C. Thurber | | 3,5603,306 |
| |
(2) | Represents the aggregate grant date fair value of stock awards we granted by the Company as computed under FASB (Financial Accounting Standards Board) ASC (Accounting Standards Codification) Topic 718.718, Compensation- Stock Compensation, (ASC 718). The fair value of the stock awards was equal to the stock price on the date of grant. Compensation in the form of stock awards includes RSUs granted in 2017.2019. |
| |
(3) | No options were granted to directors in 2017,2019, and there were no outstanding options held by the Company’sour non-employee directors as of December 31, 2017.2019. The following table sets forth the aggregate number of outstanding stock awards held by the Company’sour non-employee directors as of December 31, 2017:2019: |
|
| | |
| Name | | Number of RSUs |
Thomas J. Baltimore, Jr.John P. Case | | -6,289 |
| William Cavanaugh III | | 5,242–
|
| Alan H. Cohen | | 5,242–
|
| Ngaire E. Cuneo | | 5,2424,285 |
| Charles R. Eitel | | 5,2424,285 |
| Norman K. Jenkins | | 1,837 |
Dennis D. Oklak | | -4,285 |
| Melanie R. Sabelhaus | | 5,2424,285 |
| Peter M. Scott, III | | 5,242 |
Jack R. Shaw | | 5,2424,285 |
| David P. Stockert | | 1,8024,285 |
| Chris T. Sultemeier | | 6,289 |
| Michael E. Szymanczyk | | 5,2424,285 |
| Warren M. Thompson | | 6,003 |
| Lynn C. Thurber | | 5,2424,285 |
| |
(4) | Represents the amount of matching charitable contributions provided under the Duke Realty Matching Gifts program. |
| |
(5) | Mr. Baltimore forfeited his 2017 stock award upon his retirement from the Board of Directors on April 26, 2017.Reflects changes in committee assignments or Chairperson position during 2019. |
20
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors, or theBoard’s Audit Committee is composed of three directors, each of whom is independent under Securities and Exchange Commission, or SEC Rule 10A-3 and the listing standards of the New York Stock Exchange.NYSE. The duties and responsibilities of the Audit Committee are set forth in a written Audit Committee Charter which is available on the Investor Relations/Corporate Governance section of the Company’scompany’s website at http://www.dukerealty.com. The Board of Directors has determined that each of Ms. Cuneo, Mr. Scott, and Mr. Szymanczyk is an “audit committee financial expert” as defined by the rules of the SEC.
Management is responsible for the Company’scompany’s internal controls and financial reporting process andas well as compliance with laws and regulations and ethical business standards. KPMG LLP, or KPMG, the Company’scompany’s independent registered public accounting firm, is responsible for auditing the consolidated financial statements and expressing an opinion on the financial statements and the effectiveness of internal controls over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States)., or the PCAOB. The Audit Committee’s responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee meets separately at most regular committee meetings with management, the Internal Audit Department, and KPMG. The Audit Committee met with management and KPMG to review and discuss the Company’s 2017company’s 2019 consolidated financial statements. The Audit Committee also discussed with KPMG the matters required by the applicable requirements of the PCAOB Auditing Standard No. 16 (Communication with Audit Committees). Managementand the SEC, and KPMG also made presentations to the Audit Committee throughout the year on specific topics of interest, including: (i) current developments and best practices for audit committees; (ii) updates on the substantive requirements of the Sarbanes-Oxley Act of 2002, including management’s responsibility for assessing the effectiveness of internal control over financial reporting; (iii) the Company’scompany’s critical accounting policies; (iv) the applicability of several new and proposed accounting releases; and (v) numerous SEC initiatives. The Audit Committee has received the written disclosures and the letter from KPMG in accordance with applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with KPMG that firm’s independence. The Audit Committee pre-approved all audit, audit-related, and permitted non-audit services provided by KPMG to the Companycompany and the related fees for such services, and has concluded that such services are compatible with KPMG’s independence.
Based upon the Audit Committee’s discussions with management and KPMG, and the Audit Committee’s review of the representations of management and KPMG, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’scompany’s Annual Report on Form 10-K for the year ended December 31, 2017,2019, to be filed with the SEC.
Audit Committee
Peter M. Scott, III, ChairmanChairperson
Ngaire E. Cuneo
Michael E. Szymanczyk
The information contained in the Audit Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference in such filing.
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Company
We incurred the following fees for services rendered by KPMG, the Company’sour independent registered public accountants, during 20172019 and 2016:2018:
Audit Fees: $1,498,250$1,721,000 for 20172019 and $1,354,220$1,402,000 for 2016.2018, which included fees for services associated with comfort letters and auditor consents totaling $425,000 and $330,000 respectively.
Audit-Related Fees: $51,50055,000 for 20172019 and $43,000$53,000 for 2016.2018. These fees include employeeprimarily relate to associate benefit plan audits and other accounting related consultation.audits.
Tax Fees: $43,3827,673 for 20172019 and $169,847$25,162 for 2016.2018. These fees are for services foron various tax consulting matters and include $16,762 and $148,338an additional $15,000 in 2017 and 2016, respectively,2018 approved by the Audit Committee for special projects.Committee.
All Other Fees: None.
Audit Committee Pre-Approval Policies
The Audit Committee has adopted a policy that requires the pre-approval of all fees paid to KPMG for audit and non-audit services. Under thatthis policy, the committee pre-approved the following services, including the amount of fees payable for such services:
Taxtax consulting services;
Auditaudit services associated with SEC filings;
Consultationsconsultations regarding the appropriate accounting or disclosure treatment of specific transactions or events;
Audits of the Company’s employee benefit plans; and
Accounting and compensation consulting services.audits of our associate benefit plans.
Any fees in excess of the pre-approved amounts, or any services not described above, require the pre-approval of the Audit Committee chairman,chairperson, with a review by the Audit Committee at its next scheduled meeting. All non-audit services provided by KPMG in 20162018 and 20172019 were approved in accordance with this pre-approval policy.
Audit Committee Review
The Company’s Audit Committee has reviewed the services rendered and the fees billed by KPMG for the fiscal year ended December 31, 2017.2019. The Audit Committee has determined that the services rendered and the fees billed last year that were not related directly to the audit of the Company’sour financial statements were compatible with the maintenance of independence of KPMG as the Company’sour independent registered public accountants.
REPORT OF THE EXECUTIVE COMPENSATION AND HUMAN CAPITAL COMMITTEE
Each member of our Executive Compensation and Human Capital Committee is independent, as determined by the Board of Directors and based on the NYSE listing standards. As membersMembers of the Executive Compensation and Human Capital Committee we have primary responsibility for setting the compensation of the Company’scompany’s senior executive officers in a manner that is effective and consistent with the compensation strategy for the Company.company. As part of that responsibility, we have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based upon such reviews and discussions, we recommended that the Board of Directors include the Compensation Discussion and Analysis in this proxy statement.
Executive Compensation and Human Capital Committee
Alan H. Cohen, Chairperson
Melanie R. Sabelhaus, Chairperson
Lynn C. ThurberJohn P. Case
Norman K. Jenkins
The information contained in the Report of the Executive Compensation and Human Capital Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference in such filing.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Executive Compensation and Human Capital Committee consists of three independent directors: Mr. Cohen, Ms. Sabelhaus, Mr. Case, and Ms. Thurber.Mr. Jenkins. No member of the Executive Compensation and Human Capital Committee is or was formerly an officer or an employeeassociate of the Company.company. No executive officer of the Companycompany serves as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board, of Directors, nor has such interlocking relationship existed in the past.
Corporate Responsibility
As part of our vision to continually set the standard for maximizing stakeholder value, we have a long standing commitment to sustainable practices in environmental, social, and corporate governance, or ESG, initiatives. Below, we note some of our accomplishments in each ESG category. At the end of 2019, we decided to strengthen our commitment by hiring a Vice President of Corporate Responsibility, whose sole responsibility will be to lead our efforts on all facets of ESG strategic initiatives and implementation of related strategies, policies, communications, and processes. We are proud of our ESG efforts, but recognize that we still have opportunities to do more. We believe our new Vice President of Corporate Responsibility will help us do just that.
Environmental
We have implemented sustainable and customer-oriented practices in development and operations to try to mitigate the impact to the environment and reduce overall corporate risk.
On December 17, 2019, we adopted a Sustainable Development Policy intended to increase the operational efficiency of our buildings and promote sustainable design principles. We are committed to integrating innovative, sustainable building design features in alignment with LEED®, including constructing to LEED criteria and achieving certification in all new developments where feasible. LEED®- an acronym for Leadership in Energy and Environmental Design™ - is a registered trademark of the U.S. Green Building Council®.
We also follow sustainable building standards for maintenance, renovations, and tenant improvement projects with an objective of providing operating cost savings for tenants as well as supporting tenant and landlord sustainability objectives.
For existing buildings, we look for ways to reduce energy, water, and waste consumption, including, for example, retrofitting older high energy consuming light fixtures to newer, more efficient LED lighting. While we do not control most of the utility usage at our properties, we partner with Goby, Inc. in order to help us monitor and manage the utility usage that we do control. Our partnership with Goby, Inc. is also instrumental in benchmarking buildings with EnergyStar when required by municipalities or other governmental regulation. In order to make this partnership more useful, we have updated our standard lease form to include language requiring tenants to provide us with their utility usage. With the help of the utility management platform and more data from tenants, we expect to establish realistic utility usage benchmarks and then find ways to work with tenants to help make energy, water, and waste efficiency decisions.
In 2019, we completed the GRESB Real Estate Assessment for the second time. GRESB is an industry leader in providing ESG benchmarks for real estate assets. By responding, we are able to assess and improve our ESG performance over time. In 2019, we increased our GRESB survey score from the previous year and we expect to continue participating in the survey.
We were the first of the industrial REITs to issue a “green bond” in the United States in November 2019. We plan to use the net proceeds from this green bond to finance future or refinance recently completed “Eligible Green Projects.” This may include green buildings, energy efficiency projects, sustainable water and wastewater management systems, renewable energy projects, clean transportation solutions and pollution prevention and control.
Social
We have numerous initiatives that demonstrate our care and concern for everyone with whom we interact, including the communities in which we do business.
| |
| • | We are dedicated to fair compensation, fostering a dynamic and balanced work environment, and providing associates with developmental opportunities to perform well and derive satisfaction from their work. A testament to our culture is our average associate tenure of 12.5 years. We also routinely conduct associate engagement surveys and have received numerous awards for being a great place to work. Recently, the Best Companies Group in partnership with local business journals awarded us 1st place for the Best Places to |
Work in Chicago, Illinois (medium company category); 2nd place for the Best Places to Work in Philadelphia, Pennsylvania (large company category); and 4th place for the Best Places to Work in Orange County, California (large company category).
Since 2001, we have had a diversity and inclusion program, pursuant to which we strive to attract and retain diverse talent, hire diverse vendors, and partner with our tenants on diversity initiatives. In 2019, NAREIT, the REIT industry trade group, recognized us as the Corporate Gold winner and Mr. Connor as the individual winner of its inaugural Dividends Through Diversity and Inclusion Recognition Awards program.
In 2019, we continued our support of the Duke Realty Women’s Network initiative, the goal of which is to create a network that supports the investment in, development, and growth of women at our company. The Duke Realty Women’s Network holds semi-annual panel discussions for all associates and organizes various networking events in the local offices.
| |
| • | In addition, we promote all aspects of wellness for our associates-including physical, emotional, and financial health-through our wellness program, which includes group activities, online resources, and generous incentives. We have also won awards for our wellness program, including Finalist-4th Place in the Healthiest Employer of Indiana awards and the American Heart Association’s Workplace Health Achievement Gold Level Recognition. |
We encourage our associates to participate in volunteer and community activities and support those who do by providing each associate with two paid community days per year. We hold an annual company-wide Day of Service in which all associates are encouraged to volunteer in their local communities. We also have charitable contribution programs, such as our dollars for doers program (matching dollars for volunteer hours spent) and our matching gifts program (matching dollars for associate donations to charities).
We have partnered with the American Red Cross since 2017 to help prevent and alleviate human suffering in the face of emergencies. Each year, Duke Realty associates participate in various engagement opportunities from volunteering in the organization’s “Sound the Alarm” campaign, during which our associates helped local fire departments install smoke alarms, replace batteries in existing smoke alarms, and provide fire prevention and safety education, to assisting in the Missing Maps project, during which associates have helped put people from high risk countries on the map, organized blood drives in their communities, and built military kits to ship overseas. Currently, Duke Realty is an American Red Cross Disaster Responder member and recognized as one of the largest supporters nationwide.
Corporate Governance
Our reputation is one of our most important assets. Since our inception, we have insisted that our associates, officers, and directors conduct business in accordance with the highest ethical standards. We also strive to implement robust corporate governance practices, as they are critical to keeping us accountable and transparent.
We are devoted to ensuring that the Board has a strong oversight function, with a majority of independent directors and a Lead Director. We also conduct annual evaluations of our Board and its committees.
31% of our Board and our nominees to the Board are female. Our Compensation and Human Capital Committee is chaired by a woman. We also have a Board Diversity and Inclusion Policy.
The Board oversees our risk management processes, with our Internal Audit Department reporting directly to the Audit Committee. Please see “Board Oversight of Risk Management” for more information regarding the Board’s role in risk management.
We conduct annual Code of Business Ethics training sessions, and associates and directors must sign off on our Code of Business Ethics every year.
We have a Corporate Responsibility Committee that reports to the Board.
We have adopted proxy access, shareholders can call special meetings and amend our bylaws, and we do not have a shareholder rights plan.
Through all of our ESG efforts, we demonstrate that operating and developing commercial real estate can be conducted with a conscious regard for the environment and the community, while also benefiting our shareholders, associates, tenants, and communities in which we operate.
PROPOSAL TWO: ADVISORY VOTE TO APPROVE THE COMPENSATION OF NAMED EXECUTIVE OFFICERS
In accordance with the requirements of Section 14A of the Exchange Act and the related SEC rules, we are asking our shareholders to vote to approve, on an advisory (nonbinding) basis, the compensation of our named executive officers, as disclosed in this proxy statement.
As discussed in the Compensation Discussion and Analysis beginning on page 26,35, we have designed our executive compensation program to attract and retain the highest quality executive officers, directly link pay to our performance, and build value for our shareholders. Our program provides total compensation opportunities at levels that are competitive in our industry, ties a significant portion of each executive’s compensation to achieving our key business objectives, and closely aligns the interests of our executives with the interests of our shareholders. In sum, our compensation is designed to reward executives when the Company achieves strong financial and operational results, and likewise to provide reduced pay when financial and operating results are not as strong. We believe the compensation of our named executive officers is reflective of and consistent with that intent.
This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers described in this proxy statement.
At the annual meeting of shareholders on April 26, 2017, over 94%24, 2019, more than 91% of the shares voted were voted in support of the compensation of our named executive officers, as discussed and disclosed in the 20172019 proxy statement. The Executive Compensation and Human Capital Committee appreciates and values the views of our shareholders. In considering the results of last year’s advisory vote to approve executive compensation, the Executive Compensation and Human Capital Committee concluded that the compensation paid to our named executive officers and the Company’sour overall pay practices enjoy strong shareholder support. No significant changes were made to our executive compensation program for 20172019 as a result of the advisory vote.
The Board of Directors invites you to review carefully the Compensation Discussion and Analysis beginning on page 2635 and the tabulartables and other disclosures on compensation under Executive Compensation beginning on page 44,53, and encourages you to cast a vote to approve the Company’scompany’s executive compensation programs through the following resolution:
“Resolved, that shareholders approve the compensation of the Company’scompany’s named executive officers as discussed and disclosed in the Compensation Discussion and Analysis, the executive compensation tables, and any narrative executive compensation disclosure contained in this proxy statement.”
The say-on-pay vote is advisory and, therefore, not binding on the Company,company, the Executive Compensation and Human Capital Committee, or the Board of Directors.Board. The shareholders’ advisory vote will not overrule any decision made by the Board of Directors or the Executive Compensation and Human Capital Committee or create or imply any additional fiduciary duty by our directors. However, if there is a significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider our shareholders’ concerns and the Executive Compensation and Human Capital Committee will evaluate whether any actions are necessaryneeded to address those concerns. Currently say-on-paySay-on-pay votes currently are held by the Companycompany annually, and we expect the next say-on-pay vote after this Annual Meeting to occur at the 20192021 annual meeting of shareholders.
The proposal to approve, on an advisory basis, the compensation of the Company’sour named executive officers will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions and broker non-votes will not be treated as votes cast and therefore will not affect the outcome.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL TWO.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In the paragraphs that follow, we provide an overview and analysis of our compensation program and policies, the material compensation decisions we havethe Compensation and Human Capital Committee has made under those programs and policies with respect to our top executive officers, and the material factors that wethe Compensation and Human Capital Committee has considered in making those decisions. Following thisthe Compensation Discussion and Analysis or CD&A,(CD&A), under the heading “Executive Compensation,” is a series of tables containing specific data about the compensation earned in 20172019 by the following individuals, whom we refer to as our named executive officers:
our Chairman and Chief Executive Officer, Mr. James B. Connor;
our Executive Vice President and Chief Financial Officer, Mr. Mark A. Denien;
our Executive Vice President General Counsel and Corporate Secretary, Ms. Ann C. Dee;
our Executive Vice President, Construction,Chief Operating Officer, Mr. Peter D. Harrington; andSteven W. Schnur.
our Executive Vice President, Chief Investment Officer, Mr. Nicholas C. Anthony.Anthony; and
As a matter of convenience, throughout this CD&A we refer to the Board of Directors of the Company as the “Board”our Executive Vice President, General Counsel and to the Executive Compensation Committee as the “Committee.”Corporate Secretary, Ms. Ann C. Dee.
20172019 Performance Highlights
20172019 was aanother excellent year of milestones and accomplishments for Duke Realty. We proudly celebrated our 45th yearimproved in business, earned inclusion in the S&P 500,nearly every key operating metric, including same-property net operating income growth, rent growth, and completed the final step in our portfolio repositioning strategydevelopment starts compared to shift our investment focus to the higher growth industrial real estate asset class. We achieved outstanding operational results, continued to grow our portfolio through strategic development and quality acquisitions,what was an already very impressive 2018, and further strengthened our already sound balance sheet. Our efforts have positioned Duke Realty as the leading pure-play, domestic-only industrial REIT in the U.S.
As ofAt December 31, 2017, our portfolio of2019, we owned or jointly controlled 519 primarily industrial properties, included 496 rental and development properties, including jointly controlled properties, encompassing 147.5which encompassed 155.3 million rentable square feet (including 38 unconsolidated joint venture in-service properties with 11.0 million square feet, 21 consolidated properties under development with 8.7 million square feet and isone unconsolidated joint venture property under development with 133,000 square feet). Our properties are leased by a diverse base of more than 1,000800 tenants whose businesses include e-commerce, government service, manufacturing, retailing, wholesale trade, and distribution. As a fully integrated commercial real estate firm, we provide in-house leasing, management, development, and construction services. We also own, directly andowned, including through ownership interests in unconsolidated joint ventures approximately 1,900(with acreage not adjusted for our percentage ownership interest), 1,380 acres of land and controlcontrolled an additional 1,6001,000 acres through purchase options.
