UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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BOSTON PROPERTIES, INC.
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April 3, 20205, 2021
DearTo My Fellow Stockholder:BXP Stockholders,
 | On behalf of the entire Board of Directors, I want to thank you for your continued support of Boston Properties and invite you to attend our 2021 Annual Meeting of Stockholders. In view of the continuing health risks related to the COVID-19 pandemic, we have determined that our annual meeting this year will once again be a virtual meeting, conducted solely via audio webcast. You will be able to participate in the virtual meeting online, vote your shares electronically, and submit questions by visiting www.virtualshareholdermeeting.com/BXP2021. Over the course of our 50-year history, Boston Properties has proven its resilience through a variety of global, national, secular and BXP-specific challenges. These included financial recessions, wars, terrorist attacks on the cities in which we operate, and the sudden passing of |
one of our co-founders. In every instance, although we endured some short-term pain and uncertainty, we adjusted to the conditions and emerged stronger. That said, by any measure, 2020 was a remarkably challenging year, one in which we experienced three mega-events simultaneously: (1) the most serious worldwide health crisis of our generation; (2) a collective reawakening to the sad reality that the road to achieving racial justice in our country remains long and difficult; and (3) a much-heightened awareness of the Boardimportance of Directors, I am delighted to invite you to attend the 2020 Annual Meeting of Stockholders of Boston Properties, Inc., or BXP. The meeting will be held on Wednesday, May 20, 2020 at 9:00 a.m., Eastern Time, at Metropolitan Square, 655 15th Street, NW, 2nd Floor, Washington, DC 20005. However, as discussed in detail in the Notice of Meeting that follows this letter, depending on the status of theCOVID-19 pandemic, we may decide to hold the meeting “virtually.”environmental and sustainability issues.
As I write this letter, we are quickly approaching the 50th anniversary of the founding of Boston Properties, Inc. and our 23rd year as a public company listed on the NYSE. In lightview of these milestones,remarkable events, I want to share with you some notable achievementschange course this year. Instead of using this letter to summarize and highlight financial information that is contained in 2019, as well as highlight some key policy changes that we believe will enhance transparencythe accompanying Annual Report and improve your understanding of Boston Properties’ affairs.
proxy statement, I want to talk about how Boston Properties is certainly much largerresponded to these challenges and more complex today than at any time in its history,where we stand as we now operate in five regions on both U.S. coastlines and are developing premier buildings on a scale that is greater than ever before. Despite that growth, your Board is pleased to report thatmove into the second quarter of 2021. Spoiler alert: under the strong leadership of our CEO, Owen Thomas, and our President, Doug Linde, the visionCompany acted thoughtfully and strategyresponsibly, successfully meeting these complex challenges with compassion and in a manner consistent with our recognition by Newsweek as one of America’s Most Responsible Companies.
COVID-19 Pandemic
Needless to say, the COVID-19 pandemic presented unprecedented and outsized challenges for everyone – people died, lives were disrupted, and the economy suffered massive dislocation. In addition, because COVID restrictions kept people out of offices, retail stores, restaurants and hotels for most of the past year, it presented special challenges to our business. That reality, in turn, brought front-and-center one of our founders, Mort ZuckermanBoard’s most important responsibilities – risk oversight. Of course, the Board is always aware that, as one of the largest publicly traded owners of Class A office properties in the United States, BXP operates in a challenging environment, and attention to risk is a constant staple of our work. But COVID – and the late Ed Linde, remainconsequent temporary shift in the foundationlocus of whatwork (from office to home) – took that recognition to a new level, as the world and our company navigated uncharted waters with no idea as to how long they would persist.
Right from the outset, therefore, the Board changed its usual way of operating in order to ensure that we do. That strategy has proven successful. An investmentremained fully abreast, in BXP common stockreal time, of the risks posed by the pandemic and management’s responses to them. In particular, the Board and several of its committees held a significant number of additional meetings in 2020 to analyze and act on these matters, while all of the directors engaged with management even more frequently in informal settings. We wrestled with the unpredictability of the pandemic, the uncertainty of its duration, its effect on our business as well as on the datebusinesses of our IPO has appreciated by more than 1,346% as of December 31, 2019, far surpassing the 456% return on an equal investmenttenants, what it would mean for our stockholders and stock price, how we would conduct public reporting in the S&P 500 Index.
2019 Business Highlights
2019 was an excellent year for Boston Properties, particularly considering that it followedface of uncertainty, whether work-from-home would be a very strong 2018. Our success is demonstrated by our financial results and other key accomplishments. Whileshort-term blip or have longer-term consequences, how we would ensure the accompanying proxy statement details your management team’s significant accomplishments in 2019, I want to highlight some that stand out and provide context for the discussion of the compensationsafety of our named executive officers, or “NEOs”:
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tenants as they began to return to our offices in greater numbers, and perhaps, most importantly, what effect all of this would have on our employees, the lifeblood of our company. When appropriate, we also brought in outside experts to help us address these vexing matters.
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Environmental, Social and Governance (ESG) Leadership
2019 was another strong year for BXP during which we made substantial progress and maintained our position as an industry leader on environmental, social and governance issues.
› Environmental. Our sustainability strategy isWe also took special precautions to conduct our business in a manner that contributes to positive economic, social and environmental outcomes for our customers, stockholders,protect employees and the communities we serve. Our experience demonstrates that throughtenants from exposure to COVID. We worked with our activities, we can contributeown property management teams and brought in world-renowned health security experts to environmental solutionsdevelop a Health Security Plan for operating our properties. The plan is now widely viewed as a positive force while improving our financial performance and becoming a stronger, more purposeful organization in the process. We deliver efficient, healthy and productive workspaces while simultaneously mitigating operational costs and potential external impacts of energy, water, waste, and greenhouse gas emissions. We are also keenly focused on the climate resilience of our existing portfolio of assets, and we are preparing for long-term climate risks, suchworld-class, market-leading safety protocol. Most importantly, as extreme heat, severe storms and sea level rise, by considering climate change scenarios.
Your Board of Directors and CEO are committed to building a company culture in which the commitment to these tenets extends to every region in which we operate, every department and function, and every employee. As a result of these focused efforts, BXP won variousthis extraordinary work, we kept our commitment to our tenants by providing them with clean and safe buildings that remained open for business throughout the pandemic. In this regard, the Board wishes to express special thanks to BXP’s property-management teams, who were instrumental in helping us meet our tenants’ needs.
Although there were some inevitably choppy waters, especially at the outset, under the leadership of Owen and Doug, the Company moved forward with confidence and a focus on our long-term objectives, even when doing so may have had short-term negative implications. We refinanced a significant amount of debt, approved several development opportunities, effectively husbanded our assets, and dealt fairly with our tenants, many of whom faced their own serious economic challenges. I am pleased to report that positive results are beginning to show. Our stock has recovered a substantial portion of the early losses experienced throughout our industry, our buildings are now being safely reoccupied, and other awards in 2019,our employees remain committed and highly motivated.
As I write this letter, a year since the outbreak of COVID, remarkably the U.S. is now providing its citizens with vaccines. Consequently, although the pandemic is not yet over, and we continue to adapt our day-to-day operations to respond to its effects and our tenants’ needs, as we move into the spring of 2021 there is no doubt that renewed hope and optimism are recognizedin the air. We expect that in a few months everyone that wants to be vaccinated will have had the opportunity to do so, and that our buildings will return to most of their pre-pandemic operations.
Nevertheless, as a global industry leaderleading company in sustainability. Yourthe office business, we will inevitably face continuing questions and uncertainties over the impact of the “work-from-home” experience of the past year on our business going-forward. For our part, based on extensive internal analysis, external outreach and our directors’ own experience in leading organizations, we continue to believe that there is no better way for a company to support its own success than by fostering the necessary culture, collaboration, mentorship, training and creativity, all of which result from bringing people together to work in teams in a person-to-person collaborative environment. These are the essentials that the modern office provides, and we believe that this core foundational view will soon be reaffirmed by companies throughout the nation.
Social Justice
This past year, Americans also witnessed major social-justice movements that spotlighted the racial injustices and economic inequities that continue to plague our society. In response, and despite the separate challenges of COVID, the Company decided that we needed to expand and accelerate our longstanding commitment to diversity, equity and inclusion. Owen immediately set the tone-at-the-top by signing on to the CEO Action for Diversity and Inclusion campaign, the largest collective business commitment ever made on this issue. The Company also took internal steps to address these issues by establishing the BXP Diversity and Inclusion Committee in early 2020. The mission of this new committee is two-fold: (1) to promote and ingrain diversity, inclusion, equality and transparency as a cornerstone of BXP’s culture, business activities and decision-making practices; and (2) to provide a priority mechanism for developing specific D&I-based programs that will have a positive impact on the Company as well as in the broader community. In addition, the Board is especially proudexpressly committed to engaging with management to identify other ways by which we can drive further change, and, for the first time, our Compensation Committee has included goals and objectives to ensure that our executives are held accountable for progress on these issues. To be fully transparent, we intend to provide periodic updates on the results of these accomplishments because they are a direct result of our sustained commitment throughout the enterprise over several years. A list of these various awards is on page 5 of the accompanying proxy statement.
› Social. Boston Properties has an established reputation for excellence and integrity, and these core values are inherent in our culture; defining our strategy, achieving our business goals, and contributing to our overall success. Our teams are highly engaged with their local communities in determining how our projects can enhance neighborhoods, improve public amenities and provide high-quality space for working and living in order to positively impact the regions in which we operate. BXP and its employees also make a social impact through charitable giving and volunteerism.
Similarly, BXP is committed to providing an environment for its employees that fosters talent, energy and well-being. We seek an inclusive and diverse workforce that represents the communities we serve, and we design our programs to meet the needs of our workforce and support our employees and their families. The success of our efforts is demonstrated by the long tenure of our employees, nearly 40% of whom have worked at BXP for more than ten years.
› Governance. Your Board of Directors currently consists of eleven individuals with diverse backgrounds who are dedicated to serving the best interests of our stockholders. The accompanying proxy statement contains very detailed information on the composition of our Board and its responsibilities, including a snapshot of our policies on page 1 of the Proxy Summary.
Investor Outreach & Changes in Compensation Policies
At our 2019 annual meeting, our stockholders approved the“Say-on-Pay” resolution to ratify the compensation we paid to our named executive officers. Although the core philosophy and design of our compensation program remained materially consistent with prior years, Institutional Shareholder Services recommended that its clients vote against our 2019Say-on-Pay resolution and the percentage of votes cast in favor of theSay-on-Pay resolution decreased from approximately 91% in 2018 to approximately 67% in 2019.
The results of the vote reflected approval of our executive compensation program as a whole, but the level of support was less than we expected and less than we desire. As a result, your independent directors, led by the Chair of the Compensation Committee and me, engaged directly with ten of our largest institutional investors representing ownership of more than 40% of the outstanding shares of BXP common stock to solicit feedback on our executive compensation program and our corporate governance policies generally and to better understand their individual concerns.
In addition to the feedback from investors, the Compensation Committee evaluated the advice received from its new independent consultant, Frederic W. Cook & Co., Inc. on the reasonableness of the Company’s executive compensation levels in comparison with those of other similarly situated companies and recommendations for the components and amounts of compensation paid to our top executive officers.efforts.
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The “Compensation DiscussionCommitment to ESG
Lastly, responding further to the past year’s challenges, the Company has stepped up its Environmental, Social and Analysis” section ofGovernance (ESG) efforts, which you will be able to see in detail in the accompanying proxy statement. Our investment and operating philosophies are both shaped by our core strategy of long-term ownership and our commitment to making our communities the centers of commerce and civic life that make them thrive. We are increasingly focused on developing and maintaining healthy, high-performance buildings, while simultaneously mitigating operational costs and the potential external impacts of energy, water, waste, greenhouse gas emissions, and climate change. To these ends, we have publicly adopted long-term energy, emissions, water and waste goals containing aggressive reduction targets that are aligned with the United Nations Sustainable Development Goals. Indeed, as you will see more about in our proxy statement, includes a discussion of the feedbackBoston Properties is recognized as an international leader in sustainability and ESG, and our management and Board firmly intend to preserve and enhance those achievements. For transparency, we received from investors,have committed to provide high-quality ESG data and information for evaluation by independent third parties and, as well as the advice received from FW Cook. Each contributednew ESG assessments, ratings and frameworks emerge, we intend to the Compensation Committee taking policy actions,engage fully with our stakeholders to make sure that we remain nimble and I want to highlight the following key changes:
› New Annual Cash Bonus Program – The Compensation Committee established a new 2020 Annual Incentive Plan. Under this plan, beginning in 2020, annual cash bonuses paid to our executive officers will be directly linked to their performance against goals in three, equally-weighted categories:responsive.
FFO per Share
Leasing
Business/Individual Goals
Some of our investors expressed a desire for more objectivity and structure in BXP’s annual cash bonus program, including specific weightings ascribed to each measure and transparent disclosure of goals and results. The new bonus plan addresses investors’ feedback on the discretionary nature of BXP’s traditional bonus program, reduces the number of performance goals and includes specific weightings for each measure.
› Target and Maximum Cash Bonus Opportunities – Beginning in 2020, all executive officers have target and maximum annual cash bonus opportunities. Amounts actually earned may range from zero (0) to 150% of target, depending on performance versus theirpre-established goals in each category. The Compensation Committee incorporated the target and maximum bonus opportunities in the new bonus plan in response to investors expressing a preference for a clearly defined ranges of bonus opportunities.
› Allocation to Performance-based Equity Awards – The Compensation Committee increased the percentage of equity awards that are granted to our CEO in the form of performance-based equity awards from 50% to 55%, so the allocation between performance-based and time-based equity awards is now55%-45%. (The allocation for all other NEOs remains50%-50%.) In addition, the Compensation Committee increased the allocation of total compensation to long-term equity compensation and decreased the allocation to short-term cash compensation to increase alignment with stockholders and focus on long-term performance. As a result, performance-based equity awards for all NEOs represent a greater percentage of total direct compensation than they did in 2018.
We trust that you will view these changes as a demonstration of the commitment of Boston Properties’ Board to engage with you and to proactively respond to your concerns.
*****
The accompanying proxy statement contains a great deal of other important information about Boston Properties, and we hope you will take the time to read it.it and vote at the annual meeting. Whether or not you are able to attendparticipate in the “virtual” annual meeting, we welcome your participationinterest in our affairs and thank you for your continued support.
Sincerely,
Joel I. Klein
Chairman of the Board
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NOTICE OF 20202021 ANNUAL
MEETING OF STOCKHOLDERS
DATE AND TIME | ||||
LOCATION | ||||
RECORD DATE | March | |||
*Depending on the status of health concerns about the coronavirus, orCOVID-19, we may decide to hold the annual meeting by live audio webcast instead of holding the annual meeting in person at Metropolitan Square. The Company will publicly announce a decision to hold the annual meeting, at the same date and time, solely by audio webcast in a press release available athttp://investors.bxp.com/press-releases as soon as practicable before the annual meeting. In the event the annual meeting is not held at Metropolitan Square, you or your proxyholder may participate, vote and examine our stockholder list by visitingwww.virtualshareholdermeeting.com/BXP2020 and using your16-digit control number.
Since becoming a public company in 1997, we have always held our annual meetings in person, and it remains our intention to do so under normal circumstances.
ITEMS OF BUSINESS
| 1. | To elect the eleven (11) nominees for director named in the proxy statement, each to serve for aone-year term and until their respective successors are duly elected and qualified. |
| 2. | To hold anon-binding, advisory vote on named executive officer compensation. |
| 3. | To approve the Boston Properties, Inc. 2021 Stock Incentive Plan. |
| 4. | To ratify the Audit Committee’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, |
To consider and act upon any other matters that are properly brought by or at the direction of the Board of Directors before the annual meeting and at any adjournments or postponements thereof. |
IMPORTANT INFORMATION REGARDING OUR VIRTUAL ANNUAL MEETING
Due to the continuing public health concerns relating to the coronavirus, or COVID-19, Boston Properties’ 2021 annual meeting will be a “virtual” meeting conducted by live audio webcast. Stockholders will not be able to attend the meeting in person, but will be able to listen, vote and submit questions during the virtual annual meeting from any remote location that has internet connectivity. You or your proxyholder may participate and vote by visiting www.virtualshareholdermeeting.com/BXP2021 and using your 16-digit control number on your proxy card, voting instruction form, or the Notice of Internet Availability you previously received. For more information, see “Information about the Annual Meeting — Attending the Virtual Annual Meeting” on page 105 in the proxy statement.
A list of stockholders entitled to vote at the meeting will be available for examination by any stockholder for any purpose relevant to the meeting for at least ten days prior to May 20, 2021. The stockholder list will be available in electronic form during the annual meeting online at www.virtualshareholdermeeting.com/BXP2021.
Since becoming a public company in 1997 until 2020, we always held our annual meetings in person. However, due to COVID-19, we held a virtual annual meeting last year for the first time. We intend to hold our future annual meetings in person when it is safe to do so.
PROXY VOTING
Whether or not you plan to attend the meeting and vote your shares of common stock virtually in person, we urge you to vote your shares as instructed in the proxy statement. If you received a copy of the proxy card by mail, you may sign, date and mail the proxy card in the postage-paid envelope provided.
If your shares of common stock are held by a broker, bank or other nominee, please follow the instructions you receive from your broker, bank or other nominee to have your shares of common stock voted.
Any proxy may be revoked at any time prior to its exercise at the annual meeting.
By Order of the Board of Directors,
Frank D. Burt, ESQ.
Secretary
April 3, 20205, 2021
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on May 20, 2020.2021.The proxy statement and our 20192020 annual report to stockholders are available atwww.proxyvote.com.atwww.proxyvote.com.
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| › | PROXY SUMMARY |
This summary highlights information contained elsewhere in the proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. References to “we,” “us,” “our,” “Boston Properties,” “BXP” and the “Company” in this summary refer to Boston Properties, Inc. and references to “BPLP” in this summary refers to Boston Properties Limited Partnership, our operating partnership.
20202021 ANNUAL MEETING INFORMATION
| Date and Time | Location | Record Date | ||
9:00 a.m., Eastern Time |
| March |
VOTING MATTERS AND RECOMMENDATIONS
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Proposal 1 | Election of Eleven (11) Directors | ✓ FOR each nominee | Page 7 | |||
Proposal 2 | Non-binding, Advisory Vote on Named Executive Officer Compensation | ✓ FOR | ||||
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Proposal 3 | ✓ FOR | |||||
Proposal 4 | Ratification of Appointment of Independent Registered Public Accounting Firm | ✓ FOR | ||||
GOVERNANCE AND COMPENSATION POLICIES AND KEY DATA
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BOARD NOMINEES
Following the recommendation of the Nominating and Corporate Governance (“NCG”) Committee, our Board of Directors has nominated the following eleven (11) candidates for election as directors at the 20202021 annual meeting of stockholders.
Name | Principal Occupation | Age(1) | Director Since | Independent | Current Committee Memberships | Principal Occupation | Age(1) | Director Since | Independent | Current Committee Memberships | ||||||||||
Joel I. Klein Chairman of the Board | Chief Policy and Strategy Officer of Oscar Health Corporation | 73 | 2013 | Yes | (2) | Chief Policy and Strategy Officer of Oscar Health Corporation | 74 | 2013 | Yes | (2) | ||||||||||
Kelly A. Ayotte | Former United States Senator for the State of New Hampshire | 51 | 2018 | Yes | Compensation; NCG | Former United States Senator for the State of New Hampshire | 52 | 2018 | Yes | Compensation (Chair); NCG | ||||||||||
Bruce W. Duncan(3) | Chairman and former Chief Executive Officer of First Industrial Realty Trust, Inc. | 68 | 2016 | Yes | Compensation (Chair); NCG | President and Chief Executive Officer and a Director of CyrusOne Inc. | 69 | 2016 | Yes | Audit; NCG | ||||||||||
Karen E. Dykstra(3) | Former Chief Financial and Administrative Officer of AOL, Inc. | 61 | 2016 | Yes | Audit | Former Chief Financial and Administrative Officer of AOL, Inc. | 62 | 2016 | Yes | Audit | ||||||||||
Carol B. Einiger | President of Post Rock Advisors, LLC | 70 | 2004 | Yes | Compensation | President of Post Rock Advisors, LLC | 71 | 2004 | Yes | Compensation; NCG | ||||||||||
Diane J. Hoskins | Chair andCo-Chief Executive Officer of M. Arthur Gensler Jr. & Associates, Inc. | 62 | 2019 | Yes | NCG | Chair and Co-Chief Executive Officer of M. Arthur Gensler Jr. & Associates, Inc. | 63 | 2019 | Yes | NCG; Sustainability (Chair) | ||||||||||
Douglas T. Linde | President of Boston Properties, Inc. | 56 | 2010 | No | President of Boston Properties, Inc. | 57 | 2010 | No | Sustainability | |||||||||||
Matthew J. Lustig | Chairman of North America Investment Banking and Head of Real Estate & Lodging at Lazard Fréres & Co. | 59 | 2011 | Yes | NCG (Chair) | Chairman of North America Investment Banking and Head of Real Estate & Lodging at Lazard Frères & Co. | 60 | 2011 | Yes | NCG (Chair); Sustainability | ||||||||||
Owen D. Thomas | Chief Executive Officer of Boston Properties, Inc. | 58 | 2013 | No | Chief Executive Officer of Boston Properties, Inc. | 59 | 2013 | No | Sustainability | |||||||||||
David A. Twardock(3) | Former President of Prudential Mortgage Capital Company, LLC | 63 | 2003 | Yes | Audit (Chair); Compensation | Former President of Prudential Mortgage Capital Company, LLC | 64 | 2003 | Yes | Audit (Chair); Compensation | ||||||||||
William H. Walton, III | Managing Member &Co-Founder of Rockpoint Group, LLC | 68 | 2019 | Yes | Audit | Co-Founder and Managing Member of Rockpoint Group, LLC | 69 | 2019 | Yes | Compensation |
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| (2) | Mr. Klein serves as our independent,non-executive Chairman of the Board and as anex officio member of each of the |
| (3) | Our Board of Directors determined that each of Ms. Dykstra and |
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| › | PROXY SUMMARY |
SNAPSHOT OF 20202021 BOARD NOMINEES
Presented below is a snapshot of the expected composition of our Board of Directors immediately following the 20202021 annual meeting of stockholders, assuming the election of the eleven (11) nominees named in the proxy statement. Our Board of Directors believes that, collectively, the nominees exhibit an effective mix of qualifications, experience, diversity and diversity.tenure. For comparison purposes, we have also presented comparable metrics for the constituents of the S&P 500 Index, of which Boston Properties is a member. Data for the S&P 500 Index is based on theSpencer Stuart Board Index2019.2020.
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The following summarizes the qualifications and experience of the eleven (11) nominees for election as directors. For additional information, see “Proposal 1: Election of Directors – Nominees for Election” beginning on page 9 of the proxy statement.
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| › | PROXY SUMMARY |
SUSTAINABILITYENVIRONMENTAL, SOCIAL & GOVERNANCE
The BXP sustainabilityEnvironmental, social and governance (“ESG”) considerations continue to evolve and influence how we conduct our business. Our core strategy is long-term ownership of commercial real estate; therefore, sustainable development and responsible growth are fundamental to our investment philosophy. As stakeholder interest in issues like healthy buildings, climate resilience, diversity and inclusion, health and wellness, social equity and community involvement continues to grow, it reinforces just how intertwined our work is with many important aspects of people’s lives. It also means BXP has a unique opportunity to provide leadership in crafting solutions, and we intend to continue making efforts to improve ESG performance and conduct our business — the development and operation of new and existing buildings — in a manner that contributes to positive economic, social and environmental outcomes for our customers, shareholders,stockholders, employees and the communities we serve. Our investment philosophy is shaped by our core strategy of long-term ownership and our commitment to our communities and the centers of commerce and civic life that make them thrive. We are focused on developing and maintaining healthy, high-performance buildings, while simultaneously mitigating operational costs and the potential external impacts of energy, water, waste, greenhouse gas emissions and climate change. To that end, we have publicly adopted long-term energy, emissions, water and waste goals that establish aggressive reduction targets and have been aligned with the United Nations Sustainable Development Goals. BXP is a corporate member of the U.S. Green Building Council® (“USGBC”) and has a long history of owning, developing and operating properties that are certified under USGBC’s Leadership in Energy and Environmental Design™ (“LEED®”) rating system. In addition, we have been an active participant in the green bond market since 2018, which provides access to sustainability-focused investors interested in the positive environmental externalities of our business activities. BXP and its employees also make a social impact through charitable giving, volunteerism, public-realm investments and diversity and inclusion. Through these efforts, we demonstrate that operating and developing commercial real estate can be conducted with a conscious regard for the environment and society while mutually benefiting our stakeholders.
› INDUSTRY LEADERSHIP
ENVIRONMENTAL | We are focused on developing and maintaining healthy, high-performance buildings, while simultaneously mitigating operational costs and the potential external impacts of energy, water, waste, greenhouse gas emissions and climate change. For additional information, see “Human Capital and Sustainability” beginning on page 35. |
We are recognized as an industry leader in sustainability as demonstrated by the following awards and achievements.
Sustainability Highlights | ||||
• Corporate member of the U.S. Green Building Council® • Fitwel Champion through partnership with Fitwel, a leading healthy building certification system, to support healthy building design and operational practices across our portfolio • In 2017, shortly after the U.S. announced its withdrawal from the Paris Agreement, we proudly signed the We Are Still In declaration • Between 2018-2021, BPLP issued an aggregate of $2.7 billion of green bonds in three separate offerings; | • The Science Based Targets initiative (SBTi) Target Validation Team classified BXP’s emissions reduction target as in line with a 1.5°C trajectory, currently the most ambitious designation available; BXP is one of six North American real estate companies with this distinction and the only office company in that group • 27.7 million square feet LEED certified, of which 96% is certified at the highest Gold and Platinum levels • We publish an annual sustainability report, which is available on our website at http://www.bxp.com under the heading “Sustainability,” but it is not incorporated by reference into this proxy statement | |||
2020 Awards and Recognitions | ||||
• Ranked among the top real estate companies in the Global Real Estate Sustainability Benchmark (“GRESB”) assessment, earning a fifth consecutive 5-Star rating; earned GRESB “Green Star” designation for the ninth consecutive year • Recognized by the EPA as a 2020 ENERGY STAR Partner of the Year • 2020 Best in Building Health award winner | • Named one of America’s Most Responsible Companies by Newsweek magazine; ranked 56th overall out of 400 companies and the highest of any office REIT • Named a Green Lease Leader at the highest Gold level by the Institute for Market Transformation and the U.S. Department of Energy | |||
Achievements
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| › | PROXY SUMMARY |
SOCIAL Boston Properties’ success depends on human capital and the prosperities of the communities we serve. We therefore focus on social performance and positive externalities, including diversity and inclusion in our workforce, the well-being of our employees, their training and professional development and making positive contributions to our communities. For additional information, see “Human Capital and Sustainability” beginning on page 35. Diversity & Inclusion Initiatives in 2020 Health, Safety & Wellness • Launched the BXP Diversity & Inclusion (“D&I”) Committee with the mission of promoting diversity, inclusion, equality and transparency as part of our culture, business activities and decision-making practices • Our Chief Executive Officer signed the CEO ActionforDiversity&Inclusionpledge, the largest CEO-driven business commitment to advance diversity and inclusion • Offered Unconscious/ImplicitBiastraining as part of our commitment to mitigate unconscious bias in the work environment and foster an inclusive workforce • The following is a snapshot of the diversity of our workforce as of December 31, 2020: • We offer our employees benefits and other programs designed to support physical health, mental health, work-life balance and financial well-being • In early 2020, we established a Health and Security Task Force to develop the BXP Heath Security Plan, a comprehensive set of building operational measures, including cleaning and disinfection, air and water. Total Workforce(1) Employee Engagement & Development(2) • We invest significant resources in our employees’ • The success of our efforts is demonstrated by the satisfaction and long tenure of our employees: • 2020 employee engagement survey with 93% responsiveness and an overall rating of “very favorable” • average tenure is 9.8 years for employees and • 32% of our employees worked at BXP for more than Managers & Above(1) (1) We determine race and gender based on our employees’ self-identification. Ethnic minorities are defined as those included in the EEO Ethnicity and Race Categories: Asian, Black/African American, Hispanic/Latino, Native American or Pacific Islander, or multiracial background. Total workforce includes all of our employees except union employees for which the union controls the hiring process. (2) Data as of December 31, 2020 | 5Awards and Ratings
› GREEN FINANCEIn 2018 and 2019, BXP marketed and issued an aggregate of $1.85 billion of green bonds in two separate bond offerings and subsequently provided impact reporting for the first offering in 2019. Green bonds restrict the use of proceeds to eligible green projects. Eligible Green Projects are defined as: (1) building developments or redevelopments; (2) renovations in existing buildings; and (3) tenant improvement projects, in each case, that have received, or are expected to receive, in the three years prior to the issuance of the notes or during the term of the notes, a LEED Silver, Gold or Platinum certification (or environmentally equivalent successor standards). The definition of Eligible Green Projects includes the Salesforce Tower development project, which has received LEED Platinum certification, and was the project associated with BXP’s inaugural green bond offering.
in the workplace
personal growth by providing a range of development opportunities including training, tuition reimbursement and seminars and conferences
18.2 years for our executive leadership
10 years
20202021 Proxy Statement
| › | PROXY SUMMARY |
GOVERNANCE Boston Properties is committed to strong corporate governance policies and practices that not only reflect regulatory requirements, NYSE listing standards and broadly recognized governance practices, but also foster effective leadership and independent oversight by our Board of Directors. Our governance is intended to help us execute our long-term strategy, and therefore we believe it is aligned with our stockholders’ interests. Notable features of our governance framework include: Board Leadership • Mr. Joel I. Klein serves as our independent, non-executive Chairman of the Board • Incorporated in Delaware; the Maryland Unsolicited Takeovers Act does not apply to us • Proxy Access By-law right • Annual election of all directors • Majority voting standard in uncontested director • Stockholder right to amend By-laws • No Stockholder Rights Plan (or “poison pill”) • Disclosure of Policy on Company Political Spending Board Composition and • Eleven (11) directors • Four directors are women and one director is African-American • Three of the five (60%) new directors elected since 2016 are women • 82% independent Director Qualifications and Policies • Retirement age: 75-year maximum age limit at time of nomination • Regular executive sessions of independent directors • All directors, officers and employees are subject to a Code of Business Conduct and Ethics • Each director attended more than 75% of the meetings of the Board and committees on which he or she served in 2020; in the aggregate, our directors attended more than 99% of the total number of meetings held in 2020 • Annual self-evaluation for the Board and each committee, and bi-annual interviews of individual directors by our Chairman of the Board; process overseen by our NCG Committee Compensation • 89% of votes cast FOR our “Say-on-Pay” proposal at the 2020 annual meeting • Stock ownership requirements for executives (for CEO, 6x base salary) • Double-Trigger vesting for time-based equity awards • Compensation Clawback Policy • Policy against tax gross-up provisions • Non-employee directors are compensated under a • Stock ownership requirements for • Anti-hedging, anti-pledging and 6 | › CLIMATE RESILIENCEWe are focused on climate preparedness and resiliency in advancement of our sustainability strategy. As a long-term owner and active manager of real estate assets in operation and under development, we strive to obtain adaptive capacity by continuing to proactively implement measures and planning and decision-making processes to protect our investments by improving resilience. We are preparing for long-term climate risk by considering climate change scenarios and will continue to assess climate change vulnerabilities resulting from potential future climate scenarios and sea level rise. Event-driven (acute) and longer-term (chronic) physical risks that may result from climate change could have a material adverse effect on our properties, operations and business. Management’s role in assessing and managing these climate-related risks and initiatives is spread across multiple teams across our organization, including our executive leadership and our Sustainability, Risk Management, Development, Construction and Property Management departments. Climate resilience measures include training and implementation of emergency response plans and the engagement of our executives and our Board of Directors on climate change and other environmental, social and governance (“ESG”) aspects.› PUBLIC SUSTAINABILITY GOALS AND PROGRESSOur sustainability goals establish reduction targets for energy, greenhouse gas emissions, water consumption and waste. In 2016, we achieved our first round of energy, emissions and water targets three years early. By resetting company-wide goals, we raise stakeholder awareness and make best efforts to drive continuous year-over-year,like-for-like key performance indicator improvement. We have adopted goals with the following specific time frames, metrics and targets below a 2008 baseline:(1)
(1)Full 2019 calendar year energy Stockholder Rights
electionswater data assuredIndependencethird party is not yet available. 2018 is the most recent yearstockholder-approved planwhich complete energydirectors (5x annual retainer)water data is available and assured by a third party.anti-short-sale policiesWe are committed to transparent reporting of ESG sustainability indicators. Boston Properties publishes an annual sustainability report that is aligned with the Global Reporting Initiative (“GRI”) reporting framework. More detailed sustainability information, including our strategy, key performance indicators, annuallike-for-like comparisons, achievements and historical sustainability reports are available on our website athttp://www.bxp.com under the heading “Sustainability.” Except for the documents specifically incorporated by reference into our Annual Report on Form10-K, information contained on our website or that can be accessed through our website is not incorporated by reference into our Annual Report on Form10-K. 20202021 Proxy Statement
| 1› | PROPOSAL 1: ELECTION OF DIRECTORS |
PROXY STATEMENT
This proxy statement is being made available to stockholders of Boston Properties, Inc. (“we,” “us,” “our,” “Boston Properties” or the “Company”) on or about April 3, 20205, 2021 via the Internet or by delivering printed copies by mail, and is furnished in connection with the solicitation of proxies by the Board of Directors of Boston Properties, Inc. (our “Board” or our “Board of Directors”) for use at our 20202021 annual meeting of stockholders to be held virtually by live audio webcast on Wednesday,Thursday, May 20, 20202021 at 9:00 a.m., Eastern Time, at Metropolitan Square, 655 15th Street, NW, 2nd Floor, Washington, DC 20005,www.virtualshareholdermeeting.com/BXP2021, and any adjournments or postponements thereof.