Our 2017 business plan centered around a significant portfolio repositioning, asIn 2019, we disposedrefined the geography of our medical office product type, through a series of asset sales totaling $2.9 billion, and sold nearly all ofassets to increase our remaining suburban office properties. We made significant progress in strategically redeploying the proceeds from these transactionsexposure to further improve our balance sheet as well as grow our industrial portfoliocoastal Tier 1 markets through value-creating development projects and the acquisition of quality, strategically-located industrial assets with high potential for growth in cash flow growth potential.flow.
In addition to portfolio repositioning, we continued to execute on our operational and capital strategies in 2017.2019. Highlights include:
Despite the temporary dilutionIn 2019, earnings per diluted share increased by 10% from 2018, primarily due to the salehigher gains on sales of more than $3.0 billion of assets in 2017, our continued strong propertyproperties. Earnings per diluted share from continuing operations resulted inincreased by 11% from 2018. In 2019, we achieved an increase of over 10% in both Adjusted Funds from Operations (AFFO) and over 8% in Core Funds from Operations (Core FFO). AFFO and Core FFO are not generally accepted accounting principles (GAAP) metrics. See Appendix A for a discussion and reconciliation to the most directly comparable GAAP measures.
Occupancy in our stabilized in-service portfolio stood at 98.5% at year-end 2017, up from 98.1% in 2016. Our average total in-service occupancy for the year was 96.9%, which was near the “stretch” goal level in our annual bonus plan.96.0%. Even with the high occupancy level in our stabilized portfolio, we have ample opportunity to grow earnings and lease additional space in our unstabilized portfolio.
We recorded a 19.2%28.6% increase in GAAP rental rates for 2017,2019, which contributed to strong same-property net operating income growth.
We improvedmaintained our already strong balance sheet and overall financial position by utilizing proceeds from property dispositions to repay debt and opportunistically raise capital in the debt markets when rates and pricing were favorable, all while maintaining high investment-grade credit ratings and improving the key metrics that drive such ratings.
We were the first of the industrial REITs to issue a “green bond” in the United States in November 2019. Please see “Corporate Responsibility—Environmental” for more information on this “green bond” issuance.
Our operational and strategic success has translated into strong returns to our shareholders. Our total shareholder return was 54.0%46.4% and 143.0%107.7% over the past three and five fiscal years, respectively. This is particularly favorable when compared to total shareholder returns of 17%26.2% and 56.3%40.5% for the MSCI US REIT Index and 38.3% and 108.1% for the S&P 500 over the same time periods. We increased our quarterly dividend from $0.215 per share for the first three quarters of 2019 to $0.235 per share for the fourth quarter of 2019, representing a 9.3% increase. We expect to continue to distribute an amount at least equal to our taxable earnings, to meet the requirements to maintain our REIT status, and additional amounts as determined by our Board. Distributions are declared at the discretion of our Board and are subject to actual cash available for distribution, our financial condition, capital requirements, and such other factors as our Board deems relevant.
Fiscal 20172019 Pay and Performance Alignment |
| | | | | | | | | | | | | | | | | | | | | |
Fiscal Year 2017 Performance Measures and Results |
| Fiscal Year 2017 Award Payouts/Vesting |
| Annual Incentive Awards | | | |
| Corporate Goals (all named executive officers) | |
| Annual cash incentive awards for all executives had the following corporate goals: AFFO/share, average total in-service lease up occupancy, and Core FFO/share (industrial only). | The table below summarizes the overall bonus payouts which were based on the corporate, division (as applicable) and individual goals and weightings for each executive.
|
| | | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual |
|
| AFFO/Share* | |
| $1.02 |
|
| $1.05 |
|
| $1.07 |
|
| $1.10 |
|
| $1.10 |
| NEO | % of Target Earned | Annual Incentive Payout |
| Core FFO/Share* | $1.13 |
| $1.17 |
| $1.19 |
| $1.22 |
| $1.24 |
| Connor | 185.00% |
| $2,072,000 |
|
| Average Total In-Service Lease Up Occupancy | 95.00% |
| 96.50% |
| 97.00% |
| 97.50% |
| 96.90% |
| Denien | 185.00% |
| $1,063,750 |
|
| | | | | | | Dee | 185.00% |
| $864,880 |
|
| Division Goals (Mr. Harrington and Mr. Anthony) | Harrington | 156.90% |
| $499,430 |
|
| Awards for Mr. Harrington included the following financial and operational goals related to our Construction Division, plus various other metrics relating to project execution, overhead expenses, and diversity and inclusion. | Anthony | 180.10% |
| $851,800 |
|
| | | |
| (Dollar figures are in millions.) | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual |
| |
| Construction Volume | | $415.7 |
| $593.8 |
| $653.2 |
| $712.6 |
| $677.3 |
|
| Construction Starts | | $367.5 |
| $525.0 |
| $577.5 |
| $630.0 |
| $733.7 |
| | | |
| Development Cost Variance | | 4.00% |
| 2.00% |
| 1.50% |
| 1.00% |
| 1.44% |
| | | |
| Awards for Mr. Anthony included the following goals related to our Capital Transactions and Joint Venture Division, plus various other metrics relating to joint ventures and our executive mentoring program. | | | |
| (Dollar figures are in millions.) | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual |
| | | |
| Healthcare Monetization Volume | $2,315.2 |
| $2,420.4 |
| $2,535.7 |
| $2,662.5 |
| $2,874.0 |
| | | |
| Healthcare Monetization Yield | 5.75% |
| 5.50% |
| 5.25% |
| 5.00% |
| 4.60% |
| | | |
| Acquisitions Volume | $150.0 |
| $250.0 |
| $300.0 |
| $400.0 |
| $994.0 |
| | | |
| Acquisitions Yield | 4.50% |
| 4.75% |
| 4.90% |
| 5.10% |
| 4.54% |
| | | |
| Dispositions Volume (excluding healthcare) | $218.8 |
| $230.3 |
| $241.8 |
| $253.9 |
| $227.6 |
| | | |
Dispositions Yield (excluding healthcare) | 8.68% |
| 8.43% |
| 8.28% |
| 8.13% |
| 7.37% |
| | | |
| Individual Goals (all named executive officers) | | | |
| Awards for all executives included subjective, non-formulaic individual performance goals. | |
| 2017-2019 Performance Share Plan Awards (“PSP Awards”) | | | |
| PSP awards vest after three years, if and to the extent performance goals are met, and have two performance components: average annual growth in AFFO/Share and relative total shareholder return, based on a peer group of selected REITs and certain indices. Named executive officers have the opportunity to elect to receive LTIP Units with the same vesting schedule in lieu of PSP awards. | The performance goals and resulting payout for the PSP Awards relating to fiscal years 2015-2017 are described on pages 39-41.
|
| | Threshold (50%) |
| Target (100%) |
| Superior (200%) |
| | |
| Average Annual Growth in AFFO/Share* | -5.70% |
| -2.70% |
| -0.70% or above | |
| | Threshold (50%) |
| Target (100%) |
| Superior (200%) |
| Outperformance (250%) |
| |
| Annualized TSR Percentile Rank | ≥25 |
| ≥50 |
| ≥75 |
| ≥75 & ≥15.00% Absolute TSR | |
Restricted Stock Units (RSUs) RSUs granted in 2017 vest in equal amounts on the first three anniversaries of the grant date, provided that the named executive officer remains employed on each such vesting date. Named executive officers have the opportunity to elect to receive LTIP Units with the same vesting schedule in lieu of RSUs. |
| *Reflects adjusted performance goals due to medical office disposition. See discussion on pages 35-38 for more information. |
|
| | | | | | | | | | | | | | | | | |
Fiscal Year 2019 Performance Measures and Results |
| Fiscal Year 2019 Award Payouts/Vesting |
| Annual Incentive Awards | | | |
| Corporate Goals (all named executive officers) | |
| Annual cash incentive awards for all executives had the following corporate goals: AFFO/share, Core FFO/share, and average total in-service lease up occupancy. | The table below summarizes the overall bonus payouts which were based on the corporate, division (as applicable) and individual goals and weightings for each named executive officer. |
| | | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual |
| AFFO/Share |
| $1.23 |
|
| $1.27 |
|
| $1.29 |
|
| $1.32 |
| $1.30 | NEO | % of Target Earned | Annual Incentive Payout |
| Core FFO/Share | $1.34 |
| $1.40 |
| $1.43 |
| $1.47 |
| $1.44 | Connor | 153.80% | $2,164,800 |
| Average Total In-Service Lease Up Occupancy | 94.00% |
| 95.50% |
| 96.20% |
| 97.00% |
| 96.00% | Denien | 153.80% | $1,076,250 |
| | Schnur | 153.70% | $969,360 |
| Division Goals (Mr. Anthony) | Anthony | 155.40% | $922,810 |
| The award for Mr. Anthony also included the following goals related to our Capital Transactions and Joint Venture Division. | Dee | 153.70% | $804,480 |
| (Dollar figures are in millions) | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual | | | |
Acquisitions Volume(1) | $133.3 |
| $200.0 |
| $233.3 |
| $300.0 |
| $215.7 | | | |
Acquisitions Yield(2) | 4.00% |
| 4.25% |
| 4.40% |
| 4.60% |
| 4.66% | | | |
Dispositions Volume(1) | $326.2 |
| $434.9 |
| $489.3 |
| $598.0 |
| $498.5 | | | |
Dispositions Yield(3) | 6.25% |
| 6.00% |
| 5.60% |
| 5.40% |
| 5.64% | | | |
(1) Based on ownership share. | | | |
(2) Stabilized capitalization rate | | | |
(3) In-place capitalization rate | | | |
| | | | |
| Individual Goals (all named executive officers) | | | |
| Awards for all executives included subjective, non-formulaic individual performance goals. | |
| 2019-2021 Performance Share Plan Awards (PSP awards) | | | |
| PSP awards vest after three years, if and to the extent performance goals are met, and have two performance components: average annual growth in AFFO/Share and relative total shareholder return, based on a peer group of selected REITs and certain indices. Named executive officers have the opportunity to elect to receive Long-Term Incentive Plan, or LTIP, units with the same vesting schedule in lieu of PSP awards. | The performance goals and resulting payout for the PSP awards relating to fiscal years 2017-2019 are described on pages 49-50.
|
| | Threshold (50%) |
| Target (100%) |
| Superior (200%) |
| | |
| Average Annual Growth in AFFO/Share | 0.00% |
| 3.00% |
| 5.00% or above | |
| | Threshold (50%) |
| Target (100%) |
| Superior (200%) |
| Outperformance (250%) |
| Annualized Relative TSR (Total Shareholder Return) Percentile Rank | 25 |
| 50 |
| 75 |
| ≥75 & ≥15.00% Absolute TSR |
Restricted Stock Units (RSUs) RSUs granted in 2019 vest in equal amounts on the first three anniversaries of the grant date, provided that the named executive officer remains employed on each such vesting date. Named executive officers have the opportunity to elect to receive LTIP Units with the same vesting schedule in lieu of RSUs. |
Our Executive Compensation Practices
The Compensation and Human Capital Committee is mindful of evolving practices in executive compensation and corporate governance. The following table highlights our current executive compensation practices – both the practices we believe drive performance and mitigate risk and the practices we have not implemented or eliminated because we do not believe they would serve our shareholders’ long-term interests.
|
|
| Executive Compensation Practices We Have Implemented: |
|
•þProvide balanced pay opportunities consisting of (1) cash and equity, (2) annual and longer-termlong-term incentives, and
(3) fixed and variable pay |
•þAlign pay and performance
|
•þUse diverse performance measures
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•þHave appropriate caps on performance-based bonus payouts
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•þProvide perquisites that are limited and have sound business rationale
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•þInclude “double-trigger” change in control provisions in equity awards
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•þApply share ownership and retention guidelines for senior executive officers and directors
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•þUtilize an independent compensation adviser
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•þMitigate undue risk in compensation programs
|
•þMaintain a clawback policy
|
•þMaintain an anti-hedging/pledging policy
|
| |
| Executive Compensation Practices We Have Not Implemented: |
|
•ýNo “liberal” change in control definition that would be activated on shareholder approval of a transaction
|
•ýNo tax gross-ups on perquisites (except for certain relocation costs that are available to all associates)
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•ýNo tax gross-up protection for change in control excise taxes
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•ý No repricing of options or SARs (directly or indirectly) without prior shareholder approval
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•ýGenerally do not utilize No employment contracts, though we do haveexcept for severance agreements with certain officers
|
Consideration of Most Recent Say-on-Pay Vote
The Compensation and Human Capital Committee recognizes that executive pay practices and views of sound governance principles continue to evolve. Consequently, the Compensation and Human Capital Committee intends to continue paying close attention to the advice and counsel of its independent compensation adviser and invites our shareholders to communicate any concerns or opinions on executive pay directly to the Compensation and Human Capital Committee or the Board. Please refer to “Information about Communications with Duke Realty Corporation and Our Board of Directors”Board” on pages 4 and 5page 6 for information about communicating with the Board.
At the annual meeting of shareholders on April 26, 2017, over 94%24, 2019, more than 91% of the shares voted were voted in support of the compensation of our named executive officers, as discussed and disclosed in the 20172019 proxy statement. In consideringBased on the results of this most recent advisory vote to approve the compensation of our named executive officers, the Compensation and Human Capital Committee concluded that the compensation paid to our named executive officers and the Company’scompany’s overall pay practices enjoy strong shareholder support. No significant changes were made to our executive compensation program for 20172019 as a result of the advisory vote.
At the annual meeting of shareholders on April 26, 2017, our shareholders expressed a preference that advisory votes on executive compensation occur every year. Consistent with this preference, the Board of Directors determined to
implementhas implemented an advisory vote to approve executive compensation every year until the next required vote on the frequency of shareholder votes on the compensation of executives, which willis expected to occur at the 2023 annual meeting.
Overview of Executive Compensation Philosophy and Objectives
We have designed our executive compensation program, under the direction of the Compensation and Human Capital Committee, to attract and retain the highest quality executive officers, directly link pay to our performance, and build value for our shareholders. In order to do this effectively, our program is designed to:
provide total compensation opportunities with a combination of compensation elements that are competitive;
tie a significant portion of each executive’s compensation to achieving our key business objectives; and
align shareholder interests and executive rewards by tying a significant portion of each executive’s compensation opportunity to pay for performance standards designed to increase long-term shareholder value.
Determining Individual Compensation Levels and Pay Mix
When setting compensation, the Compensation and Human Capital Committee seeks to achieve optimal balance between:
fixed and variable pay;
short-term and long-term pay;incentives; and
cash and equity.
We believe that a significant percentage of our executives’ compensation should be at risk and subject to performance. In addition, we attempt to balance the short- and long-term focus of our executives and to align their interests with our shareholders by providing a meaningful portion of their compensation in the form of equity-based awards.
Our executive compensation program includes the following elements:
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| | |
| Compensation Element | | Overview/Objectives |
| Base Salary | • | Fixed portion of an executive’s annual compensation that is intended to recognize fundamental market value for the individual’s skills and experience of the individual relative tobased on the responsibilities of his or her position. |
| Annual Cash Incentive | • | Annual cash incentives vary based on performance against pre-defined goals and are intended to reward short-term performance, including company, individual, and in some cases, division performance. |
Long-term Incentive Awards (restricted stock units and performance sharePSP awards) | • | Stock-based incentives vary based on stock price and, in the case of performance sharePSP awards, on the achievement of predefined goals. They are intended to reward performance over a multi-year period, link executives’executives’ interests to those of shareholders, and encourage retention through a multi-year vesting schedule. |
The following charts show the allocations of the fiscal year 20172019 target total direct compensation for our CEO and the fiscal year 20172019 average target total direct compensation for our other named executive officers, respectively. Base salary is the only fixed element of compensation, with the remainder being at risk. Base salarysalaries and annual bonusbonuses are paid in cash, while 100% of the long-term incentive opportunityopportunities (RSUs and performance shares) isPSP awards) are paid in stock.stock, or partnership units, at the executive’s election.
Fiscal 20172019 Targeted Total Direct Compensation
How We Make Compensation Decisions
The Compensation and Human Capital Committee has primary responsibility for determining the Company’sour compensation strategy and setting the compensation of the Company’sour senior executive officers. Information about the CommitteeCompensation and its composition and responsibilitiesHuman Capital Committee can be found on page 1521 of this proxy statement, under the caption “Board Committees—Executive Compensation Committee.Committees.” To assist in evaluating the compensation practices at the Company,company, the Compensation and Human Capital Committee engaged Frederic W. Cook & Co., Inc. (FW Cook), or FW Cook, as its independent executive compensation consultantadviser in 2017.2019. FW Cook reports directly to the Compensation and Human Capital Committee and provides no other services to the Company.company. The following table outlines the roles and responsibilities of the various parties in determining executive compensation.
|
| | |
| | Roles and Responsibilities |
| The Compensation and Human Capital Committee | • | Determines the Company’sour compensation strategy. |
| | • | Oversees design, implementation, and administration of Companyour equity programs. |
| | • | Approves incentive programs and sets performance goals for executive officers. |
| | • | Reviews the performance of the CEO. |
| | • | Determines appropriate levels of compensation for our executive officers, including the CEO, by assessing their individual performance in addition toas well as the financial and operational results of the Companycompany against annual objectives. |
| FW Cook | • | Provides advice, research, and analytical services on a variety of subjects, including compensation philosophy, trends, and best practices, peer group selection, target competitive positioning, pay mix, and incentive program design. |
| CEO | • | Develops an assessment of individual performance for each of his direct reports. |
| | • | Provides recommendations to the Compensation and Human Capital Committee regarding individual compensation levels for such executives. |
| | • | Provides recommendations to the Compensation and Human Capital Committee regarding metrics and goal levels for incentive plans for Company,company, division, and individual performance for himself and each of his direct reports. |
| Other Members of Management | • | Our ChiefVice President, Human Resources Officer provides data and information relating to our compensation programs to the Compensation and Human Capital Committee and FW Cook to help facilitate the Compensation and Human Capital Committee’s review of competitive compensation practices. |
| | • | Our Chief Financial Officer provides the Compensation and Human Capital Committee with reports on financial performance as it relates to key business drivers and performance measures included in incentive program designs. |
Assessing the Competitive Marketplace
As part of its process of evaluating our compensation program, theThe Compensation and Human Capital Committee reviews peer compensation data to ensure that our executive officer compensation is competitive in the marketplace. In 2016,2018, management engaged FPL Associates or FPL,(FPL), to provide market data on compensation structure and design practices from our peer group. The peer group, developed in consultation with FW Cook, consisted of 1415 public REITs that were similar in size to the Companycompany in terms of total capitalization (market value of common stock, preferred stock, operating partnership units, and balance sheet long-term debt) at that time.. Total capitalization of companies in this peer group ranged from approximately $9.5 billion to $20.3 billion, with a median of $14.1 billion (as of June 30, 2018). Our total capitalization of approximately $13.0 billion (also as of June 30, 2018) was 92% of the median of the peer group. This peer group was used to assess competitive levels of compensation for our executive officers to help inform the Committee’sCompensation and Human Capital Committee’s decisions on 20172019 target total direct compensation opportunities. The total capitalization of companies in this peer group ranged from approximately $9.1 billion to $23.8 billion, with a median of $12.2 billion (as of June 30, 2016). The Company’s total capitalization of approximately $12.7 billion (also as of June 30, 2016) was consistent with the median of the peer group. The companies included in the REIT compensation peer group were as follows:were:
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| | | |
•Alexandria Real Estate Equities, Inc. | Digital•Federal Realty Investment Trust | Kimco Realty Corporation | Taubman Centers, Inc.•Liberty Property Trust |
•Apartment Investment and Management Company | Douglas Emmett,• Healthpeak Properties, Inc. | Liberty Property Trust | UDR, Inc.•The Macerich Company |
•Camden Property Trust | Federal Realty Investment Trust | The Macerich Company | |
DDR Corp. | •Host Hotels & Resorts, Inc. | •Mid-America Apartment Communities, Inc. |
•Douglas Emmett, Inc. | •Kilroy Realty Corporation | •Regency Centers Corporation |
•Extra Storage Space, Inc. | •Kimco Realty Corporation | •UDR, Inc. |
How the Compensation and Human Capital Committee Uses Peer Group Data
The Compensation and Human Capital Committee’s objective related to executive compensation is to provide a range of compensation opportunities with a combination of elements that are generallycompetitive relative to similarly-situated executives at competitive median opportunities.other companies and internally. To do this,assess external competitiveness, the Compensation and Human Capital Committee reviews the median compensation levels from the compensation peer group companies for each component of pay, including base salary, target annual incentive bonus, target total cash compensation (which includes both base salary and target annual incentive bonus), target long-term compensation,incentives, and target total direct compensation (which includes base salary, target annual incentive bonus, and the target value of long-term incentives) for each executive officer position at the Company.position. In setting individual executive target total direct compensation opportunities for 2017 within2019, the range of these parameters, theCompensation and Human Capital Committee examined each component of pay on both a stand-alone basis and as a total. Decisions were based on the Committee’sCompensation and Human Capital Committee’s business judgment, informed by the comparative data, professional advice, and other considerations, including each executive’s experience level and job performance; his or her duties and responsibilities at the Companycompany compared to the duties and responsibilities of executive officers in similar positions at compensation peer group companies; the Company’scompany’s performance; internal pay equity; and other circumstances unique to the Company.company.
Analysis of 20172019 Compensation Decisions
Base Salaries
Base salaries paid to the Company’sour executive officers are the fixed portion of annual compensation and are intended to recognize the fundamental skills and experience of our executive officers. The Compensation and Human Capital Committee considers the executive’s performance, role, and responsibilities,responsibilities; internal equity considerations,considerations; and external competitive compensation data when determining the base salary for each executive officer. Base salaries for each of the named executive officers were increased at the beginning of 20172019 to recognize performance and bring salaries more in line with competitive benchmarks as follows:
| | | Name | | 2016 | 2017 | | 2018 | 2019 |
| James B. Connor | | $650,000 | $800,000 | | $850,000 | $880,000 |
| Mark A. Denien | | $460,000 | $500,000 | | $540,000 | $560,000 |
| Steven W. Schnur | | | $440,000 | $460,000 |
| Nicholas C. Anthony | | | $460,000 | $475,000 |
| Ann C. Dee | | $390,000 | $425,000 | | $440,000 | $455,000 |
| Peter D. Harrington | | $300,000 | $335,000 | |
| Nicholas C. Anthony | | $390,000 | $430,000 | |
Mr. Schnur was later promoted on September 2, 2019 to Executive Vice President, Chief Operating Officer with a new base salary of $485,000.
Annual Cash Incentives
The Company paysWe pay annual incentive bonuses to reward executives for achieving or surpassing annual performance goals that are directly related to our key financial and operational objectives for the year and for execution of specific strategies of the Company.company strategies. At the beginning of each year, the Compensation and Human Capital Committee establishes performance targets for the annual incentive program. These performance targets are developed using economic and industry factors, including the interest rate environment, general market conditions, overall Companycompany leverage, annual capital recyclingcapital-recycling goals, the capital market environment, specific platform issues, and other considerations.
Each named executive officer has a target annual bonus potential, expressed as a percentage of base salary, that is based on his or her role and responsibilities, internal equity considerations, and external competitive compensation data as reviewed from time to time.data. Annual bonuses are paid in cash in February for the prior year’s performance, and are based uponon the Compensation and Human Capital Committee’s assessment of the Company’sour overall performance against goals and each executive’s individual (and, if applicable, division) performance against goals approved by the Compensation and Human Capital Committee.
The following table shows the target annual cash incentive for 20172019 for each of our named executive officers and the actual award earned, in each case expressed as a percentage of base salary:
| | | Name | | Target Annual Bonus (as a % of Salary) | Actual Annual Bonus (as a % of Salary) | | Target Annual Bonus (as a % of Salary) | Actual Annual Bonus (as a % of Salary) |
| James B. Connor | | 140% | 259% | | 160% | 246% |
| Mark A. Denien | | 115% | 213% | | 125% | 192% |
| Steven W. Schnur | | | 130% | 200% |
| Nicholas C. Anthony | | | 125% | 194% |
| Ann C. Dee | | 110% | 204% | | 115% | 177% |
| Peter D. Harrington | | 95% | 149% | |
| Nicholas C. Anthony | | 110% | 198%
| |
For 2017,2019, 75% of the annual bonus opportunityopportunities for Messrs. Connor, Denien, and DenienSchnur and Ms. Dee and 35% of the annual bonus opportunity for Messrs. Harrington andMr. Anthony were based on overall Companycompany performance, as measured by three operational strategy goals: one that measured the Company’scompany’s annual AFFO per share, one that measured the Company’scompany’s annual Core FFO per share, and one that measured the average total in-service lease up occupancy of our real estate portfolio, each as described in more detail below. We selected these measures because they directly impact and are indicative of our success in achieving our primary financial and operational objectives for 2017:2019: namely, increasing profitability by maximizing cash from operations.
AFFO and Core FFO are calculated by first computing FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income (loss)or loss in accordance with GAAP, excluding gains (losses)or losses on sales of depreciable property,real estate assets (including real estate assets incidental to our business) and related taxes, gains or losses from change in control, impairment charges related to depreciable real estate assets;assets (including real estate assets incidental to our business); plus real estate related depreciation and amortization, and after similar adjustments for unconsolidated joint ventures.ventures and partially owned consolidated entities. Then, to determine Core FFO, FFO computed in accordance with NAREIT is adjusted for certain items that are generally non-cash in nature and that materially distort the comparative measurement of company performance over time.can create significant earnings volatility and do not directly relate to our core business operations. The adjustments include gains on sale of undeveloped land; impairment charges not related to depreciable real estate assets; tax expense or benefit related to (i) changes in deferred tax asset valuation allowances, (ii) changes in tax exposure accruals that were established as the result of the previous adoption of new accounting principles, or (iii) taxable income (loss) related to other items excluded from FFO or Core FFO (collectively referred to as “other income tax items”); gains (losses) on debt transactions; adjustments on the repurchasegains or redemption of preferred stock; gains (losses) on and related costs of acquisitions; gains on the sale of merchant buildings;losses from involuntary conversion from weather events or natural disasters; promote income; severance and severanceother charges related to major overhead restructuring activities; and the expense impact of costs attributable to successful leasing activities. Although our calculation of Core FFO differs from NAREIT’s definition of FFO and may not be comparable to that of other REITs and real estate companies, we believe it provides a meaningful supplemental
that of other REITs and real estate companies, we believe it provides a meaningful supplemental measure of our operating performance. AFFO is Core FFO less recurring building improvements and total second generation capital expenditures (the leasing of vacant space that had previously been under lease by the company is referred to as second generation lease activity) related to leases commencing during the reporting period, and adjusted for certain non-cash items, including straight line rental income and expenses; non-cash components of interest expense, andincluding interest rate hedge amortization; stock compensation expense; and after similar adjustments for unconsolidated partnerships and joint ventures.
Average Total In-Service Occupancy (Lease-Up Basis) is the average square footage of our in-service real estate portfolio represented by executed leases without regard to whether the leases have commenced, divided by the total average square footage of our in-service real estate portfolio, excluding the impact of any acquisitions during the year.
Forty percent40% of the annual bonus opportunity for Messrs. Harrington andMr. Anthony in 20172019 was based on performance goals for their respective divisions,his division, which are described on page 36.45.
Twenty-five percent25% of the annual incentive bonus opportunity for each of our named executive officers in 20172019 was directly tied to individual performance.
For purposes of the annual bonus program, individual performance in 20172019 was evaluated in a subjective and non-formulaic manner, based on certain individual goals:
As the Company’scompany’s Chairman and Chief Executive Officer, or CEO, Mr. Connor��sConnor’s individual goals for 20172019 were based upon successfully completingimplementing the monetization of our healthcare platform, recruiting new board members,company’s 2019-2021 strategic plan, maintaining our overall leverage atthe company’s BBB+ levels,credit metrics, further developing succession and leadership plans, recruiting a new Board member, joining the board of a charity or university, and implementingdeveloping a strategy to further the Company’s 2017-2019 long-term strategy.company’s corporate responsibility initiatives.
As the Company’scompany’s Chief Financial Officer, or CFO, Mr. Denien’s individual goals for 20172019 focused on maintaining the company’s BBB+ credit metrics, successful monetizationcompletion of our healthcare platform, developing and implementing tax strategies around capital recycling goals, achieving a fixed-charge coverage ratio of at least 3.7x and proforma debt to EBITDA of less than 6.0x, and the smooth transition of the Information Technology functioncompany’s real estate accounting software to become part of his division.YARDI Systems, Inc., continuing personal development opportunities, and enhancing investor and analyst communications.
As the Company’s General Counsel, Ms. Dee’s individualcompany’s Chief Operating Officer, Mr. Schnur’s goals for 20172019 included developing the West Coast leadership team and growing Duke Realty’s investment in the West Coast, creating development and succession planning, the successful monetizationplans for leadership roles within real estate operations, driving efficiency in operations by achieving lower general and administrative expenses as a percent of our healthcare platform, developing key personnel, providing leadershiptotal revenue and oversight to Company initiatives regarding sustainabilitygross assets goals, and cyber risk,taking an active role in investor and providing assistance and support to the Board and Corporate Governance Committee in her role as General Counsel and Corporate Secretary.
As the Company’s Executive Vice President, Construction, Mr. Harrington’s goals for 2017 focused on the construction group’s organizational structure, succession planning and leadership development, operational metrics, risk management, processes, and management reports.analyst relations.
As the Executive Vice President, Chief Investment Officer, Mr. Anthony’s goals for 2019 included staff growthimplementing the acquisition and disposition components of the 2019-2021 strategic plan, implementing a development plan for the successful monetization of our healthcare platform, development ofnew Capital Transactions Manager, taking an ongoing target acquisition listactive role in investor and strategy,analyst relations, and cultivating relationships with brokers, industrial warehouse owners, investors and analysts.finalizing the company’s headquarters project.
The Committee established annual performanceAs the company’s General Counsel, Ms. Dee’s individual goals for 2017 annual incentive bonuses in January 2017. After2019 included assisting with the dispositionimplementation of the medical office portfolio throughcompany’s corporate responsibility goals, developing a series of transactions closing in 2017, the Committee adjusted the Company operating performance goals to remove budgeted operating resultssuccession strategy for the medical office properties fromlegal department, and successfully transitioning the date of their sale through year end, to remove overhead related costs onhuman resources department after the actual dateretirement of the related transactions, to exclude budgeted occupancy statistics for each property from the date of sale through year end, and to take into accountChief Human Resources Officer.
the expected capital effects of the transaction and use of proceeds. The following tables summarize the goals before and after adjustment for the disposition:
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| | | | | | | |
| AFFO/Share |
| | Threshold | | Target | | Stretch | | Superior |
| Original | $1.08 | | $1.11 | | $1.13 | | $1.16 |
| Adjusted | $1.02 | | $1.05 | | $1.07 | | $1.10 |
|
| | | | | | | |
| Core FFO/Share |
| | Threshold | | Target | | Stretch | | Superior |
| Original | $1.20 | | $1.24 | | $1.26 | | $1.29 |
| Adjusted | $1.13 | | $1.17 | | $1.19 | | $1.22 |
The following table shows the adjusted performance goals and weightings of the 20172019 annual incentive bonus opportunities for the named executive officers.
|
| | | | | | | |
| | Weighting for
James B. Connor, Mark A. Denien and Ann C. Dee | Weighting for Peter D. Harrington and Nicholas C. Anthony |
2017 Annual Incentive Targets |
| | | | Threshold | Target | Stretch | Superior | Actual |
| AFFO/Share(1) | 25.00% | 11.66% | $1.02 | $1.05 | $1.07 | $1.10 | $1.10 |
| Core FFO/Share(2) | 25.00% | 11.66% | $1.13 | $1.17 | $1.19 | $1.22 | $1.24 |
| Average Total In-Service Lease Up Occupancy | 25.00% | 11.66% | 95.00% | 96.50% | 97.00% | 97.50% | 96.90% |
| Division Goals | 0.00% | 40.00% | For Mr. Harrington: Assessment of achievement against a mix of financial and operational goals applicable to our Construction Division, including: construction volume ($593.8 million target, $677.3 million actual), construction starts ($525.0 million target, $733.7 million actual), development cost variance (2.00% target, 1.44% actual), and various project execution, overhead expense and diversity and inclusion metrics.
For Mr. Anthony: Assessment of achievement against a mix of financial and operational goals applicable to our Capital Transactions and Joint Venture Division including: healthcare monetization volume ($2.4 billion target, $2.9 billion actual), healthcare monetization yield (5.50% target, 4.60% actual), acquisitions volume ($250.0 million target, $994.0 million actual), acquisitions yield (4.75% target, 4.54% actual), dispositions volume (excluding healthcare) ($230.3 million target, $227.6 million actual), and dispositions yield (excluding healthcare) (8.43% target, 7.37% actual). |
| Individual Goals | 25.00% | 25.00% | Subjective assessment of achievement of individual goals for 2017 as discussed above. |
| Total | 100.00% | 100.00% | |
|
| | | | | | | |
| | Weighting for
James B. Connor, Mark A. Denien, Steven W. Schnur, and Ann C. Dee | Weighting for Nicholas C. Anthony |
2019 Annual Incentive Targets |
| | | | Threshold | Target | Stretch | Superior | Actual |
| AFFO/Share | 25.00% | 11.66% | $1.23 | $1.27 | $1.29 | $1.32 | $1.30 |
| Core FFO/Share | 25.00% | 11.66% | $1.34 | $1.40 | $1.43 | $1.47 | $1.44 |
Average Total In-Service Lease Up Occupancy(1) | 25.00% | 11.66% | 94.00% | 95.50% | 96.20% | 97.00% | 96.00% |
| Division Goals | 0.00% | 40.00% | For Mr. Anthony: Assessment of achievement against a mix of financial and operational goals applicable to our Capital Transaction and Joint Ventures Division including: acquisitions volume ($200.0 million target, $215.7 million actual), acquisitions yield (4.25% target, 4.66% actual), dispositions volume ($434.9 million target, $498.5 million actual), and dispositions yield (6.00% target, 5.64% actual). |
| Individual Goals | 25.00% | 25.00% | Subjective assessment of achievement of individual goals for 2019 as discussed above. |
| Total | 100.00% | 100.00% | |
| |
(1) | Reflects goals as adjusted in July 2017 for the medical office portfolio disposition. OriginalIn setting goals for occupancy for 2019, the Compensation and Human Capital Committee considered the Company’s speculative development projects expected to be completed in late 2018 and 2019, which would add significant additional vacant space to the portfolio. Even with aggressive leasing of this additional vacant space, our planned occupancy levels for 2019 were slightly lower than for 2018. Therefore, the Compensation and Human Capital Committee established threshold (94.00%), target (95.50%), and stretch and superior levels were $1.08, $1.11, $1.13, and $1.16, respectively. |
| |
(2) | Reflects goals as adjusted in July 2017 for the medical office portfolio disposition. Original(96.20%) goals for 2019 average total in-service occupancy that were slightly lower than the Company’s threshold (94.70%), target (96.00%), and stretch and(96.50%) goals for 2018 average total in-service occupancy. The superior levels were $1.20, $1.24, $1.26, and $1.29, respectively.goal for average total in-service occupancy remained the same (97.00%) for 2019. |
Performance for the corporate goals is measured against four different levels established by the Compensation and Human Capital Committee - threshold, target, stretch, and superior. Achieving the target level of performance results in a payout at 100% of target for the relevant measure. Threshold performance results in a payout at 50% of target, and stretch and superior performance result in payouts at 150% and 200% of target, respectively. Performance below the threshold goal results in no payout for the relevant measure. Payout amounts between performance levels are determined using interpolation. The Committee reviews the performance against the division goals relating to our Construction Division and Capital Transactions and Joint Ventures Division, which were used for Messrs. Harrington andMr. Anthony, respectively, and the individual goals for named executive officers, and determines the payout for these elements in a partially formulaic and partially non-formulaic manner.
Financial component target levels set for our executive compensation program are used for that limited purpose and should not be understood to be statements of management’s expectations of our future results or other guidance. Investors should not apply these targets in any other context.
Long-Term Incentive Awards
The objectives of the Company’scompany’s long-term incentive compensation program are to:
reward achievement over a multi-year period;
align the interests of the executives with those of our shareholders by focusing executives on the shareholder return performance of the Company;company; and
provide a retention mechanism through multi-year vesting.
The Compensation and Human Capital Committee oversees grants of long-term incentives on an annual basis and at such other times asthat may be warranted. A target long-term incentive award value is established for each executive as a percentage of base salary. The Compensation and Human Capital Committee determines the target grant amounts using factors similar to those used in setting annual incentive targets, including the executive’s level of responsibility within the Companycompany and internal and external equity considerations.
The following table shows the target long-term incentive award values for 20172019 for each of our named executive officers, expressed as a percentage of base salary:
|
| | |
| Name | | Target Long-Term Incentive Award Value (as a % of Salary) |
| James B. Connor | | 400%440% |
| Mark A. Denien | | 220%240% |
| Steven W. Schnur | | 195% |
| Nicholas C. Anthony | | 240% |
| Ann C. Dee | | 170% |
Peter D. Harrington | | 125% |
Nicholas C. Anthony | | 205%195% |
TheAs shown in the following graphic, the long-term equity awards made to our named executive officers in February 20172019 consisted of a combination of one-third RSUs and performance sharetwo-thirds PSP awards.