Depending on the status of health concerns about the coronavirus, orCOVID-19, we may decide to hold the annual meeting by live audio webcast instead of holding the meeting in person at Metropolitan Square. The Company will publicly announce a decision to hold the annual meeting, at the same date and time, solely by audio webcast in a press release available athttp://investors.bxp.com/press-releases as soon as practicable before the annual meeting. In the event the annual meeting is not held at Metropolitan Square, you or your proxyholder may participate, vote and examine our stockholder list by visitingwww.virtualshareholdermeeting.com/BXP2020 and using your16-digit control number.
Since becoming a public company in 1997 until 2020, we have always held our annual meeting in person. Due to the health and safety concerns related to the COVID-19 pandemic, we held a virtual meeting in 2020 and will do so again this year. We intend to hold future annual meetings in person, andprovided that it remains our intentionis safe to do so under normal circumstances.so.
ELECTION OF DIRECTORS
Boston Properties is currently governed by an eleven-member Board of Directors. The current members of our Board of Directors are Kelly A. Ayotte, Bruce W. Duncan, Karen E. Dykstra, Carol B. Einiger, Diane J. Hoskins, Joel I. Klein, Douglas T. Linde, Matthew J. Lustig, Owen D. Thomas, David A. Twardock and William H. Walton, III. are:
› Kelly A. Ayotte › Diane J. Hoskins › Owen D. Thomas | › Bruce W. Duncan › Joel I. Klein › David A. Twardock | › Karen E. Dykstra › Douglas T. Linde › William H. Walton, III | › Carol B. Einiger › Matthew J. Lustig |
At the 20202021 annual meeting of stockholders, directors will be elected to hold office for aone-year term expiring at the 20212022 annual meeting of stockholders. Directors shall hold office until their successors are duly elected and qualified, or until their earlier resignation or removal. Any director appointed to our Board of Directors to fill a vacancy will hold office for a term expiring at the next annual meeting of stockholders following such appointment.
Following the recommendation of the NCG Committee, our Board of Directors nominated all incumbent directors currently serving forre-election. In making its recommendations, the NCG Committee considered a number of factors, including its criteria for Board membership, which include the minimum qualifications that must be possessed by a director candidate in order to be nominated for a position on our Board. Our Board of Directors anticipates that, if elected, the nominees will serve as directors. However, if any person nominated by our Board of Directors is unable to serve or for good cause will not serve, the proxies will be voted for the election of such other person as our Board of Directors may recommend.
VOTE REQUIRED AND MAJORITY VOTING STANDARD
OurBy-laws provide for a majority voting standard. This means that, in an uncontested election, nominees for director are elected if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. The majority voting standard would not apply in contested elections, which, generally, will include any situation in which Boston Properties receives a notice that a stockholder has nominated a person for election to our Board of Directors at a meeting of stockholders that is not withdrawn on or before the tenth day before Boston Properties first mails its notice for such meeting to the stockholders.
The majority voting standard will apply to the election of directors at the 2021 annual meeting of stockholders. Accordingly, nominees for director will be elected if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. Broker non-votes, if any, and abstentions will not be treated as votes cast.
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The majority voting standard will apply to the election of directors at the 2020 annual meeting of stockholders. Accordingly, nominees for director will be elected if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. Brokernon-votes, if any, and abstentions will not be treated as votes cast.
Our Board of Directors has also adopted a related resignation policy, included in our Corporate Governance Guidelines, under which a director who fails to receive the required number of votes forre-election will tender his or her resignation to our Board of Directors for its consideration. The NCG Committee will then act on an expedited basis to determine whether it is advisable to accept the director’s resignation and will submit theits recommendation for prompt consideration by our Board of Directors. Our Board of Directors will act on the tendered resignation within 90 days following certification of the stockholder vote and will promptly and publicly disclose its decision. TheAny director whose resignation is under consideration will abstain from participating in any decision regarding his or her resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of stockholders and until the director’s successor is duly elected and qualified or until the director’s earlier resignation or removal. The NCG Committee and our Board of Directors may consider any factors they deem relevant in deciding whether to accept a director’s resignation.
| ✔ | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR EACH OF ITS NOMINEES: KELLY A.
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The following biographical descriptions set forth certain information with respect to the nominees for election as directors at the 2021 annual meeting, based on information furnished to Boston Properties by each nominee, includingas well as the specific experience, qualifications, attributes and skills that led to the conclusion by our Board of Directors that such person should serve as a director of Boston Properties.
JOEL I. KLEIN
Chief Policy and Strategy Officer of Oscar Health Corporation
| Qualifications:
Mr. Klein has worked for more than 40 years in private industry and government during which time he has gained significant experience in senior policy making and executive roles, as well as a broad range of legal and financial matters.
Professional Background:
• Chief Policy and Strategy Officer of Oscar Health Corporation, a health insurance company
• Director of News Corporation
• Executive Vice President, Office of the Chairman of News Corporation from June 2003 to December 2015 and Chief Executive Officer of Amplify, the education division of News Corporation, from January 2011 to December 2015
• Chancellor of the New York City Department of Education from 2002 through 2010, where Mr. Klein oversaw a system of over 1,600 schools with 1.1 million students, 136,000 employees and a $22 billion budget
• U.S. Chairman and Chief Executive Officer of Bertelsmann, Inc. and Chief U.S. Liaison Officer to Bertelsmann AG, a media company, from 2001 to 2002
• Various roles with the Clinton administration, including Assistant U.S. Attorney General in charge of the Antitrust Division of the U.S. Department of Justice from 1997 to 2000 and Deputy White House Counsel to President Clinton from 1993 to 1995. Mr. Klein entered the Clinton administration after 20 years of public and private legal work in Washington, DC | Other Leadership Experience, Community Involvement and Education:
• Member of the Boards of The Foundation for Excellence in Education (ExcelinEd) and StudentsFirstNY
• Member of the Advisory Boards of the Zuckerman Mind Brain Behavior Institute and Columbia College
• Received a BA magna cum laude from Columbia University and a JD magna cum laude from Harvard Law • Received honorary degrees from ten colleges and universities | ||||
Director since: January 2013
Age:
Independent
Chairman of the Board
Current Board Committees: • ex officio member of all committees
Other Public Company Boards: • Current: • Former (past 5 years):
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SENATOR KELLY A. AYOTTE
Former
| Qualifications:
Senator Ayotte has significant leadership and strategic planning skills, as well as legal experience and experience in government and public
Professional Business Experience:
• Represented New Hampshire in the United States Senate from 2011 to 2016; chaired the Armed Services Subcommittee on Readiness and the Commerce Subcommittee on Aviation Operations; and served on the Budget, Homeland Security and Governmental Affairs, Small Business and Entrepreneurship, and Aging Committees
• New Hampshire’s first female Attorney General from 2004 to 2009 appointed by Republican Governor Craig Benson and reappointed twice by Democratic Governor John Lynch
• Previously Deputy Attorney General, Chief of the Homicide Prosecution Unit and Legal Counsel to Governor Craig Benson
• Former associate at the McLane Middleton law firm and law clerk to the New Hampshire Supreme Court
• Director of The Blackstone Group, Inc., Caterpillar Inc. and News Corporation
• Director of Blink Health LLC and BAE Systems, Inc., each a private company board
• Former director of Bloom Energy Corporation from 2017 to 2019
• Member of advisory boards of Microsoft Corporation, Chubb Insurance and Cirtronics Corporation | Other Leadership Experience, Community Involvement and Education:
• Senior Advisor for Citizens for Responsible Energy Solutions
• Member of the non-profit boards of the One Campaign, the International Republican Institute, the McCain Institute, Swim with a Mission, Winning for Women and Veterans Count of New Hampshire
• Member of the Aspen Institute’s Economic Strategy
• Member of the Board of Advisors for the Center on Military and Political Power at the Foundation for Defense of Democracies
• Co-chair of the Center for Strategic and International Study’s Commission on Health Security
• Co-chair of the Center for a New American Security’s Digital Freedom Forum
• Graduated with honors from the Pennsylvania State University and received a JD from the Villanova University School of Law | ||||
Director since:May 2018
Age:
Independent
Current Board Committees: • Compensation (Chair) • NCG
Other Public Company Boards: • Current: The Blackstone Group, Inc., Caterpillar Inc. • Former (past 5 years): Bloom Energy Corporation
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BRUCE W. DUNCAN
| Qualifications:
Mr. Duncan has more than 30 years of diverse real estate management and investment experience, including as a chief executive officer and a director of other publicly traded companies.
Professional Business Experience:
• • Various positions at First Industrial Realty Trust, Inc.,
• Former Chairman of the Board of Directors of Starwood Hotels & Resorts Worldwide, Inc. (“Starwood”), a leading worldwide hotel and leisure company, from May 2005 until its acquisition by Marriott International, Inc. in September 2016; director of Starwood from 1999 to September 2016; interim Chief Executive Officer of Starwood from April 2007 to September 2007
• Trustee of Starwood Hotels & Resorts, a REIT and former subsidiary of Starwood, from 1995 to 2006
• Director of the mutual funds sponsored and managed by T. Rowe Price Associates, Inc. since September 2013 • Senior Advisor to Kohlberg Kravis Roberts & Co. (“KKR”), a global investment firm, since 2018; previously senior advisor to KKR from July 2008 to January 2009 • Director of Marriott International, Inc., the world’s largest hotel company,
• Various positions at Equity Residential, one of the largest publicly traded apartment REITs in the United States, from March 2002 to December 2005, including Chief Executive Officer and Trustee from May 2005 to December 2005, President, Chief Executive Officer and Trustee from January 2003 to May 2005, and President and Trustee from March 2002 to December 2002
•
| Other Leadership Experience, Community Involvement and Education:
• Life Trustee of Rush University Medical Center in Chicago
• • Former member of the Executive Committees of the Board of the Canadian Institute for Public Real Estate Companies (CIPREC) and the National Multi-Housing Council (NMHC)
• Former trustee of the International Council of Shopping Centers (ICSC)
• Received a BA in Economics from Kenyon College and an MBA in Finance from the University of Chicago | ||||
Director since:May 2016
Age:
Independent
Current Board Committees: • • NCG
Other Public Company Boards: • Current: CyrusOne Inc. • Former (past 5 years): First Industrial Realty Trust, Inc., Marriott International, Inc.
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KAREN E. DYKSTRA
Former Chief Financial and Administrative Officer of AOL, Inc.
| Qualifications:
Ms. Dykstra has extensive strategic, management, financial, accounting and oversight experience, particularly with companies in the technology sector.
Professional Business Experience:
• Chief Financial and Administrative Officer of AOL, Inc., a global media technology company, from November 2013 to July 2015; Chief Financial Officer of AOL, Inc. from September 2012 to November
• Partner of Plainfield Asset Management LLC (“Plainfield”) from January 2007 to December 2010
• Chief Operating Officer and Chief Financial Officer of Plainfield Direct Inc., Plainfield’s business development company, from May 2006 to 2010 and a director from 2007 to 2010
• Various positions with Automatic Data Processing, Inc. for
• Director of Sirius Computer Solutions, a private company
• Director of Gartner, Inc. since 2007 and VMware, Inc. since March 2016
• Former director of Crane Co. from 2004 to 2012 | Education:
• Received a BA in Accounting from Rider University and an MBA from Fairleigh Dickinson University | ||||
Director since:May 2016
Age:
Independent
Current Board Committees: • Audit
Other Public Company Boards: • Current: Gartner, Inc. • Former (past 5 years): None
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CAROL B. EINIGER
President of Post Rock Advisors, LLC
| Qualifications:
Ms. Einiger has more than 40 years of experience as an investment banker and investment advisor, during which time she has gained significant expertise in the operation of public and private debt and equity capital markets and the evaluation of investment opportunities.
Professional Background:
• President of Post Rock Advisors, LLC, a private family investment
• Senior Advisor of Roundtable Investment Partners LLC, a registered investment advisory firm, from January 2017 to June 2018
• Chief Investment Officer of The Rockefeller University, where
• Chief Financial Officer and then Acting President of the Edna McConnell Clark Foundation from 1992 to 1996
• Managing Director at Wasserstein Perella & Co. from 1989 to 1992
• Visiting Professor andExecutive-in-Residence at Columbia Business School from 1988 to 1989
• Various positions at The First Boston Corporation from 1973 to 1988, becoming Managing Director and Head of the Capital Markets Department
• Various positions at Goldman, Sachs & Co. from 1971 to 1972 | Other Leadership Experience, Community Involvement and Education:
• Director, member and former Chair of the Investment Committee ofUJA-Federation of New York
• Member of the Investment Committee of the JPB Foundation and the Board of Overseers of Columbia Business School
• Former member of the Boards of Trustees and Investment Committees of the University of Pennsylvania, the Lasker Foundation, the Horace Mann School
• Former member of the Advisory Board of Blackstone Alternative Asset Management
• Former Vice Chair of the Investment Committee of The Museum of Modern Art
• Former Director of Credit Suisse First Boston (USA) and The New York Stem Cell Foundation
• Recipient of numerous awards, including the Alumni Award of Merit of the University of Pennsylvania, the Columbia Business School Distinguished Alumna Award, the AJC National Human Relations Award, the Anti-Defamation League Woman of Achievement Award and the Catalyst Award for Corporate Leadership
• Received a BA from the University of Pennsylvania and an MBA with honors from Columbia Business School | ||||
Director since:May 2004
Age:
Independent
Current Board Committees: • Compensation • NCG
Other Public Company Boards: • Current: None • Former (past 5 years): None
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DIANE J. HOSKINS
| Qualifications:
Ms. Hoskins has more than 30 years of architecture, design, real estate and business experience, including as a chief executive officer of a global brand. During this time, she has gained extensive leadership, strategic planning, financial stewardship and organizational development experience, as well as a deep understanding of markets and clients, including their current and future space needs and insight into how companies envision their
Professional Background:
• Co-CEO of M. Arthur Gensler Jr. & Associates, Inc. (“Gensler”), the world’s largest architecture, design, and planning firm since 2005, and Chair of the Gensler Board of Directors since 2018, where Ms. Hoskins has broad responsibility for
• Various positions at Gensler since 1995, including Southeast Regional Managing Principal and Managing Director of the Washington, DC office
• Founded the Gensler Research Institute to generate new knowledge and develop a deeper understanding of the connection between design, business, and the human experience
• Senior Vice President of Epstein Architecture and Engineering from 1990 to 1994
• Development Analyst at Olympia & York from 1987 to 1990
• Architect Designer at Gensler from 1983 to 1985
• Architect at Skidmore Owings & Merrill from 1980 to 1983 | Other Leadership Experience, Community Involvement and Education:
• Member of the World Economic Forum’s Global Future Council on Cities & Urbanization and the CEO Initiative by Fortune and Time
• Fellow of the American Institute of Architects, Global Board Member of the Urban Land Institute, Board Member of the Washington Board of Trade and member of several organizations, including
• Serves on the Visiting Committee of the School of Architecture at the Massachusetts Institute of Technology (MIT) and the Board of Advisors of the University of California, Los Angeles (UCLA) Anderson School of Management
• Ms. Hoskins has been honored by several organizations for her work, including the Spirit of Life Award from City of Hope and the Outstanding Impact Award from the Council of Real Estate Women
• Inducted into the Washington Business Hall of Fame in 2016, and
• Ms. Hoskins is sought after by the media to share her expertise in many top tier media outlets, including The Wall Street Journal, The New York Times, Harvard Business Review, Fortune, Business Insider, Financial Times, Bloomberg TV, and global architecture and design trade publications
• Frequent speaker at premier conferences, including the Bloomberg Business/CEO Summit, the Economist Human Potential Conference, and the Wall Street Journal Future of Cities Conference; was a featured panelist at the UN Climate Summit in the fall of 2019
• Graduated from MIT and holds an MBA from the Anderson Graduate School of Management at UCLA | ||||
Director since: May 2019
Age:
Independent
Current Board Committees: • Sustainability (Chair) • NCG
Other Public Company Boards: • Current: None • Former (past 5 years): None
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DOUGLAS T. LINDE
President of Boston Properties, Inc.
| Qualifications:
Mr. Linde has more than 30 years of experience in the real estate industry, including as our President and former Chief Financial Officer, during which time he gained extensive knowledge of the real estate industry, capital markets and real estate finance, as well as substantial experience in transactional, operational and accounting matters.
Professional Background:
• President of Boston Properties, Inc. since May 2007
• Mr. Linde joined Boston Properties in January 1997 as Vice President of Acquisitions and New Business to help identify and execute acquisitions and to develop new business
• President of Capstone Investments, a Boston real estate investment company, from 1993 to 1997
• Project Manager and Assistant to the Chief Financial Officer of Wright Runstad and Company, a private real estate developer in Seattle, WA, from 1989 to 1993
• Began his career in the real estate industry with Salomon Brothers’ Real Estate Finance Group | Other Leadership Experience, Community Involvement and Education:
• Trustee of the Beth Israel Lahey Health Board of Trustees
• Director Emeritus of the Board of Directors of Beth Israel Deaconess Medical Center (“BIDMC”) andco-chair of the BIDMC capital campaign
• Member of the Real Estate Roundtable
• Director of the Boston Municipal Research Bureau and Jobs for Massachusetts
• Member of the Urban Studies and Planning Visiting Committee at MIT • Trustee Emeritus of the Wesleyan University Board of Trustees
• Received a BA from Wesleyan University and an MBA from Harvard Business School | ||||
Director since:January 2010
Age: Current Board Committees: • Sustainability
Other Public Company Boards: • Current: None • Former (past 5 years): None
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MATTHEW J. LUSTIG
Chairman of North America Investment Banking and Head of Real Estate
| Qualifications:
Mr. Lustig has worked for more than 35 years in the real estate industry, during which time he has gained extensive experience providing strategic and financial advice and transaction execution to clients including leading real estate companies, and investing in real estate companies and assets as a principal.
Professional Background:
• Chairman of North America Investment Banking at Lazard Frères & Co. (“Lazard”), the investment bank, since 2019 (previously Head of North America Investment Banking, from 2012 to 2019), with responsibility for the management of a range of Financial Advisory/Investment Banking businesses
• Head of Real Estate & Lodging at Lazard, a position he has held for more than 20 years, serving clients and running its Real Estate and Lodging industry group. In recent years, Mr. Lustig has played an active role in more than $300 billion of advisory assignments and transactions involving leading real estate and lodging companies in the public and private markets
• Former Chief Executive Officer of the real estate investment business of Lazard and its successors, where he oversaw multiple funds with over $2.5 billion of equity capital invested in REITs and real estate operating companies
• Director of Ventas, Inc., a REIT with a portfolio of senior housing, research and innovation, and healthcare properties, since May 2011
• Former Chairman of Atria Senior Living Group, Inc., which was acquired by Ventas in May 2011
• Former director of several other public and private fund portfolio REITs and companies | Other Leadership Experience, Community Involvement and Education:
• Member of the Real Estate Roundtable, the Urban Land Institute, the Pension Real Estate Association (former Board and Executive Committee member) and the Council on Foreign Relations
• Member of the Real Estate centers at the business schools of Wharton/UPenn (Chairman of the Advisory Board) and Columbia University
• Member of the Board of Advisors at the School of Foreign Service at Georgetown University
• Received a BSFS from Georgetown University | ||||
Director since:January 2011
Age:
Independent
Current Board Committees: • NCG (Chair) • Sustainability
Other Public Company Boards: • Current: Ventas, Inc. • Former (past 5 years): None
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OWEN D. THOMAS
Chief Executive Officer of Boston Properties, Inc.
| Qualifications:
Mr. Thomas is a recognized leader in the real estate industry with more than 33 years of executive leadership, strategic planning and management experience, as well as substantial experience in financial and capital markets. Our Board agreed to nominate Mr. Thomas for re-election to the Board of Directors for so long as he remains CEO, and he has agreed to resign from the Board upon termination of employment.
Professional Background:
• Chief Executive Officer of Boston Properties, Inc. since April 2013
• Chairman of the Board of Directors of Lehman Brothers Holdings Inc. (“LBHI”) from March 2012 until March 2013 and continues to serve as a member of the Board of Directors of LBHI
• Various positions at Morgan Stanley from 1987 to 2011, including Chief Executive Officer of Morgan Stanley Asia Ltd., President of Morgan Stanley Investment Management, Head of Morgan Stanley Real Estate and Managing Director
• Member of Morgan Stanley’s Management Committee from 2005 to 2011 • Director of Grosvenor Group Limited from 2011 to 2013 | Other Leadership Experience, Community Involvement and Education:
• Global Chairman of the Urban Land Institute
• Director of the Real Estate Roundtable
• Member of the Executive Board of Nareit
• Member and former Chairman of the Pension Real Estate Association • Former Director of the University of Virginia Investment Management Company •Received a BS in Mechanical Engineering from the University of Virginia and an MBA from Harvard Business School | ||||
Director since:April 2013
Age: Current Board Committees: • Sustainability
Other Public Company Boards: • Current: None • Former (past 5 years): None
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DAVID A. TWARDOCK
Former President of Prudential Mortgage Capital Company, LLC
| Qualifications:
Mr. Twardock has more than
Professional Background:
• Former President of Prudential Mortgage Capital Company, LLC, the real estate finance affiliate of Prudential Financial, Inc., from December 1998 to March 2013, which had more than $70 billion in assets under management and administration as of December 31, 2012 and annually lent billions of dollars in real estate debt financing
• Various positions with Prudential relating to real estate equity and debt from 1982 to December 1998, including as Senior Managing Director of Prudential Realty Group from 1996 to November 1998
• Member of the advisory • Private investor in multiple real estate partnerships
• Director of Morgan Stanley Bank, N.A. from 2015 through 2018 • Member of the advisory board of Blue Vista Capital Management from 2015 to 2020 | Other Leadership Experience, Community Involvement and Education:
• Member of the Urban Land Institute and the Economics Club of Chicago
• Former director of the Real Estate Roundtable and former Chairman of the Real Estate Roundtable Capital Markets Committee
• Received a BS in Civil Engineering from the University of Illinois and an MBA in Finance and Behavioral Science from the University of Chicago | ||||
Director since:May 2003
Age:
Independent Current Board Committees: • Audit (Chair) • Compensation
Other Public Company Boards: • Current: None • Former (past 5 years): None
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WILLIAM H. WALTON, III
Co-Founder and Managing Member of Rockpoint Group, LLC
| Qualifications:
Mr. Walton has 40 years of real estate investment, development and management experience, as well as executive leadership experience having served in various roles and as a director of several public and private companies.
Professional Background:
•
• Co-founder of Westbrook Real Estate Partners, LLC (“Westbrook”), a real estate investment management firm
• Managing director in the real estate group of Morgan Stanley & Co., Inc. prior toco-founding Westbrook • Director of Dream Finders Homes, Inc., a publicly-traded residential building company, and FRP Holdings, Inc., a publicly-traded real estate investment and development company
• Director of Crow Holdings, a privately owned real estate and investment firm
• Former trustee of Corporate Office Properties Trust and former director of Florida Rock Industries and The St. Joe Company | Other Leadership Experience, Community Involvement and Education:
• Involved with several real estate industry organizations
• Director or trustee of severalnon-profit organizations, with a particular interest in educational and policy entities, including the American Enterprise Institute, the Jacksonville University Public Policy Institute
• Former member of the boards of Communities in Schools, the Episcopal School of Jacksonville, KIPP Jacksonville Schools, Mpala Wildlife Foundation, Princeton University and Princeton University Investment Company
• Received an AB from Princeton University and an MBA from Harvard Business School | ||||
Director since:May 2019
Age:
Independent Current Board Committees: •
Other Public Company Boards: • Current: Dream Finders Homes, Inc., FRP Holdings, Inc. • Former (past 5 years): None
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| 1› | PROPOSAL 1: ELECTION OF DIRECTORS |
› SUMMARY OF BOARD NOMINEE QUALIFICATIONS, EXPERIENCE AND DIVERSITY
In addition to the minimum qualifications that our Board of Directors believes are necessary for all directors, the following chart highlights certainsome of the key qualifications, and experience that our Board believes are relevant to ourthe effective oversight of Boston Properties and the execution of its long-term strategy and therefore relevant when considering candidates for election to our Board.. A mark for an attribute indicates that the nominee gained the attribute through a current or prior position other than his or her service on the Boston Properties Board of Directors. Our Board did not assign specific weights to any of these attributes or otherwise formally rate the level of a nominee’s attribute relative to the rating for any other potential nominee.nominee or any other person. The absence of a mark for an attribute does not necessarily mean that the nominee does not possess that attribute; it means only that when the Board considered that nominee in the overall context of the composition of our Board of Directors, that attribute was not a key factor in the determination to nominate that individual. Further information on each nominee’s qualifications and relevant experience is provided in the individual biographical descriptions above.
NOMINEE QUALIFICATIONS AND EXPERIENCE | ||||||||||||||||||||||
| Qualification/Experience | Ayotte | Duncan | Dykstra | Einiger | Hoskins | Klein | Linde | Lustig | Thomas | Twardock | Walton | |||||||||||
Strategic Planning | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | |||||||||||
CEO/Executive Management | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | ||||||||||||
Risk Oversight | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | |||||||||||
| 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | |||||||||||||||
Asset Management | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | ||||||||||||||
Capital | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | ||||||||||||||
Other Public Company | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | ||||||||||||||
| 🌑 | 🌑 | 🌑 | |||||||||||||||||||
International | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | ||||||||||||
Financial Literacy | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | |||||||||||
Audit Committee Financial Expert | 🌑 | 🌑 | 🌑 | |||||||||||||||||||
Technology Industry | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | |||||||||||||||||
Corporate Governance | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | ||||||||||||
Sustainability | 🌑 | 🌑 | 🌑 | 🌑 | ||||||||||||||||||
Talent Management | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | 🌑 | |||||||||||
BOARD COMPOSITION | ||||||||||||||||
DIVERSITY OF NOMINEES | DIVERSITY OF NOMINEES | |||||||||||||||
| 9 of 11 | 7.2 years | 63.2 years | 4 | 1 | 8.2 years | 64.2 years | 4 | 1 | ||||||||
Independent Directors | Average Tenure of all Nominees | Average Age of all Nominees | Women | Ethnic Minority | Average Tenure of all Nominees | Average Age of all Nominees | Women | Ethnic Minority | ||||||||
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| 1› | PROPOSAL 1: ELECTION OF DIRECTORS |
Under the rules of the New York Stock Exchange (the “NYSE”), a majority of the Board of Directors must qualify as “independent directors.” To qualify as an “independent director,” the Board of Directors must affirmatively determine that the director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). Our Board of Directors established categorical standards to assist it in making the required independence determinations.