The following table describes the design features and purpose of the RSUs and PSP awards.
|
| | | | |
| Award | | Design Features | | Purpose |
| RSUs | • | Vest over a defined period of time, subject to the executive’s continued employment
| • | Retention of key talent
|
| | | • | Align the interests of management with those of shareholders |
| PSP awards | •
| Earned based on continued employment and the achievement of financial performance targets established by the Compensation and Human Capital Committee
| • | Focus and incentivize our executives on long-term financial performance
|
| • | Represent the right to earn actual shares of the company’s common stock at the end of a three-year performance period established for each PSP award
| • | Retention of key talent |
| | | • | Align the interests of management with those of shareholders |
In 2017,2019, executive officers were permitted to elect to receive LTIP units in lieu of RSUs or performance sharePSP awards. The LTIP units are designed to qualify as profitprofits interests in our operating partnership, Duke Realty Limited Partnership, for federal income tax purposes. To the extent the value of the LTIP units increaseincreases after the grant date, the LTIP units will become regular common units of ownership in theour operating partnership upon
vesting. Pursuant to the limited partnership agreement of theour operating partnership, common units of ownership in the operating partnership may be redeemed for shares in the Companycompany on a 1:1 basis.
RSUs.To support the retention of key talent and to manage the efficient use of shares in our stock plan, the Committee elected to make one-third of the long-term incentive grants in 2017 in the form of RSUs. RSUs are aligned with performance because they allow the holder to share in total shareholder return, both through share price appreciation (or depreciation) and dividends.
The RSUs granted in 20172019 vest ratably over a three-year period, subject to the holder’s continued employment with the Company.company. During the vesting period, RSUs accumulate dividend equivalents, which are deemed to be reinvested in additional vested RSUs based upon the closing price of the Company’scompany’s common stock on the dividend payment date. When the original RSUs vest, the original RSUs and the RSUs acquired through corresponding dividend equivalents are converted to shares of the Company’scompany’s common stock and paid to participants.
LTIP units elected in lieu of RSUs have the same time-based vesting provisions as the RSUs. However, instead of accumulating dividend equivalents, holders of time-based vesting LTIP units issued in lieu of RSUs receive cash distributions from the operating partnership on each dividend payment date.
Performance Share Awards. The Performance Share Plan, or Awards
PSP is designed to provide executive officers with long-term incentive opportunities directly related to financial performance objectives established by the Committee for each award. Performance share awards granted under the PSPPerformance Share Plan (PSP), represent the right to earn actual shares of the Company’scompany’s common stock at the end of a performance cycleperiod established for each PSP award. Executives may also elect to receive LTIP units in lieu of performance shares. The actual number of performance shares or LTIP units earned with respect to an award is based upon the target number of performance shares, multiplied by a “payout percentage” ranging from 0 to 225% and determined by the level of performance against pre-established performance goals. Performance shares also earn dividend equivalents only if they vest. LTIP units awarded in lieu of PSP awards receive cash distributions equal to ten10 percent of the regular partnership distributions during the vesting period, so the LTIP units continue to qualify as “profit“profits interests” for tax purposes. The LTIP units accrue additional dividend equivalent LTIP units up to ninety90 percent of the regular partnership distributions. As with performance shares, full dividend equivalents are earned on LTIP units only if those LTIP units vest.
Impact of Medical Office Disposition on Performance Share Awards. As noted above, after our announcement of the medical office disposition, the Committee met in July 2017 to discuss the expected impact of the disposition on the Company’s budget and operations. After considering the Company’s restated budget and the expected change the transaction would have on AFFO per share for 2017 and future years (expected reduction by $0.06, $0.041, and $0.041 in 2017, 2018, and 2019, respectively) the Committee adjusted the performance goals relating to growth in AFFO per share for all outstanding PSP awards. Goals related to total shareholder return remained unchanged.
Grant of Performance Share Awards in 2017. Two-thirds of the total grant date value of the long-term equity awards made to our named executive officers in February 2017 consists of performance shares under the PSP. These2019
The PSP awards have two financial performance components, each weighted one-half of the 20172019 PSP Award,award, that are measured over a three-year period beginning January 1, 20172019, as shown in more detail on the following page.below. Shares and LTIP units granted under the PSP are issued under the Duke Realty Corporation 2015 Long-Term Incentive Plan or the(the 2015 Incentive Plan.Plan). To the extent performance goals are achieved, the 2017 performance share2019 PSP awards will pay out after the end of the 2017-20192019-2021 performance period.
The first financial component measures the Company’scompany’s average annual growth in AFFO per share. The following table shows the AFFO per-share growth goals and corresponding payout percentages of target shares for the 20172019 PSP Awards, withawards. The payout for AFFO performance between the Threshold and Target levels and the Target and Superior levels will be linearly interpolated.
| | | 2017-2019 Average Annual Growth in AFFO per share(1) | |
| 2019-2021 Average Annual Growth in AFFO per share | | 2019-2021 Average Annual Growth in AFFO per share |
| Performance Level | | Targets | Payout Percentage | | Targets | Payout Percentage |
| Superior | | 3.9% or above | 200.0% | | 5.0% or above | 200.0% |
| Target | | 1.8% | 100.0% | | 3.0% | 100.0% |
| Threshold | | -1.3% | 50.0% | | 0.0% | 50.0% |
| | | Less than -1.3% | 0.0% | |
| Below Threshold | | | Less than 0.0% | 0.0% |
| |
(1) | Reflects goals as adjusted in July 2017 for the medical office portfolio disposition. Original goals for superior, target, and threshold levels were 5%, 3%, and 0%, respectively. |
The second financial component measures our annualized total shareholder return (changes in stock price, inclusive of reinvested dividends) relative to a peer group. The following table shows the payout percentage for the 20172019 PSP Awardsawards at various levels of relative and absolute total shareholder return withreturn. The TSR payout forpercentage will be linearly interpolated between the Threshold and Target performance between levels linearly interpolated.and the Target and Superior performance levels.
|
| | | |
2017-20192019-2021 Relative Total Shareholder Return |
| Performance Level | | Targets | Payout Percentage |
| Outperformance | | ≥ 75th Percentile and ≥ 15.0% Absolute TSR | 250.0% |
| Superior | | 75th Percentile | 200.0% |
| Target | | 50th Percentile | 100.0% |
| Threshold | | 25th Percentile | 50.0% |
| Below Threshold | | < 25th Percentile | 0.0% |
For purposes of relative total shareholder return comparisons, the company selected REITs against which we most directly competed for business and/or capital as well as two REIT indices that were relevant performance benchmarks at the time the PSP awards were granted.
|
| |
| • EastGroup Properties, Inc. | • NAREIT FTSE Industrials Index |
| • First Industrial Realty Trust, Inc. | • Prologis, Inc. |
• Liberty Property Trust(1) | • Rexford Industrial Realty, Inc. |
| • Monmouth Real Estate Investment Corporation | • STAG Industrial, Inc. |
| • MSCI US REIT Index | • Terreno Realty Corporation |
| |
(1) | On October 27, 2019, Prologis, Inc. and Liberty Property Trust announced that the two companies had entered into a definitive merger agreement by which Prologis, Inc. would acquire Liberty Property Trust, subject to the approval of the shareholders of Liberty Property Trust. Because the definitive merger agreement was announced |
prior to the end of the performance period, Liberty Property Trust’s total shareholder return will be excluded from the calculation.
For both the AFFO payout percentage and the TSR payout percentage, the payout will be zero percent if the threshold performance level is not attained.
Payout of Performance Share Awards Granted in 2017
In 2019, Messrs. Connor, Denien, Schnur, and Anthony, and Ms. Dee earned a payout of the performance shares granted under the PSP in 2017 (2017 PSP) awards. The 2017 PSP awards had two financial performance components, each weighted one-half of the 2017 PSP award, that were measured over a three-year period beginning January 1, 2017, as described in more detail below. For 2017, Messrs. Connor, Denien, and Schnur, and Ms. Dee each elected to receive LTIP units in lieu of PSP awards.
The first financial component measured was the company’s average annual growth in AFFO and the second component measured the company’s annualized total shareholder return (changes in stock price, inclusive of reinvested dividends) relative to a peer group.
The following table shows the AFFO metric goals and corresponding payout percentages for the 2017 PSP awards with payout for performance between levels linearly interpolated.
|
| | | |
2017-2019 Average Annual Growth in AFFO per share(1) |
| Performance Level | | Targets | Payout Percentage |
| Superior | | 3.9% or above | 200.0% |
| Target | | 1.8% | 100.0% |
| Threshold | | -1.3% | 50.0% |
| Below Threshold | | Less than -1.3% | 0.0% |
| |
(1) | Reflects goals as adjusted in July 2017 for our medical office portfolio disposition, which was announced in 2017. Original goals for superior, target, and threshold goals were 5%, 3%, 0%, and less than 0%, respectively. |
The following table shows the payout percentage for the 2017 PSP awards at various levels of relative total shareholder return (changes in stock prices, inclusive of reinstated dividends). The TSR payout percentage would be linearly interpolated between Threshold and Target performance levels and the Target and Superior performance levels.
|
| | | |
| 2017-2019 Relative Total Shareholder Return |
| Performance Level | | Targets | Payout Percentage |
| Outperformance | | ≥ 75th Percentile and ≥ 15.0% Absolute TSR
| 250.0% |
| Superior | | ≥ 75th Percentile | 200.0% |
| Target | | ≥ 50th Percentile | 100.0% |
| Threshold | | ≥ 25th Percentile | 50.0% |
| | | < 25th25th Percentile | 0.0%
|
For purposes of relative totalTotal shareholder return comparisons,for the Company selected2017-2019 performance period was measured versus the following REITs against which wethe company most directly competed for business and/or capital, as well as two REIT indicesindexes and one non-REITbroad market index that were relevant performance benchmarks to our business at the time the PSP awards were granted, for inclusion instart of the performance peer group:period:
|
| | | | |
DCT Industrial Trust Inc. | First Industrial Realty Trust, Inc. | Prologis, Inc. | STAG Industrial, Inc. | NAREIT FTSE Industrials Index |
EastGroup Properties, Inc. | Liberty Property Trust | MSCI US REIT Index | Terreno Realty Corporation | S&P MidCap 400 Index |
Payout of Performance Share Awards Granted in 2015. In 2017, Messrs. Connor, Denien, and Anthony and Ms. Dee earned a payout of the performance shares granted under the PSP in 2015, or the 2015 PSP Awards. The 2015 PSP Awards had three financial performance components, each weighted one-third of the 2015 PSP Award, that were measured over a three-year period beginning January 1, 2015, as described in more detail below. For 2015, Messrs. Anthony and Denien each elected to receive LTIP Units in lieu of PSP awards.
The first financial component measured the Company’s average annual growth in AFFO, the second component was a leverage metric, which included two equally-weighted measures including Fixed Charge Coverage Ratio and the ratio of Debt plus Preferred to EBITDA, and the third financial component measured the Company’s annualized total shareholder return (changes in stock price, inclusive of reinvested dividends) relative to a peer group.
The following table shows the AFFO metric goals and corresponding payout percentages for the 2015 PSP Awards with payout for performance between levels linearly interpolated.
|
| | | |
| 2015-2017 Average Annual Growth in AFFO per share(1) |
| Performance Level | | Targets | Payout Percentage |
| Superior | | 3.0% or above | 200.0% |
| Target | | 1.0% | 100.0% |
| Threshold | | -2.1% | 50.0% |
| | | Less than -2.1% | 0.0% |
| |
(1) | Reflects goals as adjusted in July 2017 for the medical office portfolio disposition. Original goals for superior, target, and threshold levels were 5%, 3%, and 0%, respectively. |
The following tables show the leverage metric goals and corresponding payout percentages of target levels for the 2015 PSP Awards with payout for performance between levels linearly interpolated.
|
| | | |
Fixed Charge Coverage Ratio (Trailing 12 Months of 2017) |
| Performance Level | | Targets | Payout Percentages |
| Superior | | 3.3 or above | 200.0% |
| Target | | 3.0 | 100.0% |
| Threshold | | 2.5 | 50.0% |
| | | Less than 2.5 | 0.0% |
|
| | | |
Debt Plus Preferred to EBITDA Ratio (Trailing 12 months of 2017) |
| Performance Level | | Targets | Payout Percentages |
| Superior | | 6.00 or less | 200.0% |
| Target | | 6.50 | 100.0% |
| Threshold | | 7.25 | 50.0% |
| | | Greater than 7.25 | 0.0% |
The following table shows the payout percentage for the 2015 PSP Awards at various levels of relative total shareholder return (changes in stock prices, inclusive of reinstated dividends). Payouts for the total shareholder return component for the 2015 PSP Awards are not interpolated.
|
| |
• DCT Industrial Trust, Inc.(1) | • NAREIT FTSE Industrials Index |
2015-2017 Relative Total Shareholder Return |
Performance Level | | Targets | Payout Percentage |
Superior | | ≥ 80th Percentile
| 200.0% |
Stretch | | ≥ 60th Percentile and < 80th Percentile
| 150.0% |
Target | | ≥ 40th Percentile and < 60th Percentile
| 100.0% |
Threshold | | ≥ 30th Percentile and < 40th Percentile
| 50.0% |
| | < 30th Percentile
| 0.0% |
Total shareholder return for the 2015-2017 performance period was measured versus the following REITs against which the Company most directly competed for business and/or capital at the start of the performance period:
|
| | | | |
Healthcare Realty Trust | • EastGroup Properties, Inc. | Highwoods Properties, Inc. | Parkway Properties, Inc.(1)
| Healthcare Trust of America,• Prologis, Inc. |
DCT Industrial Trust, Inc. | • First Industrial Realty Trust, Inc. | • S&P MidCap 400 Index |
• Liberty Property Trust(2) | Prologis, Inc. | • STAG Industrial, Inc. |
| • MSCI US REIT Index | • Terreno Realty Corporation |
| |
(1) | On October 6, 2016, Parkway Properties, Inc. merged with Cousins Properties Incorporated. Thus, its total shareholder return for the 2015-2017 performance period was excluded from the final computation. |
(1) On August 22, 2018, Prologis, Inc. acquired DCT Industrial Trust, Inc. Thus, its total shareholder return for the 2017-2019 performance period was excluded from the final computation.
40(2) On October 27, 2019, Prologis, Inc. and Liberty Property Trust announced that the two companies had entered into a definitive merger agreement by which Prologis, Inc. would acquire Liberty Property Trust, subject to the approval of the shareholders of Liberty Property Trust. Because the definitive merger agreement was announced prior to the end of the performance period, Liberty Property Trust’s total shareholder return was excluded from the calculation.
For purposes of the 20152017 PSP Awards,awards, our average annual growth in AFFO per share was 4.64%7.07%, resulting in a payout percentage of 200%; our fixed charge coverage ratio was 4.5x, resulting in a payout percentage of 200%; our debt plus preferred to EBITDA ratio was 4.5x, resulting in a payout percentage of 200%; and our relative total shareholder return ranking was atin the 55.6th25th percentile, resulting in a payout percentage of 100%50%. The combined payout percentage was 166.67%,125% of target, an average of the payout percentagepercentages for each metric.the two components. In addition, and with the exception of LTIP units, dividend equivalents accrued on the performance shares earned were paid out in shares of stock. Unpaid operating partnership distributions were paid out in additional LTIP units. Please see “Executive Compensation—Option Exercises and Stock Vested in 2017”2019” for the number of shares of stock and LTIP units and values thereof received by our named executive officers in connection with the payout of the 20152017 PSP Awards.
Special RSU Grant
As previously mentioned, 2017 marked the completion of our long-term strategic goal of becoming a pure-play industrial REIT after we sold our medical office portfolio through a series of asset sales totaling $2.9 billion. Not only did the pricing of the disposition exceed what the experts expected by a significant margin, but the timing and execution were very successful.We made significant progress in strategically redeploying the proceeds from this transaction to further improve our balance sheet, as well as grow our industrial portfolio through value-creating development projects and the acquisition of quality, strategically-located industrial assets with high cash flow growth potential.
To reward management for the success of this momentous transaction, the Committee provided a special RSU grant to certain executives, including the named executive officers.
|
| | |
Name | | Special RSU Grant Value |
James B. Connor | | $352,500 |
Mark A. Denien | | $140,000 |
Ann C. Dee | | $92,000 |
Nicholas C. Anthony | | $109,000 |
Peter D. Harrington | | $55,000 |
Because these RSUs were granted in 2018, they will be included in certain compensation tables in the 2019 proxy statement, but they are not included in any of the compensation tables in this proxy statement. awards.
Other Compensation and Benefits
The Company’sOur executive officers participate in benefit plans generally available to all other employees. The Companyassociates. We also providesprovide certain benefits to itsour executive officers that are not available to all other employees,associates, such as physical examinations that are outside the normal health care plan, financial advisory services, and automobile and cell phone allowances. We added a supplemental life insurance policy for certain officers beginning January 1, 2019. For additional information on these benefits made available during fiscal 2017,2019, please see the Summary Compensation Table under the section entitled “Executive Compensation.”
Compensation Guidelines and Policies
To help manage compensation-related risk, we have adopted guidelines to assureensure the independence of compensation advisers, a compensation recoupment policy, and stock ownership and retention guidelines, all of which are described in more detail below.
Compensation Committee Advisers Independence Guidelines.Guidelines
The Compensation and Human Capital Committee has adopted guidelines with respect toregarding the engagement of independent executive compensation advisers to advise it in fulfilling its responsibilities.advisers. These guidelines, which can be found on the Investor Relations/Corporate Governance section of the Company’sour website at
http://www.dukerealty.com, are designed to safeguard the independence of the Compensation and Human Capital Committee’s advisers from the Companycompany and management. The Compensation and Human Capital Committee’s consultant,adviser, FW Cook, reports directly to the Chairperson of the Compensation and Human Capital Committee, Chair, and all work conducted by FW Cook with respect to the Company’scompany’s compensation programs is on behalf of the Compensation and Human Capital Committee. FW Cook providedprovides no services to the Companycompany other than executive and non-employee director compensation consulting services, and has no other direct or indirect business relationship with the Companycompany or any of its affiliates. In addition, in its consulting agreement with the Compensation and Human Capital Committee, FW Cook agrees to advise the Chairperson of the Compensation and Human Capital Committee if any potential conflicts of interest arise that could cause FW Cook’s independence to be questioned and to undertake no
projects for management except as approved in advance by the Committee Chairperson.Chairperson of the Compensation and Human Capital Committee. No such conflicts of interest arose in 2017.2019.
Compensation Recoupment Policy
Compensation Recoupment Policy. The Company hasWe have adopted a compensation recoupment policy under which executive officers and the principal accounting officer could be required to return to the Companycompany certain compensation (such as a bonus or other variable compensation) to the extentif it was earned based on materially inaccurate financial statements that required a restatement or it is determined thatif a metric taken into accountused in computing the executive officer or principal accounting officer’s short-term or long-term compensation has been materially incorrectly calculated, and the Compensation and Human Capital Committee determines that the officer has received an excess incentive on account of thedue to a restatement or correction of the incorrect calculation. In that case, the Compensation and Human Capital Committee may take such action, subject to approval by the Board and applicable law, as it determines appropriate, to recover the difference between the amount actually paid to the executive officer and the amount that would have been paid based on the correct financial results. Also, ifIf the Compensation and Human Capital Committee determines that any employee’sassociate’s intentional or knowingly fraudulent or illegal conduct caused damage to the Company,company, the Compensation and Human Capital Committee also may take suchappropriate action as it determines appropriate to cancel or reduce any outstanding equity compensation awards, incentive compensation awards, or other benefits to which the employeeassociate is actually or contingently entitled, in an amount up to the damage to the Company.company. The Company’scompany’s Recoupment Policy is incorporated into the Code of ConductBusiness Ethics that can be found on the Investor Relations/Corporate Governance section of the Company’scompany’s website at http://www.dukerealty.com.
Hedging/Pledging Policy
Under our Securities Trading Policy Statement, associates and directors are prohibited from taking out loans, such as margin loans, for which repayment is secured by a pledge of shares of the company’s stock or other securities issued by the company.In addition, transactions in puts, calls, or other derivative securities, or hedging transactions of any kind, whether or not on an exchange or in any other organized market, are generally prohibited.
Stock Ownership and Retention Guidelines. Guidelines
The Company’scompany’s senior executive officers are required to hold shares of common stock with a value equal to specified multiples of base salary, as shown below. This program assists in focusing executives on long-term success and shareholder value by requiring executives to hold Companycompany stock over the long term.
|
| | |
| Position | Base Salary Multiple | Time to Attain |
| Chief Executive Officer | 6x | 5 years |
| Executive Vice Presidents and Chief Operating Officer | 4x | 5 years |
The stock ownership goal for each person subject to the Company’scompany’s Stock Ownership Guidelines is determined on an individual basis, first in dollars equal to a multiple of the executive’s base salary, and then by converting that amount to a fixed number of shares. Until the senior executive officers reach their ownership guidelines, they are required to retain shares that are owned on the date they became subject to the Stock Ownership Guidelines and at least 75% of “net shares” delivered through the Company’scompany’s executive compensation plans. For this purpose, “net shares” means the number of shares, including limited partnership units in Duke Realty Limited Partnership,our operating partnership, obtained by exercising stock options or through the vesting of awards, less the number of shares the executive sells or trades to cover the exercise costs or to pay withholding taxes. If the executive transfers an award to a family member who resides in the same household, the transferee will be subject to the same retention requirements and the shares will still be counted toward satisfaction of the ownership requirements. A copy of the Stock Ownership Guidelines can be found on the Investor Relations/Corporate Governance section of the Company’sour website at http://www.dukerealty.com.
Equity Grant Policies
Our annual equity grants, including equity grants to named executive officers, are awarded effective as of February 10 of each year, with the grant value of an RSU and the target value of a PSP award, as applicable, equal to the fair market value of our stock as of the grant date. Having a pre-determined grant date minimizes any concern that grant dates could be selectively chosen based upon market price at any given time. The Committee periodically
dates could be selectively chosen based upon market price at any given time. The Compensation and Human Capital Committee periodically approves equity grants to newly hired employeesassociates or to employeesassociates receiving promotions. These interim grants generally occur on the February 10, May 10, August 10, or November 10 immediately following the date of hire or promotion, with the grant value of an RSU equal to the fair market value of our stock as of the grant date. The Compensation and Human Capital Committee is authorized to award special equity grants on other dates from time to time when the Companycompany experiences exceptional performance results. The Companycompany does not plan to time, and has not timed, its release of material non-public information for the purpose of affecting the value of executive compensation.
Employment and Severance Agreements
As a matter of business philosophy, the Company doeswe do not enter into employment agreements with itsour executive officers. However, the Companywe do from time to time entersenter into letter agreements regarding executive severance with certain key officers. The Company entersWe enter into these agreements as a means of protecting the business interests of the Companycompany by conditioning the right of a terminated officer to receive the severance benefits upon each officer’son his or her compliance with a number of post-termination restrictive covenants, including covenants not to solicit our customers or employees, not to go to work for our competitors, and not to disclose our confidential information and trade secrets.covenants. We believe that having these covenants in place provides a tangible benefit to our shareholders.
The letter agreements provide that an officer is entitled to receive certain separation payments and benefits upon the highesttermination of his or her employment under various conditions. The level of severance pay depends upon the circumstances of the officer’s termination of employment. For example, if the officer were terminated by the company without cause or the officer resigns for good reason, then he or she would be entitled to a severance payment in the case of an employmentequal to two times (2X) (or, if such termination in connection withoccurs within one year following a change in control of the Company. We believe that such enhanced severance provides important retentive value during critical periods relatingcompany, three times (3X)) the sum of (a) his or her base salary then in effect and (b) the average annual incentive bonus paid or payable with respect to potential change in control and reduces the likelihood that executives may be concerned and distracted by uncertainty as to their ongoing roleservices performed in the organization afterthree prior calendar years, payable over a 24-month period. If the transaction.company terminates the officer’s employment due to his or her disability, then the officer would be entitled to a severance payment equal to the sum of (a) his or her base salary then in effect and (b) the average annual incentive bonus paid or payable with respect to services performed in the three prior calendar years, payable over a 12-month period. If the officer terminates his or her employment voluntarily without good reason, then the severance payment would equal one times (1X) his or her base salary then in effect, payable over a 12-month period.
For additional disclosure aboutIn addition, if an officer’s employment terminates for any reason other than cause or death, and at the termstime of the termination the officer is at least 55 years old and has at least 10 years of service with the company or an affiliate, then he or she also will receive a healthcare stipend and a financial advisory stipend during the severance period. The healthcare stipend is equal to the difference between (a) the cost the officer would have to pay to continue participation in the company’s health plans under COBRA for a period of 36 months and (b) the active associate rate for such coverage, and the healthcare stipend will be reduced by 50% for months during such period in which the officer would be age 65 or over. The financial advisory stipend is equal to the cost the company would have to pay to provide the officer the financial advisory services it provides generally to executive officers for a period of 36 months, calculated using the annual cost for such services in the year in which the termination date occurs. No severance or stipends would be payable if an officer is terminated for cause or death.
Regardless of the reason for termination of an officer’s employment, his or her right to the severance payments and stipends would stop if he or she violates any of the post-employment restrictive covenants in the amended letter agreements, pleasewhich include non-competition, non-solicitation, and non-disclosure obligations. The non-compete and non-solicitation covenants generally last for two years following termination of employment, or one year if the termination is by the company for cause or by the officer without good reason. The letter agreements do not include tax gross-up provisions. Please see “Executive Compensation—Other Potential Post-Employment Payments.”Post Employment Payments” for a table showing the amounts that would be payable to each of our named executive officers under the letter agreements under various termination scenarios using the applicable base salary and cash incentive bonus as if the termination occurred on December 31, 2019.
EXECUTIVE COMPENSATION
The total direct compensation of each of our named executive officerofficers consists of annual base salary and annual cash and long-term equity incentive awards as specifically addressed in the CD&A. The Company’sOur objective is to provide compensation opportunities that are competitive in total as well as in the mix of elements. The compensation program is designed to provide the proper balance of fixed versus variable and cash versus equity compensation.
With the exception of stock awards, the following table sets forth the compensation earned by or paid to each of theour named executive officers of the Company during the fiscal years ended December 31, 2017,2019; December 31, 2016,2018; and December 31, 2015.2017. In the case of stock awards, this table reflects the aggregate grant date fair value of stock awards grantedby the Companycompany during these years.
| | | Summary Compensation Table | Summary Compensation Table | Summary Compensation Table |
Name and Principal Position | Year | Salary | Stock Awards
(1) | Non-Equity Incentive Plan Compensation (2) | All Other Compensation
(3) | Total | Year | Salary | Stock Awards
(1) | Non-Equity Incentive Plan Compensation (2) | All Other Compensation
(3) | Total |
James B. Connor Chairman and Chief Executive Officer | James B. Connor Chairman and Chief Executive Officer | James B. Connor Chairman and Chief Executive Officer |
| | 2017 | $788,462 | $3,306,667 | $2,072,000 | $33,184 | $6,200,313 | 2019 | $877,692 | $3,613,867 | $2,164,800 | $37,545 | $6,693,904 |
| | 2016 | $647,308 | td,470,000 | td,138,070 | $32,141 | $4,287,519 | 2018 | $846,154 | $3,794,333 | td,199,380 | $33,746 | $6,873,613 |
| 2015 | $490,385 | td,035,000 | $954,160 | td9,652 | td,509,197 | 2017 | $788,462 | $3,306,667 | td,072,000 | $33,184 | $6,200,313 |
Mark A. Denien Executive Vice President and Chief Financial Officer | Mark A. Denien Executive Vice President and Chief Financial Officer | Mark A. Denien Executive Vice President and Chief Financial Officer |
| | 2017 | $496,923 | $1,136,667 | $1,063,750 | $31,301 | $2,728,641 | 2019 | $558,462 | $1,254,400 | $1,076,250 | $33,176 | $2,922,288 |
| | 2016 | $457,692 | $860,000 | $770,390 | $30,831 | td,118,913 | 2018 | $536,923 | td,317,400 | td,117,800 | $32,046 | $3,004,169 |
| 2015 | $441,923 | $702,000 | $688,000 | td8,257 | td,860,180 | 2017 | $496,923 | td,136,667 | td,063,750 | $31,301 | td,728,641 |
Ann C. Dee Executive Vice President, General Counsel and Corporate Secretary | |
| | 2017 | $422,308 | $746,583 | $864,880 | $29,994 | $2,063,765 | |
| | 2016 | $388,846 | $525,000 | $523,150 | $28,792 | $1,465,788 | |
Peter D. Harrington Executive Vice President, Construction | |
Steven W. Schnur Executive Vice President and Chief Operating Officer | | Steven W. Schnur Executive Vice President and Chief Operating Officer |
| | 2017 | $332,308 | $432,708 | $499,430 | $21,538 | $1,285,984 | 2019 | $466,154 | $837,200 | $969,360 | $65,465 | $2,338,179 |
| | 2016 | $292,386 | $175,500 | $335,580 | $13,661 | $817,127 | 2018 | $437,692 | $822,200 | $816,750 | $121,662 | $2,198,304 |
Nicholas C. Anthony Executive Vice President, Chief Investment Officer | Nicholas C. Anthony Executive Vice President, Chief Investment Officer | Nicholas C. Anthony Executive Vice President, Chief Investment Officer |
| | 2017 | $426,923 | $910,883 | $851,800 | $31,241 | $2,220,847 | 2019 | $473,846 | $1,064,000 | $922,810 | $33,499 | $2,494,155 |
| | | 2018 | $457,692 | $1,026,567 | $897,260 | $32,203 | $2,413,722 |
| | | 2017 | $426,923 | $910,883 | $851,800 | $31,241 | $2,220,847 |
Ann C. Dee Executive Vice President, General Counsel and Corporate Secretary | | Ann C. Dee Executive Vice President, General Counsel and Corporate Secretary |
| | | 2019 | $453,846 | $828,100 | $804,480 | $33,656 | $2,120,082 |
| | | 2018 | $438,846 | $867,767 | $810,700 | $32,358 | $2,149,671 |
| | | 2017 | $422,308 | $746,583 | $864,880 | $29,994 | $2,063,765 |
| |
(1) | This column reflects the aggregate grant date fair value in the applicable year for (a) RSUs granted under the 2005 Incentive Plan or the 2015 Incentive Plan and (b) performance shares granted under the PSP, as computed under FASB ASC Topic 718. It also includes the grant date fair value for any LTIP units granted in lieu of RSUs and/or PSP awards, as elected by the executive officer. In 2017, Ms. Dee elected to receive LTIP units in lieu of PSP awards, and2019, Messrs. Connor Denien, and HarringtonDenien elected to receive LTIP units in lieu of both RSUs and PSP awards. Mr. Schnur elected to receive LTIP units in lieu of PSP awards. The grant value for all such awards is equal to the fair market value of our stock as of the grant date.dates. Pursuant to SEC rules, the amounts shown in the Summary Compensation Table for awards subject to financial performance conditions are based on the probable outcome as of the date of grant and exclude the impact of estimated forfeitures. The following table sets forth the grant date target values of the 20172019 PSP grant, in addition to values assuming achievement of the highest level of performance, for each named executive officer. |
| | | 2017 PSP Awards | |
| 2019 PSP Awards | | 2019 PSP Awards |
| Name | | Target Grant Date Fair Value ($)(a) | Value Assuming Highest Level of Performance ($) | | Grant Date Target Value ($)(a) | Value as of Grant Date, Assuming Highest Level of Performance ($) |
| James B. Connor | | $2,133,333(b) | $5,333,333 | | $2,581,333(b) | $5,807,999 |
| Mark A. Denien | | $733,333(b) | $1,833,333 | | $896,000(b) | $2,016,000 |
| Steven W. Schnur | | | $598,000(b) | $1,345,500 |
| Nicholas C. Anthony | | | $760,000 | $1,710,000 |
| Ann C. Dee | | $481,667(b) | $1,204,167 | | $591,500 | $1,330,875 |
| Peter D. Harrington | | $279,167(b) | $697,917 | |
| Nicholas C. Anthony | | $587,667 | $1,469,167 | |
| |
(a) | Represents the grant date target value of PSP awards. The grant date fair value shownreported in the Summary Compensation Table is based on the probable outcome at the time of grant, which was abovebelow target. The total value reported in the Summary Compensation Table also includes the grant date value of all RSU awards. |
| |
(b) | Represents the grant date value at target of LTIP units awarded in lieu of PSP awards upon election by the executive officer. See the discussion of LTIP units awarded in lieu of PSP awards under the section entitled “Performance Share Awards” included in the discussion of long-term incentive awards in the CD&A. |
| |
(2) | Represents the aggregate annual cash incentive bonus that is based upon the Company’scompany’s attainment of certain corporate performance goals as compared to predetermined targets established at the beginning of each calendar year as well as an individual, and in certain cases, a division performance component. |
| |
(3) | All other compensation for 20172019 includes the value of Companycompany matching and profit sharing contributions to the Company’scompany’s 401(k) plan and profit sharing plan, and the value of term life insurance premium payments made by the Company, each valued at $10,000 or less for all named executive officers.company. In addition, all other compensation includes the following perquisites: (1)perquisites for each of the named executive officers: (i) an automobile allowance and cell phone allowance of $3,000 and $600 each, respectively, for each named executive officer; (2)allowance; (ii) payments for personal financial planning services in the amount of $16,380 each for Messrs. Connor, Denien,services; and Anthony and Ms. Dee and $8,000 for Mr. Harrington; and (3)(iii) payments for executive medical examinationsexaminations. With regard to Mr. Schnur, all other compensation also includes $31,788 for Messrs. Connor, Denien,tax gross-ups related to moving and Anthony. relocation expenses. |
Grants of Plan-Based Awards in 20172019
The following table summarizes grants made to the named executive officers in 20172019 under the Company’scompany’s plans:
|
| | | | | | | | | | | | | | |
| Name | Grant Date | Compensation Committee Approval Date | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards |
| | Threshold | Target | Maximum | | Threshold (#) | Target (#) | Maximum (#) | |
| James B. Connor | | | | $700,000 | $1,120,000 | $2,240,000 | | | | | | | |
| 2/10/17 | 1/25/17 | | | | | | 42,228 | 84,455 | 190,024 | | | $2,240,000 |
| 2/10/17 | 1/25/17 | | | | | | | | | | 42,228 | $1,066,667 |
| Mark A. Denien | | | | $359,375 | $575,000 | $1,150,000 | | | | | | | |
| 2/10/17 | 1/25/17 | | | | | | 14,516 | 29,031 | 65,320 | | | $770,000 |
| 2/10/17 | 1/25/17 | | | | | | | | | | 14,516 | $366,667 |
| Ann C. Dee | | | | $292,188 | $467,500 | $935,000 | | | | | | | |
| 2/10/17 | 1/25/17 | | | | | | 9,534 | 19,068 | 42,903 | | | $505,750 |
| 2/10/17 | 1/25/17 | | | | | | | | | | 9,534 | $240,833 |
| Peter D. Harrington | | | | $198,906 | $318,250 | $636,500 | | | | | | | |
| 2/10/17 | 1/25/17 | | | | | | 5,526 | 11,052 | 24,867 | | | $293,125 |
| 2/10/17 | 1/25/17 | | | | | | | | | | 5,526 | $139,583 |
| Nicholas C. Anthony | | | | $295,625 | $473,000 | $946,000 | | | | | | | |
| 2/10/17 | 1/25/17 | | | | | | 11,633 | 23,265 | 52,346 | | | $617,050 |
| 2/10/17 | 1/25/17 | | | | | | | | | | 11,632 | $293,833 |
|
| | | | | | | | | | | | | | |
| Name | Grant Date | Compensation Committee Approval Date | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards |
| | Threshold | Target | Maximum | | Threshold (#) | Target (#) | Maximum (#) | |
| James B. Connor | | | | $880,000 | $1,408,000 | $2,816,000 | | | | | | | |
| 2/10/19 | 1/30/19 | | | | | | 43,051 | 86,102 | 193,730 | | | $2,323,200 |
| 2/10/19 | 1/30/19 | | | | | | | | | | 43,051 | $1,290,667 |
| Mark A. Denien | | | | $437,500 | $700,000 | $1,400,000 | | | | | | | |
| 2/10/19 | 1/30/19 | | | | | | 14,944 | 29,887 | 67,246 | | | $806,400 |
| 2/10/19 | 1/30/19 | | | | | | | | | | 14,943 | $448,000 |
Steven W. Schnur
| | | | $394,063 | $630,500 | $1,261,000 | | | | | | | |
| 2/10/19 | 1/30/19 | | | | | | 9,974 | 19,947 | 44,881 | | | $538,200 |
| 2/10/19 | 1/30/19 | | | | | | | | | | 9,973 | $299,000 |