Under these categorical standards, any relationship with us shall be deemed not material if:
| 1. | The relationship does not preclude a finding of independence under Sections 303A.02(b) of the NYSE Listed Company Manual (the “NYSE Disqualifying Rules”); and |
| 2. | The relationship does not involve any of the following, whether currently existing or occurring since the end of the last fiscal year or during the past three fiscal years: |
| (a) | a director being an executive officer of, or owning, or having owned, of record or beneficially in excess of ten percent (10%) equity interest in, any business or professional entity that has made during any of such fiscal years, or proposes to make during the Company’s current fiscal year, payments to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company for property or services in excess of five percent (5%) of: (i) the Company’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year), or (ii) the other entity’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year); |
| (b) | a director being an executive officer of, or owning, or having owned, of record or beneficially in excess of ten percent (10%) equity interest in, any business or professional entity to which the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company has made during any of such fiscal years, or proposes to make during the Company’s current fiscal year, payments for property or services in excess of five percent (5%) of: (i) the Company’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year), or (ii) the other entity’s consolidated gross revenues for such fiscal year (or, in the case of proposed payments, its last fiscal year); |
| (c) | a director or an immediate family member of the director being an officer, director or trustee of a charitable organization where the annual discretionary charitable contributions of the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in any single year to the charitable organization exceeded the greater of $1 million or two percent (2%) of that organization’s consolidated gross revenues for the fiscal year; |
| (d) | a director or an immediate family member of a director being indebted to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in an amount in excess of $120,000; |
| (e) | a director being an executive officer, partner or greater than 10% equity owner of an entity, or being a trustee or a substantial beneficiary of a trust or estate, indebted to the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company in an amount in excess of the greater of $120,000 or 5% of such entity’s total consolidated assets, or to whom the Company or an entity controlled by an executive officer of the Company is indebted (other than with respect to (i) any publicly traded debt securities of the Company or such entity or(ii) non-recourse loans secured by real estate where both the lender and the Company or such entity intend for the lender to transfer all right to, and control over, the loan within 12 months and the documentation includes customary provisions for loans targeted at the commercial mortgage backed securities (CMBS) or collateralized debt obligation (CDO) markets) in an amount in excess of 5% of the Company’s or such entity’s total consolidated assets; |
| (f) | a transaction or currently proposed transaction (other than relating to the ownership of securities), which involved or involves the direct or indirect payment in a single year of in excess of $120,000 from the Company, an executive officer of the Company or an entity controlled by an executive officer of the Company to a director or an immediate family member of a director; |
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| 1› | PROPOSAL 1: ELECTION OF DIRECTORS |
| (g) | a director or an immediate family member of a director being an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of an entity that has aco-investment or is a joint venture partner with the Company where the amount of the entity’s equity investment in any single year exceeds the greater of $1 million or 2% of the total consolidated assets of the entity; or |
| (h) | a director or an immediate family member of a director being an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of an entity (other than the Company) in which an executive officer of the Company or an entity controlled by an executive officer of the Company is an executive officer, general or managing partner or owner of more than 10% of the outstanding equity securities of the entity. |
For purposes of these standards, “immediate family” member has the same meaning as in the NYSE Disqualifying Rules.
Relationships not specifically deemed not material by the above categorical standards may, in the Board’s judgment, be deemed not to be material.
› 20202021 INDEPENDENCE DETERMINATIONS
The Board of Directors concluded that the following directors qualify as independent directors under NYSE rules because none of them (1) has any relationships that would disqualify him or her from being considered independent under the minimum objective standards contained in the NYSE rules or (2) has any relationships other than those deemed to be immaterial under the categorical standards adopted by the Board of Directors.
› Kelly A. Ayotte
›
› | ›
› Diane J. Hoskins
› | ›
›
› William H. Walton, III |   | |||
In determining that each of Ms. Ayotte and Messrs. Duncan andMr. Twardock qualified as an independent director for purposes of his or her service on the Compensation Committee, our Board considered that (1) each serves or previously served as anon-employee director (or advisory board member) for a company with which Boston Properties has a commercial relationship and engaged in commercial transactions in the ordinary course of business, (2) each transaction was on arms’-length terms and the director had no direct or indirect involvement in the transaction, and (3) the director had no pecuniary interest in the success of the transaction.
CONSIDERATION OF DIRECTOR NOMINEES
› SECURITYHOLDER RECOMMENDATIONS
The NCG Committee’s current policy is to review and consider any director candidates who have been recommended by securityholders in compliance with the procedures established from time to time by the NCG Committee. All securityholder recommendations for director candidates must be submitted to our Secretary at Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103, who will forward all recommendations to the NCG Committee. We did not receive any securityholder recommendations for director candidates for election at the 20202021 annual meeting in compliance with the procedures set forth below. All securityholder recommendations for director candidates for election at the 20212022 annual meeting of stockholders must be submitted to our Secretary on or before December 4, 20206, 2021 and must include the following information:
the name and address of record of the securityholder;
a representation that the securityholder is a record holder of our securities, or if the securityholder is not a record holder, evidence of ownership in accordance with Rule14a-8(b)(2) under the Securities Exchange Act of 1934;
22 | | | |
| 1› | PROPOSAL 1: ELECTION OF DIRECTORS |
the name, age, business and residential address, educational background, current principal occupation or employment, and principal occupation or employment for the preceding five (5) full fiscal years of the proposed director candidate;
a description of the qualifications and background of the proposed director candidate which addresses the minimum qualifications and other criteria for Board membership as approved by the Board from time to time;
a description of all arrangements or understandings between the securityholder and the proposed director candidate;
the consent of the proposed director candidate (1) to be named in the proxy statement relating to our annual meeting of stockholders and (2) to serve as a director if elected at such annual meeting; and
any other information regarding the proposed director candidate that is required to be included in a proxy statement filed pursuant to the rules of the Securities and Exchange Commission (“SEC”).
› BOARD MEMBERSHIP CRITERIA
The NCG Committee has established criteria for NCG Committee-recommended director nominees. These criteria include the following specific, minimum qualifications that the NCG Committee believes must be met by an NCG Committee-recommended nominee for a position on the Board:
the candidate must have experience at a strategic or policymaking level in a business, government,non-profit or academic organization of high standing;
the candidate must be highly accomplished in his or her respective field, with superior credentials and recognition;
the candidate must be well regarded in the community and must have a long-term reputation for high ethical and moral standards;
the candidate must have sufficient time and availability to devote to our affairs, particularly in light of the number of boards on which the candidate may serve;
the candidate’s principal business or occupation must not be such as to place the candidate in competition with us or conflict with the discharge of a director’s responsibilities to us and our stockholders; and
to the extent the candidate serves or has previously served on other boards, the candidate must have a history of actively contributing at board meetings.
In addition to the minimum qualifications for each nominee set forth above, the NCG Committee will recommend director candidates to the full Board for nomination, or present director candidates to the full Board for consideration, to help ensure that:
a majority of the Board of Directors will be “independent” as defined by the NYSE rules;
each of its Audit, Compensation and NCG Committees will be comprised entirely of independent directors; and
at least one member of the Audit Committee will have such experience, education and other qualifications necessary to qualify as an “audit committee financial expert” as defined by the rules of the SEC.
Finally, in addition to any other standards the NCG Committee may deem appropriate from time to time for the overall structure and composition of the Board, the NCG Committee may consider the following factors when recommending director candidates to the full Board for nomination, or presenting director candidates to the full Board for consideration:
whether the candidate has direct experience in the real estate industry or in the markets in which we operate; and
whether the candidate, if elected, assists in achieving a mix of Board members that represents a diversity of background and experience.
› IDENTIFYING AND EVALUATING NOMINEES
The NCG Committee may solicit recommendations for director nominees from any or all of the following sources:non-management directors, the Chief Executive Officer, other executive officers, third-party search firms or any other source it deems appropriate.
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| 1› | PROPOSAL 1: ELECTION OF DIRECTORS |
The NCG Committee will review and evaluate the qualifications of any proposed director candidate that it is considering or has been recommended to it by a securityholder in compliance with the NCG Committee’s procedures for that purpose, and conduct inquiries it deems appropriate into the background of these proposed director candidates. In identifying and evaluating proposed director candidates, the NCG Committee may consider, in addition to the minimum qualifications for NCGCommittee-recommended director nominees, all facts and circumstances that it deems appropriate or advisable, including, among other things, the skills of the proposed director candidate, his or her depth and breadth of business experience, his or her independence, and the needs of our Board. Neither the NCG Committee nor the Board, has a specific policy with regard to the consideration of diversity in identifying director nominees, although both may consider diversity when identifying and evaluating proposed director candidates. As noted above, the NCG Committee, when recommending director candidates to the full Board for nomination, may consider whether a director candidate, if elected, assists in achieving a mix of Board members that represents a diversity of background and experience. Other than circumstances in which we may be legally required by contract or otherwise to provide third parties with the ability to nominate directors, the NCG Committee will evaluate all proposed director candidates that it considers or who have been properly recommended to it by a securityholder based on the same criteria and in substantially the same manner, with no regard to the source of the initial recommendation of the proposed director candidate.
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| 2› | CORPORATE GOVERNANCE |
Boston Properties is committed to strong corporate governance policies practices, and procedurespractices designed to make the Boardfoster effective in exercising itsleadership and independent oversight role.of management. Our Board of Directors oversees management performance on behalf of our stockholders to ensure that theour stockholders’ long-term interests of our stockholders are being served, to monitor adherence to Boston Properties standards’Properties’ standards and policies, and to promote the exercise of responsible corporate citizenship. Our Board values and considers the feedback we receive from our stockholders, and we have taken a number of actions over the last several years to increase stockholder rights, enhance the Board’s structure, and augment our commitment to sustainability and corporate responsibility taking into account those perspectives.
Our Corporate Governance Guidelines provide that our Board of Directors does not have a policy with respect to whether or not the role of Chairman of the Board and CEO should be separate or combined. However, our Board has determined that its leadership structure should include either an independent,non-executive Chairman of the Board or a lead independent director who satisfies our standards for independence. Accordingly, our Corporate Governance Guidelines provide that it is the Board’s policy that if (1) the positions of Chairman of the Board and CEO are held by the same person, (2) the position of Chairman of the Board is held by anon-independent director or (3) none of the directors has been elected to serve as Chairman of the Board, then the independent directors shall select an independent director to serve as lead independent director.
When our Board of Directors amended our Corporate Governance Guidelines in 2014 to create the position of lead independent director, the Board contemplated that in the future it might determine that it is advisable to appoint an independent,non-executive Chairman of the Board. As a result, our Corporate Governance Guidelines provide that an independent director selected to serve as lead independent director will serve in that role until (1) he or she ceases to be an independent director or resigns from the position, (2) a successor is selected by a majority of the independent directors or (3) an independent director is serving as the Chairman of the Board. In addition, if the Chairman of the Board is an independent director, then the Chairman of the Board shall assume the responsibilities of the lead independent director referenced above and there will not be a separate lead independent director.
The independent directors selected Mr. Klein to serve as lead independent director in May 2016, a position he held until May 2019. Our Board of Directors appointed Mr. Klein as independent,non-executive Chairman of the Board, effective immediately following the 2019 annual meeting of stockholders.stockholders, and he continues to serve in that role. In addition to responsibilities that may be assigned from time to time by the full Board, Mr. Klein’s responsibilities as Chairman include:
• Approving information sent to the Board
• Approving Board meeting agendas and schedules to ensure
• Coordinating the work of each committee with the activities of the full Board
• Calling meetings of the independent directors
• Presiding at all meetings of the Board, including executive sessions of independent directors
• Attending meetings of Board committees regularly
• Working with the CEO and the Chair of the NCG Committee to provide strategic direction on all Board and governance matters
• Serving as liaison between the CEO and the independent directors
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• Working with the CEO on matters of strategic importance to the Board and the Company
• Ensuring that he is available, if requested by major stockholders, for direct consultation and communication
• Working with the Compensation Committee to establish and review annual and long-term goals for assessing performance and to evaluate the performance of the CEO
• Conductingbi-annual interviews with individual directors regarding individual contributions and overall Board composition and planning
• Independently reviewing with the CEO the Company’s succession plan for executive officers |
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| 2› | CORPORATE GOVERNANCE |
Our Board believes that Mr. Klein’s appointment as Chairman enhances our independent directors’ oversight of our business and affairs. Our Board of Directors encourages strong communication among all of its independent directors and the CEO, and the Board believes that it has been able to effectively provide independent oversight of our business and affairs, including risks facing the
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Company, through our Chairman of the Board, the independent committees of our Board of Directors, the overall composition of our Board of Directors and contributions from all of our independent directors and other corporate governance processes in place.
Number of Meetings and Attendance.Our Board of Directors met eightfourteen (14) times during 2019.2020. Each incumbent director attended at least 75% of the aggregate of (1)(x) the total number of meetings of our Board of Directors in 20192020 held during the period for which he or she was a director and (2)(y) the total number of meetings in 20192020 of all committees of our Board of Directors on which the director served during the periods that he or she served.As a whole,In the aggregate, during 2019,2020, our directors attended more than 98%99% of the aggregatetotal number of Board meetings and meetings of committees on which they served.
Annual Meeting Attendance.Directors are expected to attend annual meetings of our stockholders in person unless doing so is impracticable due to unavoidable conflicts. Nine of the elevenAll directors then serving along with two first-time nominees, attended the 20192020 annual meeting of stockholders. Two directors then serving did not attend the 2019 annual meeting of stockholders because they were not standing forre-election.
Meetings ofNon-Management Directors.Directors who qualify as“non-management” within the meaning of the rules of the NYSE meet on a regular basis in executive sessions without management participation. The executive sessions occur after each regularly scheduled meeting of our entire Board and at such other times that thenon-management directors deem appropriate, and they are chaired by our independent,non-executive Chairman of the Board. Each director has the right to call an executive session. Currently, all of ournon-management directors are independent.
BOARD REFRESHMENT AND EVALUATIONS
› DIRECTOR SUCCESSION PLANNING
Led by our Chairman of the Board and our NCG Committee, our Board of Directors remains focused on ensuring a smooth transition if and when directors decide to retire or otherwise leave our Board and that the composition of our Board is systematically refreshed so that, taken as a whole, our Board has the desired mix of skills, experience, reputation and diversity relevant to our strategic direction and operating environment, as well as the knowledge, ability and independence to continue to deliver a high standard of governance expected by investors. Among other aspects of the process, our Board of Directors:
identifies the collective mix of desired skills, experience, knowledge, diversity and independence for our Board of Directors, taken as a whole, and identifies potential opportunities for enhancement in one or more of those areas;
considers each current director’s experience, skills, principal occupation, reputation, independence, age, tenure, committee membership and diversity (including geography, gender and ethnicity); and
| • | considers the results of our Board and committee self-evaluations, as well as feedback received from |
 | ||||
Since 2016, our Board nominated, and our stockholders elected, five new directors, three of whom are women.
Board Committee Rotation.› BOARD COMMITTEE ROTATION
The NCG Committee also considers the periodic rotation of committee members and committee chairs to introduce fresh perspectives and to broaden and diversify the views and experience represented on committees.
Director Tenure and Mandatory Retirement Age.› DIRECTOR TENURE AND MANDATORY RETIREMENT AGE
To ensure that our Board has an appropriate balance of experience, continuity and fresh perspective, our Board considers the length of tenure and age when nominating candidates for election. Our Board does not have formal limits on director tenure, but has a policy that provides no person shall be nominated by the Board for election as anon-employee director following his or her 75th birthday.
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| 2› | CORPORATE GOVERNANCE |
› BOARD AND COMMITTEE EVALUATIONS
The feedback received from each member of our Board during the Board and committee evaluation process plays a critical role in ensuring that our Board and its committees function effectively. To this end, the NCG Committee is responsible for establishing the process used and the criteria for the evaluations.
| Topics considered during the Board and committee evaluations include:
Board and Committee Operations
| |||
• Board and committee membership, including independence, director skills, background, expertise and diversity
• Board rotation and succession •Committee structure
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• Process for director nominations
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• Number and conduct of meetings, including time allocated for, and encouragement of, candid dialogue and executive sessions
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• Materials and information, including quality, quantity and timeliness of information received from management, and suggestions for educational sessions
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• Culture
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Board Performance
| ||||
• • Risk oversight › Financial › Cyber Attacks and Intrusions › ESG
• Identification of topics that should receive more attention and discussion
• Management succession
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Committee Performance
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• Performance of committee duties under its charter
• Effectiveness of outside advisors
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| 2› | CORPORATE GOVERNANCE |
Our Board of Directors has an (1) Audit, (2) Compensation and (3) NCG Committee. Each of the Audit Committee, Compensation Committee and NCG Committeethese committees operates pursuant to a charter that was approved by our Board of Directors and that is reviewed and reassessed at least annually. AAs required by the rules of the NYSE, a copy of each of these charters is available on our website athttp://www.bxp.comunder the heading “Corporate Governance.” In addition, on March 18, 2021, our Board of Directors established a Sustainability Committee. Our Board of Directors may from time to time establish other special or standing committees to facilitate the management of Boston Properties or to discharge specific duties delegated by the full Board of Directors.
The membership and the function of each of the Audit Committee, Compensation Committee and NCG Committee,these committees, and the number of meetings each held during 2019,2020, are described below.
› AUDIT COMMITTEE
Members: David A. Twardock (Chair) Bruce W. Duncan* Karen E.
Number of Meetings in
| The Audit Committee’s responsibilities include:
• sole authority to appoint, retain, terminate and determine the compensation of our independent registered public accounting firm;
• reviewing with our independent registered public accounting firm the scope and results of the audit engagement;
• approving professional services provided by our independent registered public accounting firm;
• reviewing the independence of our independent registered public accounting firm;
• overseeing the planning and conduct of our annual risk assessment;
• overseeing our cyber risk management; •evaluating the Company’s internal audit function and reviewing the internal audit plan; and
• performing such other oversight functions as may be requested by our Board of Directors from time to time.
Each member of the Audit Committee is “independent” as that term is defined in the rules of the SEC and the NYSE.
For additional disclosures regarding the Audit Committee, including the Audit Committee Report, see “Proposal
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| 2› | CORPORATE GOVERNANCE |
��
› COMPENSATION COMMITTEE
Members:
Kelly A. Ayotte (Chair) Carol B. Einiger David A. Twardock William H. Walton, III*
Number of Meetings in
*Mr. Walton was appointed to the Compensation Committee on July 9, 2020. Mr. Duncan served as the Chair of the Compensation Committee until July 9, 2020. | The Compensation Committee’s responsibilities include:
• reviewing and approving the corporate goals and objectives relevant to the compensation of the CEO and certain designated senior executive officers;
• evaluating the performance of the CEO and designated senior executive officers in light of such goals and objectives and determining and approving compensation of these officers based on such evaluation;
• reviewing and approving the compensation of other executive officers;
• reviewing and approving grants and awards under all incentive-based compensation plans and equity-based plans;
• reviewing and making recommendations to the full Board of Directors regarding the compensation ofnon-employee directors; and
• performing other functions and duties deemed appropriate by our Board of Directors.
None of the members of the Compensation Committee is an employee of Boston Properties and each of them is an independent director under the NYSE rules.
The Compensation Committee makes all compensation decisions for all executive officers. The Compensation Committee reviews and approves all equity awards for all employees and delegated limited authority to the CEO to make equity grants to employees who are not executive officers.
In
The Compensation Committee Report is included in this proxy statement on page
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| | | 29 |
| 2› | CORPORATE GOVERNANCE |
› NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Members: Matthew J. Lustig (Chair) Kelly A. Ayotte Bruce W. Duncan Carol B. Einiger* Diane J.
Number of Meetings in
*Ms. | The NCG
• identifying individuals qualified to become Board members, consistent with criteria established by the NCG Committee, and recommending to the Board director nominees for election at each annual meeting of stockholders; • recommending to the Board the directors for appointment to is committees;
• establishing a policy with regard to the consideration by the NCG Committee of director candidates recommended by securityholders;
• establishing procedures to be followed by securityholders submitting such recommendations and establishing a process for identifying and evaluating nominees for
• performing such other functions as may be requested by our Board of Directors from time to time.
The NCG Committee is also responsible for annually reviewing our Corporate Governance Guidelines and recommending any changes to
Each member of the NCG Committee is an independent director under the NYSE rules. | |
› SUSTAINABILITY COMMITTEE
Members: Diane J. Hoskins (Chair) Douglas T. Linde Matthew J. Lustig Owen D. Thomas | The Board of Directors established the Sustainability Committee on March 18, 2021. Under its charter, the Sustainability Committee’s responsibilities include: • reviewing and sharing real estate industry sustainability best practices; • working with our Board and management to establish environmental performance goals (energy, emissions, water and waste), and initiatives related to climate action and resilience; • monitoring and evaluating the Company’s progress in achieving its sustainability goals and commitments, as well as relevant independent environmental, sustainability and governance ratings and rankings; • reporting to and advising our Board as appropriate on the Company’s sustainability objectives and its strategy; • periodically reviewing legal, regulatory and compliance matters that may have a material impact on the implementation of the Company’s sustainability objectives, and making recommendations to our Board and management, as appropriate, with respect to the Company’s response to such matters; • assisting our Board in fulfilling its oversight responsibility by identifying, evaluating and monitoring the environmental and climate trends, issues, risks and concerns that affect or could affect the Company’s business activities and performance; • advising our Board on significant stakeholder concerns related to sustainability; and • performing such other functions as may be requested by our Board of Directors from time to time.
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| 2› | CORPORATE GOVERNANCE |
BOARD’S ROLE IN RISK OVERSIGHT
Our Board of Directors plays an important role in thehas overall responsibility for our risk oversight of Boston Properties. Ouroversight. The Board of Directors is involved in risk oversight through direct decision-making authoritydischarges this responsibility either directly with respect to significant matters andor indirectly through its committees. While the oversight of management by ourfull Board of Directors and its committees. In particular, our Board of Directors administers itsis primarily responsible for risk oversight, function through:
its committees monitor and address risks that are within the review and discussionscope of regular periodic reports to oura particular committee’s expertise, the committee’s charter or the resolution(s) appointing the committee. Our Board of Directors and its committees on topics relatingexercise their oversight responsibilities in a variety of ways, but in all cases our directors are informed by regular reports from management that are intended to theidentify key risks that Boston Properties faces, including, among others:and our strategies to mitigate them.
Our Board of Directors administers its risk oversight function through: | ||||
• Regular periodic reports from management on material risks that Boston Properties faces, including, among others:
› market conditions
› | tenant concentrations, credit worthiness and |
› | leasing activity and |
› | the status of |
› | compliance with debt |
› | management of debt |
› access to debt and equity capital |
› | existing and potential legal claims against Boston |
› |
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› | potential |
› | public health crises, pandemics and › succession planning |
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the required approval by our Board of Directors (or a committee thereof) of significant transactions and other decisions, including, among others:
› acquisitions and dispositions of | |||||
› | development |
› | new |
› | the appointment › the compensation of Boston Properties’ › transactions with related persons and conflicts of interest | |||
• Reports from the Audit, Compensation, NCG and Sustainability Committees, and other committees that may be established from time to time, on matters delegated to them | ||||
• Reports from outside consultants, including legal, accounting and tax professionals, regarding various areas of potential risk | ||||
the direct oversight of specific areas of Boston Properties’ business by the Audit, Compensation and NCG Committees; and
regular periodic reports from Boston Properties’ independent registered public accounting firm and other outside consultants regarding various areas of potential risk, including, among others, those relating to the qualification of Boston Properties as a REIT for tax purposes and Boston Properties’ internal control over financial reporting.
Our Board of Directors also relies on management to bring significant matters impacting Boston Properties to its attention.
Pursuant to the Audit Committee’s charter, the Audit Committee is specifically responsible for discussing the guidelines and policies that govern the process by which Boston Properties’ exposure to risk is assessed and managed by management. As part of this process, the Audit Committee oversees the planning and conduct of an annual risk assessment that is designed to identify and analyze risks to achieving Boston Properties’ business objectives. The results of the risk assessment are then discussed with management and used to develop Boston Properties’ annual internal audit plan. In addition, as one component of Boston Properties’ anti-fraud program, Boston Properties, under the supervision of the Audit Committee, established a hotline that is available for the anonymous and confidential submission of complaints relating to any matter to encourage the reporting of questionable activities directly to our senior management and the Audit Committee (see“– Other Governance Matters – Communications with the Board” below).
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| 2› | CORPORATE GOVERNANCE |
BOARD COMMITTEES Our Board of Directors uses its committees to assist in risk oversight as follows: | ||||||||||||
| Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Sustainability Committee | |||||||||
The Audit Committee oversees risks related to: • the integrity of our financial statements and internal control over financial reporting; • compliance with GAAP and the use of estimates and judgments; • our use of non-GAAP financial measures; • pending and threatened litigation, and legal and regulatory requirements; • the performance of our internal audit function; • the independence and performance of our independent auditors; • REIT compliance; • cyber-security and insurance; and • our anti-fraud program. | The Compensation Committee oversees risks related to: • our ability to attract, retain and motivate our executive officers; • the use of compensation practices and plans to align the interests of our executives with our stockholders; and • the influence of incentive compensation on excessive risk-taking. For more information, see “Compensation Discussion and Analysis — IV. Other Compensation Policies — Assessment of Compensation-Related Risks” on page 76. | The NCG Committee oversees risks related to: • the composition, leadership and independence of the Board and its committees; • the general operations of the Board; • the process of conducting the annual Board and committee evaluations; • our compliance with our Corporate Governance Guidelines and applicable laws and regulations, including applicable rules of the NYSE; and • policies with respect to the consideration of director candidates recommended by stockholders. | The Sustainability Committee oversees risks related to: • environmental and climate action and resilience trends and issues; • our progress in achieving our sustainability goals and initiatives; and • regulatory compliance matters that may impact our sustainability objectives. | |||||||||
Audit Committee Role in Risk Assessment. The Audit Committee oversees an annual risk assessment designed to identify and analyze risks to achieving Boston Properties’ business objectives. The results of the risk assessment are used to develop Boston Properties’ annual internal audit plan.
Because of the role of our Board of Directors in the risk oversight of Boston Properties, our Board of Directors believes that any leadership structure that it adopts must allow it to effectively oversee the management of the risks relating to Boston Properties’our operations. Our Board of Directors recognizes that there are different leadership structures that could allow it to effectively oversee the management of thethese risks, relating to Boston Properties’ operations, and while our Board believes its current leadership structure enables it to effectively manage such risks, it was not the primary reason our Board of Directors selected its current leadership structure over other potential alternatives. See the discussion under the heading “– Board Leadership Structure” abovebeginning on page 25 for a discussion of why our Board of Directors has determined that its current leadership structure is appropriate.
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| 2› | CORPORATE GOVERNANCE |
› CODE OF BUSINESS CONDUCT AND ETHICS AND OTHER POLICIES
Our Board of Directors adopted the following policies, copies of which are available on our website:
Code of Business Conduct and Ethics (the(the “Code of Ethics”) available on our website athttp://investors.bxp.com/code-conduct-and-ethics
The Code of Ethics governs business decisions made and actions taken by our directors, officers and employees. We intend to disclose on this website any amendment to, or waiver of, any provision of this Code of Ethics applicable to our directors and executive officers that would otherwise be required to be disclosed under the rules of the SEC or the NYSE rules.
Corporate Governance Guidelinesavailable on our website athttp://investors.bxp.com/governance-guidelines
Policy on Company Political Spendingavailable on our website athttp://investors.bxp.com/policy-political-spend
› COMMUNICATIONS WITH THE BOARD
Stockholders and other interested parties who wish to communicate with any of our directors or the Board of Directors as a group, may do so by writing to them at Name(s) of Director(s)/Board of Directors of Boston Properties, Inc., c/o Compliance Officer, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103.
Stockholders and other interested parties who wish to contact the Audit Committee to report complaints or concerns regarding accounting, internal accounting controls or auditing matters, may do so by:
| • | following any of the “Procedures for Submission of Complaints under the Audit Committee Complaint Procedures” that are attached as Exhibit 1 to our Code of Ethics (see “– Code of Business Conduct and Ethics and Other Policies” above), or |
writing to the Chair of the Audit Committee of Boston Properties, Inc., c/o Compliance Officer, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103.
You are welcome to make any such reports anonymously, but we prefer that you identify yourself so that we may contact you for additional information if necessary or appropriate.
Stockholders and other interested parties who wish to communicate with ournon-management directors as a group, may do so by writing toNon-Management Directors of Boston Properties, Inc., c/o Compliance Officer, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103.
We recommend that all correspondence be sent via certified U.S. mail, return receipt requested. All correspondence received by the Compliance Officer will be forwarded by the Compliance Officer promptly to the addressee(s).
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› COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Mses. Ayotte and Einiger and Messrs. Duncan, Twardock and Twardock.Walton each served on the Compensation Committee during 2020. None of these persons has served as an officer or employee of Boston Properties. None of these persons had any relationships with Boston Properties requiring disclosure under Item 404 of RegulationS-K. None of Boston Properties’ executive officers served as a director or a member of a compensation committee (or other committee serving a similar function) of any other entity, an executive officer of which served as a director of Boston Properties or a member of the Compensation Committee during 2019.2020.
| | 2021 Proxy Statement | 33 |
| 2› | CORPORATE GOVERNANCE |
› PROXY ACCESSBY-LAW PROVISIONS
OurBy-laws include a proxy access right for stockholders, pursuant to which a stockholder, or group of no more than five stockholders, meeting specified eligibility requirements, may include director nominees in our proxy materials for annual meetings of our stockholders. In order to be eligible to utilize these proxy access provisions, a stockholder, or group of stockholders, must:
have owned shares of common stock equal to at least 3% of the aggregate of the issued and outstanding shares of common stock continuously for at least the prior three years;
represent that such shares were acquired in the ordinary course of business and not with the intent to change or influence control and that such stockholder or group does not presently have such intent; and
provide a notice requesting the inclusion of director nominees in our proxy materials and provide other required information to us not less than 120 days prior to the anniversary of the date of the proxy statement for the prior year’s annual meeting of stockholders (with adjustments if the date for the upcoming annual meeting of stockholders is more than 30 days before or more than 60 days after the anniversary date of the prior year’s annual meeting).
For purposes of the foregoing requirements, issued and outstanding common units, other than those owned by us, Boston Properties Limited Partnership (our “Operating Partnership”) or any of their directly or indirectly wholly owned subsidiaries and excluding issued and outstanding long term incentive units, will be treated as issued and outstanding shares of common stock.
Additionally, all director nominees submitted through these provisions must be independent and meet specified additional criteria, and stockholders will not be entitled to utilize this proxy access right at an annual meeting if we receive notice through our traditional advanced noticeby-law provisions that a stockholder intends to nominate a director at such meeting. The maximum number of director nominees that may be submitted pursuant to these provisions may not exceed 25% of the number of directors then in office.
The foregoing proxy access right is subject to additional eligibility, procedural and disclosure requirements set forth in ourBy-laws.
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| 3› | HUMAN CAPITAL AND SUSTAINABILITY |
HUMAN CAPITAL AND SUSTAINABILITY
Boston Properties’ success depends on human capital. We are focused on social performance and positive externalities, including diversity and inclusion in our workforce, the well-being of our employees, their training and professional development, and making positive contributions to the communities we serve.
› DIVERSITY & INCLUSION
Our policy is to recruit, hire, assign, promote and train in all job titles without regard to race, national origin, religion, age, color, sex, sexual orientation, gender identity, disability, or protected veteran status, or any other characteristic protected by applicable law.