| Nicholas C. Anthony | | | | $371,094 | $593,750 | $1,187,500 | | | | | | | |
| 2/10/19 | 1/30/19 | | | | | | 12,675 | 25,350 | 57,038 | | | $684,000 |
| 2/10/19 | 1/30/19 | | | | | | | | | | 12,675 | $380,000 |
| Ann C. Dee | | | | $327,031 | $523,250 | $1,046,500 | | | | | | | |
| 2/10/19 | 1/30/19 | | | | | | 9,685 | 19,730 | 44,393 | | | $532,350 |
| 2/10/19 | 1/30/19 | | | | | | | | | | 9,865 | $295,750 |
| |
(1) | Represents the 20172019 annual cash incentive bonus opportunities for each executive. See the description of the annual cash incentive award in the CD&A. |
| |
(2) | Represents the number of shares that could be earned under performance shares granted during 20172019 under the PSP,or the number of limited partnership units in our operating partnership that could be earned under LTIP units granted in lieu of PSP awards. All of the performance sharePSP awards and LTIP units granted in lieu of PSP awards have a three-year performance measurement period. The value is computed in accordance with FASB ASC Topic 718. See pertinent details regarding the payout of awards under the PSP in the section entitled “Performance Share Awards” included in the discussion of long-term incentive awards in the CD&A. |
| |
(3) | Represents the number of RSUs granted during 20172019 under the 2015 Incentive Plan, or the number of LTIP units granted in lieu of RSUs. See the description of the RSUs and LTIP units in the section entitled “RSUs” included in the discussion of long-term incentive awards in the CD&A. |
| | | Outstanding Equity Awards at 2017 Fiscal Year End | |
| Outstanding Equity Awards at 2019 Fiscal Year End | | Outstanding Equity Awards at 2019 Fiscal Year End |
| | The following table contains information concerning outstanding equity awards held by each of the named executive officers as of December 31, 2017: | |
| The following table contains information concerning outstanding equity awards held by each of the named executive officers as of December 31, 2019: | | The following table contains information concerning outstanding equity awards held by each of the named executive officers as of December 31, 2019: |
| | | Stock Awards | | Stock Awards |
| Named Executive Officer | Grant Date | | Number of Shares or Units of Stock Granted That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock Granted That Have Not Vested (1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (2) | |
| Name | | Grant Date | | Number of Shares or Units of Stock Granted That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock Granted That Have Not Vested (1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)(2) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested (2) |
| James B. Connor | 2/10/13 | | 5,901 | $160,553 | - | 2/10/17 | | 14,076 | $488,015 | – | – |
| | 2/10/14 | | 14,667 | $399,086 | - | |
| | 2/10/15 | | 8,133 | $221,299 | - | 2/10/18 | | 32,015 | $1,109,960 | 227,508 | $7,887,702 |
| | 2/10/16 | | 46,541 | $1,266,391 | 138,658 | $3,772,884 | 2/10/18 | | 7,548 | $261,689 | – |
| | 2/10/17 | | 42,228 | $1,149,024 | 88,966 | $2,420,776 | 2/10/19 | | 43,051 | $1,492,578 | 198,595 | $6,885,289 |
| Mark A. Denien | 2/10/13 | | 1,381 | $37,576 | - | 2/10/17 | | 4,838 | $167,733 | – |
| | 5/10/13 | | 759 | $20,651 | - | 2/10/18 | | 11,115 | $385,357 | 78,989 | $2,738,549 |
| | 2/10/14 | | 10,103 | $274,900 | - | 2/10/18 | | 2,621 | $90,870 | – |
| | 2/10/15 | | 5,516 | $150,090 | - | 2/10/19 | | 14,943 | $518,074 | 68,935 | $2,389,976 |
| | 2/10/16 | | 14,845 | $403,932 | 48,278 | $1,313,644 | |
| | 2/10/17 | | 14,516 | $394,980 | 30,582 | $832,131 | |
| Ann C. Dee | 2/10/13 | | 951 | $25,869 | - | |
| | 5/10/13 | | 815 | $22,172 | - | |
| | 2/10/14 | | 5,751 | $156,490 | - | |
| | 2/10/15 | | 3,635 | $98,902 | - | |
| | 2/10/16 | | 9,062 | $246,577 | 29,472 | $801,933 | |
| | 2/10/17 | | 10,099 | $274,788 | 20,087 | $546,556 | |
| Peter D. Harrington | 2/10/13 | | 2,263 | $61,570 | - | |
| | 5/10/13 | | 781 | $21,255 | - | |
| | 2/10/14 | | 4,533 | $123,337 | - | |
| Steven W. Schnur | | 2/10/17 | | 2,381 | $82,553 | – | – |
| | 2/10/15 | | 2,885 | $78,489 | - | 2/10/18 | | 7,345 | $254,642 | 49,299 | $1,709,196 |
| | 2/10/16 | | 6,614 | $179,963 | - | 2/10/18 | | 1,732 | $60,054 | – |
| | 2/10/17 | | 5,526 | $150,362 | 11,642 | $316,790 | 2/10/19 | | 10,251 | $355,391 | 46,008 | $1,595,097 |
| Nicholas C. Anthony | 2/10/13 | | 1,770 | $48,154 | - | 2/10/17 | | 4,306 | $149,280 | – | – |
| | 5/10/13 | | 798 | $21,723 | - | 2/10/18 | | 9,171 | $317,964 | 61,905 | $2,146,246 |
| | 2/10/14 | | 3,954 | $107,580 | - | 2/10/18 | | 2,160 | $74,884 | – |
| | 2/10/15 | | 3,836 | $104,378 | - | 2/10/19 | | 13,028 | $451,678 | 58,629 | $2,032,667 |
| Ann C. Dee | | 2/10/17 | | 3,529 | $122,365 | – | – |
| | 2/10/16 | | 11,328 | $308,235 | 36,839 | $1,002,389 | 2/10/18 | | 7,322 | $253,854 | 52,037 | $1,804,123 |
| | 2/10/17 | | 12,321 | $335,257 | 24,646 | $670,614 | 2/10/18 | | 1,724 | $59,771 | – |
| | | 2/10/19 | | 10,140 | $351,543 | 45,631 | $1,582,027 |
|
| |
| Officer | Represents |
| James B. Connor | The awards dated February 10, 2017, through February 10, 2019, represent the number of LTIP units granted in lieu of RSUs pursuant to the executive’s election, including the special grant of RSUs. |
| Mark A. Denien | The awards dated February 10, 2017, through February 10, 2019, represent the number of LTIP units granted in lieu of RSUs pursuant to the executive’s election, including the special grant of RSUs. |
| Steven W. Schnur | The amount represents the number and market value of outstanding RSUs granted pursuant to the 20052015 Incentive Plan for 2017, 2018, and 2019, including the years 2013special grant of RSUs. The totals include accumulated dividend equivalent RSUs. |
| Nicholas C. Anthony | The amount represents the number and 2014 andmarket value of outstanding RSUs granted pursuant to the 2015 Incentive Plan for 2016,2017, 2018, and 2019, including the special grant of RSUs. The totals include accumulated dividend equivalent RSUs.RSUs. |
| Ann C. Dee | The amount represents the number and market value of outstanding RSUs granted pursuant to the 2015 Incentive Plan for 2017 and 2019. The totals include accumulated dividend equivalent RSUs. The awards dated February 10, 2015 and February 10, 2017,2018, represent the number of LTIP units granted in lieu of RSUs pursuant to the executive’s election. |
Mark A. Denien | The amount representselection, including the number and market valuespecial grant of outstanding RSUs granted pursuant to the 2005 Incentive Plan for the years 2013 and 2014, including accumulated dividend equivalent RSUs.
The awards dated February 10, 2015, February 10, 2016, and February 10, 2017, represent the number of LTIP units granted in lieu of RSUs pursuant to the executive’s election.
|
Ann C. Dee | The amount represents the number and market value of outstanding RSUs granted pursuant to the 2005 Incentive Plan for the years 2013 through 2015 and pursuant to the 2015 Incentive Plan for 2017, including accumulated dividend equivalent RSUs.
The awards dated February 10, 2016, represent the number of LTIP units granted in lieu of RSUs pursuant to the executive’s election.
|
Peter D. Harrington | The amount represents the number and market value of outstanding RSUs granted pursuant to the 2005 Incentive Plan for the years 2013 through 2015 and pursuant to the 2015 Incentive Plan for 2016, including accumulated dividend equivalent RSUs.
The awards dated February 10, 2017, represent the number of LTIP units granted in lieu of RSUs pursuant to the executive’s election.
|
Nicholas C. Anthony | The amount represents the number and market value of outstanding RSUs granted pursuant to the 2005 Incentive Plan for the years 2013 and 2014 and pursuant to the 2015 Incentive Plan for 2017, including accumulated dividend equivalent RSUs.
The awards dated February 10, 2015 and February 10, 2016, represent the number of LTIP units granted in lieu of RSUs pursuant to the executive’s election.
|
The RSUs granted prior to January 2015 vest in five equal annual installments beginning onWith the first anniversaryexception of the special grant date, subject to the holder’s continued employment. Theof RSUs in 2018, RSUs and LTIP units granted beginning on February 10, 2015, and after vest in three equal installments beginning on the first anniversary of the grant date, subject to the holder’s continued employment and in the case of the LTIP units, subject to certain other vesting requirements. The special grant dated February 10, 2018, vests in two equal installments. See pertinent details regarding LTIP units granted in lieu of RSUs, including cash distributions and certain other vesting requirements, included in the discussion of long-term incentive awards in the CD&A. The dividend equivalent RSUs vest as they accrue but are paid out when the host award vests or, if the host award fails to vest and is forfeited, are paid out as soon as practical after such forfeiture, including any delay necessary to comply with Section 409A of the Code. In all cases, the market value indicated is based upon the closing price of the Company’scompany’s common stock on December 31, 2017,2019, of $27.21$34.67 per share.
(2)
(2)
|
| |
| Officer | Represents |
| James B. Connor | The amount represents the number of common units in Duke Realty Limited Partnership,our operating partnership, plus additional LTIP units that would be earned in place of unpaid cash distributions, that would be earned at the superiormaximum payout level for the LTIP units granted in lieu of PSP awards in 20162018 and at the target payout level for LTIP units granted in lieu of PSP awards in 2017.2019. |
| Mark A. Denien | The amount represents the number of common units in Duke Realty Limited Partnership,our operating partnership, plus additional LTIP units that would be earned in place of unpaid cash distributions, that would be earned at the superiormaximum payout level, for the LTIP units granted in lieu of PSP awards in 20162018 and 2019. |
| Steven W. Schnur | The amount represents the number of common units in our operating partnership, plus LTIP units earned in place of unpaid cash distributions, that would be earned at the targetmaximum payout level, for the LTIP units granted in lieu of PSP awards in 2017.2018 and 2019. |
| Nicholas C. Anthony | The amount represents the number of shares that would be earned at the maximum payout level, including dividend equivalent shares, for the awards granted pursuant to the PSP in 2018 and 2019. |
| Ann C. Dee | The amount represents the number of common units in Duke Realty Limited Partnership,our operating partnership, plus additional LTIP units that would be earned in place of unpaid cash distributions, that would be earned at the superiormaximum payout level, for the LTIP units granted in lieu of PSP awards in 2016 and at2018. For 2019, the target payout level for LTIP units granted in lieu of PSP awards in 2017. |
Peter D. Harrington | The amount represents the number of common units in Duke Realty Limited Partnership, plus additional LTIP units that would be earned in place of unpaid cash distributions, that would be earned at the target payout level, for the LTIP units granted in lieu of PSP awards in 2017. Mr. Harrington was not eligible to receive PSP awards in 2016. |
Nicholas C. Anthony | The amount represents the number of shares that would be earned at the targetmaximum payout level, including dividend equivalent shares, for the awards granted in 2017 pursuant to the PSP.
The amount represents the number of common units in Duke Realty Limited Partnership, plus additional LTIP units that would be earned in place of unpaid cash distributions, that would be earned at the superior payout level for the LTIP units granted in lieu of PSP awards in 2016.
|
All such amounts are represented at a market value based upon the closing price of the Company’scompany’s common stock on December 31, 2017,2019, of $27.21$34.67 per share. The PSP awards have a three-year performance measurement period. Further details regarding awards granted under the PSP, including LTIP units, are found under the section entitled “Performance Share Awards” included in the discussion of long-term incentive awards in the CD&A.
Option Exercises and Stock Vested in 20172019
The following table shows the number of shares acquired and the value realized upon vesting in 20172019 of (i) RSUs, including the value of dividend equivalents earned and vested in 20172019 on all outstanding RSUs; (ii) LTIP units received in lieu of RSUs; (iii) performance shares granted in 20152017 under the PSP, including the value of dividend equivalents earned and vested in 20172019 with respect thereto; (iv) LTIP units received in lieu of performance shares granted in 20152017 under the PSP, including the value of dividend equivalents earned on unpaid cash distributions and LTIP units earned above target payout; and/or (v) dividend equivalents earned in 20172019 on performance units previously vested under the 2000 Performance Share Plan or 2000 PSP.(2000 PSP). The aggregate value of the shares acquired is based upon the fair market value of the Company’scompany’s common stock on the vesting date.
| | | | | Stock Awards | | Stock Awards |
| Name | | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting (1) | | Number of Shares Acquired on Vesting (#)(1) | Value Realized on Vesting (1) |
| James B. Connor | | 96,165 | $2,531,669(2) | | 183,036 | $6,038,659(2) |
| Mark A. Denien | | 52,429 | $1,388,977 | | 65,137 | $2,142,031 |
| Steven W. Schnur | | | 30,029 | $985,296 |
| Nicholas C. Anthony | | | 51,007 | $1,683,671 |
| Ann C. Dee | | 32,201 | $854,298 | | 42,442 | $1,397,416 |
| Peter D. Harrington | | 13,241(3) | $338,775(3) | |
| Nicholas C. Anthony | | 37,907 | $1,004,617 | |
| |
(1) | Includes the following number of shares or LTIP units acquired and value realized on vesting for the 20152017 PSP award: |
| | | Name | | Number of Shares/LTIP Units Acquired on Vesting (#) | Value Realized on Vesting | | Number of Shares/LTIP Units Acquired on Vesting (#)(a) | Value Realized on Vesting |
| James B. Connor | | 46,490 | $1,264,999 | | 117,368 | $4,069,140 |
| Mark A. Denien | | 31,298(a) | $851,631 | | 40,345 | $1,398,767 |
| Steven W. Schnur | | | 17,880 | $619,908 |
| Nicholas C. Anthony | | | 32,614 | $1,130,734 |
| Ann C. Dee | | 18,393 | $500,473 | | 26,499 | $918,736 |
| Peter D. Harrington | | – | |
| Nicholas C. Anthony | | 21,768(a) | $592,318 | |
| |
(a) | Messrs. Connor, Denien, and AnthonySchnur, and Ms. Dee elected to receive LTIP units in lieu of PSP awards in 2015.2017. The number represents the LTIP units earned upon vesting, including additional LTIP units earned in place of unpaid cash distributions. |
| |
(2) | Includes $21,704$12,754 for Mr. Connor attributable to the value of dividend equivalents earned in 20172019 on performance units previously vested under the 2000 PSP for which receipt has been deferred. This amount isDividend equivalent units earned under the 2000 PSP also are included in the “Aggregate Earnings in the Last FY” column of the Nonqualified Deferred Compensation table. For a description of these dividend equivalents, see the description of the 2000 PSP under the heading, “Nonqualified Deferred Compensation for 2017.2019.” |
| |
(3) | Includes 11,066 RSUs with a value of $281,540, deferred into the Executives’ Deferred Compensation Plan upon vesting, pursuant to Mr. Harrington’s previous election. This amount is also included in the “Executive Contributions in the Last FY” column of the Nonqualified Deferred Compensation table. |
Nonqualified Deferred Compensation for 20172019
TheOur named executive officers’ nonqualified deferred compensation in 20172019 consists of participation in one or both of the following plans: (1) the Executives’ Deferred Compensation Plan or DC Plan,(DC Plan), and (2) the 2000 PSP. The DC Plan continues in effect as the Company’scompany’s primary nonqualified deferred compensation plan. Certain of theour named executive officers have undistributed awards under the 2000 PSP, although no further awards will be made under such plan. The 2000 PSP constitutes a deferred compensation plan in the technical sense that outstanding vested awards may be paid out in a future year.
Executives’ Deferred Compensation Plan.Plan
The Companycompany does not make contributions to the DC Plan and does not guarantee any return on participant account balances. Executives are permitted to elect to defer up to 50% of base salary, 100% of annual cash incentive bonus, and 100% of RSU and PSP awards. The Companycompany has established an irrevocable rabbi trust to hold assets separate from other general corporate assets for the purpose of paying future participant obligations. The assets of the trust remain available to the general creditors of the Company.company. Participants are 100% vested in their deferrals and related earnings. Participants who retire on or after reaching age 50 will receive their DC Plan account balance, based upon their election, either in full or by partial lump-sum payment and/or by annual installments of two to 15 years. A participant who terminates employment other than by retirement, death, or disability will receive the undistributed portion of the account balance in a lump-sum payment. In the event of a participant’s death, the participant’s designated beneficiary will receive the undistributed portion of the account balance in a lump-sum payment. A participant may also elect to receive some or all of a particular year’s deferral and related earnings prior to retirement or termination of employment in the form of a lump-sum payment or in up to five annual installments. Subject to approval by the DC Plan administrator, in the event of an unforeseen financial emergency beyond the participant’s control, a participant may request a withdrawal from his or her account up to the amount necessary to satisfy the emergency (provided the participant does not have the financial resources to otherwise meet the hardship).
2000 Performance Share Plan.
Awards under the 2000 PSP were made in 2000 and 2004 in the form of performance units, all of which are now fully vested. The payment for vested awards is made in shares of common stock. However, vested awards are not paid until retirement or termination of employment, and thus are considered deferred compensation. Dividends are paid on the awards in cash or additional performance units, as previously elected by the participant.
The following table sets forth certain information as of December 31, 2017,2019, regarding deferred compensation plans available to each of theour named executive officers.
| | | Name | Name | Name of Plan | Executive Contributions in Last FY (1) | Registrant Contributions in Last FY | Aggregate Earnings
in Last FY
(2) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE (3) | Name | Name of Plan | Executive Contributions in Last FY (1) | Registrant Contributions in Last FY | Aggregate Earnings
in Last FY
(2) | Aggregate Withdrawals/ Distributions | Aggregate Balance at Last FYE (3) |
| James B. Connor | James B. Connor | DC Plan | – | James B. Connor | DC Plan | – |
| 2000 PSP | – | td9,720 | – | $378,697 | 2000 PSP | – | td39,570 | – | $510,884 |
| Mark. A. Denien | Mark. A. Denien | DC Plan | – | – | – | – | Mark. A. Denien | DC Plan | – |
| 2000 PSP | – | – | – | – | 2000 PSP | – |
| Steven W. Schnur | | Steven W. Schnur | DC Plan | – | $331,354 | – | td,257,206 |
| 2000 PSP | – |
| Nicholas C. Anthony | | Nicholas C. Anthony | DC Plan | – | $394,573 | – | td,587,562 |
| 2000 PSP | – |
| Ann C. Dee | Ann C. Dee | DC Plan | $31,000 | – | td17,167 | – | $935,068 | Ann C. Dee | DC Plan | td5,000 | – | $300,052 | – | td,240,978 |
| 2000 PSP | – | 2000 PSP | – |
| Peter D. Harrington | DC Plan | $306,540 | – | $99,556 | – | $946,291 | |
| 2000 PSP | – | – | – | – | |
| Nicholas C. Anthony | DC Plan | – | td12,887 | – | td,226,159 | |
| 2000 PSP | – | |
| |
(1) | Executive contributions represent deferral of base salary in 2019, which amounts are also disclosed in the fiscal 2019 “Salary” column of the Summary Compensation Table. Messrs. Connor, Denien, Schnur, and Anthony did not defer any of their salary, incentive bonus, or vesting RSU and PSP awardsAwards in 20172019. |
| |
(2) | Aggregate earnings are not includable in the Summary Compensation Table because such earnings were not preferential or above market. |
| |
(2) | Earnings represent notional returns on (a) participant-selected investments in the DC Plan and (b) dividend reinvestments in the 2000 PSP. Aggregate earnings are not includable in the Summary Compensation Table because those earnings were not preferential or above market. |
| |
(3) | The aggregate balance at December 31, 2017,2019, includes the following amounts of employeeassociate contributions representing compensation earned and deferred in prior years that was reported in the Summary Compensation Table for the year in which earned or would have been so reported if the officer had been a named executive officer in such year. Amounts in the following table include contributions to the DC Plan and the value of vested awards and dividend equivalents under the 2000 PSP. |
|
| | |
| Name | | Total |
| James B. Connor | | $208,511 |
| Mark A. Denien | | – |
Ann C. DeeSteven W. Schnur | | $630,335 |
Peter D. Harrington | | $705,608496,261 |
| Nicholas C. Anthony | | $500,492 |
| Ann C. Dee | | $675,335 |
Other Potential Post-Employment Payments
The Companycompany and each of itsour named executive officers have entered into letter agreements that provide for separation payments upon the termination of the officer’s employment under various conditions. The level of severance pay under the letter agreements depends upon the circumstances of the officer’s termination of employment. For example, if the officer were terminated by the Company without “cause”Please see “Compensation Discussion and not in connection withAnalysis—Employment and Severance Agreements,” for a “change in control”description of the Company (each of which terms are defined in the letter agreements), then the officer would be entitled to a severance payment equal to two times (2X) the sum of (a) his or her base salary in effect on the last day of the calendar year immediately preceding the calendar year in which termination occurs and (b) annual cash incentive bonus for services performed in the prior year, payable over a 24-month period. If the officer terminated his or her employment voluntarily, then the severance payment would equal one times (1X) his or her base salary in effect on the last day of the calendar year immediately preceding the calendar year in which termination occurs, payable over a 12-month period. If the officer were terminated for “cause,” then the severance payment would be $10,000, payable over a two-month period. Regardless of the reason for termination of an officer’s employment, that officer’s right to the severance payments would stop if and when he or she violated any of the post-employment restrictive covenants in the agreement. The payments in the case of voluntary termination or termination for cause are solely consideration for the executive’s post employment non-solicitation and confidentiality covenants. Longer-term non-solicitation covenants apply in the case of termination without cause or for good reason. The agreements with all of our named executive officers contain a sunset provision, which provides that, in the event the executive’s employment terminates effective on or after his or her 62nd birthday under any one of the termination scenarios other than termination for good reason or upon a change of control, he or she will not be entitled to receive any separation benefits from the Company.
The letter agreements provide the highest severance payment (three times (3X) the sum of (a) base salary in effect on the last day of the calendar year immediately preceding the calendar year in which termination occurs and (b) annual cash incentive bonus for services performed in the prior year, payable over a 24-month period) in the case of the Company’s termination of the executive’s employment or the executive’s resignation of employment for “good reason” (as defined in the severance agreements) within one year after a change in control of the Company. The letter agreements do not provide any excise tax “gross-ups.”agreements.
The following table shows the amounts that would be payable to each of theour named executive officers under the letter agreements under various termination scenarios using the applicable base salary and cash incentive bonus as if the termination occurred on December 31, 2017.2019. The severance agreements do not include tax gross-up provisions, and all payments made to the executives would be net of applicable withholdings.
| | | Named Executive Officer | Executive Leaves Voluntarily with No Change in Control | Termination by Company without Cause and with No Change in Control | Termination by Company For Cause | Executive Leaves for “Good Reason” or Termination by Company following Change in Control | Executive Leaves Voluntarily with No Change in Control | Termination by Company without Cause and with No Change in Control | Termination due to Disability | Termination by Company without Cause or by Officer for “Good Reason” following Change in Control |
| James B. Connor | $650,000 | $3,576,140 | $10,000 | $5,364,210 | $970,066 | $5,456,366 | $2,773,216 | $8,139,516 |
| Mark A. Denien | $460,000 | $2,460,780 | $10,000 | $3,691,170 | $560,000 | $3,087,960 | $1,543,980 | $4,631,940 |
| Steven W. Schnur | | $485,000 | $2,374,013 | $1,187,007 | $3,561,020 |
| Nicholas C. Anthony | | $475,000 | $2,525,211 | $1,262,606 | $3,787,820 |
| Ann C. Dee | $390,000 | $1,826,300 | $10,000 | $2,739,450 | $545,066 | $2,465,886 | $1,277,976 | $3,653,796 |
| Peter D. Harrington | $300,000 | $1,271,160 | $10,000 | $1,906,740 | |
| Nicholas C. Anthony | $390,000 | $2,007,520 | $10,000 | $3,011,280 | |
Change in Control Provisions Under Other Agreements
The Company’scompany’s long-term compensation plans, including the 2015 Incentive Plan, generally provide that a change in control occurs upon the occurrence of any of the following: (1) when the incumbent members of the Board cease to constitute a majority of the Board; (2) except in the case of certain issuances or redemptions of stock or the acquisition of stock by any employeeassociate benefit plan sponsored by the Company,company, when any person acquires a 25% or more ownership interest in the outstanding common stock or combined voting power of the then outstanding securities of the Company;company; (3) the consummation of a reorganization, merger, consolidation, statutory share exchange, or other corporate transaction, unless (a) the beneficial owners of the Company’scompany’s stock immediately prior to the transaction continue to own 50% or more of the outstanding common stock and combined voting power of the then outstanding securities of the Company,company, (b) no person acquires a 25% or more ownership interest in the then outstanding common stock or combined voting
power of the then outstanding securities of the Company,company, and (c) at least a majority of the members of the board of directors of the surviving corporation were incumbent directors at the time of approval of the corporate transaction; (4) the approval by the shareholders of the Companycompany of a complete liquidation or dissolution; or (5) when the Company’scompany’s ownership interest in the operating partnership is reduced below 50%.
All outstanding awards granted under the 2005 Incentive Plan and the 2015 Incentive Plan provide for “double trigger” change in control vesting, such that the effect of a change in control depends upon whether the award is assumed by the acquiring company. If awards are not assumed by the acquiring company, service-based awards vest in full upon the change in control and performance-based awards vest at the “target” level if the change in control occurs prior to the second anniversary of the beginning of the performance period. Such awards vest at the “actual” level if the change in control occurs on or after the second anniversary of the beginning of the performance period and prior to the end of the performance period, based on performance through the date of the change in control. If the awards are assumed by the acquiring company, similar accelerated vesting of awards is contingent on the grantee’s involuntary termination without cause or for good reason within one year following the change in control.
The following table shows the total additional value of the awards that would be payable to each of the named executive officers under the accelerated vesting provisions of these plans upon the occurrence of a change in control as of December 31, 2017,2019, and assuming that the acquiring company does not assume the awards. Unless indicated otherwise below, award values were determined at $27.21$34.67 per share, the closing price of the Company’scompany’s stock on December 31, 2017.2019.
| | | Named Executive Officer | | RSUs (1) | PSP Award (2) | Total | | RSUs (1) | PSP Award (2) | Total |
| James B. Connor | | $3,009,834 | $4,307,223 | $7,317,057 | | $3,352,242 | $6,565,780 | $9,918,022 |
| Mark A. Denien | | $1,235,334 | $1,488,948 | $2,724,282 | | $1,162,034 | $2,279,338 | $3,441,372 |
| Steven W. Schnur | | | $717,322 | $1,468,571 | $2,185,893 |
| Nicholas C. Anthony | | | $944,896 | $1,857,296 | $2,802,192 |
| Ann C. Dee | | $769,063 | $947,526 | $1,716,589 | | $765,826 | $1,504,962 | $2,270,788 |
| Peter D. Harrington | | $560,853 | $316,790 | $877,643 | |
| Nicholas C. Anthony | | $880,951 | $1,171,811 | $2,052,762 | |
| |
(1) | Represents the value of the unvested awards at December 31, 2017.2019. |
| |
(2) | Represents awards granted in 20162018 and 20172019 under the PSP. The value of the awards granted in 20162018 would be fixed at the target level in the event of a change in control prior to January 1, 2018,2020, and the value of the awards granted in 20172019 would be fixed at the target level in the event of a change in control prior to January 1, 2019.2021. The above table assumes a change of control occurring on December 31, 2017,2019, with the result that both the 20162018 and 20172019 awards would pay out at the target level. |
Retirement Provisions underUnder Other Agreements
Awards granted to named executive officers pursuant to the 2005 Incentive Plan and the 2015 Incentive Plan will continue to vest upon the executive’s termination of employment, other than for cause, on or after reaching age 55, and provided that the sum of the executive’s age and years of service to the Companycompany totals at least 65 years (which is defined as “retirement” for purposes of the 2005 Incentive Plan and the 2015 Incentive Plan). Such awards are subject to the restrictive covenants in each executive’s letter agreement regarding severance payments, previously described under the section “Other Potential Post-Employment Payments.“Compensation Discussion and Analysis—Employment and Severance Agreements.” As of December 31, 2017, Messrs.2019, Mr. Connor Denien, Harrington, and Anthony and Ms. Dee were eligible for retirement under these provisions. The values represented above in the table under “—Change in Control Provisions Under Other Agreements” also reflect the total value of the unvested awards that would remain eligible for continued vesting for each of these named executive officersMr. Connor and Ms. Dee under the provisions of these plans upon the occurrence of a retirement as of December 31, 2017,2019, and assuming continuing compliance with the restrictive covenants.
Risk Assessment of Overall Compensation Program
The Compensation and Human Capital Committee has reviewed with management the design and operation of our incentive compensation arrangements for all employees,associates, including executive officers, for the purpose of determiningto determine whether suchthese programs might encourage inappropriate risk-taking that would be reasonably likely to have a material adverse effect on the Company.company. Specifically, management compiled an inventory of all incentive compensation arrangements applicable to the Company’s employeescompany’s associates at all levels, which were then summarized for the Compensation and Human Capital Committee’s independent compensation consultant.adviser. The consultantadviser analyzed these arrangements in the context of potential high-risk design provisions and concluded that the program is well-designed overall not to encourage behaviors that would create a material risk for the Company.company. The consultantadviser noted in particular the following program provisions that support this conclusion: (1) appropriate pay philosophy, peer group, and market positioning to support business objectives; (2) an effective balance in cash and equity, short and longer-term performance focus, corporate, business unit, and individual performance focus, and financial and non-financial performance measurement as well as the discretion of the Compensation and Human Capital Committee; (3) a balanced weighting of performance measures; (4) fixed maximum levels for performance-based awards; and (5) meaningful risk mitigation features including stock
ownership guidelines, the compensation recoupment policy, and independent Compensation and Human Capital Committee oversight. Based on the independent review and findings of the consultant,adviser, the Compensation and Human Capital Committee concluded that the Company’scompany’s compensation plans, programs and policies, considered as a whole, including applicable risk-mitigation features, are not reasonably likely to have a material adverse effect on the Company.company.
CEO Pay Ratio
The 20172019 compensation disclosure ratio of the median annual total compensation of all Company employeescompany associates to the annual total compensation of the Company’s chief executive officercompany’s CEO is as follows:
|
| | |
| Category | | 20172019 Total Compensation
and Ratio |
| Annual total compensation of Mr. Connor (A) | | $6,200,313
6,693,904 |
Median employeeassociate total compensation (excluding Mr. Connor) (B) | | $109,695122,714 |
| Ratio of A to B | | 57:55:1 |
The Companycompany identified the median employeeassociate by examining the following compensation elements for all individuals, excluding Mr. Connor: base salary as of December 31, 2017; 20162019; 2018 bonus paid in 2017;2019; grant date value of 20172019 long-term grants; leasing commissions paid in 2017;2019; and overtime paid in 2017.2019. The Companycompany determined the median employeeassociate based on its workforce as of December 31, 2017,2019, and included all part-time, temporary, and full-time employees.associates. After identifying the median employee,associate, the Companycompany calculated 20172019 total compensation for such employeeassociate using the same methodology used for our named executive officers as set forth in the Summary Compensation Table.
Equity Compensation Plan Information
The following table provides information as of December 31, 2017,2019, about our common stock that may be issued, whether upon the exercise of options, warrants, and rights, or otherwise, under our existing equity compensation plans.
|
| | | | |
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (B) | Weighted-Average Remaining Term of Outstanding Options, Warrants and Rights (C) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (A)) (D) |
| Equity compensation plans approved by shareholders | 3,269,768 | $22.29 | 0.11 | 7,489,995 |
| Equity compensation plans not approved by shareholders(E) | – | – | – | – |
| Total | 3,269,768 | $22.29 | 0.11 | 7,489,995 |
|
| | | |
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) |
| Equity compensation plans approved by shareholders | 3,358,056 (1) | –(2) | 6,362,131 (3) |
Equity compensation plans not approved by shareholders(4) | – | – | – |
| Total | 3,358,056 (1) | – | 6,362,131 (3) |
The number of options and full value awards granted and outstanding as of December 31, 2017,2019, as indicated above, are from all plans.
| |
(A)(1) | IncludesRepresents shares of our common stock issuable pursuant to the exercise of stock options and conversion of full-value awards (i.e. RSUs and performance shares).shares, or LTIP units elected in lieu of such awards. |
| |
(B)(2) | BecauseNo options remain outstanding under our full-valueequity plans. Our outstanding awards do not have an exercise price, the aggregate number of shares of common stock issuable pursuant to such awards, or 3,265,810 shares, is not included in the calculation of weighted average exercise price. |
| |
(C) | The average remaining term of all outstanding options is 0.11 years. Because vesting of our full-value awards is based upon time or Company performance, the remaining terms of full-value awards are excluded from this calculation. |
(3)
| |
(D) | Represents the number of remaining shares available for grant under the Company’scompany’s 2015 Incentive Plan, all of which may be used for grants of either options or full-value awards.Plan. |
| |
(E)(4) | All of the Company’scompany’s equity plans have been approved by its shareholders. |
OWNERSHIP OF COMPANY SHARES
The following table sets forth the beneficial ownership of shares of common stock of the Companycompany and common units of ownership in Duke Realty Limited Partnership, or theour operating partnership units, as of February 23, 2018,20, 2020, for:
each of our named executive officers;
each of our directors;
our current directors and executive officers as a group; and
each person or group known to us to be holding more than 5% of such common stock.
| |
Beneficial Owner | | Shares and Units Beneficially Owned (1) | | Shares Issuable Upon Exercise of Stock Options (2) | | Total | |
Percent of
Class | | Shares and Partnership Units Beneficially Owned (1)(12) | | Shares Issuable Upon Exercise of Stock Options (2) | | Total | |
Percent of
Class |
| James B. Connor(3) | | 235,536 | | – | | 235,536 | | * | |
| Mark A. Denien(4) | | 110,667 | | – | | 110,667 | | * | |
| Ann C. Dee(5) | | 74,497 | | – | | 74,497 | | * | |
| Peter D. Harrington(6) | | 27,454 | | – | | 27,454 | | * | |
| Nicholas C. Anthony(7) | | 51,940 | | – | | 51,940 | | * | |
James B. Connor(3) | | | 461,553 | | – | | 461,553 | | * |
Mark A. Denien(4) | | | 171,640 | | – | | 171,640 | | * |
Steven W. Schnur(5) | | | 48,700 | | – | | 48,700 | | * |
Nicholas C. Anthony(6) | | | 99,465 | | – | | 99,465 | | * |
Ann C. Dee(7) | | | 112,597 | | – | | 112,597 | | * |
| John P. Case | | – | | – | | – | | * | | 11,364 | | – | | 11,364 | | * |
| William Cavanaugh III | | 44,401 | | – | | 44,401 | | * | |
| Alan H. Cohen | | 50,883 | | – | | 50,883 | | * | |
| Ngaire E. Cuneo | | 36,740 | | – | | 36,740 | | * | | 36,740 | | – | | 36,740 | | * |
| Charles R. Eitel | | – | | – | | – | | * | | – | | – | | – | | * |
| Tamara D. Fischer | | | – | | – | | – | | * |
| Norman K. Jenkins | | 78 | | – | | 78 | | * | | – | | – | | – | | * |
| Melanie R. Sabelhaus | | 33,185 | | – | | 33,185 | | * | | 31,126 | | – | | 31,126 | | * |
| Peter M. Scott, III | | 20,381 | | – | | 20,381 | | * | | 20,381 | | – | | 20,381 | | * |
| Jack R. Shaw | | 2,659 | | – | | 2,659 | | * | |
| David P. Stockert | | 10,985 | | – | | 10,985 | | * | | 29,573 | | – | | 29,573 | | * |
| Chris Sultemeier | | – | | – | | – | | * | |
| Chris T. Sultemeier | | | 11,432 | | – | | 11,432 | | * |
| Michael E. Szymanczyk | | 37,081 | | – | | 37,081 | | * | | 37,081 | | – | | 37,081 | | * |
| Warren M. Thompson | | | 4,332 | | – | | 4,332 | | * |
| Lynn C. Thurber | | 99,475 | | – | | 99,475 | | * | | 115,558 | | – | | 115,558 | | * |
| All directors and executive officers as a group (19 persons) | | 861,050 | | – | | 861,050 | | * | |
| The Vanguard Group, Inc.(8) | | 63,016,914 | | – | | 63,016,914 | | 17.65% | |
| BlackRock, Inc.(9) | | 38,099,284 | | – | | 38,099,284 | | 10.67% | |
| FMR LLC (10) | | 27,597,207 | | – | | 27,597,207 | | 7.73% | |
| State Street Corp.(11) | | 20,439,078 | | – | | 20,439,078 | | 5.73% | |
| All directors and executive officers as a group (17 persons) | | | 1,210,579 | | – | | 1,210,579 | | * |
The Vanguard Group, Inc.(8) | | | 60,917,401 | | – | | 60,917,401 | | 16.54% |
BlackRock, Inc.(9) | | | 36,686,488 | | – | | 36,686,488 | | 9.96% |
State Street Corp.(10) | | | 24,178,587 | | – | | 24,178,587 | | 6.56% |
Cohen & Steers, Inc.(11) | | | 25,850,229 | | – | | 25,850,229 | | 7.02% |
* Less than one percent (1%)
| |
(1) | The number of shares and units in this column represents the number of shares of common stock and/or partnership units the person “beneficially owns,” as determined by the rules of the SEC. Unless otherwise indicated, each person listed in the table possesses sole voting and investment power with respect to the common shares reported in this column to be owned by such person. |
| |
(2) | As of February 23, 2018,20, 2020, there are no outstanding stock options owned by any of our named executive officers or directors. |
| |
(3) | Includes 8,653 shares owned by family members and 38,475276,502 partnership units. |
| |
(4) | Includes 52,783157,269 partnership units. |
| |
(5) | Includes 27,626 partnership units. |
| |
(6) | Includes 1,310 shares owned by family members and 9,06367,262 partnership units. |
| |
(6)(7) | Includes 1,8421,386 shares owned by family members and 57,028 partnership units. |
| |
(7) | Includes 34,348 partnership units. |
(8)
| |
(8) | The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355. This information is based solely on twoa Schedule 13G/As13G filed by The Vanguard Group and Vanguard Specialized Funds-Vanguard REIT Index Fund with the SEC on February 9, 2018 and February 2, 2018, respectively. The above total includes 23,950,398 shares separately reported by Vanguard REIT Index Fund.11, 2020. The Vanguard Group has the sole power to vote 909,164914,347 shares and dispose of 61,993,43159,943,962 shares, including shared power to vote 533,601468,012 shares and dispose of 1,023,483973,439 shares. |
| |
(9) | The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. This information was obtained from a Schedule 13G/A13G filed with the SEC on January 19, 2018.February 5, 2020. Total shares beneficially owned include 33,742,927 shares32,603,959 with sole voting power and 38,099,284 shares36,686,488 with sole dispositive power. |
| |
(10) | The address of FMR LLC is 245 Summer Street, Boston, MA 02210. This information was obtained from Schedule 13G/A filed with the SEC on February 13, 2018. Total shares beneficially owned include 15,889,459 shares with sole voting power and 27,597,207 shares with sole dispositive power. |
| |
(11) | The address of State Street Corporation is One Lincoln Street, Boston, MA 02111. This information was obtained from a Schedule 13G/A13G filed with the SEC on February 14, 2018.2020. Total shares beneficially owned include 20,439,07820,130,634 with shared voting power and 24,145,390 with shared dispositive power. |
| |
(11) | The address of Cohen & Steers, Inc. is 280 Park Avenue, 10th Floor, New York, NY 10017. This information was obtained from a Schedule 13G filed with the SEC on February 14, 2020. Total shares beneficially owned include 14,478,702 with sole voting power and 25,850,229 with sole dispositive power. |
| |
(12) | While not included in the table above, shares deferred into our Directors’ Deferred Compensation Plan by members of the Board of Directors are considered to be shares owned for purposes of each director’s target ownership requirement pursuant to the Company’scompany’s Stock Ownership Guidelines,Policies, which are described on page 18.24. Shares owned by individual directors as of the record date in the Directors’ Deferred Compensation Plan are as follows: |
|
| | |
| Name | | Number of Deferred Shares |
William Cavanaugh III | | 129,986 |
| Ngaire E. Cuneo | | 171,806198,398 |
| Charles R. Eitel | | 44,55547,174 |
| Norman K. Jenkins | | 18,345 |
| Peter M. Scott, III | | 25,91336,938 |
Jack R. ShawMichael E. Szymanczyk | | 80,46617,856 |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s directors and executive officers and persons who beneficially own more than 10% of the Company’s common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock, including derivatives of the Company’s common stock. Officers, directors, and greater-than-10%-beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, all Section 16(a) filing requirements applicable to its officers, directors, and greater-than-10% beneficial owners were complied with during the year ended December 31, 2017.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company’sOur Code of ConductBusiness Ethics requires that all associates, officers, and directors avoid conflicts of interestsinterest that interfere with the performance of their duties or are not in the best interests of the Company.company. The Audit Committee reviews all material proposed transactions between the Companycompany and related partiesas specified under Item 404 of Regulation S-K promulgated by the SEC and examines each such transaction for potential conflicts of interestsinterest and other improprieties. The Audit Committee has not adopted any specific written procedures for conducting such reviews and considers each transaction in light of the specific facts and circumstances presented. The CompanyWe currently doesdo not have any such transactions to report.