In 2020, we formalized and elevated our focus on diversity and equity within our company.
We launched the BXP Diversity & Inclusion (“D&I”) Committee with the mission of promoting diversity, inclusion, equality and transparency as part of our culture, business activities and decision-making practices. Priorities for the D&I Committee include recruiting, retention and professional development, review and assessment of our policies with a focus on business partner diversity and other relationships, and community outreach.
| • | Our Chief Executive Officer is a signatory to the CEO Action for Diversity & Inclusion campaign, the largest CEO-driven business commitment to advance diversity and inclusion in the workplace. |
The following is a snapshot of the diversity of our workforce as of December 31, 2020:
| TOTAL WORKFORCE(1) | MANAGER & ABOVE(1) | |
|  | |
(1) We determine race and gender based on our employees’ self-identification. Ethnic minorities are defined as those included in the EEO Ethnicity and Race Categories: Asian, Black/African American, Hispanic/Latino, Native American or Pacific Islander, or multiracial background. Total workforce includes all of our employees except union employees for which the union controls the hiring process. | ||
› CULTURE & EMPLOYEE ENGAGEMENT
The success of our business is tied to the quality of our workforce, and we strive to maintain a corporate environment without losing the entrepreneurial spirit with which we were founded more than 50 years ago.
We conduct employee engagement surveys to monitor satisfaction in all aspects of their employment; employee responsiveness to the surveys has been consistently high (93% responsiveness in 2020 reflected an overall rating of “very favorable”)
| | 2021 Proxy Statement | 35 |
| 3› | HUMAN CAPITAL AND SUSTAINABILITY |
The success of our efforts in the workplace is demonstrated by the satisfaction and long tenure of our employees:
32% worked at BXP for ten or more years
average tenure is 9.8 years for employees and 18.2 years for our executive leadership.
› HEALTH, SAFETY & WELLNESS
We are keenly aware of the influence of buildings on human health and its importance to our tenants and employees. In light of the COVID-19 pandemic, our focus on healthy buildings has become even more important.
In early 2020, we established a Health Security Task Force of internal and external subject matter experts
Task force developed the BXP Health Security Plan, a comprehensive set of building operational measures, including cleaning and disinfection, air and water quality, physical distancing, screening and personal protective equipment, and health security communication
We also believe the success of our employees depends upon their physical health, mental health, work-life balance and financial well-being. To support this, our employee benefits program includes:
an Employee Wellness Program to encourage employees to improve their health and well-being, and
an Employee Assistance Program that includes services for childcare, eldercare, personal relationship information, financial planning assistance, stress management, mental illness and general wellness and self-help.
› CAREER DEVELOPMENT & TRAINING
We invest significant resources in our employees’ personal and professional growth and development and provide a range of development opportunities that build and strengthen employees’ leadership and professional skills.
In 2020, we offered Unconscious/Implicit Bias training as part of our commitment to recognize that we all have a role to play to mitigate unconscious bias in the work environment and support an inclusive workforce.
We actively work to promote our growth and operations in a sustainable and responsible manner across our five regions. The BXP sustainability strategy is to conduct our business, the development and operation of new and existing buildings, in a manner that contributes to positive economic, social and environmental outcomes for our investors, customers, employees and the communities we serve. Our investment philosophy is shaped by our core strategy of long-term ownership and our commitment to our communities and the centers of commerce and civic life that make them thrive. We are focused on developing and maintaining healthy, high-performance buildings, while simultaneously mitigating operational costs and the potential external impacts of energy, water, waste, greenhouse gas emissions and climate change. To that end, we have publicly adopted long-term energy, emissions, water and waste goals that establish aggressive reduction targets and have been aligned with the United Nations Sustainable Development Goals. BXP is a corporate member of the U.S. Green Building Council® (“USGBC”) and has a long history of owning, developing and operating properties that are certified under USGBC’s Leadership in Energy and Environmental Design™ (LEED®) rating system. In 2018, we announced a partnership with a leading healthy building certification system, Fitwel, to support healthy building design and operational practices across our portfolio, becoming a Fitwel Champion.
In addition, since 2018 we have been an active participant in the green bond market, which provides access to sustainability-focused investors interested in the positive environmental externalities of our business activities. BXP and its employees also make a social impact through charitable giving, volunteerism, public realm investments and diversity and inclusion. Through these efforts, we demonstrate that operating and developing commercial real estate can be conducted with a conscious regard for the environment and wider society while mutually benefiting our stakeholders.
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| 3› | HUMAN CAPITAL AND SUSTAINABILITY |
› INDUSTRY LEADERSHIP
We continue to be recognized as an industry leader in sustainability. In 2020, BXP ranked among the top real estate companies in the Global Real Estate Sustainability Benchmark (“GRESB”) assessment, earning a fifth consecutive 5 Star rating, the highest rating and recognition for being an industry leader. It was the ninth consecutive year that BXP earned the GRESB “Green Star” designation, achieving the highest scores in several categories, including: Data Monitoring & Review, Targets, Policies, Reporting and Leadership. BXP was also named one of America’s Most Responsible Companies by Newsweek magazine in 2020. BXP ranked 56th overall out of 400 companies included. It was the second highest ranking of all property companies and the highest ranking of any office REIT. In 2014, 2015, 2017, 2018 and 2019, BXP was selected by Nareit as a Leader in the Light Award winner. Nareit’s annual Leader in the Light Awards honor Nareit member companies that have demonstrated superior and sustained sustainability practices.
BXP has adopted sustainable development and operational practices across its portfolio. In 2017, shortly after the U.S. withdrawal from the Paris Agreement, BXP became a proud signatory of the We Are Still In declaration, and aligned emissions reduction targets with climate science. The SBTi Target Validation Team has classified BXP’s emissions reduction target ambition and has determined that it is in line with a 1.5°C trajectory, currently the most ambitious designation available. As of the end of 2020, BXP is one of six North American Real Estate companies with this distinction and the only North American office company in that group. We have LEED certified 27.7 million square feet of our portfolio, of which 96% is certified at the highest Gold and Platinum levels. BXP’s master lease form includes green lease clauses that support a more sustainable tenant-landlord relationship. In 2020, BXP was named a Green Lease Leader at the highest Gold level by the Institute for Market Transformation and the U.S. Department of Energy for exhibiting a strong commitment to high performance and sustainability in buildings and best practices in leasing. Through active asset management and tenant engagement, BXP has been a leader in energy efficiency and healthy building practices. In 2020 BXP was recognized by the Environmental Performance Agency a 2020 ENERGY STAR Partner of the Year. BXP was named a 2020 Best in Building Health award winner. We completed the first Fitwel Design Certified project in the world in 2019 and executed more Fitwel certifications by count and building area than any other company in 2019. BXP has 11 Fitwel Ambassadors among our Sustainability, Development and Property Management teams.
› GREEN FINANCE
From 2018 to 2021, BPLP issued an aggregate of $2.7 billion of green bonds in three separate offerings. The terms of the green bonds have restrictions that limit our allocation of the net proceeds to “eligible green projects.” We published our first Green Bond Allocation Report in June 2019, disclosing the full allocation of approximately $988 million in net proceeds from BPLP’s inaugural green bond offering to the eligible green project at our Salesforce Tower property in San Francisco, California. We recently published our September 30, 2020 Green Bond Allocation Report disclosing the full allocation of approximately $841 million in net proceeds from BPLP’s green bond offering in June 2019. The Green Bond Allocation Reports are available on our website at http://www.bxp.com under the heading “Sustainability,” but they are not incorporated by reference into this proxy statement, our Annual Report on Form 10-K, or any other document we file with the SEC.
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| 3› | HUMAN CAPITAL AND SUSTAINABILITY |
› CLIMATE RESILIENCE
As a long-term owner and active manager of real estate assets in operation and under development, we take a long-term view of potential risks, including climate change. We are in the process of evaluating physical and transition risks associated with climate change and we view this as an opportunity to protect asset value by proactively assessing climate risk, implementing measures, planning and decision-making processes to protect our investments by improving resilience. We are preparing for long-term climate risk by considering climate change scenarios and will continue to assess climate change vulnerabilities resulting from potential future climate scenarios and sea level rise. In 2020, we began using Four Twenty Seven climate risk scoring to evaluate the forward-looking physical climate risk exposure of our entire portfolio. Event-driven (acute) and longer-term (chronic) physical risks that may result from climate change could have a material adverse effect on our properties, operations and business. Management’s role in assessing and managing these climate-related risks and initiatives is spread across multiple teams across our organization, including our executive leadership and our Sustainability, Risk Management, Development, Construction and Property Management departments. Climate resilience measures include training and implementation of emergency response plans and the engagement of our executives and BXP’s Board of Directors on climate change and other ESG aspects.
› PUBLIC SUSTAINABILITY GOALS AND PROGRESS
Our sustainability goals establish reduction targets for energy, greenhouse gas emissions, water consumption and waste. In 2016, we achieved our first round of energy, emissions and water targets three years early. By resetting company-wide goals, we raise stakeholder awareness and make best efforts to drive continuous year-over-year, like-for-like key performance indicator improvement. We have adopted goals with the following specific time frames, metrics and targets below a 2008 baseline:(1)
| (1) | Full 2020 calendar year energy and water data assured by a third party is not yet available. 2019 is the most recent year for which complete energy and water data is available and assured by a third party. |
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| 3› | HUMAN CAPITAL AND SUSTAINABILITY |
› ESG REPORTING
A notable part of our commitment to sustainable development and operations is our commitment to transparent reporting of ESG performance indicators, as we recognize the importance of this information to investors, lenders and others in understanding how BXP assesses sustainability information and evaluates risks and opportunities. We publish an annual sustainability report that is aligned with the Global Reporting Initiative reporting framework, United Nations Sustainable Development Goals and the SASB framework that includes our strategy, key performance indicators, annual like-for-like comparisons, achievements and historical sustainability reports. This report is available on our website at http://www.bxp.com under the heading “Sustainability,” but it is not incorporated by reference in this proxy statement. In addition, we continue to work to further align our reporting with the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures to disclose climate-related financial risks and opportunities.
| | 2021 Proxy Statement | 39 |
| 4› | EXECUTIVE OFFICERS |
Biographies of our executive officers, other than Messrs. Thomas and Linde, are presented below, based on information furnished to Boston Properties by each executive officer. Each executive officer holds office until the regular meeting of the Board of Directors following the next annual meeting of stockholders and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Information for Messrs. Thomas and Linde is included above under “Proposal I: Election of Directors – Nominees for Election”beginning on page 9.
Name | Age | Position | Joined BXP | |||
Raymond A. Ritchey | 70 | Senior Executive Vice President | 1980 | |||
Michael E. LaBelle | 57 | Executive Vice President, Chief Financial Officer and Treasurer | 2000 | |||
Peter D. Johnston | 62 | Executive Vice President, Washington, DC Region | 1987 | |||
Bryan J. Koop | 62 | Executive Vice President, Boston Region | 1999 | |||
Robert E. Pester | 64 | Executive Vice President, San Francisco, Region | 1998 | |||
John F. Powers | 74 | Executive Vice President, New York Region | 2014 | |||
Frank D. Burt | 62 | Senior Vice President, Chief Legal Officer and Secretary | 1986 | |||
Michael R. Walsh | 54 | Senior Vice President, Chief Accounting Officer | 1986 | |||
Raymond A. Ritchey
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| EXECUTIVE OFFICERS |
Michael E. LaBelle
Peter D. Johnston
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• Executive Vice President, Washington, DC Region of Boston Properties since January 2016, with responsibility for all operations, including project development, leasing, construction, property management and administrative activities for our Washington, DC office, with a staff of approximately 181 people
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Bryan J. Koop
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| EXECUTIVE OFFICERS |
Robert E. Pester |
John F. Powers
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• Spent eight years at Swiss Bank Corp (now UBS)
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Frank D. Burt
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| 4› | EXECUTIVE OFFICERS |
Michael R. Walsh |
| | 2021 Proxy Statement | 43 |
| 5› | PRINCIPAL AND MANAGEMENT STOCKHOLDERS |
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The table below shows the amount of common stock of Boston Properties, Inc. and units of partnership interest in our Operating Partnership beneficially owned as of February 15, 20205, 2021 by:
each director;
each of our named executive officers (“NEOs”);
all directors and executive officers of Boston Properties Inc. as a group; and
each person known by Boston Properties to be the beneficial owner of more than 5% of our outstanding common stock.
On February 15, 2020,5, 2021, there were:
154,904,043155,805,445 shares of our common stock outstanding;
16,791,84816,097,110 common units of partnership interest in our Operating Partnership (“common units”) outstanding (other than the common units held by Boston Properties)Properties, Inc.), each of which is redeemable for one share of Boston Properties’Properties, Inc.’s common stock (if Boston Properties elects to issue common stock rather than pay cash upon such redemption);
1,368,4291,587,923 long term incentive units of partnership interest in our Operating Partnership (“LTIP units”) outstanding that were issued as part of our long-term incentive (“LTI”) program, excluding LTIP units issued pursuant to 20182019 Multi-Year Long-Term Incentive Program (“MYLTIP”) awards, 20192020 MYLTIP awards and 20202021 MYLTIP awards, each of which, upon the satisfaction of certain performance and service conditions, is convertible into one common unit; and
61,09073,744 deferred stock units outstanding.
All references in this proxy statement to LTIP units exclude LTIP units issued pursuant to 2018 MYLTIP awards, 2019 MYLTIP awards, 2020 MYLTIP awards and 20202021 MYLTIP awards because the three-year performance periods of these awards had not ended by February 15, 2020.5, 2021. LTIP units issued pursuant to 2018 MYLTIP awards, 2019 MYLTIP awards, 2020 MYLTIP awards and 20202021 MYLTIP awards are collectively referred to herein as “Unearned Performance Awards.” None of our directors or NEOs beneficially ownsowned any preferred units or shares of our preferred stock.
44 | | | |
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| PRINCIPAL AND MANAGEMENT STOCKHOLDERS |
| Common Stock | Common Stock and Units | Common Stock | Common Stock and Units | |||||||||||||||||||||||||||||
| Name and Address of Beneficial Owner* | Number of Shares Beneficially Owned(1) | Percent of Common Stock(2) | Number of Shares and Units Beneficially Owned(1) | Percent of Common Stock and Units(3) | Number of Shares Beneficially Owned(1) | Percent of Common Stock (2) | Number of Shares and Units Beneficially Owned (1) | Percent of Common Stock and Units (3) | ||||||||||||||||||||||||
Directors and Named Executive Officers | Directors and Named Executive Officers |
| Directors and Named Executive Officers |
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Kelly A. Ayotte(4) | 80 | * | * | 2,267 | * | * | 213 | * | * | 4,109 | * | * | ||||||||||||||||||||
Bruce W. Duncan(5) | — | * | * | 4,250 | * | * | 21,000 | * | * | 26,959 | * | * | ||||||||||||||||||||
Karen E. Dykstra(6) | 5,689 | * | * | 6,214 | * | * | 7,420 | * | * | 7,945 | * | * | ||||||||||||||||||||
Carol B. Einiger(7) | 19,207 | * | * | 26,467 | * | * | 29,185 | * | * | 38,154 | * | * | ||||||||||||||||||||
Diane J. Hoskins(8) | 1,140 | * | * | 1,140 | * | * | 4,149 | * | * | 4,149 | * | * | ||||||||||||||||||||
Joel I. Klein(9) | 6,642 | * | * | 12,992 | * | * | 9,081 | * | * | 17,140 | * | * | ||||||||||||||||||||
Douglas T. Linde(10) | 259,860 | * | * | 513,574 | * | * | 259,131 | * | * | 554,901 | * | * | ||||||||||||||||||||
Matthew J. Lustig(11) | 7,173 | * | * | 16,381 | * | * | 8,799 | * | * | 19,716 | * | * | ||||||||||||||||||||
Owen D. Thomas(12) | 63,488 | * | * | 340,708 | * | * | 63,624 | * | * | 402,264 | * | * | ||||||||||||||||||||
David A. Twardock(13) | 5,999 | * | * | 5,999 | * | * | 8,060 | * | * | 8,060 | * | * | ||||||||||||||||||||
William H. Walton, III(14) | 465 | * | * | 1,605 | * | * | 1,610 | * | * | 4,459 | * | * | ||||||||||||||||||||
Raymond A. Ritchey(15) | — | * | * | 338,725 | * | * | — | * | * | 371,015 | * | * | ||||||||||||||||||||
Michael E. LaBelle(16) | 28,479 | * | * | 136,817 | * | * | 11,333 | * | * | 135,195 | * | * | ||||||||||||||||||||
Bryan J. Koop(17) | 15,919 | * | * | 73,182 | * | * | 17,919 | * | * | 87,145 | * | * | ||||||||||||||||||||
All directors and executive officers as a group (19 persons)(18) | 470,507 | * | * | 1,687,979 | * | * | 499,708 | * | * | 1,912,747 | 1.10 | % | ||||||||||||||||||||
5% Holders | ||||||||||||||||||||||||||||||||
The Vanguard Group(19) | 20,235,548 | 13.06 | % | 20,235,548 | 11.69 | % | 22,350,551 | 14.35 | % | 22,350,551 | 12.88 | % | ||||||||||||||||||||
BlackRock, Inc.(20) | 15,053,881 | 9.72 | % | 15,053,881 | 8.70 | % | 16,207,690 | 10.40 | % | 16,207,690 | 9.34 | % | ||||||||||||||||||||
Norges Bank (The Central Bank of Norway)(21) | 13,037,554 | 8.42 | % | 13,037,554 | 7.53 | % | 13,037,554 | 8.37 | % | 13,037,554 | 7.51 | % | ||||||||||||||||||||
State Street Corporation(22) | 9,721,252 | 6.28 | % | 9,721,252 | 5.62 | % | 8,745,065 | 5.61 | % | 8,745,065 | 5.04 | % | ||||||||||||||||||||
TCI Fund Management Limited | 8,362,038 | 5.37 | % | 8,362,038 | 4.82 | % | ||||||||||||||||||||||||||
| * | Unless otherwise indicated, the address is c/o Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103. |
| ** | Less than 1%. |
| (1) | The number of shares of common stock “beneficially owned” by each beneficial owner is determined under rules issued by the SEC regarding the beneficial ownership of securities. This information is not necessarily indicative of beneficial ownership for any other purpose. “Number of Shares Beneficially Owned” includes (a) shares of common stock that may be acquired upon the exercise of options that are exercisable on or within 60 days after February |
| (2) | The total number of shares outstanding used in calculating this percentage assumes (a) the exercise of all options to acquire shares of common stock that are exercisable on or within 60 days after February |
| (3) | The total number of shares outstanding used in calculating this percentage assumes (a) that all common units and LTIP units are presented (assuming conversion in full into common units, if applicable) to the Operating Partnership for redemption and are acquired by Boston Properties for shares of common stock, (b) does not separately include outstanding common units held by Boston Properties, as these common units are already reflected in the |
| | 2021 Proxy Statement | 45 |
| 5› | PRINCIPAL AND MANAGEMENT STOCKHOLDERS |
denominator by the inclusion of all outstanding shares of common stock, (c) the exercise of all options to acquire shares of common stock that are exercisable on or within 60 days after February |
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| (4) | Represents |
| (5) | Represents 21,000 shares of common stock held indirectly through a trust. Also includes, only under the “Number of Shares and Units Beneficially Owned” column, |
| (6) | Includes |
| (7) |
|
| (8) | Represents |
| (9) | Represents |
| (10) | Includes |
| (11) | Represents |
| (12) | Includes |
| (13) | Includes |
| (14) | Includes |
| (15) | Includes, only under the “Number of Shares and Units Beneficially Owned” column, |
| (16) |
|
| (17) | Includes |
| (18) | Includes an aggregate of |
| (19) | Information regarding The Vanguard Group (“Vanguard”) is based solely on a Schedule 13G/A filed by Vanguard with the SEC on February |
| (20) | Information regarding BlackRock, Inc. (“BlackRock”) is based solely on a Schedule 13G/A filed by BlackRock with the SEC on |
| (21) | Information regarding Norges Bank (The Central Bank of Norway) (“Norges Bank”) is based solely on a Schedule 13G/A filed by Norges Bank with the SEC on February |
46 | | | 2021 Proxy Statement |
| 5› | PRINCIPAL AND MANAGEMENT STOCKHOLDERS |
| (22) | Information regarding State Street Corporation (“State Street”) is based solely on a Schedule 13G filed by State Street with the SEC on February |
| (23) | Information regarding TCI Fund Management Limited and Christopher Hohn is based solely on a Schedule 13G filed jointly by TCI Fund Management Limited and Christopher Hohn with the SEC on February 16, 2021. The address for each of TCI Fund Management Limited and Christopher Hohn is 7 Clifford Street, London, W1S 2FT, United Kingdom. The Schedule 13G indicates that each of TCI Fund Management Limited and Christopher Hohn have shared voting and dispositive power with respect to all of the shares of common stock. |
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires the executive officers and directors of Boston Properties, and persons who own more than ten percent of a registered class of Boston Properties’ equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE. Officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish Boston Properties with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports furnished to us and written representations from our officers and directors that no other reports were required during the fiscal year ended December 31, 2020, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than ten percent beneficial owners were timely satisfied, except Ms. Hoskins, who failed to timely file two Form 4 reports, each reflecting a purchase of common stock, which purchases were subsequently reflected on a Form 5.
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| COMPENSATION OF DIRECTORS |
Ournon-employee director compensation is intended to attract, retain and appropriately compensate highly qualified individuals to serve on our Board of Directors. At our 2019 annual meeting of stockholders, our stockholders approved the Boston Properties, Inc.Non-Employee Director Compensation Plan (the “Director Compensation Plan”), effective January 1, 2019. The Director Compensation Plan sets forth the cash and equity compensation that is to be paid to ournon-employee directors in a specific, formulaic manner. The compensation levels established under the Director Compensation Plan have not changed since 2019.
Our directorsDirectors who are also employees of Boston Properties or any of its subsidiaries receive no additional compensation for their services as directors.
COMPONENTS OF DIRECTOR COMPENSATION
Non-employee directors do not receive meeting attendance fees for any meeting of our Board of Directors or a committee thereof that he or she attends.
› CASH COMPENSATION
During 2019,2020, we paid ournon-employee directors the following cash compensation pursuant to the Director Compensation Plan:
| Role | Annual Cash | |||
AllNon-Employee Directors for Board Services | $85,000 | |||
Chairman of the Board(2) | $100,000 | |||
Chair of the Audit Committee(2) | $20,000 | |||
Members of the Audit Committee | $15,000 | |||
Chairs of other standing committees(2)(3) | $15,000 | |||
Members of other standing committees(3) | $10,000 | |||
| (1) | The sum of all cash retainers are payable in quarterly installments in arrears, subject to proration for periods of service less than a full quarter in length. |
| (2) | The retainer payable to the Chairman is in addition to all other retainers to which the Chairman may be entitled and the retainer to each committee chair is in addition to the retainer payable to all members of the committee. |
| (3) | The term “other standing committees” includes the Compensation and NCG |
Under the Director Compensation Plan,non-employee directors do not receive meeting attendance fees for any meeting of our Board of Directors or a committee thereof that he or she attends.Non-employee directors also are reimbursed for reasonable expenses incurred to attend Board of Directors and committee meetings.
› EQUITY COMPENSATION
The Director Compensation Plan provides for grants of equity tonon-employee directors as follows:
Annual Grant. Each continuingnon-employee director is entitled to receive, on the fifth business day after the annual meeting of stockholders, an annual equity award with an aggregate value of $150,000.$150,000.
Initial Grant. Any newnon-employee director that is appointed to our Board of Directors other than at an annual meeting of stockholders would be entitled to receive, on the fifth business day after the appointment, an initial equity award with an aggregate value of $150,000 (prorated based on the number of months from the date the director is first appointed to our Board of Directors to the first anniversary of the Company’s most recently held annual meeting of stockholders).
Annual and initial equity awards are made in the form of shares of restricted common stock, or, if offered by the Board of Directors and elected by such director, LTIP units (or a combination of both).
| | | |
| COMPENSATION OF DIRECTORS |
The actual number of shares of restricted common stock or LTIP units that we grant is determined by dividing the fixed value of the grant by the closing market price of our common stock on the NYSE on the grant date.
Annual and initial grants of LTIP units and restricted common stock will vest 100% on the earlier of (1) the first anniversary of the grant date and (2) the date of the next annual meeting of stockholders.
Accordingly, on May 29, 2019,28, 2020, the last reported sale price of a share of our common stock on the NYSE was $87.76, and we granted each of Mses. Ayotte, Einiger, Dykstra and Hoskins and Messrs. Duncan, Klein, Lustig, Twardock and Walton each received 1,1401,709 LTIP units or shares of restricted common stock.
Non-employee directors may elect, inIn accordance with the Boston Properties, Inc. 2012 Stock Option and Incentive Plan (the “2012 Plan”) and our Amended and Restated Rules and Conditions for Directors’ Deferred Compensation Program (the “Directors’ Deferred Compensation Program”), non-employee directors may elect to defer all cash retainers otherwise payable to such directorthem and to receive his or herthe deferred cash compensation in the form of our common stock or in cash following the director’stheir retirement from our Board of Directors. Each electing director is credited with the number of deferred stock units determined by dividing the amount of the cash compensation deferred during each calendar quarter by the closing market price of our common stock on the NYSE on the last trading day of the quarter. Hypothetical dividends on the deferred stock units are “reinvested” in additional deferred stock units based on the closing market price of the common stock on the cash dividend payment date. Payment
Directors may elect to receive payment of a director’s account may be madeamounts in their accounts either in (x) a lump sum of shares of our common stock equal to the number of deferred stock units in a director’s account or in(y) ten annual installments following the director’s retirement from our Board of Directors. In addition,non-employee directors who elect a deferred payout following their retirement from the Board may elect to change their notional investment from our common stock to a deemed investment in one or more measurement funds. This election to convert may only be made after the director’s service on the Board ends, the conversion date must be at least 180 days after the latest issuance date of deferred stock units credited to the director’s account, the election is irrevocable and the director must convert 100% of his or her deferred stock account if any is converted. Payment of a director’s account that has been converted to measurement funds will be in cash instead of shares of our common stock. The measurement funds available to directors are the same as those available to our executives under our Nonqualified Deferred Compensation Plan. See“Compensation of Executive Officers – Nonqualified Deferred Compensation”Compensation in 2020” on page 72.81.
DIRECTOR STOCK OWNERSHIP GUIDELINES
5x | Annual Cash Retainer for Board Service | |
Our Board believes it is important to align the interests of the directors with those of the stockholders and for directors to hold equity ownership positions in Boston Properties. Accordingly, eachnon-employee director is expected to retain an aggregate number of shares of our common stock, of the Company, deferred stock units (and related dividend equivalent rights) in the Company, and LTIP units and common units in the Operating Partnership, whether vested or not, equal to at least five (5) times the value of the then current annual cash retainer paid tonon-employee directors for their service on the Board, without respect to service on committees of the Board or as lead independent director or Chairman. Eachnon-employee director, until such director complies with the ownership guidelines set forth above, is expected to retain all equity awards granted by the Company or the Operating Partnership (less amounts sufficient to fund any taxes owed relating to such equity awards). The deferred stock units (and related dividend equivalent rights) in the Company and LTIP units and common units in the Operating Partnership shall be valued by reference to the market price of the number of shares of our common stock of the Company issuable upon the settlement or exchange of such units assuming that all conditions necessary for such settlement or exchange have been met. For shares of our common stock of the Company or equity valued by reference to our common stock of the Company for purposes of these ownership guidelines, the market price of theour common stock of the Company used to value such equity shall be the greater of (1) the market price on the date of purchase or grant of such equity or (2) the market price as of the date compliance with these ownership guidelines is measured.
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| COMPENSATION OF DIRECTORS |
The following table summarizes the compensation earned by ournon-employee directors during the year ended December 31, 2019.2020.
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Total($) | Fees Earned or Paid in Cash(1) | Stock Awards(2) | Total | ||||||||||||||||||
Kelly A. Ayotte | 105,000 | 135,000 | 240,000 | $ | 112,174 | $ | 135,000 | $ | 247,174 | |||||||||||||||
Bruce W. Duncan | 139,190 | 135,000 | 274,190 | $ | 121,535 | $ | 135,000 | $ | 256,535 | |||||||||||||||
Karen E. Dykstra | 110,000 | 150,000 | 260,000 | $ | 102,500 | $ | 150,000 | $ | 252,500 | |||||||||||||||
Carol B. Einiger | 100,852 | 135,000 | 235,852 | $ | 95,000 | $ | 135,000 | $ | 230,000 | |||||||||||||||
Dr. Jacob A. Frenkel(3) | 37,060 | — | 37,060 | |||||||||||||||||||||
Diane J. Hoskins | 58,200 | 150,000 | 208,200 | $ | 95,000 | $ | 150,000 | $ | 245,000 | |||||||||||||||
Joel I. Klein | 185,000 | 135,000 | 320,000 | $ | 185,000 | $ | 135,000 | $ | 320,000 | |||||||||||||||
Matthew J. Lustig | 120,000 | 135,000 | 255,000 | $ | 112,500 | $ | 135,000 | $ | 247,500 | |||||||||||||||
Martin Turchin(3) | 39,011 | — | 39,011 | |||||||||||||||||||||
David A. Twardock | 130,000 | 150,000 | 280,000 | $ | 130,000 | $ | 150,000 | $ | 280,000 | |||||||||||||||
William H. Walton, III | 61,264 | 135,000 | 196,264 | $ | 97,649 | $ | 135,000 | $ | 232,649 | |||||||||||||||
| (1) | Mses. Ayotte and Einiger and Messrs. Duncan, Klein, Lustig, |
| Name | Deferred Stock Units Earned During | |||
Kelly A. Ayotte | ||||
Bruce W. Duncan | ||||
Carol B. Einiger | ||||
Joel I. Klein | ||||
Matthew J. Lustig | ||||
| ||||
David A. Twardock | ||||
William H. Walton, III | ||||
| (2) | Represents the total fair value of common stock and LTIP unit awards granted tonon-employee directors in |
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| | | |
| COMPENSATION DISCUSSION AND ANALYSIS | ||
| I. EXECUTIVE OVERVIEW |
COMPENSATION DISCUSSION AND ANALYSIS
This “Compensation Discussion and Analysis,” or “CD&A,” sets forth our philosophy and objectives regarding the compensation of our named executive officers (“NEOs”), including how we determine the elements and amounts of executive compensation. When we use the term “Committee” in this CD&A, we mean the Compensation Committee of the Board of Directors of Boston Properties, Inc. Our NEOs for 20192020 were:
Name | Title | |||||||
Owen D. Thomas | Chief Executive Officer | |||||||
Douglas T. Linde | President | |||||||
Raymond A. Ritchey | ||||||||
Senior Executive Vice President | ||||||||
Michael E. LaBelle | Executive Vice President, Chief Financial Officer | |||||||
Bryan J. Koop | Executive Vice President, Boston Region | |||||||
Our executive compensation program covering our NEOs is designed to attract and retain critical executive talent, motivate behaviors that align with stockholders’ interests and pay for performance. To ensure that pay is competitive with market ranges, we review a benchmarking analysis each year when establishing base salary, annual incentive target opportunities and long-term incentive (“LTI”) target opportunities. More than 90% of our NEOs’ pay is variable and contingent on performance with approximately ›two-thirds POLICY CHANGES TO COMPENSATION PROGRAMpaid in the form of LTI equity compensation. Although target incentive opportunities are set by reference to market, the terms of our incentive plans provide for actual payouts to be above or below target levels depending upon actual performance against pre-determined goals.