PROPOSAL THREE: RATIFICATION OF REAPPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected KPMG as the Company’sour independent registered public accounting firm for the fiscal year ending December 31, 20182020, and has further directed that the selection of the independent registered public accounting firm be submitted for ratification by the shareholders at the Annual Meeting.
Representatives of KPMG will be present at the Annual Meeting, will have the opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
In order toTo ratify the selection of KPMG, the votes cast in favor of the proposal must exceed the votes cast against the proposal. Abstentions will not be treated as votes cast and therefore will not affect the outcome. The ratification of the selection of KPMG as the Company’sour independent registered public accountants for 20182020 will be deemed to be a discretionary matter and brokers will be permitted to vote uninstructed shares as to such matter; therefore, no broker non-votes are expected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF KPMG AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2018.2020.
SHAREHOLDER PROPOSALS AND NOMINATIONS FOR 20192021 ANNUAL MEETING
Shareholder Proposals and Nominations for inclusion in the Company’s Proxy Materials
SEC rules establish the eligibility requirements and the procedures that must be followed for a shareholder’s proposal to be included in the Company’scompany’s proxy materials. Under those rules, any shareholder wishing to have a proposal considered for inclusion in the Company’scompany’s proxy materials for the 20192021 annual meeting must submit his or her proposal to the Companycompany in writing on or before November 14, 2018,11, 2020, which is 120 calendar days prior to the anniversary of the date this proxy statement was released to shareholders. However, if the date of the 20192021 annual meeting of shareholders is more than 30 calendar days earlier or later than the anniversary date of the 20182020 annual meeting of shareholders, then the deadline is a reasonable time before the company beginswe begin to print and send itsour proxy materials. Proposals must comply with all applicable SEC rules.
If a shareholder wishes to nominate a director for inclusion in the Company’scompany’s proxy material for the 20192021 annual meeting of shareholders pursuant to the Company’scompany’s proxy access bylaw provision, the Company’scompany’s bylaws require that the shareholder give advance written notice to the Company’scompany’s Corporate Secretary no earlier than 150 days and no later than 120 days before the one year anniversary of the date when the proxy materials for the previous year’s annual meeting of shareholders were released to shareholders, which for the 20192021 annual meeting would be no earlier than October 15, 2018,12, 2020, and no later than November 14, 2018.11, 2020. However, if the date of the 20192021 annual meeting of shareholders is more than 30 calendar days earlier or later than the date contemplated at the time of the 20182020 annual meeting of shareholders, the notice must be received by the Company’scompany’s Corporate Secretary not fewer than the later of (i) 150 calendar days prior to the date of the contemplated annual meeting or (ii) the date which is 10 calendar days after the date of the first public announcement or other notification to the shareholders of the date of the contemplated annual meeting.
Shareholder Proposals and Nominations not for inclusion in the Company’s Proxy MaterialMaterials
If a shareholder wishes to present a proposal, including a proposal to nominate a director nominee, at the 20192021 annual meeting, even if suchthe proposal or nomination is not intended to be included in the 20192021 proxy materials, the Company’scompany’s bylaws require that the shareholder give advance written notice to the Company’scompany’s Corporate Secretary at least 120 days before the one year anniversary of the date when the proxy statement was released to shareholders in connection with the previous year’s annual meeting, which for the 20192021 annual meeting would be November 14, 2018.11, 2020. However, if the date of the 20192021 annual meeting of shareholders is more than 30 calendar days earlier or later than the date contemplated at the time of the 20182020 annual meeting of shareholders, the notice must be received by the Company’scompany’s Corporate Secretary not fewer than the later of (i) 150 calendar days prior to the date of the contemplated annual meeting or (ii) the date which is 10 calendar days after the date of the first public announcement or other notification to the shareholders of the date of the contemplated annual meeting.
If a shareholder is permitted to present a proposal at the 20192021 annual meeting, but the proposal was not included in the 20192021 proxy material,materials, the Companycompany believes that its proxy holder would have the discretionary authority granted by the proxy card (and as permitted under SEC rules) to vote on the proposal if the proposal was received after January 28, 2019,25, 2021, which is 45 calendar days prior to the one-year anniversary of the mailing of this proxy statement.
ANNUAL REPORT
A copy of the Company’s 2017our 2019 Annual Report is available on the Internet as described in the Notice of Internet Availability of Proxy Materials. Additionally, a copy of the Company’s 2017our 2019 Annual Report on Form 10-K for the fiscal year ended December 31, 2017,2019, may be obtained, free of charge, by any shareholder by writing to Duke Realty Corporation, 600 East 96th Street, Suite 100,8711 River Crossing Blvd., Indianapolis, Indiana 46240, Attention: Investor Relations. Our Annual Report on Form 10-K is also available and may be accessed free of charge through the Investor Relations section of our Internet website at http://investor.dukerealty.com.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before this Annual Meeting. However, if other matters should properly come before the Annual Meeting, it is the intention of each person named in the proxy to vote such proxy in accordance with his or her judgment on such matters.
judgment.
HOUSEHOLDING OF PROXY MATERIAL
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more shareholders sharing the same address by delivering to that address a single proxy statement to those shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for shareholders and cost savings for companies. Some brokers household proxy materials, delivering a single proxy statement to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one copy, please notify your broker if your shares are held in a brokerage account, or notify us if you hold registered shares. You can notify us by sending a written request to Duke Realty Corporation, c/o Corporate Secretary, 600 East 96th Street, Suite 100,8711 River Crossing Blvd., Indianapolis, Indiana 46240 or by calling our Investor Relations Department at (317) 808-6005.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. Whether or not you plan to attend the meeting, you are urged to vote your proxy.
Please refer to our annual and quarterly financial statements filed with the Securities and Exchange Commission on Forms 10-K and 10-Q and other public reports for further information about us and our business.
FFO: FFO is a non-GAAP performance measure computed in accordance with standards established by the National Association of Real Estate Investment Trusts (“NAREIT”) Funds from Operations White Paper - 2018 Restatement. It is calculated as net income attributable to common shareholders computed in accordance with generally accepted accounting principles (“GAAP"), excluding depreciation and amortization related to real estate, gains and losses on sales of real estate assets (including real estate assets incidental to our business) and related taxes, gains and losses from change in control, impairment charges related to real estate assets (including real estate assets incidental to our business) and similar adjustments for unconsolidated joint ventures and partially owned consolidated entities. We believe FFO to be most directly comparable to net income attributable to common shareholders as defined by GAAP. FFO does not represent a measure of liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions to shareholders.
Core FFO: Core FFO is computed as FFO adjusted for certain items that are generally non-cash in nature and that can create significant earnings volatility and do not directly relate to our core business operations. The adjustments include tax expenses or benefits related to (i) changes in deferred tax asset valuation allowances, (ii) changes in tax exposure accruals that were established as the result of the previous adoption of new accounting principles, or (iii) taxable income (loss) related to other items excluded from FFO or Core FFO (collectively referred to as “other income tax items”), gains or losses on debt transactions, gains or losses from involuntary conversion from weather events or natural disasters, promote income, severance and other charges related to major overhead restructuring activities and the expense impact of costs attributable to successful leasing activities. Although our calculation of Core FFO differs from NAREIT’s definition of FFO and may not be comparable to that of other REITs and real estate companies, we believe it provides a meaningful supplemental measure of our operating performance.
AFFO: AFFO is defined by the Company as the Core FFO (as defined above), less recurring building improvements and total second generation capital expenditures (the leasing of vacant space that had previously been under lease by the Company is referred to as second generation lease activity) related to leases commencing during the reporting period, and adjusted for certain non-cash items including straight line rental income and expense, non-cash components of interest expense including interest rate hedge amortization, stock compensation expense and after similar adjustments for unconsolidated partnerships and joint ventures.
While we believe our modified FFO measures are important supplemental measures, neither NAREIT’s nor our measures of FFO should be used alone because they exclude significant economic components of net earnings computed under GAAP, and are, therefore, limited as an analytical tool. These FFO measures are used by management as supplemental financial measures of operating performance and we believe that it is important that shareholders, potential investors and financial analysts understand the measures management uses. We do not use our FFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP, as indicators of our operating performance, as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs. We reconcile our modified FFO measures to our net earnings computed under GAAP as follows:
Duke Realty Corporation and Subsidiaries
Non-GAAP Reconciliations - FFO, Core FFO, and AFFO
Twelve Months Ended December 31,
(Unaudited and in thousands, except per share amounts)
|
| | | | | | | | | | | | | | | | | |
| | 2019 | | 2018 |
| | Amount | Wtd. Avg. Shares | Per Share | | Amount | Wtd. Avg. Shares | Per Share |
| Net income attributable to common shareholders | $ | 428,972 |
| | | | $ | 383,729 |
| | |
| Less dividends on participating securities | (1,487 | ) | | | | (1,675 | ) | | |
| Net income per common share-basic | 427,485 |
| 362,234 |
| $ | 1.18 |
| | 382,054 |
| 357,569 |
| $ | 1.07 |
|
| Add back: | | | | | | | |
| Noncontrolling interest in earnings of unitholders | 3,678 |
| 3,118 |
| | | 3,528 |
| 3,290 |
| |
| Other potentially dilutive securities | 1,487 |
| 1,987 |
| | | 1,675 |
| 2,438 |
| |
| Net income attributable to common shareholders-diluted | $ | 432,650 |
| 367,339 |
| $ | 1.18 |
| | $ | 387,257 |
| 363,297 |
| $ | 1.07 |
|
| Reconciliation to FFO | | | | | | | |
| Net income attributable to common shareholders | $ | 428,972 |
| 362,234 |
| | | $ | 383,729 |
| 357,569 |
| |
| Adjustments: | | | | | | | |
| Depreciation and amortization | 327,223 |
| | | | 312,217 |
| | |
| Depreciation, amortization and other - unconsolidated joint ventures | 10,083 |
| | | | 9,146 |
| | |
| Gains on sales of properties | (235,098 | ) | | | | (208,780 | ) | | |
| Gains on land sales | (7,445 | ) | | | | (10,334 | ) | | |
| Income tax expense triggered by sales of real estate assets | 8,686 |
| | | | 8,828 |
| | |
| Gains on sales of real estate assets - unconsolidated joint ventures | (21,239 | ) | | | | (12,094 | ) | | |
| Impairment charges - unconsolidated joint venture | — |
| | | | 2,214 |
| | |
| Noncontrolling interest share of adjustments | (702 | ) | | | | (923 | ) | | |
| NAREIT FFO attributable to common shareholders - basic | 510,480 |
| 362,234 |
| $ | 1.41 |
| | 484,003 |
| 357,569 |
| $ | 1.35 |
|
| Noncontrolling interest in income of unitholders | 3,678 |
| 3,118 |
| | | 3,528 |
| 3,290 |
| |
| Noncontrolling interest share of adjustments | 702 |
| | | | 923 |
| | |
| Other potentially dilutive securities | | 1,987 |
| | | | 2,438 |
| |
| NAREIT FFO attributable to common shareholders - diluted | $ | 514,860 |
| 367,339 |
| $ | 1.40 |
| | $ | 488,454 |
| 363,297 |
| $ | 1.34 |
|
| Gains on involuntary conversion - including share of unconsolidated joint venture | (3,559 | ) | | | | (3,897 | ) | | |
| Loss on debt extinguishment | 6,320 |
| | | | 388 |
| | |
| Non-incremental costs related to successful leases | 12,402 |
| | | | — |
| | |
| Core FFO attributable to common shareholders - diluted | $ | 530,023 |
| 367,339 |
| | | $ | 484,945 |
| 363,297 |
| |
| AFFO | | | | | | | |
| Core FFO - diluted | $ | 530,023 |
| 367,339 |
| | | $ | 484,945 |
| 363,297 |
| |
| Adjustments: | | | | | | | |
| Straight-line rental income and expense | (20,724 | ) | | | | (26,037 | ) | | |
| Amortization of above/below market rents and concessions | (7,566 | ) | | | | (2,332 | ) | | |
| Stock based compensation expense | 19,801 |
| | | | 20,198 |
| | |
| Non-cash interest expense | 5,904 |
| | | | 5,788 |
| | |
| Second generation concessions | (999 | ) | | | | (164 | ) | | |
| Second generation tenant improvements | (15,183 | ) | | | | (18,436 | ) | | |
| Second generation leasing costs | (22,178 | ) | | | | (25,935 | ) | | |
| Building improvements | (12,685 | ) | | | | (9,947 | ) | | |
| AFFO - diluted | $ | 476,393 |
| 367,339 |
| | | $ | 428,080 |
| 363,297 |
| |
Duke Realty Corporation and Subsidiaries
Reconciliation of Net Income to FFO as Defined by NAREIT
Twelve Months Ended December 31,
(Unaudited and in thousands, except per share amounts)
|
| | | | | | | | | | | | | | | | | | | |
| | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| Net income attributable to common shareholders - continuing operations | $ | 432,199 |
| | $ | 383,368 |
| | $ | 290,592 |
| | $ | 298,421 |
| | $ | 188,248 |
|
| Less: noncontrolling interest in earnings - consolidated joint ventures | 6 |
| | (11 | ) | | 114 |
| | (46 | ) | | (147 | ) |
| Diluted net income attributable to common shareholders - continuing operations | $ | 432,205 |
| | $ | 383,357 |
| | $ | 290,706 |
| | $ | 298,375 |
| | $ | 188,101 |
|
| Weighted average common shares and potentially dilutive securities | 367,339 |
| | 363,297 |
| | 362,011 |
| | 357,076 |
| | 352,197 |
|
| Diluted net income per common share - continuing operations | $ | 1.18 |
| | $ | 1.06 |
| | $ | 0.80 |
| | $ | 0.84 |
| | $ | 0.53 |
|
| 3 year growth | 48 | % | | | | | | | | |
| 5 year growth | 123 | % | | | | | | | | |
| | | | | | | | | | |
| Reconciliation to FFO | | | | | | | | | |
| Net income attributable to common shareholders | $ | 428,972 |
| | $ | 383,729 |
| | $ | 1,634,431 |
| | $ | 312,143 |
| | $ | 615,310 |
|
| Adjustments: | | | | | | | | | |
| Depreciation and amortization | 327,223 |
| | 312,217 |
| | 299,472 |
| | 317,818 |
| | 320,846 |
|
| Joint venture share of adjustments | (11,156 | ) | | (734 | ) | | (44,223 | ) | | (49,736 | ) | | 13,336 |
|
| Gains on real estate asset sales, net of taxes and impairments | (233,857 | ) | | (210,286 | ) | | (1,453,702 | ) | | (162,818 | ) | | (645,358 | ) |
| Noncontrolling interest share of adjustments | (702 | ) | | (923 | ) | | 11,023 |
| | (1,037 | ) | | 3,197 |
|
| NAREIT FFO attributable to common shareholders - basic | $ | 510,480 |
| | $ | 484,003 |
| | $ | 447,001 |
| | $ | 416,370 |
| | $ | 307,331 |
|
| Noncontrolling interest in income of unitholders | 3,678 |
| | 3,528 |
| | 15,176 |
| | 3,089 |
| | 6,404 |
|
| Noncontrolling interest share of adjustments | 702 |
| | 923 |
| | (11,023 | ) | | 1,037 |
| | (3,197 | ) |
| NAREIT FFO attributable to common shareholders - diluted | $ | 514,860 |
| | $ | 488,454 |
| | $ | 451,154 |
| | $ | 420,496 |
| | $ | 310,538 |
|
| Weighted average common shares and potentially dilutive securities | 367,339 |
| | 363,297 |
| | 362,011 |
| | 357,076 |
| | 352,197 |
|
| NAREIT FFO per share attributable to common shareholders - diluted | $ | 1.40 |
| | $ | 1.34 |
| | $ | 1.25 |
| | $ | 1.18 |
| | $ | 0.88 |
|
| 3 year growth | 12 | % | | | | | | | | |
| 5 year growth | 59 | % | | | | | | | | |