During 2019, based on feedback received from investors followingWhen we established the voting resultstarget compensation levels for each component of our NEOs’ compensation in early 2020, our Committee did not foresee the widespread, negative impact that the COVID-19 pandemic would have on our 2019Say-on-Pay resolutionbusiness and our stockholders. The unprecedented issues Boston Properties faced due to the global health crisis created a remarkably challenging year for our NEOs. In addition to the global pandemic, in connection with2020, major social-justice movements and demonstrations highlighted the onboardingracial injustices and economic inequities plaguing our society and called for companies to act. There was also a heightened focus on the importance of environmental and advice received from, Frederic W. Cook & Co., Inc. (“FW Cook”),sustainability issues.
Despite the Committee’s new compensation consultant,sudden and significant impacts of the pandemic on our business, the Committee made significant changes todid not modify the design and structurecomponents or the target compensation levels of our executive compensation program.
Engaged FW Cook as New Consultant(April 2019)Annual Meeting Say-on-Pay Results(May 2019)Investor Outreach(July Oct. 2019)Evaluated Feedback & Advice;Modified & Improved Policies2019Pensation"Increased performance-based equity allocation"Decreased cash compensation2020 CompensationEstablished new The Committee also did not modify the 2020 Annual Incentive Plan,
At our 2019 annual meeting, our stockholders voted on anon-binding, advisory resolution including any of its three categories (FFO, leasing, and business and individual goals) or the specific targets within each category established in early 2020. In deciding not to ratifychange the compensation paid to our NEOs (the“Say-on-Pay resolution”). Althoughprogram, the core philosophyCommittee prioritized strong alignment with Boston Properties’ investors and design of our compensation program remained materially consistent with prior years, Institutional Shareholder Services (“ISS”), a proxy advisory firm, recommended that its clients vote against our 2019Say-on-Pay resolutiontheir experiences during the pandemic. As the year progressed and the percentage of votes cast in favor of theSay-on-Pay resolution decreased from approximately 91% at our 2018 annual meeting to approximately 67% at our 2019 annual meeting. The outcomeseverity of the votepandemic became clearer, the Committee supplemented the business and individual goals with additional goals that guided the NEOs in 2019 was sufficientresponding thoughtfully and responsibly to approve the resolution, but the level of support was less than we expected, less than we received on ourSay-on-Pay resolutionglobal health crisis and important social and environmental issues.
Our NEOs showed exceptional leadership in anyaddressing all of the last five yearssignificant challenges and less than we desire.
In lightissues presented to them in 2020, but with business conditions dominated by the pandemic, they were unable to achieve their FFO and leasing targets under the 2020 Annual Incentive Plan. Our NEOs did not earn any payout under the FFO per share category and only one NEO earned a portion of the voting results, our Board, led bytarget payout for the Chairmanleasing category; for the third category of the Board and the Chair of our Compensation Committee, directly engaged with our larger institutional investors, some of whom voted against theSay-on-Pay resolution, to solicit feedback on our overall executive compensation program and corporate governance and to better understand their individual concerns. After evaluating the feedback received from our investors and the advice of FW Cook, the Committee made policy changes that impacted compensation paid with respect to 2019 and will impact 2020 compensation decisions, including the establishment of the new 2020 Annual Incentive Plan, (see“II.Say-on-Pay Results & Investor Outreach”the business and “VII. New 2020 Annual Incentive Plan”).
individual goals, each NEO exceeded his goals. As discussed in this CD&A, for 2019, total compensation paida result, the Committee awarded final bonus payments to our CEONEOs that ranged from 50% to 75% of target. While these same challenging business conditions had a severe, negative impact on office REITs generally, leading to negative absolute total stockholder returns (“TSR”) across the sector in 2020, the Committee noted that Boston Properties’ TSR for the one-year and three-year periods ending December 31, 2020 placed it at the 80th percentile, or third, among its most directly comparable office peers for both periods. (For a list of these peers, see “– II. Executive Compensation Program – LTI Equity Compensation – 2021 MYLTIP” below.) Although the Committee did not change from 2018 and, forbase its decisions on BXP’s relative TSR rankings, the Committee believes they validated the appropriateness of the final bonus payments to our NEOs as a group, total compensation was essentially flat compared to 2018 (a decrease of (0.7%)).NEOs.
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
| I. EXECUTIVE OVERVIEW |
The Committee remains proud of the extraordinary leadership demonstrated by our NEOs and their efforts in protecting our tenants’ and employees’ health and safety and preserving our properties, financial condition, culture of excellence and ultimately the Boston Properties’ brand in 2020.
›2020 COMPENSATION DECISIONS
As described in detail later in this CD&A, below are the key actions that our Compensation Committee took with respect to our NEOs’ 2020 compensation and the impact of those decisions on 2020 compensation.
2020 COMPENSATION DECISION HIGHLIGHTS |
Ø No change in base salary for any of the NEOs Ø No change to Annual Incentive Plan categories, weightings or goal targets set in January 2020 resulting in bonus payments ranging from 50% to 75% of target › Supplemented Business and Individual goals to add pandemic-related goals Ø No change to any outstanding equity plans or awards, including MYLTIP awards granted in 2020 Ø LTI equity compensation as a percentage of total compensation increased to 81% for our CEO and 74% for all of the NEOs as a group (from 72% and 64%, respectively, in 2019) Ø Granted LTI equity compensation for 2020 performance below target for CEO Ø Below - target payout of 29% for CEO under 2018 MYLTIP (covering Feb. 2018 – Feb. 2020); CEO realized 36% of aggregate amount reported and expensed for that award |
 |
% Variable Pay(1)
|
% Paid in Equity(1)
|
Cash Bonus
|
2018 MYLTIP Payout
| ||||
93% | 74%
| 50%
| 29%
|
 | % Variable Pay(1)
| % Paid in Equity(1)
|
Cash Bonus as % of Target
|
2018 MYLTIP Payout
| ||||
91% | 66%
| 57%
| 29%
|
| (1) | Percentages based on 2020 target total direct compensation. |
| (2) | On February 5, 2021, the three-year performance period for the Company’s 2018 MYLTIP awards ended and the final payout was 29% of target, representing only 36% of the reported pay for each of the CEO and the NEOs as a group. |
›2020 SAY-ON-PAY VOTE & STOCKHOLDER OUTREACH
Say-on-Pay Vote
At our 2020 annual meeting of stockholders, approximately 89% of the votes cast supported our “Say-on-Pay” advisory vote. These results reflect continued investor support for our executive compensation program, including the changes our Committee made in 2019 to our executive compensation program based on investor feedback. The 2020 compensation year is the first year in which the changes made in 2019 were effective, and although COVID-19 unpredictably and unprecedentedly impacted our business and financial results, the Committee determined not to modify any of the key changes from 2019 to our executive compensation. In doing so, our Committee opted to remain within the original framework of the 2020 Annual Incentive Plan when determining 2020 compensation. We believe this demonstrates the Committee’s commitment to the changes it made in response to investor feedback.
52 | | | 2021 Proxy Statement |
| 7› | COMPENSATION DISCUSSION AND ANALYSIS | |
| I. EXECUTIVE OVERVIEW |
›Investor Outreach & Feedback
We are firmly committed to learning investors’ perspectives and believe that proactive engagement is an effective means to solicit and receive valuable feedback. This feedback has helped shape our policies and practices. We conduct outreach throughout the year to ensure that management and the Board understand the issues of importance to our investors and address them appropriately. The Board regularly reviews shareholder feedback, which informs Board discussions on a wide range of topics, including our approaches to corporate governance, ESG, human capital management, diversity, equity and inclusion and executive compensation.
In 2020, we engaged directly with our investors in various forums and through different media (including in-person meetings prior to the pandemic and virtual meetings during the pandemic) as part of our outreach program. In addition to discussions in the ordinary course of business, we:
hosted three investor outreach series to meet with existing investors, potential investors in Europe and one dedicated to ESG matters;
| • | held more than 400 one-on-one meetings with investors at various REIT conferences, including Nareit REITWeek and REITWorld conferences, Citi 2020 Global, Evercore ISI and Bank of America Merrill Lynch 2020 Global Real Estate conferences and the NYSE Real Estate Investor Day; |
held one-on-one 2019 PERFORMANCE HIGHLIGHTSmeetings at four non-REIT conferences: the Morgan Stanley Sustainable Futures conference, the Stifel Cross-Sector conference, BofA Financial Futures conference and the Goldman Sachs Financials conference; and
held meetings at other ESG-focused engagements, including numerous one-on-one meetings with ESG-dedicated funds and an investor webinar focused on our efforts related to ESG matters.
In total, we engaged directly with representatives of more than 200 firms, including approximately 50 U.S. and international institutional investors who own, in the aggregate, approximately 45% of the total number of outstanding shares of BXP common stock and approximately 80% of the total number of outstanding shares of BXP common stock held by actively managed funds.
The Committee determined thattopics discussed at these meetings varied, but generally focused on the NEO’s performance in 2019 was strong, particularly given that it followed very strong performance in 2018. Overall, management met or exceeded the primary corporate goals for 2019 that were established at the beginningimpacts of the year. These goalspandemic and our NEOs’ performance against each are detailedresponses thereto. Among other things, we heard questions about the long-term impact of the hybrid or partial “work-from-home” trend on demand for office space, the impact of new sublease space on overall supply and rental rates and the financial strength of various industries and sectors (including co-working, retail stores, restaurants, theaters and fitness clubs). We also discussed with them the details of our Health Security Plan for repopulating our buildings. The questions expressed in “V. Assessing Performance–2019 Corporate Goals” below.dialogue with our investors were echoed by REIT analysts and even the media, and they helped guide us in establishing the pandemic-related goals.
In 2020, our Investor Relations team was ranked by Institutional Investor Magazine as #1 among Office REITs and #3 among all REITs in three categories: Best IR program, Best IR Team and Best IR Professional. We believe our NEOs’ overall strong performanceInvestor Relations team excelled in 2019leading and coordinating these atypical outreach efforts, and the recognition it received is reflected in the following highlights:well deserved.
2019 Performance Highlights | ||||||
11% | 7.6 Million | 9% | 26% | |||
Y-o-Y Growth in Diluted FFO per Share* | Square Feet Leased | Y-o-Y Increase in Cash Dividend | Total Stockholder Return (“TSR”) for 2019 | |||
6.7% | 5.4% | 8th | 5th | |||
Y-o-Y Growth in Same Property NOI (BXP’s Share)** | Y-o-Y Growth in Same Property NOI – Cash (BXP’s Share)** | Consecutive Green Star Recognition from GRESB | Nareit “Leader in the Light Award” since 2014 | |||
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›HIGHLIGHTS OF 2019 COMPENSATION DECISIONS
Based on the Committee’s assessment of 2019 performance, the Committee awarded total compensation that was unchanged from 2018 for our CEO and was essentially flat for all NEOs as a group. In addition, the Committee (1) reallocated a portion of total compensation from cash compensation to long-term incentive (LTI) equity compensation and (2) increased the amount of performance-based LTI equity compensation as a percentage of total compensation. The following are highlights of 2019 compensation:
2019 Compensation Highlights | ||||||||
CEO: | ||||||||
No Change | 93% | 72% | (11.3)% | 55% | ||||
in total compensation from 2018 | of pay that is variable and not guaranteed | paid in equity* with remaining 28% | decrease in cash bonus from 2018 | of total equity awarded as TSR-based performance equity (increase from 50% for 2018*) | ||||
All NEOs (as a group): | ||||||||
(0.7)% | 90% | 64% | (9.9)% | 52% | ||||
decrease in total compensation | of pay that is variable and not guaranteed | paid in equity* with remaining 36% paid in cash | decrease in cash bonus from 2018 | of total equity awarded asTSR-based performance equity | ||||
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
| I. EXECUTIVE OVERVIEW |
› COMPENSATION GOVERNANCE
The objectives of our executive compensation program are to attract, retain and rewardmotivate executives who have the motivation, experience and skills to lead the Company and continue our long-term track record of profitability, growth and TSR. The following table highlights key features of our executive compensation program that demonstrate the Company’s ongoing commitment to promoting stockholder interests through sound compensation governance practices.
| WHAT WE DO | WHAT WE DON’T DO | |||||
| Variable pay is 93% of our CEO’s total target compensation. The vast majority of total compensation is variable |
| No tax gross-ups.We do not provide any new executive with tax gross-ups with respect to payments made in connection with a change of control. | |||
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| No hedging, pledging or short-sales. We do not allow hedging, pledging or short-sales of Company securities. | ||||
| Two-thirds of target compensation paid in equity. We align our NEOs with our long-term investors by awarding | |||||
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| We do not encourage unnecessary or excessive risk taking as a result of our compensation policies; incentive compensation is not based on a single performance metric and we do not have guaranteed minimum payouts. | ||||||
| Capped bonus and LTI awards. We have caps on annual and long-term incentives. |
| No stock option repricing. We do not allow for repricing of stock options. | |||
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II.SAY-ON-PAY RESULTS & INVESTOR OUTREACH
The following timeline highlights the key events that factored into the Committee’s compensation decisions for 2019 and other policy changes, including the establishment of the new 2020 Annual Incentive Plan:
| Clawback policy. We have a clawback policy that allows for the recovery of previously paid incentive compensation in the event of a financial restatement. |
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›HistoricalSay-on-Pay Results
At the 2019 annual meeting of stockholders, our stockholders voted on theSay-on-Pay resolution to ratify the compensation paid to our NEOs. Although the core philosophy and design of our compensation program remained materially consistent with prior years, ISS recommended that its clients vote against our 2019Say-on-Pay resolution and the percentage of votes cast in favor of theSay-on-Pay resolution decreased from approximately 91% at our 2018 annual meeting to approximately 67% at our 2019 annual meeting.
SAY-ON-PAY RESULTS | ||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||
67% | 91% | 92% | 90% | 86% | ||||
The outcome of the vote in 2019 was sufficient to approve the resolution, but the level of support was less than we expected, less than we received on ourSay-on-Pay resolution in any of the last five years and less than we desire.
›Investor Outreach
Stockholder Engagement Process
In light of the voting results on theSay-on-Pay resolution, our Board directly engaged with our larger institutional investors, some of whom voted against the resolution, to solicit feedback and better understand their individual concerns on our overall executive compensation program and corporate governance. Between July and October 2019, one or more of the Chair of our Compensation Committee (Bruce W. Duncan), the Chairman of the Board (Joel I. Klein), a member of the Compensation
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| |||||||
Committee (Sen. Kelly A. Ayotte) and the Chair of the NCG Committee (Matthew J. Lustig) met in person with ten (10) of our largest institutional investors representing ownership of more than 40% of the outstanding shares of BXP common stock.
Mr. Duncan attended nine of the ten meetings
Messrs. Duncan and Klein also participated in a teleconference with representatives of ISS to better understand the methodology and key policies underlying its negative voting recommendation, and to discuss potential changes to the overall program
Neither our CEO, nor any other NEO, participated in any of these meetings with investors or ISS
Although our Board sought specific feedback on the topics identified as issues of concern in ISS’ 2019 proxy report on the Company, we did not limit the agenda, and the meetings generally allowed for free-flowing discussions. In addition to executive compensation, these discussions included topics such as:
our strategy and growth drivers,
overall business trends,
Board composition, director tenure, director succession and recruitment, and the process used to conduct Board and committee self-evaluations,
diversity and human capital strategy,
ESG and sustainability, and
corporate governance policies, generally.
All of the feedback received was shared with the full Board of Directors.
Feedback from Stockholders
The general feedback our Board received included support for our strategy, confidence in the strength of our management team and Board, and our demonstrated leadership among REITs in ESG and sustainability. Investors also openly shared their policies and perspectives with respect to our compensation program. Overall, they conveyed that our CEO’s pay and performance were reasonably aligned in 2018 and that our benchmarking peer group included appropriate and high-quality REITs. While acknowledging the limitations inherent in using relative TSR as the performance metric for our MYLTIP program (which is the performance-based component of LTI equity awards) and being open to the use of one or more operational metrics, investors generally support the MYLTIP program as currently designed.
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While the general consensus was positive, our investors also offered some specific suggestions to improve our program. The Committee evaluated the feedback received and responded as summarized below.
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
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III. 2019II. EXECUTIVE COMPENSATION DECISIONS
Based on the Committee’s assessment of 2019 performance, investor feedback and the advice of FW Cook, the Committee awarded total compensation that was unchanged from 2018 for our CEO and essentially flat for all NEOs as a group. In addition, the Committee (1) reallocated a portion of total compensation from cash compensation to LTI equity compensation and (2) increased the amount of performance-based LTI equity compensation as a percentage of total compensation. When determining specific individual compensation amounts, the Committee considered the following factors:
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individual contributions to overall results and development opportunities,
results of a compensation benchmarking analysis among peers with respect to 2018 compensation, and
anticipated market compensation increases and trends.
The following table presents the total direct compensation of our NEOs, inclusive of salary, bonus and LTI equity awards, for 2019 compared to 2018. LTI equity includes MYLTIP awards whose ultimate value will be determined over a three-year period from the grant date based on our relative TSR. To link annual awards of long-term equity incentive compensation to annual performance, the Committee typically makes equity awards for a particular year in late January or early February of the following year. SEC rules for equity awards (unlike for cash bonuses) require that they be presented as compensation for the year in which the awards were actually granted, and therefore equity awards shown in the Summary Compensation Table presented under “Compensation of Executive Officers” on page 68 lag one year (i.e., awards made in January 2020 to reward performance in 2019 are not reflected in this year’s Summary Compensation Table).
| Salary(1) | Cash Bonus | |||||||||||||||||||||||
| Executive | 2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||||
Owen D. Thomas | $ | 900,000 | $ | 875,000 | 2.9% | $ | 2,550,000 | $ | 2,875,000 | (11.3)% | ||||||||||||||
Douglas T. Linde | $ | 750,000 | $ | 725,000 | 3.4% | $ | 2,095,000 | $ | 2,180,000 | (3.9)% | ||||||||||||||
Raymond A. Ritchey | $ | 740,000 | $ | 720,000 | 2.8% | $ | 1,820,000 | $ | 2,080,000 | (12.5)% | ||||||||||||||
Michael E. LaBelle | $ | 510,000 | $ | 500,000 | 2.0% | $ | 1,295,000 | $ | 1,450,000 | (10.7)% | ||||||||||||||
Bryan J. Koop | $ | 410,000 | $ | 400,000 | 2.5% | $ | 1,370,000 | $ | 1,550,000 | (11.6)% | ||||||||||||||
Total | $ | 3,310,000 | $ | 3,220,000 | 2.8% | $ | 9,130,000 | $ | 10,135,000 | (9.9)% | ||||||||||||||
| LTI Equity Awards | Total Compensation | |||||||||||||||||||||||
| Executive | 2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||||
Owen D. Thomas | $ | 9,050,000 | $ | 8,750,000 | 3.4% | $ | 12,500,000 | $ | 12,500,000 | 0% | ||||||||||||||
Douglas T. Linde | $ | 5,655,000 | $ | 5,395,000 | 4.8% | $ | 8,500,000 | $ | 8,300,000 | 2.4% | ||||||||||||||
Raymond A. Ritchey | $ | 4,240,000 | $ | 4,200,000 | 1.0% | $ | 6,800,000 | $ | 7,000,000 | (2.9)% | ||||||||||||||
Michael E. LaBelle | $ | 1,945,000 | $ | 1,950,000 | (0.3)% | $ | 3,750,000 | $ | 3,900,000 | (3.8)% | ||||||||||||||
Bryan J. Koop | $ | 1,370,000 | $ | 1,300,000 | 5.4% | $ | 3,150,000 | $ | 3,250,000 | (3.1)% | ||||||||||||||
Total | $ | 22,260,000 | $ | 21,595,000 | 3.1% | $ | 34,700,000 | $ | 34,950,000 | (0.7)% | ||||||||||||||
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PROGRAM
› 2019 PAY MIX
For each NEO, the Committee approved the appropriate level and mix of pay based on his role, responsibilities and performance. The Committee believes that our executive compensation is well-aligned with our stockholders’ interests and in line with the Benchmarking Peer Group (see “VI. Determining Executive Compensation – Benchmarking Peer Group & Compensation Advisor’s Role”). Variable pay, consisting of annual cash bonuses and LTI equity awards, constitutes the vast majority of our executive compensation. For our CEO and NEOs as a group, variable pay for 2019 was 93% and 90%, respectively. This emphasis on variable pay allows the Committee to reward good performance and penalize poor performance.
The following present the allocations of total pay for 2019 among each component of compensation for (1) our CEO and (2) all NEOs as a group:
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›ALLOCATION OF LTI AWARDS
The Committee approved LTI equity awards to NEOs for 2019 performance as a mix of performance-based MYLTIP awards and time-based, full-value equity awards. The MYLTIP awards were denominated in a fixed number of LTIP units as of February 4, 2020, the date of initial grant. After evaluating the feedback received from investors, the Committee increased the amount of performance-based equity as a percentage of total LTI equity for our CEO so that his allocation was 55% performance-based and 45% time-based. For the other NEOs, the Committee maintained the allocation at 50% performance-based and 50% time-based, which is generally accepted by our investors. In total for 2019, performance-based equity awards for all NEOs represent a greater percentage of total direct compensation than they did for 2018, and the total amount of LTI equity as a percentage of total compensation for all NEOs as a group also increased to 64%.
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The following table sets forth the dollar values of the performance-based and time-based equity awards granted to NEOs in 2020 for performance in 2019:
| Executive | Total LTI Equity Awards | Total LTI Equity Awards as % of Total Compensation | Performance- Equity Awards | % of Total Equity Awards | Time-Based LTI Equity Awards | % of Total Equity Awards | ||||||||||||||||||
Owen D. Thomas | $ 9,050,000 | 72% | $ 4,977,500 | 55% | $ 4,072,500 | 45% | ||||||||||||||||||
Douglas T. Linde | $ 5,655,000 | 67% | $ 2,827,500 | 50% | $ 2,827,500 | 50% | ||||||||||||||||||
Raymond A. Ritchey | $ 4,240,000 | 62% | $ 2,120,000 | 50% | $ 2,120,000 | 50% | ||||||||||||||||||
Michael E. LaBelle | $ 1,945,000 | 52% | $ 972,500 | 50% | $ 972,500 | 50% | ||||||||||||||||||
Bryan J. Koop | $ 1,370,000 | 43% | $ 685,000 | 50% | $ 685,000 | 50% | ||||||||||||||||||
Total | $22,260,000 | 64% | $11,582,500 | $10,677,500 | ||||||||||||||||||||
The performance-based portion of LTI equity awards for 2019 performance was granted in the form of 2020 MYLTIP awards, which have a three-year performance period (February 4, 2020 to February 3, 2023), and an additional year of time-based vesting. The dollar values of the awards were converted into a fixed number of MYLTIP units on the initial grant date, and the number of units initially granted equals 200% of the target number of units, and it is the maximum number of units that may be earned. Following completion of the three-year performance period, the Committee will determine the final payout based on computations from our appraisal expert for this plan, AON plc, and if the number of units initially awarded exceeds the number of units ultimately earned, then the excess will be forfeited. Therefore, while the award of 2020 MYLTIP units is in recognition for performance in 2019, award recipients must continue to perform over the three-year term of the 2020 MYLTIP program in order to earn and vest in any of the MYLTIP units and must generally remain employed for the four years to earn the full amount. The aggregate target number of units for NEOs is approximately 85,663 LTIP units and an aggregate payout opportunity ranging from zero to a maximum of 171,326 LTIP units. The baseline share price for 2020 MYLTIP awards was $143.52 (the average closing price per share of our common stock on the NYSE for the five trading days prior to and including February 4, 2020).
The 2020 MYLTIP awards are generally amortized into earnings over the four-year plan period under the graded vesting method, unless accelerated in certain circumstances such as a “Qualified Retirement” as defined under “– Potential Payments Upon Termination or Change in Control – Retirement Eligibility Provisions for LTI Equity Awards.” Under the Financial Accounting Standards Board’s Accounting Standards Codification 718 “Compensation – Stock Compensation” (“ASC Topic 718”), we expect that 2020 MYLTIP awards to NEOs will have an aggregate value of approximately $11.6 million.
The time-based LTI equity awards granted to the NEOs for 2019 performance consisted of LTIP units or restricted shares of our common stock that generally vest ratably over a four-year period (25% per year), subject to acceleration in certain circumstances including attaining retirement eligibility. See “– Potential Payments Upon Termination or Change in Control – Retirement Eligibility Provisions for LTI Equity Awards.” Pursuant to our Equity Award Grant Policy discussed below, time-based LTI equity awards were issued as of the close of business on January 31, 2020 based on the closing price per share of our common stock on the NYSE on that date of $143.35.
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IV. COMPONENTS OF EXECUTIVE COMPENSATION
›OUR EXECUTIVE COMPENSATION PROGRAM
| COMPONENT | WHY WE PAY IT | |
Base Salary | Provide a fixed, competitive level of cash compensation that reflects the NEO’s leadership role and the relative market rate for the executive’s experience and responsibilities
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Annual Cash Incentive | Reward NEOs for achievement of annual financial and strategic goals that drive stockholder value, thereby aligning our NEOs’ interests with those of our stockholders
•
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Performance-Based Equity (MYLTIP) | Align the interests of our NEOs with those of our stockholders
Motivate, retain and reward NEOs to achieve multi-year strategic business objectives that drive both relative and absolute TSRout-performance
• Create a direct link between executive pay and • Enhance executive officer retention with 100% vesting after completion of three-year performance period (i.e., “cliff vesting”), with one additional year of post-vesting transfer restrictions
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Time-Based Equity | Align the interests of our NEOs with those of our stockholders
Motivate, retain and reward NEOs to achieve multi-year strategic business objectives that drive absolute TSRout-performance • Create a direct link between executive pay and absolute TSR performance
• Enhance executive officer retention with time-based, multi-year vesting schedules for equity incentive awards
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› 2020 ANNUAL TARGET COMPENSATION
In the first quarter of each year, the Committee establishes annual target total compensation for each NEO by considering competitive benchmarking data, executive position and level of responsibility and, for executives other than our CEO, our CEO’s recommendation. Targets are reviewed annually and adjusted if determined to be appropriate by the Committee. The Committee may also adjust target compensation to reflect changes in or new responsibilities.
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| 7› | COMPENSATION DISCUSSION AND ANALYSIS | |
| II. EXECUTIVE COMPENSATION PROGRAM |
Variable pay, consisting of annual cash bonuses and LTI equity awards, constitutes the vast majority of our executive compensation. We believe that having a significant portion of our executives’ compensation at risk more closely aligns their interests with our long-term interests and those of our stockholders. For our CEO and NEOs as a group, variable pay for 2020 was 92.8% and 90.5%, respectively, of target total compensation. This emphasis on variable pay allows the Committee to reward good performance and penalize poor performance. For 2020, the targeted mix of total direct compensation was as follows:
| CEO TARGET PAY MIX | ALL NEOs TARGET PAY MIX | |
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The total target direct compensation for each NEO was as follows:
| Name | Salary | Target Bonus | Target LTI Equity | Total Target Compensation | ||||||||||||
Owen D. Thomas | $ 900,000 | $ 2,350,000 | $ 9,250,000 | $ 12,500,000 | ||||||||||||
Douglas T. Linde | $ 750,000 | $ 1,900,000 | $ 5,850,000 | $ 8,500,000 | ||||||||||||
Raymond A. Ritchey | $ 740,000 | $ 1,650,000 | $ 4,410,000 | $ 6,800,000 | ||||||||||||
Michael E. LaBelle | $ 510,000 | $ 1,250,000 | $ 1,990,000 | $ 3,750,000 | ||||||||||||
Bryan J. Koop | $ 410,000 | $ 1,250,000 | $ 1,490,000 | $ 3,150,000 | ||||||||||||
›CASH COMPENSATION
Base Salary
The base salary for each NEO is determined by the Committee and is intended to provide a fixed level of compensation that reflects the NEO’s leadership role and the relative market rate for similarly-situatedsimilarly situated executives in the NEO’s position. The Committee determines whether to adjust base salaries based on a range of factors, including benchmark versus peers and changes in individual duties and responsibilities. Any increases to base salaries are generally determined in January of the compensation year and become effective in February of the compensation year.
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| II. EXECUTIVE COMPENSATION PROGRAM |
The Committee did not increase the base salary of any NEO for 2021 and has not changed the base salary for any NEO since 2019.
Name
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2020 Salary
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2019 Salary
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% Change
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Owen D. Thomas | $900,000 | $900,000 | — | |||||
Douglas T. Linde | $750,000 | $750,000 | — | |||||
Raymond A. Ritchey | $740,000 | $740,000 | — | |||||
Michael E. LaBelle | $510,000 | $510,000 | — | |||||
Bryan J. Koop | $410,000 | $410,000 | — | |||||
Total | $3,310,000 | $3,310,000 | — | |||||
2020 Annual Incentive Plan
Program Design and Structure
In January 2020, based largely on feedback received from our investors in 2019, base salaries represented an increasethe Committee established the 2020 Annual Incentive Plan under which annual cash bonuses payable to our executive officers are directly linked to the achievement of 2.8% over 2018specific, pre-established goals. Under the plan, each NEO has a target bonus opportunity expressed in a fixed dollar amount. Actual earned amounts may range from zero (0) to 150% of target, depending on performance versus the annual goals in each category, with payout interpolated for all NEOsperformance between levels.
| Performance Level for Each Category | Payout (% of Target) | |
| >= Maximum | 150% | |
| Target | 100% | |
| Threshold | 50% | |
| <Threshold | 0 |
We use a “scorecard” approach for our bonus determinations. This approach is intended to reflect a comprehensive analysis by the Committee of corporate, regional and individual performance based on performance in three categories: (1) FFO per Share, (2) Leasing and (3) Business and Individual goals.
FFO per Share. FFO per share was selected as a group. key financial metric for the 2020 Annual Incentive Plan because it is the earnings metric most commonly used by investors and analysts to evaluate our performance on an absolute basis and relative to other REITs. As such, the Committee considers this to be the corporate component of the scorecard as it is an objective, company-wide performance metric that drives near-term business strategies. The FFO per share goal is subject to adjustment for acquisitions, dispositions, financings, lease terminations and similar transactions and circumstances.
Leasing. The Committee established specific leasing goals, starting at the property level, rolling up by region and then aggregating to corporate leasing goals, as the second component. The leasing goals were then categorized as short-term leasing and total leasing goals to encourage the executives to focus on current addressable vacancies and near-term roll-over, and to avoid scenarios in which leasing goals are met solely due to unexpected early renewals. The Committee selected this category because it links objective measures of corporate, regional and individual performance by formula to the amounts paid.
Business & Individual Goals. Business goals include milestone-oriented objectives related to management of capital expenditures and G&A expense, acquisitions, dispositions, delivering development and construction projects on time and budget and achieving the desired returns on cost, joint ventures, securing entitlements, and/or launching new developments. Business goals are based on regional priorities for the regional EVPs. For the CEO and President, business goals include a relevant subset of those regional goals, as well as goals related to executive management of the Company. For the CFO, business goals relate to balance sheet management, capital raising, and other finance department priorities.
Individual goals include leadership and professional development goals, diversity initiatives, succession planning and other ESG priorities for each executive. The Compensation Committee considers absolute and/or relative performance outcomes against Company and Business and Individual goals and objectives, as well as the context in which they were achieved (including, e.g., degree of difficulty, importance to BXP, headwinds and tailwinds during the year and other similar factors).
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| II. EXECUTIVE COMPENSATION PROGRAM |
For the 2020 compensation year, the Committee didset the weighting of each category equally for all NEOs except for Mr. LaBelle. The following table summarizes the performance measurement categories and weightings under the Annual Incentive Plan for 2020.
| Weightings | ||||||||||||||||||||
| Annual Incentive Performance Measures | Thomas | Linde | LaBelle(1) | Ritchey | Koop | |||||||||||||||
| FFO per Share | 33.3 | % | 33.3 | % | 33.3 | % | 33.3 | % | 33.3 | % | ||||||||||
| Leasing (Short-Term and Total) | ||||||||||||||||||||
Overall BXP | 33.3 | % | 33.3 | % | 16.7 | % | ||||||||||||||
DC Region(2) | 24.8 | % | ||||||||||||||||||
LA Region(2) | 8.5 | % | ||||||||||||||||||
Boston Region | 33.3 | % | ||||||||||||||||||
| Business & Individual Goals | ||||||||||||||||||||
Overall BXP | 33.3 | % | 33.3 | % | ||||||||||||||||
Finance | 50.0 | % | ||||||||||||||||||
DC Region + LA Region | 33.3 | % | ||||||||||||||||||
Boston Region | 33.3 | % | ||||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
| (1) | For all NEOs except Mr. LaBelle, the weighting of each category is equal (33.3% for each of FFO per Share, Leasing and Business and Individual goals). For Mr. LaBelle, the weightings are 33.3% for FFO per share, 16.7% for leasing and 50% for business & individual goals. In determining Mr. LaBelle’s weightings for each category, the Committee considered, among other things, his reduced role in leasing relative to Messrs. Thomas and Linde and his direct role in and responsibility for the Finance Department of the Company. |
| (2) | Mr. Ritchey’s leasing goal (weighted 33.3% in total) is evenly split between short-term and total leasing (16.7% each) and further bifurcated between the Washington, DC and Los Angeles regions based on the square footage of each region’s portfolio as follows: short-term: 70% Washington, DC / 30% Los Angeles; total: 79% Washington, DC / 21% Los Angeles. |
NEOs’ Response to the World Health Crisis and Important Social and Environmental Issues
At the time we filed our 2020 proxy statement, the COVID-19 pandemic was in its infancy and, in light of the rapidly changing business environment and fluid nature of the potential implications on the Company’s business, the Committee reserved its right to re-evaluate the categories and targets, as appropriate, in light of the pandemic’s actual impact on Boston Properties. Soon thereafter, Americans witnessed the social movements that spotlighted racial and social injustices that plague society that called for action, and we experienced a much-heightened awareness of the importance of environmental and sustainability issues.
Despite the sudden and significant impact of the global pandemic on our business, the Committee prioritized maintaining a strong alignment with our shareholders’ interests and decided not increase base salariesto modify any aspects of the executive compensation program despite the unexpected and unprecedented economic and social conditions. In deciding not to change the 2020 Annual Incentive Plan, the Committee considered (1) the importance of demonstrating its commitment to the more formulaic bonus plan in its first year, (2) whether doing so would disrupt the alignment of interests between our NEOs and investors and (3) whether choosing not to do so would negatively impact retention and incentives. As a result, our NEOs earned no payout under the FFO per share category and only one NEO earned a portion of the potential payout for the NEOs.leasing category and it was below target.
For the third performance category under the 2020 Annual Incentive Program
The annual incentive program is designed to provide NEOs withPlan, the Committee established Business and Individual goals for each NEO in January 2020. This category represented 33.3% of the potential payout opportunity to earn cash bonuses basedfor each NEO other than Mr. LaBelle (for whom it represented 50%). As it became clear that the pandemic was causing severe strain on the achievement ofpre-established corporateeconomy, our tenants and individual goals. For 2019our business, the Board shifted its priorities for management and prior years, rather than rely on a strict formulaic framework, the Committee combinedappended to each NEO’s Business and Individual goals a quantitativeset of pandemic-related goals intended to assess and reward the NEOs for their success in meeting those priorities.
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| II. EXECUTIVE COMPENSATION PROGRAM |
In determining that our NEOs exceeded their pandemic-related goals, the Committee noted the following achievements:
although physical occupancy was low, all office properties throughout the Boston Properties portfolio remained open for tenants,
in early April 2020, we formed a qualitative assessment againstHealth Security Task Force comprised of Boston Properties’ employees, as well as outside experts in health care, industrial hygiene, cleaning and security,
in May 2020, the goals to:Heath Security Task Force issued a Heath Security Plan for repopulating the workplace, which provided a framework for health security at BXP’s office properties, including enhanced cleaning and disinfection, air and water quality protocols, physical distancing, screening and personal protective equipment (PPE) requirements,
following the release of the Health Security Plan in early May, our NEOs and management teams conducted town halls and one-on-one sessions with tenants across BXP’s regions to support their office repopulation processes, which slowly began in June in Boston,
our NEOs demonstrated remarkable discipline and flexibility in maximizing rent collections while concurrently addressing tenants’ needs:
for the month of April 2020, the first full month of COVID-19 restrictions, we collected approximately 97% of the total rent due April 1 from office tenants, and collections among all tenants were approximately 93% |
| › | by the fourth quarter of 2020, collections from office tenants had improved to a strong 99.7%, and collections from all tenants were 99.1%, |
when appropriate, our NEOs worked with our tenants (primarily in retail businesses) that were in financial distress to modify lease agreements and otherwise provide relief in light of the economic downturn. During 2020, these lease modification agreements covered approximately 4.7 million square feet
| › | although some of the lease modifications were deferrals under which we expect the tenant will pay us in full primarily in 2021, the majority of the lease modifications involved extending the lease term (in some cases for a year or more) or providing for a period of time where the tenant will only pay percentage rent |
| › | as a result of the lease modification agreements that extended the lease terms, we expect to see an increase in the cash rent we will receive in the future, |
in elevating our focus on diversity and equity, we constituted our Diversity and Inclusion Committee in early 2020. Our NEOs demonstrated strong commitment to fostering its success and supported the D&I Committee in promoting diversity both within BXP and in the communities in which we operate
| › | the D&I Committee set its focus on (1) recruitment and development, (2) Company policies and (3) community outreach |
| › | the D&I Committee has met and expects to meet regularly with our full Board of Directors, and |
| › | in early May 2020, we issued $1.25 billion of 3.250% senior unsecured notes that mature in 2031, and we used the net proceeds to repay amounts borrowed under our revolving line of credit and to bolster our liquidity. |
Although it was not a factor in assessing our NEOs’ performance against their pandemic-related goals, the Committee noted that Boston Properties and its NEOs were ranked #1 among all office REITs by Institutional Investors Magazine in 2020 in the category “Crisis Management amid COVID-19.” They also ranked #1 in the following categories:
Overall All-American Executive Team,
Best CEO and
Best CFO.
Despite the severe, negative impacts of the pandemic on office REITs generally, which led to negative absolute total stockholder returns across the sector in 2020, the Committee also noted that Boston Properties’ TSR for the one-year and three-year periods ending December 31, 2020 placed it at the 80th percentile, or third, among its most directly comparable office peers for both periods. (For a list of these peers, see “– LTI Equity Compensation – 2021 MYLTIP” below.) Although the Committee did not base its decisions on BXP’s relative TSR rankings, the Committee believes they validated the appropriateness of the final bonus payments to our NEOs.
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| II. EXECUTIVE COMPENSATION PROGRAM |
Set forth in the following tables is a summary of each NEO’s performance measures and weightings, with specific threshold, targets and maximum goals for each of the FFO per share and leasing performance measures, and the principal business, individual and pandemic-related goals, along with each NEO’s performance results for 2020.
Owen D. Thomas | ||||||||||||||||
Performance Category | Weighting | Payout (% of target) | Threshold 50% | Target 100% | Maximum 150% | 2020 Results | Category Payout % | |||||||||
FFO per Share |  | $7.35 | $7.55 | $7.75 | $6.29(1) | 0% | ||||||||||
Leasing (in million square feet) |
| Short-term | 3.2 | 3.6 | 4.4 | 1.7 | 0% | |||||||||
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| Total
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| 5.0
| 5.6
| 6.9
| 3.7
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Business & Individual Goals |
| | The Committee assessed Mr. Thomas’ performance against his | 150.0% | ||||||||||||
Business goals included: • Execute capital raising strategy to fund future investments • Manage G&A, capital expenditures and credit ratings • Complete identified transactions • Deliver identified development projects in-service | Individual goals included: • Make contributions to increase workforce diversity • Increase employee engagement • Oversee and manage employees, including the execution of succession plans | Pandemic-related goals included: • Demonstrate strong leadership during pandemic and demands of remote work • Ensure health security of BXP employees and customers • Maximize rent collections • Optimize leasing outcomes • Ensure active development projects remain on schedule and on budget | ||
TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 50.0% | ||||
| (1) | For all NEOs, represents Diluted FFO per share. For disclosures required by Regulation G, refer to pages 101 through 104 of our |
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
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Douglas T. Linde | ||||||||||||||||
Performance Category | Weighting | Payout (% of target) | Threshold 50% | Target 100% | Maximum 150% | 2020 Results | Category Payout % | |||||||||
FFO per Share | | $7.35 | $7.55 | $7.75 | $6.29 | 0% | ||||||||||
Leasing (in million square feet) |
| Short-term | 3.2 | 3.6 | 4.4 | 1.7 | 0% | |||||||||
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| Total
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| 5.0
| 5.6
| 6.9
| 3.7
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Business & Individual Goals |
| | The Committee assessed Mr. Linde’s performance against his | 150.0% | ||||||||||||
Business goals included: • Execute capital raising strategy to fund future investments • Manage G&A, capital expenditures and credit ratings • Complete identified transactions • Deliver identified development projects in-service | Individual goals included: • Make contributions to increase workforce diversity • Manage Information Technology department’s execution of target objectives • Increase employee engagement | Pandemic-related goals included: • Demonstrate strong leadership during the pandemic and demands of remote work • Ensure health security of BXP employees and customers • Maximize rent collections • Optimize leasing outcomes • Ensure active development projects remain on schedule and on budget | ||
TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 50.0% | ||||
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| II. EXECUTIVE COMPENSATION PROGRAM |
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Raymond A. Ritchey | ||||||||||||||||
Performance Category | Weighting | Payout (% of target) | Threshold 50% | Target 100% | Maximum 150% | 2020 Results | Category Payout % | |||||||||
FFO per Share |
| $7.35 | $7.55 | $7.75 | $6.29 | 0% | ||||||||||
Leasing (in million square feet) |
| Short-term | * | |||||||||||||
| DC: | 1.1 | 1.3 | 1.6 | 1.2 | DC: 65.6% | |||||||||||
| LA: | 0.5 | 0.6 | 0.7 | 0.1 | LA: 0% | |||||||||||
| Total | * | |||||||||||||||
| DC: | 1.8 | 2.0 | 2.5 | 1.9 | DC: 70.1% | |||||||||||
| LA: | 0.5 | 0.6 | 0.7 | 0.1 | LA: 0% | |||||||||||
* For more detail on the weightings for Mr. Ritchey’s leasing goal, see page 58.
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Business & Individual Goals |
| | The Committee assessed Mr. Ritchey’s performance against | 150.0% | ||||||||||||
Business goals included: • Assess new development and business opportunities in the DC and LA regions • Complete identified transactions | Individual goals included: • Make contributions to increase workforce diversity • Expand focus on strategy and building and maintaining relationships • Maintain mentoring and leadership roles | Pandemic-related goals included: • Demonstrate strong leadership during the pandemic and demands of remote work • Ensure health security of BXP employees and customers • Maximize rent collections • Optimize leasing outcomes • Ensure active development projects remain on schedule and on budget | ||
TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 66.9% | ||||
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Michael E. LaBelle | ||||||||||||||||
Performance Category | Weighting | Payout (% of target) | Threshold 50% | Target 100% | Maximum 150% | 2020 Results | Category Payout % | |||||||||
FFO per Share |
| $7.35 | $7.55 | $7.75 | $6.29 | 0% | ||||||||||
Leasing* (in million square feet) |
| Short-term | 3.2 | 3.6 | 4.4 | 1.7 | 0% | |||||||||
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| Total
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| 5.0
| 5.6
| 6.9
| 3.7
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* Mr. LaBelle’s leasing goal (weighted 16.7% in total) is evenly split between short-term and total leasing (8.35% each). | ||||||||||||||||
Business & Individual Goals |
| | The Committee assessed Mr. LaBelle’s performance against | 150.0% | ||||||||||||
Business goals included: • Execute capital raising strategy to fund future investments • Manage credit ratings • Develop strategy for 2021 debt maturities • Complete identified transactions • Enhance ESG disclosures in SEC | Individual goals included: • Make contributions to increase workforce diversity • Manage and maintain effectiveness and productivity of Finance Department • Advance employee succession plans through mentoring | Pandemic-related goals included: • Demonstrate strong leadership during the pandemic and demands of remote work • Ensure health security of BXP employees and customers • Manage operating expenses tightly • Support tenant collection and pandemic-related restructuring activities from financial perspective | ||
TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 75.0% | ||||
| | 2021 Proxy Statement | 63 |
| 7› | COMPENSATION DISCUSSION AND ANALYSIS | |
| II. EXECUTIVE COMPENSATION PROGRAM |
Bryan J. Koop | ||||||||||||||||
Performance Category | Weighting | Payout (% of target) | Threshold 50% | Target 100% | Maximum 150% | 2020 Results | Category Payout % | |||||||||
FFO per Share | | $7.35 | $7.55 | $7.75 | $6.29 | 0% | ||||||||||
Leasing (in million square feet) |
| Short-term | 0.5 | 0.6 | 0.8 | 0.08 | 0% | |||||||||
| Total | 1.1 | 1.3 | 1.5 | 0.8 | ||||||||||||
Business & Individual Goals |
| The Committee assessed Mr. Koop’s performance against his | 150.0% | |||||||||||||
Business goals included: • Deliver identified projects in the Boston region • Maintain schedule and budget for development projects in Boston region | Individual goals included: • Make contributions to increase workforce diversity • Exhibit strong management skills and refine new business initiatives within region • Provide consultation support to other regions related to retail activities | Pandemic-related goals included: • Demonstrate strong leadership during the COVID-19 pandemic and demands of remote work • Ensure health security of BXP employees and customers • Maximize rent collections • Optimize leasing outcomes • Ensure active development projects remain on schedule and on budget | ||
TOTAL ANNUAL INCENTIVE PAYOUT AS A % OF TARGET = 50.0% | ||||
Based on the appropriate balance between short-term objectives and long-term strategies; and
properly emphasize quantitative results while also considering qualitative factors when assessing management’s performance.
For 2020,foregoing, the Committee established a newawarded annual cash bonuses to the NEOs for 2020 as follows:
| Name | 2020 Actual Annual Incentive | 2020 Target Annual Incentive | 2020 Actual as % of Target | |||
Owen D. Thomas | $1,175,000 | $2,350,000 | 50.0% | |||
Douglas T. Linde | $950,000 | $1,900,000 | 50.0% | |||
Raymond A. Ritchey | $1,103,850 | $1,650,000 | 66.9% | |||
Michael E. LaBelle | $937,500 | $1,250,000 | 75.0% | |||
Bryan J. Koop | $625,000 | $1,250,000 | 50.0% |
64 | | | 2021 Proxy Statement |
| 7› | COMPENSATION DISCUSSION AND ANALYSIS | |
| II. EXECUTIVE COMPENSATION PROGRAM |
Changes for 2021 Annual Incentive Plan
As part of the Committee’s annual executive compensation process, the Committee reviewed and reassessed the annual cash incentive plan under which annual cash bonuses payable to our executive officers will have a direct linkprogram, including its structure. Based on that review, the Committee concluded that the categories were appropriate, but that market practice among peers was that more weight should be given to the achievementBusiness and Individual Goals. For 2021, the Committee changed the weighting of specific,pre-established goals. (See“—VII. New 2020the categories under the Annual Incentive Plan”)Plan for Mr. LaBelle so that it is the same for all five NEOs, and changed the weightings of the categories so they will be FFO per Share – 30%, Leasing – 30% and Business and Individual goals – 40%.
› LTI EQUITY COMPENSATION
The Committee’s assessmentequity component of management’s performance against operational, capital and management goals is a material factor in determining the annualour NEOs’ compensation awards. What our NEOs actually earn is driven to a significant extent by our TSR through LTI equity awards consisting of a mix of time-based and performance-based LTIP unit awards.
Time-Based Equity Awards
Time-basedThe time-based LTI equity awards granted to the NEOs for 2020 performance consisted of LTIP units or restricted shares of our common stock that generally vest ratably over a four-year period (25% per year), subject to acceleration in certain circumstances (e.g.,, retirement, death or disability, and certain qualifying terminations following a change in control). See “– Potential Payments Upon Termination or retirement), and are intended to align the interests of management with those of stockholders because the ultimate value of the award is directly tied to the value of our stock over the vesting period.Change in Control – Retirement Eligibility Provisions for LTI Equity Awards.”
Performance-Based Equity Awards – Multi-Year Long-Term Incentive Program (MYLTIP)
The performance-based portion of LTI equity awards are granted under our Multi-Year Long-Term Incentive Program, or “MYLTIP.” MYLTIPs are awarded to provide incentives for long-term performance and focus over a multi-year period. The valuedesign of thesethe MYLTIP awards is linkedlinks the ultimate payouts directly by formula to our relative TSR over a three-year overlapping measurement periods.period.
Consistent with the 20192020 MYLTIP under
Under the 2020 MYLTIP:
the Company’s relative TSR performance is measured against a single index – the FTSE Russell Nareit Office Index (the “Nareit Office Index”) (which is adjusted to include Vornado Realty Trust because it is one of the sixa publicly-traded office REITsREIT that we consider one of our most directly comparable peers (the “Office Peers”) despite being categorized as a diversified REIT by FTSE Nareit);
the awards are denominated in LTIP units; and
relative TSR is the sole determinant of how many LTIP units are earned and eligible to vest; there are no upside or downside absolute TSR modifiers.modifiers that can increase or decrease the final payout.
For 2020 MYLTIP awards, the number of LTIP units that can be earned, whether in whole, in part or not at all, is based on levels of payout opportunity ranging from zero to 200% of the target number of LTIP units issued, on a straight-line basis depending on relative TSR performance compared to the Nareit Office Index (as adjusted) as follows:
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
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CEO Reported Pay vs. Realized Pay
The Committee recognizes that a perfect correlation does not exist between the successful execution of our long-term strategy, as demonstrated over time through the achievement of goals set for management, and our TSR, particularly on a relative basis. This is particularly true when TSR is compared over a limited period of time.
The following graph shows for our CEO (1) the reported valuevalues of the MYLTIP awards granted between 2015—2020 as of thetheir respective grant dates, (2) the actual realized pay for each of the 2015-2017 MYLTIP awards granted between 2015—2018 for which the measurement periods have ended and (3) the interim valuations as of December 31, 20192020 for the 20182019 and 20192020 MYLTIP awards:
| (1) | Interim Valuation amounts and Payout as % of Reported Pay percentages shown for the |
2021 MYLTIP
In 2020, the Committee, with the assistance of FW Cook, undertook a comprehensive review of all facets of the MYLTIP plan design to help ensure that it successfully links executive pay and long-term performance and is therefore effective in motivating, retaining and rewarding our NEOs. In its review, the Committee considered whether the peer group(s) against which the Company’s performance is assessed is comprised of the appropriate peers, particularly in light of the impact of COVID-19 on the office REIT sector, as well as the appropriate metric(s) on which to assess performance.
After consideration, the Committee modified the design of the 2021 MYLTIP so that it now consists of two, equally weighted components, each of which provides a payout opportunity ranging from zero to 200% of a target number of LTIP units based on
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
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›BXP’s relative and absolute TSR performance over a three-year performance period. The objectives of the 2021 MYLTIP program are (1) retention (similar to time-based equity awards), (2) alignment with stockholders and (3) pay-for-performance. COMPANY STRATEGY
The key tenetsCommittee believes that, particularly in light of COVID-19, the performance targets are rigorous, but achievable, and challenge our business strategy are to:
maintain a keen focus on select markets that exhibit the strongest economic growth and investment characteristicsexecutive team to achieve strong performance over time, — currently Boston, Los Angeles, New York, San Franciscoon both an absolute and Washington, DC;
investrelative basis. The Committee added the second component, in part, to limit the highest quality buildings (primarily office) with unique amenities and desirable locations that are ablescenarios in which our investors may suffer losses due to maintain high occupancy rates and achieve premium rental rates through economic cycles;
maintain scale and a full-service real estate capability (leasing, development, construction and property management)decline in absolute TSR while our markets to ensure we (1) see all relevant investment deal flow, (2) maintain an ability to execute on all types of real estate opportunities, such as acquisitions, dispositions, repositioning and development, throughout the real estate investment cycle, (3) provide superior service to our tenants and (4) develop and manage our assets in the most sustainable manner possible;
be astute in market timingNEOs realize outsized payouts for investment decisions by acquiring properties in times of opportunity, developing new properties in times of growth and selling assets at attractive prices, resulting in continuous portfolio refreshment;
ensure a strong balance sheet to maintain consistent access to capital and the resultant ability to make new investments at opportune points in time; and
foster a culture and reputation of integrity, excellence and purposefulness, making us the employer of choice for talented real estate professionals, the landlord and developer of choice for our customers and the counterparty of choice for real estate industry participants.
› FOCUS ON LONG-TERM VALUE CREATION
We are a fully integrated real estate company, organized as a real estate investment trust (“REIT”), that develops, manages, operates, acquires and owns a diverse portfolio of primarily Class A office space. We are well-known for our development expertise,in-house building management and responsiveness to tenants’ needs, and we hold a superior track record of developing and operating premium Central Business District office buildings, successfulmixed-use complexes andbuild-to-suit projects for a diverse array of creditworthy tenants. The real estate business is long-term in nature, and our success requires that we make business decisions with a focus on our long-term objectives.relative TSR. As a result, BXP performance above the maximum goal under the Relative TSR component does not automatically result in a payout equal to the maximum 200% of target because the total payout would be offset, e.g., if performance is below target under the Absolute TSR component. The Committee concluded that this “offsetting” feature helps align our NEOs’ interests with our stockholders, while also providing incentives to outperform our peers.
| Ø | Relative TSR Component |
The first component of the 2021 MYLTIP, which represents one-half (50%) of the target grant-date value, retains the basic structure of the 2020 MYLTIP awards. The number of LTIP units that can be earned under this component ranges from zero to 200% of the target number of LTIP units, based on BXP’s annualized relative TSR (“rTSR”) performance compared to an index. Under this component, 100% of the target LTIP units will be earned if the Company’s TSR equals the index TSR; the maximum 200% of the target number of LTIP units will be earned if the Company’s rTSR is at least 1,000 basis points greater than the index; and no LTIP units will be earned if the Company’s rTSR is more than 1,000 basis points less than the index. For rTSR performance between -1,000 basis points and +1,000 basis points, the number of LTIP units earned will be determined using linear interpolation.
For purposes of measuring relative performance, the 2021 MYLTIP awards provide that BXP’s TSR shall be compared to the TSR of a custom peer group index (the “Custom Index”) consisting of the following nine (9) office REITs:
Columbia Property Trust | Douglas Emmett, Inc. | |
Empire State Realty Trust | Hudson Pacific Properties, Inc. | |
JBG Smith Properties | Kilroy Realty Corporation | |
Paramount Group, Inc. | SL Green Realty Corp. | |
Vornado Realty Trust |
The purpose of using a peer group is to provide a mechanism for comparing our relative performance against competitors, however, the Company does not have a directly comparable peer in the public market and often competes with larger, privately-capitalized companies for which performance data is not readily available, if at all. The FTSE Nareit Office Index, which has been the comparative index used in recent years, includes more than 20 REITs, more than half of which are not direct competitors due to geographic regions, type of product (Central Business District vs. Suburban), asset quality or size. The Custom Index was selected to include only office REITs that are most similar to the Company in terms of asset type, asset quality, and having full-scale operations in one or more of the U.S. gateway markets in which the Company operates.
For purposes of determining the TSR of the Custom Index, the weighting ascribed to each company in the Custom Index is fixed as of the grant date based on its relative market capitalization at that time; in contrast, the 2020 MYLTIP and prior programs determined the relative weight of each constituent annually and used the average of each constituent’s annual weightings over the performance period. In deciding to change the weighting methodology, the Committee strivesconsidered that market practice is to make compensation decisionsfix the weightings at the plan inception.
The Committee back-tested our performance versus the Custom Index. From February 6, 2018 through February 5, 2021, which was the performance period for the 2018 MYLTIP, our annualized TSR was 235 bps above the Custom Index, which would have resulted in payout of 123.5% of the target LTIP units. However, our absolute TSR was negative over that provideperiod. To align management with appropriate incentivesour stockholders and hold them more accountable for our absolute TSR, the 2021 MYLTIP includes an absolute TSR component, as described below. If the absolute TSR component had also been in effect, the resulting payout would have been reduced to execute our strategy and promote the best interestsapproximately 87.7% of the Company and its stockholders over the long term.
Execution of our strategy spans multiple markets with different economic drivers over long periods. Development projects, which are particularly important to our strategy, take time to identify, acquire, permit, construct, lease and stabilize. This strategy of creating value for investors is multifaceted and differs from that of many of our competitors in the office REIT segment, which makes direct comparisons difficult and underlies our less formulaic approach to assessing performance, as contrasted with a purely quantitative “actual versus target” framework.
In addition to maintaining a full-service real estate platform and providing superior service to our tenants, our focus on long-term performance involves management of capital and liquidity, leverage ratios, interest-rate risk, capital commitments and debt maturities to reduce the impact of capital market volatility and provide us with the flexibility to take advantage of opportunities as they arise.
For all of these reasons, we look at performance not only for the latest year and on a year-over-year basis, but also with a view to appropriately compensate, incentivize and retain our executives.
› PERFORMANCE METRICS
We focus on key drivers of value creation such as growth in diluted FFO per share, leasing, development starts, deliveries and economics, and new investments. While the Committee is aware that different companies may calculate relevant performancetarget.
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
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| Ø | Absolute TSR Component |
metrics differently, particularlyThe second component represents the remaining non-GAAPone-half financial measures,(50%) of the Committee finds it usefultarget grant-date value of the 2021 MYLTIP. The number of LTIP units that can be earned under this component ranges from zero to compare our200% of the target number of LTIP units, based on BXP’s cumulative absolute TSR (“aTSR”) during the performance period. Under this component, 100% of the target LTIP units will be earned if the Company achieves an aTSR equal to what+1,000 basis points; the Office Peers disclosemaximum 200% of target LTIP units will be earned if the Company achieves an aTSR of +6,000 basis points or greater; and the threshold percentage to earn any LTIP units is an aTSR of greater than -4,000 basis points. If the Company’s aTSR is greater than -4,000 basis points but less than +6,000 basis points, then the number of LTIP units earned will be determined using linear interpolation.
| Ø | Other Changes to MYLTIP Design |
Dividends. Consistent with previous MYLTIP programs, during the three-year performance period holders of 2021 MYLTIP Units are not entitled to receive full dividends on the 2021 MYLTIP Units. Instead, to support the units’ characterization as profits interests for similar measures, even though information istax purposes, the holders of the units are entitled to receive only a partial dividend on each unit equal to 10% of the dividend payable on a share of BXP common stock. Unlike prior MYLTIP programs, however, following the completion of the three-year performance period, BXP will also make a “catch-up” cash payment on the 2021 MYLTIP Units that are ultimately earned in an amount equal to the regular and special distributions, if any, declared during the performance period on BXP common stock, less the distributions actually paid to holders of 2021 MYLTIP Units during the performance period on all of the awarded 2021 MYLTIP Units.
Post-vesting Transfer Restrictions. Subject to the provisions on “Qualified Retirement” and the other terms of the award agreement, after the completion of the three-year performance period all earned MYLTIP Units shall be deemed “vested“, but may not always directly comparable among companies.be converted, redeemed, sold or otherwise transferred for one additional year after the end of the performance measurement period. Therefore, 100% of earned awards, if any, shall vest as of February 1, 2024, but may not be monetized until February 1, 2025.
Allocation of LTI Awards
2020 Performance Grants
The Committee believes that internalapproved LTI equity awards to NEOs for 2020 performance as a mix of performance-based MYLTIP awards and external data are important toolstime-based, full-value equity awards. The MYLTIP awards were denominated in a fixed number of LTIP units as of February 2, 2021, the date of initial grant. The Committee maintained the same allocation of performance-based equity as a percentage of total LTI equity for our CEO as in 2019 for 2020, so his allocation remained 55% performance-based and 45% time-based. For the other NEOs, the Committee maintained the allocation at 50% performance-based and 50% time-based.
In light of the economic circumstances and challenges the NEOs faced in 2020, including the sudden shift in priorities, the Committee awarded the dollar values set forth below for performance-based and time-based equity awards to the NEOs in 2021 for performance in 2020. The Committee awarded Messrs. Thomas and Linde the same dollar value in LTI equity awards for 2020 as was awarded last year for 2019 performance, the result of which was an award of less than target for each, and awarded Mr. Ritchey his target LTI equity awards in acknowledgment of his continued leadership in the designWashington, DC and implementation of optimal compensation programsLos Angeles regions. The Committee assessed Messrs. LaBelle and Koop’s performance in 2020 as strong and awarded each LTI equity that benchmarking against peers provides the Committee with a market check of its compensation awards. Different sections of this CD&A discuss in detail the data on which the Committee relied to make sure that different elements of compensation align with our performance. In addition, the Committee utilizes its collective experiences and judgment when establishing the appropriate types and amounts of compensation.
The Committee’s evaluation of our NEOs places strong emphasis on their contributions to overall Company performance because the Committee believes that the NEOs share responsibility for achieving the goals of the Company as a whole, and the goals are set with a view towards how they help achieve the overall long-term strategy set by the Board. We also value and seek to reward performance that develops talent at all levels of our organization, promotes our culture of excellence, enhances our reputation and extends our track record of profitability and growth.
› DIRECT OFFICE PEER COMPETITORS
In addition to assessing our performance against ourpre-established internal goals, the Committee also reviews our performance against metrics from other companies to assess our performance relative to our peers’ performance and to ensure the goals are sufficiently challenging. Given our scale, national focus and development skills, we do not have a directly comparable peer in the public market. We often compete with larger, privately-owned and, in some cases, global office development companies for which performance data is not publicly available. In the public market where operating data is available, we assess our specific performance relative to the following six Office Peers (with their approximate total capitalizations as of December 31, 2019 shown in parentheses), some of which we compete with in a single market and some of which do not have development capabilities or pursue significant development strategies.was above target.
Douglas Emmett, Inc. ($13.6 billion)
JBG Smith Properties ($7.6 billion)
Kilroy Realty Corporation ($12.9 billion)
Paramount Group, Inc. ($7.8 billion)
SL Green Realty Corp. ($14.2 billion)
Vornado Realty Trust ($22.9 billion)
Boston Properties’ total capitalization as of the same date was approximately $38.0 billion (see “VI. Determining Executive Compensation–Benchmarking Peer Group & Compensation Advisor’s Role”).
› 2019 CORPORATE GOALS
In early 2019, the Committee established for management a rigorous set of operational, capital and management goals that the Committee believed challenged management to perform for our investors, while not creating a strictly formulaic framework. The Committee believes that:
the focus should be on performance over a time span that is consistent with the different core elements of our long-term strategy for creating value;
excessive reliance on short-term goals could have negative implications for the execution of our strategy;
business conditions and unforeseen developments during the year that lead our Board and management to make decisions that impact actual performance against the goals as originally established must be taken into account; and
calculations that formulaically determine the amount of compensation paid based on performance versus goals, without the ability to exercise judgment to evaluate the quality of the results, may have unintended results.
During our outreach efforts, our investors told us that we use a relatively high number of performance goals when assessing performance, and they expressed a desire to better understand which goals were most important and how much the
| Executive | Total LTI Equity Awards | Total LTI Equity Awards as % of Target | Performance- Equity Awards | % of Total Equity Awards | Time-Based LTI Equity Awards | % of Total Equity Awards | ||||||||||||||||
Owen D. Thomas | $ 9,050,000 | 98% | $ 4,977,500 | 55% | $ 4,072,500 | 45% | ||||||||||||||||
Douglas T. Linde | $ 5,655,000 | 97% | $ 2,827,500 | 50% | $ 2,827,500 | 50% | ||||||||||||||||
Raymond A. Ritchey | $ 4,410,000 | 100% | $ 2,205,000 | 50% | $ 2,205,000 | 50% | ||||||||||||||||
Michael E. LaBelle | $ 2,189,000 | 110% | $ 1,094,500 | 50% | $ 1,094,500 | 50% | ||||||||||||||||
Bryan J. Koop | $ 1,788,000 | 120% | $ 894,000 | 50% | $ 894,000 | 50% | ||||||||||||||||
Total | $23,092,000 | 100% | $11,998,500 | 52% | $11,093,500 | 48% | ||||||||||||||||
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
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The performance-based portion of LTI equity awards for 2020 performance was granted in the form of 2021 MYLTIP awards, which have a three-year performance period (February 2, 2021 to February 1, 2024), and an additional year of post-vesting restrictions on transfer. The dollar values of the awards were converted into a fixed number of MYLTIP units on the initial grant date, and the number of units initially granted equals 200% of the target number of units, and it is the maximum number of units that may be earned. Following completion of the three-year performance period, the Committee factored them intowill determine the compensation decisions. The Committee attributes greater relative importance to certain goalsfinal payout based on whatcomputations from our independent valuation consultant for this plan, and if the Committee deems most important innumber of units initially awarded exceeds the executionnumber of our strategy in that year and, for 2019, categorized all goals as “primary” or “secondary” goals.units ultimately earned, then the excess will be forfeited. The table below lists the primary operational and capital goals for 2019 and the Committee’s overall assessment of management’s performance with respect to each denoting whether a goal was “exceeded,” “met” or “not met.” Although no specific formulaic weightings were attributed to the goals, the Committee’s assessment of performance against the primary goals was the most material factor in their determination of 2019 compensation.
› PRIMARY GOALS
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Why it is important:FFO is anon-GAAP financial measure that, when combined with the presentation of required GAAP financial measures, has improved the understanding of operating results of REITs among the investing public and has helped make comparisons of REIT operating results more meaningful. Management generally considers FFO and FFO per shareunits determined to be useful measures for understanding and comparing our operating results because, by excluding real estate-related depreciation and amortization (which can differ across owners of similar assets in similar condition based on historical cost accounting and useful life estimates), impairment losses on depreciable real estate and gains or losses associated with disposition activities, FFO and FFO per share can help investors compare the operating performance of a company’s real estate across reporting periods and to the operating performance of other companies. Our computation of FFO may not be comparable to FFO reported by other REITs or real estate companies that do not define the term in accordance with the current Nareit definition or that interpret the current Nareit definition differently.
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Why it is important: We generate revenue and cash primarily by leasing our operating and development properties. When making leasing decisions, we consider, among other things, the creditworthinessearned shall vest 100% as of the tenant,final day of the performance period, but shall be subject to an additional one-year, no-sale holding period. Therefore, while the award of 2021 MYLTIP units is partially in recognition for performance in 2020, award recipients must continue to perform over the three-year term of the lease,2021 MYLTIP program in order to earn and vest in any of the rental rateMYLTIP units and must generally remain employed for the three years to earn the full amount. The aggregate target number of units for NEOs is approximately 137,688 LTIP units and an aggregate payout opportunity ranging from zero to a maximum of 275,376 LTIP units. The baseline share price for 2020 MYLTIP awards was $90.73 (the average closing price per share of our common stock on the NYSE for the five trading days prior to and including February 2, 2021).
The 2021 MYLTIP awards are generally amortized into earnings over the three-year plan period under the graded vesting method, unless accelerated in certain circumstances such as a “Qualified Retirement” as defined under “– Potential Payments Upon Termination or Change in Control – Retirement Eligibility Provisions for LTI Equity Awards.” Under the Financial Accounting Standards Board’s Accounting Standards Codification 718 “Compensation – Stock Compensation” (“ASC Topic 718”), we expect that 2021 MYLTIP awards to NEOs will have an aggregate value of approximately $12.0 million.
2019 Performance Grants
The following table sets forth the dollar values of the performance-based and time-based equity awards granted to NEOs in February 2020 for performance in 2019:
| Executive | Total LTI Equity Awards | Performance-Based LTI Equity Awards | % of Total Equity Awards | Time-Based LTI Equity Awards | % of Total Equity Awards | |||||||||||||||
Owen D. Thomas | $ 9,050,000 | $ 4,977,500 | 55% | $ 4,072,500 | 45% | |||||||||||||||
Douglas T. Linde | $ 5,655,000 | $ 2,827,500 | 50% | $ 2,827,500 | 50% | |||||||||||||||
Raymond A. Ritchey | $ 4,240,000 | $ 2,120,000 | 50% | $ 2,120,000 | 50% | |||||||||||||||
Michael E. LaBelle | $ 1,945,000 | $ 972,500 | 50% | $ 972,500 | 50% | |||||||||||||||
Bryan J. Koop | $ 1,370,000 | $ 685,000 | 50% | $ 685,000 | 50% | |||||||||||||||
Total | $22,260,000 | $11,582,500 | 52% | $10,677,500 | 48% | |||||||||||||||
The performance-based portion of LTI equity awards for 2019 performance was granted in the form of 2020 MYLTIP awards, which have a three-year performance period (February 4, 2020 to February 3, 2023), and an additional year of time-based vesting. The dollar values of the awards were converted into a fixed number of MYLTIP units on the initial grant date, and the number of units initially granted equals 200% of the target number of units, and it is the maximum number of units that may be paid at inceptionearned. Following completion of the three-year performance period, the Committee will determine the final payout based on computations from our independent valuation consultant for this plan, and throughoutif the leasenumber of units initially awarded exceeds the number of units ultimately earned, then the excess will be forfeited. Therefore, while the award of 2020 MYLTIP units was partially in recognition for performance in 2019, award recipients must continue to perform over the three-year term of the costs2020 MYLTIP program in order to earn and vest in any of tenant improvementsthe MYLTIP units and other landlord concessions,must generally remain employed for the four years to earn the full amount.
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current and anticipated operating expenses, real estate taxes, overall vacancy, anticipated rollover and expected future demand for the space, the impact of any expansion rights and general economic factors.
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Why it is important: In addition to overall leasing volume, we established individual leasing goals for specific properties that are intended to motivate our executives to (1) anticipate and proactively manage rollover and lease terminations at ourin-service properties and (2) lease and stabilize our development properties. The specific leases and properties that comprise the goal are important components of our annual business plan.
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Why it is important:Development deliveries measure our ability to execute our development pipeline on time and within budget. In addition, the success of our development projects and realization of our plans for growth depend on the stabilized unleveraged cash yields we generate.
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Why it is important:Development starts are a useful indicator of future external growth, and they help us assess our ability to identify, underwrite and acquire new land parcels and air rights or redevelop existing properties, secure anchor tenants with significantpre-leasing commitments, obtain financing and/or joint venture partners, and commence construction of the building. Our investments in new developments and redevelopments are a product of the execution of our strategy to drive future growth, and the commencement of these projects substantiates our reputation and expertise in this area.
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Why it is important:New investments help sustain our market-leading position and growth prospects, and new partnerships provide additional sources of capital and validate our strong reputation as a preeminent owner and developer.
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› SECONDARY GOALS
In addition to the primary goals, the Committee established the goals listed below for our executive officers for 2019. Although the Committee considered these secondary goals as part of the overall assessment of the NEOs’ performance for the year, no single goal was a material factor in awarding compensation for 2019.
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VI.III. DETERMINING EXECUTIVE COMPENSATION
› PROCESS FOR DETERMINING EXECUTIVE COMPENSATION
OurStarting in 2020, and in response to shareholder feedback, our Committee followedestablished target total direct compensation opportunities for each of our NEOs consisting of base salary, target annual cash incentive, and target long-term incentive grant value. When establishing target total direct compensation levels, the same general process when setting executive compensation for 2019 as in recent years, which includes:Committee considered a variety of factors, including:
using the median (50th percentile) of a peer group of 16 REITs that are constituents of the S&P 500 Index (the “Benchmarking Peer Group”) as the beginning reference pointindustry and as an indicator of competitive market trends;conditions;
consideringthe Company’s financial and strategic performance, on both an analysis prepared by FW Cook that benchmarks each executive officer,absolute basis and the NEOs as a group, against the Benchmarking Peer Group to determine their relative placement with respect to compensation for the prior year;versus competitors;
assessing performance not only against our ownpre-established corporate goals, but also against the same performance metrics for six Office Peers;market compensation data among comparable companies;
considering individual executive past performance, future potential, roles and responsibilities, experience, retention risk, and succession planning;
total NEO compensation over time, both on an awarded basis and on a realized basis after forfeitures; and
considering projections for compensation increasescurrent and decreasesevolving practices and trends among our peers and the market generally, especially in light of the impact of the COVID-19 pandemic on global and national economies, and other input received from FW Cook; andCook.
The Committee evaluated the pre-established performance goals under the Annual Incentive Plan to determine earned annual incentives for 2020 (refer to page 64). The Committee determined LTI equity grant values earned for 2020 (granted in 2021) with reference to the targets established at the beginning of the year (refer to page 68). The ultimate earned value of these LTI equity awards will be based on the foregoing, establishing a dollar amount for total compensation for each NEO and then allocating it among base salary, cash bonus and LTI equity awards (including time-based LTI awards and performance-based LTI awards that use relative TSR over overlapping three-year measurement periods as the performance metric, to further align management’s objectives with the interests of our investors).stock, as well as performance versus the relative and absolute TSR components under the 2021 MYLTIP.
› COMPENSATION ADVISOR’S ROLE & BENCHMARKING PEER GROUP & COMPENSATION ADVISOR’S ROLE
Compensation Advisor’s Role
The Committee monitors the effectiveness of our executive compensation program on an ongoing basis. For it to be effective, among other things, we believe it is necessary for compensation to be competitive with other large public real estate companies with which we compete for executive talent. The Committee uses industry peer group data as one tool in assessing and determining pay for our executive officers. Other REITs, however, both in the office sector and in other sectors, are not always comparable to us because of differences in underlying business fundamentals. Peer group data is intended to provide the Committee with insight across the peer group into overall market pay levels for each element of compensation and total target compensation of executive officers having similar titles and responsibilities to our NEOs, market trends, “best” governance practices, and overall industry performance. The median (50th percentile) serves as a reference point and indicator of competitive market trends and the Committee uses it as the starting point when setting our executive compensation. We believe this use of peer companyHowever, market data is consistent with how stockholders and proxy advisory firms use such data.one of many factors the Committee considers when setting target pay opportunities.
In 2019,2020, the Committee again retained FW Cook to serve as its new independent, third-party compensation consultant. FW Cook reports directly to the Committee and does not provide services to management that are not under the Committee’s purview. A representative of FW Cook attends meetings of the Committee, as requested, and communicates with the Committee Chair and management between meetings. Consistent with its charter and as required by SEC rules and NYSE listing standards, prior to retaining FW Cook as its consultant, the Committee considered all factors relevant to FW Cook’s independence from management.
The Committee engaged FW Cook to provide a fresh perspective on our overall executive compensation program, adviseadvises the Committee on the reasonableness of executive compensation levels in comparison with those of other similarly situated companies, and consultconsults on the structure of our executive compensation program to optimally support our business objectives. It also advisedobjectives and advises the Committee on executive compensation trends among REITs and the broader market, noting specifically that, in aggregate, total direct compensation levels for the NEOs were competitive and reasonably aligned with relative performance, but the pay mix was more heavily weighted to cash and less to equity than the peer group overall. As a result, the Committee initiated its plan to gradually reduce cash compensation and shift the pay mix toward LTI equity awards for all NEOs. Accordingly, the Committee awarded aggregate cash bonuses to the NEOs that were (9.9)% less than awarded to the same NEOs for 2018, and the performance-based equity awards for all NEOs in 2019 represent a greater percentage of total direct compensation than they did in 2018. FW Cook also recommended changes to the 2020 compensation program design and structure. The Committee relied on this advice, and the feedback received from the investor outreach process, in deciding to establish the 2020 Annual Incentive Plan (see“—VII. New 2020 Annual Incentive Plan”).
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market.
Benchmarking Peer Group
The Committee selected the same peer group for benchmarking 2019 executive compensation that it used for 2018. That peer group consists of sixteen publicly traded real estate companies that are of comparable size to the Company in terms of total capitalization and assets, irrespective of property focus. FW Cook (i)(1) advised the Committee that size, as measured by total capitalization, best depicts the scale, complexity and breadth of the Company’s operations, as well as the amount of capital and assets managed, and therefore is the most appropriate scope measure for peer company selection and (ii)(2) reviewed the peer group for 20182019 and recommended that the
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Committee maintain the same peer group for 2020. Based on that advice, the Committee selected the same peer group for benchmarking 2020 executive compensation that it used for 2019. That peer group consists of sixteen publicly traded real estate companies that are of comparable size to the Company in terms of total capitalization and assets, irrespective of property focus. Notably, fourteen out of the sixteen members of this Benchmarking Peer Group also list uslisted Boston Properties as a peer company in their 20192020 proxy statements.
The following table provides the names and key information for each peer company:
| Number of Employees(1) | UPREIT Market Capitalization (in millions)(2) | Total Capitalization (in millions)(3) | |||||||||||||||||||||||||||||||||
| Company | Sector | Location | Total Capitalization (in millions)(1) | ||||||||||||||||||||||||||||||||
Alexandria Real Estate Equities, Inc. | Office | Pasadena, CA | 439 | $ | 19,519 | $ | 27,869 | Office | Pasadena, CA | $ | 33,988 | ||||||||||||||||||||||||
American Tower Corporation | Specialty | Boston, MA | 5,454 | $ | 101,785 | $ | 134,377 | ||||||||||||||||||||||||||||
American Tower Corporation (REIT) | Specialty | Boston, MA | $ | 137,133 | |||||||||||||||||||||||||||||||
AvalonBay Communities, Inc. | Multifamily | Arlington, VA | 3,122 | $ | 29,495 | $ | 36,932 | Multifamily | Arlington, VA | $ | 30,132 | ||||||||||||||||||||||||
Digital Realty Trust, Inc. | Specialty | San Francisco, CA | 1,550 | $ | 26,073 | $ | 38,544 | Specialty | Austin, TX | $ | 56,308 | ||||||||||||||||||||||||
Equity Residential | Multifamily | Chicago, IL | 2,700 | $ | 31,187 | $ | 40,593 | Multifamily | Chicago, IL | $ | 31,307 | ||||||||||||||||||||||||
Essex Property Trust, Inc. | Multifamily | San Mateo, CA | 1,822 | $ | 20,577 | $ | 26,683 | Multifamily | San Mateo, CA | $ | 22,547 | ||||||||||||||||||||||||
Host Hotels & Resorts, Inc. | Hotel | Bethesda, MD | 175 | $ | 13,375 | $ | 17,781 | Hotel | Bethesda, MD | $ | 16,583 | ||||||||||||||||||||||||
Prologis, Inc. | Industrial | San Francisco, CA | 1,712 | $ | 57,998 | $ | 73,220 | Industrial | San Francisco, CA | $ | 96,667 | ||||||||||||||||||||||||
Public Storage | Self-Storage | Glendale, CA | 5,900 | $ | 37,194 | $ | 43,178 | Self-Storage | Glendale, CA | $ | 47,025 | ||||||||||||||||||||||||
Regency Centers Corporation | Shopping Center | Jacksonville, FL | 450 | $ | 10,619 | $ | 14,802 | Shopping Center | Jacksonville, FL | $ | 11,952 | ||||||||||||||||||||||||
Simon Property Group, Inc. | Regional Mall | Indianapolis, IN | 3,750 | $ | 52,674 | $ | 77,619 | Regional Mall | Indianapolis, IN | $ | 59,516 | ||||||||||||||||||||||||
SL Green Realty Corp. | Office | New York, NY | 1,033 | $ | 7,663 | $ | 14,186 | Office | New York, NY | $ | 10,451 | ||||||||||||||||||||||||
UDR, Inc. | Multifamily | Highlands Ranch, CO | 1,341 | $ | 14,776 | $ | 19,841 | Multifamily | Highlands Ranch, CO | $ | 17,564 | ||||||||||||||||||||||||
Ventas, Inc. | Health Care | Chicago, IL | 516 | $ | 21,697 | $ | 34,309 | Health Care | Chicago, IL | $ | 30,811 | ||||||||||||||||||||||||
Vornado Realty Trust | Diversified | New York, NY | 4,008 | $ | 13,509 | $ | 22,917 | Office | New York, NY | $ | 17,144 | ||||||||||||||||||||||||
Welltower Inc. | Health Care | Toledo, OH | 443 | $ | 33,551 | $ | 50,382 | Health Care | Toledo, OH | $ | 42,188 | ||||||||||||||||||||||||
Median | 1,631 | $ | 23,885 | $ | 35,621 | $ | 31,059 | ||||||||||||||||||||||||||||
Average | 2,151 | $ | 30,731 | $ | 42,077 | $ | 41,332 | ||||||||||||||||||||||||||||
Boston Properties, Inc. | 760 | $ | 23,808 | $ | 37,981 | $ | 31,782 | ||||||||||||||||||||||||||||
Relative Percentile Rank | 30%-ile | 50%-ile | 58%-ile | 55%-ile | |||||||||||||||||||||||||||||||
Source: Market Intelligence, a Division of S&P Global. Data as of December 31, 2019.2020.
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Total capitalization includes debt and the book value of any preferred stock. |
The benchmarking review was based, in part, on information disclosed in the peer companies’ proxy statements filed in 20192020 (the latest year for which comprehensive data were publicly available), supplemented by data from the 2019 Nareit Compensation Survey..
› ROLE OF MANAGEMENT IN COMPENSATION DECISIONS
Our CEO and President make recommendations to the Committee on the compensation of the other executive officers, and our CEO makes recommendations to the Committee on the compensation of our President, in each case, based on their assessment of performance versus corporate and individual goals and a variety of other factors (e.g., compensation history, tenure, responsibilities, market data for competitive positions and retention concerns). All executive compensation decisions are made by the Committee.
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
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VII. NEW 2020 ANNUAL INCENTIVE PLAN
Based on feedback received from our investors and advice received from FW Cook, the Committee established a new annual cash incentive plan for 2020 under which annual cash bonuses payable to our executive officers will have a direct link to the achievement of specific,pre-established goals.
Beginning in 2020 (the first fiscal year following the 2019Say-on-Pay vote), individual target bonus opportunities will be expressed in fixed dollar amounts. Actual earned amounts may range from zero (0) to 150% of target, depending on performance versuspre-established annual goals in each category.
Annual bonuses will be based on performance in three categories: FFO per share, leasing and business/individual goals.
FFO per Share.FFO per share was selected as a key financial metric for the 2020 Annual Incentive Plan because it is the earnings metric most commonly used by investors and analysts to evaluate our performance on an absolute basis and relative to other REITs. The FFO per share goal is subject to adjustment for acquisitions, dispositions, financings, lease terminations and similar transactions and circumstances.
Leasing. For the 2020 Annual Incentive Plan, the Committee established specific corporate and regional leasing goals. Leasing will be evaluated in terms of short-term leasing and total leasing to encourage the executives to focus on current addressable vacancies and near-term roll-over, and to avoid scenarios in which leasing goals are met solely due to unexpected early renewals.
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The following table summarizes the performance measurement categories and weightings under the new 2020 Annual Incentive Plan.
| Weightings | ||||||||||||||||||||
| Annual Incentive Performance Measures | Thomas | Linde | LaBelle | Ritchey | Koop | |||||||||||||||
| FFO per Share | 33.3 | % | 33.3 | % | 33.3 | % | 33.3 | % | 33.3 | % | ||||||||||
| Leasing (Short-Term and Total) | ||||||||||||||||||||
Overall BXP | 33.3 | % | 33.3 | % | 16.7 | % | ||||||||||||||
LA Region + DC Region | 33.3 | % | ||||||||||||||||||
Boston Region | 33.3 | % | ||||||||||||||||||
| Business & Individual Goals | ||||||||||||||||||||
Overall BXP | 33.3 | % | 33.3 | % | ||||||||||||||||
Finance – Capital Raising | 25.0 | % | ||||||||||||||||||
Finance – Other | 25.0 | % | ||||||||||||||||||
LA Region + DC Region | 33.3 | % | ||||||||||||||||||
Boston Region | 33.3 | % | ||||||||||||||||||
| Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||
The Committee approved the foregoing categories and specific goal targets in January 2020, prior to theCOVID-19 outbreak becoming a global pandemic that has had a material adverse effect on the global economy. In light of the changing business environment, the Committee mayre-evaluate the categories and targets, as appropriate.
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VIII.IV. OTHER COMPENSATION POLICIES
› DOUBLE-TRIGGER ACCELERATION OF VESTING OF EQUITY AWARDS UPON A CHANGE OF CONTROL
All time-based equity awards made after 2014 include “double-trigger” vesting, meaning that, if there is a “change of control” and the awards are not otherwise cancelled in connection with the change of control transaction, then they only become fully vested if, within 24 months after the change of control, the executive’s employment is terminated by the Company or its successor without “cause” or the executive resigns for “good reason.” We believe that this policy regarding acceleration of vesting upon a change of control is in line with current best practice while also continuing to remove potential disincentives for executives to pursue a change of control transaction that would benefit stockholders. Although not required, the Committee decided to make the policy applicable tocertain senior officers, including our CEO, who were entitled to single-trigger vesting under their employment agreements, the Committee requested, and those executives voluntarily agreed, to the change. The Committee believes that this demonstrates its and management’s responsiveness to stockholders and that the policy addresses two key objectives:
| • | Aligning executives’ interests with stockholders’ interests:When a change of control may be imminent, it is important to ensure that executives’ interests are aligned with stockholders to maximize stockholder value. |
| • | Minimizing conflicts of interest:Double-trigger vesting in the context of a potential change of control (1) reduces distraction and the risk that executives leave the Company before a transaction is completed and (2) prevents executives from receiving a windfall because executives’ time-based equity vests only if their employment is terminated. |
› CLAWBACK POLICY
We have a formal “clawback” policy, which allows us to recoup from all executive officers and certain other specified officers’ incentive compensation paid on the basis of financial results that are subsequently restated. Under the policy, if we are required to prepare an accounting restatement due to materialnon-compliance with any financial reporting requirement, the Committee may require those officers to repay or forfeit “excess compensation,” which includes annual cash bonus and long-term incentive compensation in any form (including stock options, restricted stock and LTIP units, whether time-based or performance-based) received by them during the three-year period preceding the publication of the restated financial statements, that the Committee determines was in excess of the amount that they would have received had such compensation been determined based on the financial results reported in the restated financial statements.
The Committee may take into account any factors it deems reasonable in determining (1) whether to seek recoupment of previously paid excess compensation, (2) the amount of excess compensation to recoup from each individual officer, which may reflect whether the Committee concluded that he or she engaged in wrongdoing or committed grossly negligent acts or omissions, and (3) the form of the compensation to be recouped. The Committee intends to periodically review this policy and, as appropriate, conform it to any applicable final rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.
› GROSS-UP FOR EXCESS PARACHUTE PAYMENTS
In January 2014, we adopted a formal “no taxgross-up” policy with respect to our senior executives. Pursuant to this policy, we will not make or promise to make any taxgross-up payment to any senior executive in the future, other than payments in accordance with obligations existing at the time of the policy’s adoption or pursuant to arrangements applicable to our management employees generally, such as a relocation policy. All of the employment agreements that we have entered into with senior executives since 2013, including our original and current employment agreements with our CEO, Mr. Thomas, do not provide for taxgross-up payments. Accordingly, this policy formalized the Committee’s then-existing practice with respect to taxgross-ups. In addition, our Senior Executive Severance Plan and Executive Severance Plan provide that executives who become eligible to participate in these plans will not be entitled to any taxgross-up payments under the plans.
› POLICY CONCERNING HEDGING AND PLEDGING TRANSACTIONS
We prohibit all employees, including our executive officers, and directors from engaging in short sales and derivative transactions, purchasing our securities on margin and pledging our securities as collateral for a loan. Transactions such as
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purchases and sales of publicly traded put and call options, short sales, hedging transactions such as prepaid variable forwards,
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equity swaps and collars create a heightened compliance risk or could create the appearance of misalignment between management and stockholders. In addition, securities held in a margin account or pledged as collateral may be sold without consent if the owner fails to meet a margin call or defaults on the loan, thus creating the risk that a sale may occur at a time when an employee or director is aware of material,non-public information or otherwise is not permitted to trade in Company securities. Our Board has never been asked to grant a waiver, nor has it ever granted such a waiver, of this policy.
› MANDATORY MINIMUM EQUITY OWNERSHIP POLICY FOR SENIOR EXECUTIVES
To align senior management with our stockholders and demonstrate to the investment community that our senior management is personally committed to our continued financial success, we have a policy that requires the following officer positions to maintain equity ownership equal to a multiple of their base salaries as follows:
| Title | Multiple of Base Salary | |
Chief Executive Officer
| 6.0x
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President
| 5.0x
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Senior Executive Vice President
| 5.0x
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Executive Vice President, Chief Financial Officer
| 3.0x
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Executive Vice President, Regional Manager
| 2.0x
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Senior Vice President
| 1.5x |
| CEO Mandatory Minimum |
| CEO Actual Stock Ownership | ||||||||
| 6x Base Salary | 35x Base Salary |
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If an executive’s ownership falls below the applicable guideline due solely to a decline in the value of our common stock, the executive will not be required to acquire additional shares to meet the guideline, but he or she will be required to retain all shares then held (except for shares withheld to pay withholding taxes or the exercise price of options) until such time as the executive again attains the target multiple.
Employees who are hired or promoted to senior management positions will have a five-year period beginning on January 1 of the year following their appointment to achieve this ownership requirement. Exceptions may be made for significant extenuating personal circumstances. The types of securities that will be counted toward the equity ownership requirement include shares of our common stock, common units and LTIP units (excluding performance-based LTIP units until and unless they have been earned), in each case both vested and unvested, as well as shares acquired and held through our stock purchase and dividend reinvestment plans. Stock options will not be counted.
› LTIP UNITS
Since 2003, we have used a class of partnership interests in our Operating Partnership, called long-term incentive units, or LTIP units, as a form of equity-based award for annual long-term incentive equity compensation. LTIP units are designed to qualify as “profits interests” in the Operating Partnership for federal income tax purposes, meaning that initially they are not economically equivalent in value to a share of our common stock, but over time can increase in value toone-for-one parity with common stock by operation of special tax rules applicable to profits interests. LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while allowing them to enjoy a more favorable income tax treatment. Each LTIP unit awarded is deemed equivalent to an award of one share of common stock reserved under our incentive equity plan. The key difference between LTIP units and restricted stock is that at the time of award, LTIP units do not have full economic parity with common units, but can achieve such parity over time upon the occurrence of specified events in accordance with partnership tax rules. Until and unless such parity is reached, the value that an executive will realize for a given number of vested LTIP units is less than the value of an equal number of shares of our common stock.
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Under the MYLTIP awards, during the performance period holders of LTIP units will receive distributions equal toone-tenth (1/10th) of the amount of regular quarterly distributions paid on a common unit, but will not receive any special distributions. After the end of the performance period, holders of earned LTIP units, both vested and unvested, will be entitled to receive
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distributions in an amount per LTIP unit equal to the distributions, both regular and special, payable on a common unit (which equal per share dividends (both regular and special) on our common stock). Beginning with the 2021 MYLTIP, following the completion of the three-year performance period, BXP will also make a “catch-up” cash payment on the 2021 MYLTIP Units that are ultimately earned in an amount equal to the regular and special distributions, if any, declared during the performance period on BXP common stock, less the distributions actually paid to holders of 2021 MYLTIP Units during the performance period on all of the awarded 2021 MYLTIP Units. LTIP units awarded with time-based vesting conditions only, both vested and unvested, are entitled to receive distributions in an amount per LTIP unit equal to the distributions, both regular and special, payable on a common unit.
› EMPLOYMENT AGREEMENTS
We have employment agreements with each of our NEOs. (See “Compensation of Executive Officers – Employment Agreements”) For NEOs other than Mr. Thomas, these agreements provide for a certain level of severance, generally the sum of base salary plus the prior year’s cash bonus, 12 additional months of vesting in equity-based awards and participation in our health plan for up to 12 months, in the event of a termination of employment by us without cause or by the executives for good reason. The employment agreement with Mr. Thomas provides for stipulated severance benefits in lieu of participation in severance plans for which other NEOs are eligible. In return, each NEO agrees, during the term of employment and for one year thereafter, not to compete with us, solicit our tenants or employees or interfere with our relationship with our tenants, suppliers, contractors, lenders, employees or with any governmental agency. We believe that these agreements are fair to the NEOs and to our stockholders and, because the severance benefits are negotiated at the time of the agreement, avoid the need for protracted negotiations in the event of termination.
› CHANGE IN CONTROL ARRANGEMENTS
We have an employment agreement with Mr. Thomas that provides him with cash severance and certain benefits in the event of his termination under certain circumstances within 24 months following a change in control. Although Mr. Thomas was entitled to “single-trigger” vesting upon a change in control under his original employment agreement, he has agreed to be subject to the “double-trigger” vesting policy adopted for all time-based LTI equity awards made after 2014. We also have two change in control severance plans, one for our President, Senior Executive Vice President and Executive Vice Presidents, and the other for our Senior Vice Presidents and those Vice Presidents with ten (10) or more years of tenure with us. These plans also provide cash severance and certain benefits in the event of termination of employment under certain circumstances within 24 months following a change in control. The two change in control severance plans are “double trigger” arrangements, providing severance benefits only upon involuntary termination or constructive termination of the executive officer following a change in control. (See “Compensation of Executive Officers – Potential Payments Upon Termination or Change in Control”) Officers who became eligible under the two severance plans described above prior to their amendment in January 2014 upon adoption by the Committee of a formal “no taxgross-up” policy are entitled to agross-up payment in the event they become subject to the 20% golden parachute excise tax. This was market practice when these plans were adopted in 1998. Mr. Thomas is not entitled to a taxgross-up payment under his employment agreement.
In our experience, change in control cash severance protection for executive officers is common in the REIT industry. Our Committee believes it is fair to provide severance protection in the event of an involuntary termination or constructive termination of employment following a change in control because very often senior manager positions are eliminated following a change in control. The Committee believes that agreeing in advance to provide severance benefits in the event of an involuntary termination or constructive termination of employment following a change in control helps reinforce and encourage the continued attention and dedication of senior management to their assigned duties without distraction in the face of an actual or threatened change in control and helps ensure that management is motivated to negotiate the best consideration for our stockholders. For treatment of equity awards in the event of a change in control, please see“– Double-Trigger Acceleration of Vesting of Equity Awards upon a Change of Control”above.
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› PERQUISITES
We provide Messrs. Linde, Ritchey and Koop a monthly car allowance of $750 and we provide all of our executive officers a designated parking space. Mr. Thomas’ employment agreement provides that he is entitled to the use of a Company-owned or leased vehicle, but Mr. Thomas has declined this benefit at all times since 2013. Apart from these arrangements, we do not provide any other perquisites to our executive officers.
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› DEFERRED COMPENSATION PLAN
We offer a deferred compensation plan that enablespermits our executives to defer up to 20% of their base salaries and bonuses. The amounts deferred are not included in the executive’s current taxable income and, therefore, are not currently deductible by us. The executives select from a limited number of mutual funds, which serve as measurement funds, and the deferred amounts are increased or decreased to correspond to the market value of the mutual fund investments. Because the measurement funds are publicly traded securities, we do not consider any of the earnings credited under the deferred compensation plan to be “above market.” We do not provide any matching contribution to any executive officer who participates in this plan, other than a limited amount to make up for any loss of matching contributions under our Section 401(k) plan. We have made this plan available to our executives in order to ensure that our benefits are competitive. See “Compensation of Executive Officers – Nonqualified Deferred Compensation.Compensation in 2020.”
› RETIREMENT AND HEALTH AND WELFARE BENEFITS
We have never had a traditional or defined benefit pension plan. We maintain a Section 401(k) retirement plan in which all salaried employees can participate, which provides a Company matching contribution of 200% of the first 3% of compensation contributed to the plan (utilizing earnings not in excess of an amount established by the Internal Revenue Service ($280,000285,000 in 2019)2020)). Other benefits, such as health and dental plans, group term life insurance, short- and long-term disability insurance and travel accident insurance, are also available generally to all of our salaried employees. Our executives participate in Company-sponsored benefit programs available broadly to generally all of our salaried employees, including our employee stock purchase plan and our Section 401(k) plan.
› DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee’s policy is to consider the tax treatment of compensation paid to our executive officers while simultaneously seeking to provide our executives with appropriate rewards for their performance. Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), a publicly-held corporation may not deduct compensation of more than $1 million paid to any “covered employee.” Substantially all of the services rendered by our executive officers were performed on behalf of our operating partnership or its subsidiaries. The Internal Revenue Service has issued a series of private letter rulings which indicate that compensation paid by an operating partnership to executive officers of a REIT that serves as its general partner is not subject to limitation under Section 162(m) to the extent such compensation is attributable to services rendered to the operating partnership. We have not obtained a ruling on this issue, but have no reason to believe that the same conclusion would not apply to us. However, in December 2019, the Internal Revenue Service proposed new regulations that may cause the limits on deductibility under Section 162(m) to apply to such compensation. To the extent that compensation paid to our executive officers is subject to and does not qualify for deduction under Section 162(m), our Committee is prepared to exceed the limit on deductibility under Section 162(m) to the extent necessary to establish compensation programs that we believe provide appropriate incentives and reward our executives relative to their performance. Because we qualify as a REIT under the Code, we generally distribute at least 100% of our net taxable income each year and therefore do not pay federal income tax. As a result, and based on the level of cash compensation paid to our executive officers, the possible loss of a federal tax deduction would not be expected to have a material impact on us.
› ACCOUNTING FOR STOCK-BASED COMPENSATION
We account for stock-based awards in accordance with the requirements of ASC Topic 718.
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| COMPENSATION DISCUSSION AND ANALYSIS | ||
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› ASSESSMENT OF COMPENSATION-RELATED RISKS
The Committee is responsible for overseeing the risks relating to compensation policies and practices affecting senior management on an ongoing basis. The Committee believes that, because of the following factors, there is a low likelihood that our compensation policies and practices would encourage excessive risk-taking:
Risk Mitigation Factors
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• our policies and programs are generally intended to encourage executives to focus on long- term objectives;
• overall compensation is maintained at levels that are competitive with the market;
• the mix of compensation rewards long-term performance with a significantat-risk component;
•
• except for those employees who satisfy the conditions for Qualified Retirement, all equity awards are subject to multi-year vesting (see“– Potential Payments Upon Termination or Change in Control – Retirement Eligibility Provisions for LTI Equity Awards”);
• executive officers are subject to minimum stock ownership guidelines and limitations on trading in our securities, including prohibitions on hedging and pledging; and
• a clawback policy permits the Company to recoup compensation paid on the basis of financial results that are subsequently restated.
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› EQUITY AWARD GRANT POLICY
We have a policy that annual grants to employees are approved by the Committee in late January or early February of each year, with an effective grant date immediately following the closing of the NYSE on the second trading day after we publicly release financial results for the prior year. We believe this policy provides the necessary certainty and transparency for both employees and stockholders, while allowing the Committee desired flexibility.
Our Committee approves equity awards in dollar values. To the extent these awards are paid in the form of full-value awards (either shares of restricted stock and/or LTIP units), the number of shares/units granted is calculated by dividing the dollar value of the approved awards by the closing market price on the NYSE of a share of our common stock on the effective date of grant. To the extent these awards are made in the form of stock options, the number of shares underlying option grants is determined by dividing the dollar value of the approved awards by the grant-date fair value of aten-yearthe option, with the exercise price equal to the closing market price on the NYSE of a share of our common stock on the effective date of grant, as calculated by an independent valuation expert in accordance with ASC Topic 718 using assumptions approved by the Committee.. The Equity Award Grant Policy does not apply to performance-based equity awards such as the MYLTIP awards because they are not “full-value” awards upon issuance and their value depends on our future TSR performance; accordingly,of the different considerations that apply to the granting of such awards. For example, consistent with our past practice for performance- basedwhen granting performance-based equity awards, the Committee determined that the 2021 MYLTIP baseline share price, from which TSR performance is measured, should be based on the average closing stock price for the five trading days prior to and including the effective date of grant.
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| COMPENSATION OF EXECUTIVE OFFICERS |
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation for each of our NEOs in accordance with Item 402(c) of Regulation S-K.
| Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | All Other Compensation ($)(6) | Total ($)(7) | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(6) | All Other Compensation ($)(7) | Total ($)(8) | |||||||||||||||||||||||||||||||||||
Owen D. Thomas Chief Executive Officer | 2019 | 898,077 | 2,550,000 | 8,452,063 | (3) | 17,460 | 11,917,600 | 2020 | 900,000 | — | 8,644,379 | (3) | 1,175,000 | 17,910 | 10,737,289 | |||||||||||||||||||||||||||||||||
| 2018 | 875,000 | 2,875,000 | 7,927,786 | (4) | 17,160 | 11,694,946 | 2019 | 898,077 | 2,550,000 | 8,452,063 | (4) | — | 17,460 | 11,917,600 | ||||||||||||||||||||||||||||||||||
| 2017 | 875,000 | 2,425,000 | 6,745,617 | (5) | 16,680 | 10,062,297 | 2018 | 875,000 | 2,875,000 | 7,927,786 | (5) | — | 17,160 | 11,694,946 | ||||||||||||||||||||||||||||||||||
Douglas T. Linde President | 2019 | 748,077 | 2,095,000 | 5,211,300 | (3) | 34,680 | 8,089,057 | 2020 | 750,000 | — | 5,373,381 | (3) | 950,000 | 35,310 | 7,108,691 | |||||||||||||||||||||||||||||||||
| 2018 | 725,000 | 2,180,000 | 5,163,416 | (4) | 34,380 | 8,102,796 | 2019 | 748,077 | 2,095,000 | 5,211,300 | (4) | — | 34,680 | 8,089,057 | ||||||||||||||||||||||||||||||||||
| 2017 | 725,000 | 1,935,000 | 4,777,500 | (5) | 33,600 | 7,471,100 | 2018 | 725,000 | 2,180,000 | 5,163,416 | (5) | — | 34,380 | 8,102,796 | ||||||||||||||||||||||||||||||||||
Raymond A. Ritchey Senior Executive Vice President | 2019 | 738,462 | 1,820,000 | 3,990,000 | (3) | 33,876 | 6,582,338 | 2020 | 740,000 | — | 4,028,000 | (3) | 1,103,850 | 34,326 | 5,906,176 | |||||||||||||||||||||||||||||||||
| 2018 | 720,000 | 2,080,000 | 4,278,466 | (4) | 33,576 | 7,112,042 | 2019 | 738,462 | 1,820,000 | 3,990,000 | (4) | — | 33,876 | 6,582,338 | ||||||||||||||||||||||||||||||||||
| 2017 | 720,000 | 2,080,000 | 4,077,125 | (5) | 33,096 | 6,910,221 | 2018 | 720,000 | 2,080,000 | 4,278,466 | (5) | — | 33,576 | 7,112,042 | ||||||||||||||||||||||||||||||||||
Michael E. LaBelle Executive Vice President, Chief Financial Officer and Treasurer | 2019 | 509,231 | 1,295,000 | 1,916,801 | (3) | 25,680 | 3,746,712 | 2020 | 510,000 | — | 1,848,139 | (3) | 937,500 | 26,310 | 3,321,949 | |||||||||||||||||||||||||||||||||
| 2018 | 500,000 | 1,450,000 | 1,973,150 | (4) | 25,380 | 3,948,530 | 2019 | 509,231 | 1,295,000 | 1,916,801 | (4) | — | 25,680 | 3,746,712 | ||||||||||||||||||||||||||||||||||
| 2017 | 500,000 | 1,325,000 | 2,100,000 | (5) | 24,600 | 3,949,600 | 2018 | 500,000 | 1,450,000 | 1,973,150 | (5) | — | 25,380 | 3,948,530 | ||||||||||||||||||||||||||||||||||
Bryan J. Koop Executive Vice President, Boston Region | 2019 | 409,231 | 1,370,000 | 1,235,000 | (3) | 34,680 | 3,048,911 | 2020 | 410,000 | — | 1,301,500 | (3) | 625,000 | 35,310 | 2,371,810 | |||||||||||||||||||||||||||||||||
| 2018 | 400,000 | 1,550,000 | 1,257,523 | (4) | 34,380 | 3,241,903 | 2019 | 409,231 | 1,370,000 | 1,235,000 | (4) | — | 34,680 | 3,048,911 | ||||||||||||||||||||||||||||||||||
| 2017 | 400,000 | 1,280,000 | 1,316,874 | (5) | 33,600 | 3,030,474 | 2018 | 400,000 | 1,550,000 | 1,257,523 | (5) | — | 34,380 | 3,241,903 | ||||||||||||||||||||||||||||||||||
| (1) | Represent cash bonuses paid to the NEOs in recognition of performance in the year reported. Such bonuses |
| (2) | A discussion of the assumptions used in calculating these values can be found in Note 16 to our |
| (3) | Represents the aggregate grant date fair value of time-based restricted common stock and LTIP unit awards and 2020 MYLTIP awards granted in 2020, determined in accordance with ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The following table sets forth (a) the grant date fair values for the time-based restricted common stock and LTIP unit awards, (b) the grant date fair values for the 2020 MYLTIP awards based upon the probable outcome of the performance conditions as of the grant date for the awards and (c) the maximum values of the 2020 MYLTIP awards as of the date of grant, assuming that the highest levels of performance conditions are achieved. To have value, the 2020 MYLTIP awards require the Company to achieve relative total stockholder return thresholds. See “Compensation Discussion and Analysis – II. Executive Compensation Program – LTI Equity Compensation” beginning on page 65. |
| NEO | Time-Based Awards Grant Date Value | 2020 MYLTIP Awards Grant Date Value | 2020 MYLTIP Awards Maximum Value | |||||||||
| Mr. Thomas | $ | 3,666,879 | $ | 4,977,500 | $ | 10,643,375 | ||||||
| Mr. Linde | $ | 2,545,881 | $ | 2,827,500 | $ | 6,046,077 | ||||||
| Mr. Ritchey | $ | 1,908,000 | $ | 2,120,000 | $ | 4,533,257 | ||||||
| Mr. LaBelle | $ | 875,639 | $ | 972,500 | $ | 2,079,496 | ||||||
| Mr. Koop | $ | 616,500 | $ | 685,000 | $ | 1,464,682 | ||||||
| (4) | Represents the grant date fair value of time-based restricted common stock and LTIP unit awards and 2019 MYLTIP awards granted in 2019, determined in accordance with ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. |
| NEO | Restricted Common Stock and LTIP Unit Awards Grant Date Value ($) | 2019 MYLTIP Awards Grant Date Value ($) | 2019 MYLTIP Awards Maximum Value ($) | |||||||||
| Mr. Thomas | 4,077,063 | 4,375,000 | 8,750,000 | |||||||||
| Mr. Linde | 2,513,800 | 2,697,500 | 5,395,000 | |||||||||
| Mr. Ritchey | 1,890,000 | 2,100,000 | 4,200,000 | |||||||||
| Mr. LaBelle | 941,801 | 975,000 | 1,950,000 | |||||||||
| Mr. Koop | 585,000 | 650,000 | 1,300,000 | |||||||||
Represents the grant date fair value of time-based restricted common stock and LTIP unit awards and 2018 MYLTIP awards granted in 2018, determined in accordance with ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. |
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| COMPENSATION OF EXECUTIVE OFFICERS |
| (6) | Represents amounts earned under the 2020 Annual Incentive Plan paid in 2021 for performance in 2020. See “Compensation Discussion and Analysis – II. Executive Compensation Program – Cash Compensation” beginning on page 56. |
| (7) | The table below shows the components of “All Other Compensation” for |
| NEO | Life Insurance ($) | 401(k) Company Match ($) | Car Allowance ($) | Parking ($) | Total ($) | Life Insurance | 401(k) Company Match | Car Allowance | Parking | Total | ||||||||||||||||||||||||||||||
| Mr. Thomas | 660 | 16,800 | — | — | 17,460 | $ | 810 | $ | 17,100 | $ | — | $ | — | $ | 17,910 | |||||||||||||||||||||||||
| Mr. Linde | 660 | 16,800 | 9,000 | 8,220 | 34,680 | $ | 810 | $ | 17,100 | $ | 9,000 | $ | 8,400 | $ | 35,310 | |||||||||||||||||||||||||
| Mr. Ritchey | 660 | 16,800 | 9,000 | 7,416 | 33,876 | $ | 810 | $ | 17,100 | $ | 9,000 | $ | 7,416 | $ | 34,326 | |||||||||||||||||||||||||
| Mr. LaBelle | 660 | 16,800 | — | 8,220 | 25,680 | $ | 810 | $ | 17,100 | $ | — | $ | 8,400 | $ | 26,310 | |||||||||||||||||||||||||
| Mr. Koop | 660 | 16,800 | 9,000 | 8,220 | 34,680 | $ | 810 | $ | 17,100 | $ | 9,000 | $ | 8,400 | $ | 35,310 | |||||||||||||||||||||||||
The amount shown in the “Total” column for each NEO equals the sum of all columns of the Summary Compensation Table. |
GRANTS OF PLAN-BASED AWARDS IN 20192020
The following table provides information about the awards granted to our NEOs during the year ended December 31, 2019.2020.
Date of Compensation Committee Approval(1) | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | Date of Compensation Committee Approval (1) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | Grant Date of Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold (#)(2) | Target (#)(2) | Maximum (#)(2) | Grant Date | Threshold ($)(2) | Target ($)(2) | Maximum ($)(2) | Threshold (#)(3) | Target (#)(3) | Maximum (#)(3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Owen D. Thomas | 2/1/2019 | 1/23/2019 | — | — | — | 33,351 | 4,077,063 | — | 1/22/2020 | 1,175,000 | 2,350,000 | 3,525,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/5/2019 | 1/23/2019 | — | 35,784 | 71,569 | — | 4,375,000 | 1/31/2020 | 1/22/2020 | — | — | — | — | — | — | 28,409 | 3,666,879 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/4/2020 | 1/22/2020 | — | — | — | — | 36,813 | 73,626 | — | 4,977,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Douglas T. Linde | 2/1/2019 | 1/23/2019 | — | — | — | 20,563 | 2,513,800 | — | 1/22/2020 | 950,000 | 1,900,000 | 2,850,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/2020 | 1/22/2020 | — | — | — | — | — | — | 19,724 | 2,545,881 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/5/2019 | 1/23/2019 | — | 22,064 | 44,127 | — | 2,697,500 | 2/4/2020 | 1/22/2020 | — | — | — | — | 20,912 | 41,824 | — | 2,827,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Raymond A. Ritchey | 2/1/2019 | 1/23/2019 | — | — | — | 16,008 | 1,890,000 | — | 1/22/2020 | 825,000 | 1,650,000 | 2,475,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/5/2019 | 1/23/2019 | — | 17,176 | 34,353 | — | 2,100,000 | 1/31/2020 | 1/22/2020 | — | — | — | — | — | — | 14,788 | 1,908,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/4/2020 | 1/22/2020 | — | — | — | — | 15,679 | 31,359 | — | 2,120,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael E. LaBelle | 2/1/2019 | 1/23/2019 | — | — | — | 7,432 | 941,801 | — | 1/22/2020 | 625,000 | 1,250,000 | 1,875,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/2020 | 1/22/2020 | — | — | — | — | — | — | 6,784 | 875,639 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/5/2019 | 1/23/2019 | — | 7,975 | 15,950 | 0 | 975,000 | 2/4/2020 | 1/22/2020 | — | — | — | — | 7,192 | 14,385 | — | 972,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Bryan J. Koop | 2/1/2019 | 1/23/2019 | — | — | — | 4,955 | 585,000 | — | 1/22/2020 | 625,000 | 1,250,000 | 1,875,000 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/5/2019 | 1/23/2019 | — | 5,317 | 10,633 | — | 650,000 | 1/31/2020 | 1/22/2020 | — | — | — | — | — | — | 4,778 | 616,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/4/2020 | 1/22/2020 | — | — | — | — | 5,066 | 10,132 | — | 685,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | For a discussion of the Company’s policy with respect to the effective grant dates for annual equity-based awards, see “Compensation Discussion and Analysis – |
| (2) | Represents |
| (3) | Represents 2020 MYLTIP awards for each NEO. Performance-based vesting of |
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| 8› | COMPENSATION OF EXECUTIVE OFFICERS |
| (4) | Stock awards were made in the form of shares of restricted common stock and/or LTIP units at the election of each NEO. Each NEO |
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The amounts included in this column represent the grant date fair value of the, |
OUTSTANDING EQUITY AWARDS AT 2020 FISCAL YEAR-END
The following table sets forth information regarding outstanding equity awards held by our NEOs as of December 31, 20192020 pursuant to Item 402(f) of Regulation S-K.
| Option Awards(1) | Stock Awards(1) | Option Awards(1) | Stock Awards(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||||||||||||||||||||||||||||||
Owen D. Thomas | 54,282 | 95.69 | 4/2/2023 | 83,343 | 11,489,666 | 120,097 | 16,556,572 | 54,282 | 95.69 | 4/2/2023 | 91,118 | 8,613,385 | 99,987 | 9,451,771 | ||||||||||||||||||||||||||||||||||||||||||
Douglas T. Linde | 27,455 | 86.86 | 1/28/2021 | 54,155 | 7,465,808 | 79,313 | 10,934,090 | 34,476 | 100.77 | 2/3/2022 | 60,500 | 5,719,065 | 61,036 | 5,769,733 | ||||||||||||||||||||||||||||||||||||||||||
| 34,476 | 100.77 | 2/3/2022 | — | — | — | — | 41,092 | 98.46 | 2/1/2023 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| 41,092 | 98.46 | 2/1/2023 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Raymond A. Ritchey | — | — | — | 9,582 | 1,320,974 | 60,224 | 8,302,481 | — | — | — | 9,749 | 921,573 | 46,111 | 4,358,873 | ||||||||||||||||||||||||||||||||||||||||||
Michael E. LaBelle | 7,749 | 100.77 | 2/3/2022 | 23,304 | 3,212,690 | 27,269 | 3,759,304 | |||||||||||||||||||||||||||||||||||||||||||||||||
| 8,588 | 98.46 | 2/1/2023 | — | — | — | — | — | — | — | 23,236 | 2,196,499 | 20,928 | 1,978,324 | |||||||||||||||||||||||||||||||||||||||||||
Bryan J. Koop | 7,067 | 100.77 | 2/3/2022 | 15,886 | 2,190,043 | 16,357 | 2,254,977 | 7,067 | 100.77 | 2/3/2022 | 10,918 | 1,032,079 | 13,918 | 1,315,669 | ||||||||||||||||||||||||||||||||||||||||||
| 8,267 | 98.46 | 2/1/2023 | — | — | — | — | 8,267 | 98.46 | 2/1/2023 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| (1) | This table does not include LTIP unit and restricted common stock awards granted in January 2021 and |
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| COMPENSATION OF EXECUTIVE OFFICERS |
| (2) | The following table sets forth the number of unvested time-based LTIP units and/or shares of restricted common stock, and unvested LTIP units earned |
| Award/Grant Date(a) | Mr. Thomas | Mr. Linde | Mr. Ritchey(d) | Mr. LaBelle | Mr. Koop | Mr. Thomas | Mr. Linde | Mr. Ritchey(d) | Mr. LaBelle | Mr. Koop(d) | ||||||||||||||||||||||||||||||
| Time-Based Awards(b) | ||||||||||||||||||||||||||||||||||||||||
2/8/2016 | 3,749 | 2,632 | — | 1,782 | 1,506 | |||||||||||||||||||||||||||||||||||
2/3/2017 | 6,566 | 4,568 | — | 3,213 | 2,611 | 3,283 | 2,284 | — | 1,607 | — | ||||||||||||||||||||||||||||||
2/2/2018 | 24,195 | 15,523 | — | 5,735 | 3,519 | 16,130 | 10,349 | — | 3,823 | — | ||||||||||||||||||||||||||||||
2/6/2018 | — | — | 1,340 | 1,463 | 1,222 | — | — | — | 975 | — | ||||||||||||||||||||||||||||||
2/1/2019 | 33,351 | 20,563 | — | 7,432 | 4,955 | 25,014 | 15,423 | — | 5,574 | 3,717 | ||||||||||||||||||||||||||||||
| 2016 MYLTIP Award(c) | 15,482 | 10,869 | 8,242 | 3,679 | 2,073 | |||||||||||||||||||||||||||||||||||
1/31/2020 | 28,409 | 19,724 | — | 6,784 | 4,778 | |||||||||||||||||||||||||||||||||||
| 2017 MYLTIP Award(c) | 18,282 | 12,720 | 9,749 | 4,473 | 2,423 | |||||||||||||||||||||||||||||||||||
| (a) | The vesting of time-based LTI equity awards and performance-based LTI equity awards is subject to acceleration under certain circumstances and other exceptions discussed below under “– Potential Payments Upon Termination or Change in Control” |
| (b) | Time-based LTI equity awards are scheduled to vest ratably over four years, with 25% of the total award vesting on January 15 of each year beginning January 15 in the year following the |
| (c) | On February |
| (d) | All of Mr. Ritchey’s |
| (3) | The market value of |
| (4) | The following table sets forth the number of unearned performance-based LTI equity awards held by each NEO as of December 31, |
| Award(a) | Mr. Thomas | Mr. Linde | Mr. Ritchey | Mr. LaBelle | Mr. Koop | |||||||||||||||
| 2017 MYLTIP Award(b) | 45,506 | 31,661 | 24,266 | 11,133 | 6,031 | |||||||||||||||
| 2018 MYLTIP Award(c) | 38,807 | 25,588 | 18,782 | 8,161 | 5,009 | |||||||||||||||
| 2019 MYLTIP Award(d) | 35,784 | 22,064 | 17,176 | 7,975 | 5,317 | |||||||||||||||
| Award(a) | Mr. Thomas | Mr. Linde | Mr. Ritchey | Mr. LaBelle | Mr. Koop | |||||||||||||||
| 2018 MYLTIP Award(b) | 27,390 | 18,060 | 13,256 | 5,760 | 3,535 | |||||||||||||||
| 2019 MYLTIP Award(c) | 35,784 | 22,064 | 17,176 | 7,975 | 5,317 | |||||||||||||||
| 2020 MYLTIP Award(d) | 36,813 | 20,912 | 15,679 | 7,193 | 5,066 | |||||||||||||||
| (a) | The vesting of performance-based LTI equity awards is subject to acceleration under certain circumstances |
| (b) | On February |
| (c) | On February 5, 2019, these NEOs received 2019 MYLTIP awards. The measurement period for assessing performance ends on February 4, 2022. In accordance with SEC rules, the number of equity incentive plan awards is based on achieving “target” performance goals. If our performance continued through the end of the performance period at the same rate as had occurred from the beginning of the performance period through December 31, |
On February |
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| COMPENSATION OF EXECUTIVE OFFICERS |
20192020 OPTION EXERCISES AND STOCK VESTED
The following table sets forth the aggregate number of options to purchase shares of our common stock exercised by our NEOs in 20192020 and the aggregate number of shares of common stock and LTIP units that vested in 2019.2020. The Value Realized on Exercise is the product of (1) the fair market value of a share of our common stock on the date of exercise minus the exercise price, multiplied by (2) the number of shares of common stock underlying the exercised options. The Value Realized on Vesting is the product of (1) the closing price on the NYSE of a share of our common stock on the vesting date (or, if the vesting date was not a trading day, the immediately preceding trading date), multiplied by (2) the number of shares and LTIP units vesting. In each case, the value realized is before payment of any applicable taxes and brokerage commissions.
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting | ||||||||||||||||||||||||
Owen D. Thomas | 0 | 0 | 36,910 | 4,653,402 | — | — | 57,198 | $ | 8,067,183 | |||||||||||||||||||||||
Douglas T. Linde | 0 | 0 | 26,020 | 3,284,768 | 27,455 | $ | 1,587,136 | 38,819 | $ | 5,479,164 | ||||||||||||||||||||||
Raymond A. Ritchey | 96,802 | 4,075,439 | 28,050 | 3,676,589 | — | — | 34,119 | $ | 4,887,658 | |||||||||||||||||||||||
Michael E. LaBelle | 0 | 0 | 11,545 | 1,433,372 | 16,337 | $ | 617,061 | 15,798 | $ | 2,220,867 | ||||||||||||||||||||||
Bryan J. Koop | 5,616 | 264,449 | 8,210 | 1,013,312 | — | — | 14,592 | $ | 1,801,210 | |||||||||||||||||||||||
| (1) | Mr. Koop attained age 62 with 20 years of service on August 18, 2020. As a result, all of his unvested time-based LTI awards granted prior to January 1, 2019 automatically vested. |
NONQUALIFIED DEFERRED COMPENSATION IN 2020
We provide our executives with the opportunity to defer up to 20% of their base salaries and cash bonuses. Deferrals are credited with earnings or losses based upon the executive’s selection of one or more of 28 measurement funds, which are all publicly traded mutual funds. Executives may change their selection of measurement funds on a daily basis.
The table below summarizes the annual rates of return for the year ended December 31, 20192020 for the 28 measurement funds:
| Name of Fund | Return (%) | |||
American Beacon Small Cap Value Fund Class Institutional | ||||
Artisan Mid Cap Fund Institutional Class | ||||
Dodge & Cox Income Fund | ||||
Dodge & Cox International Stock Fund | ||||
Oakmark Equity And Income Fund Investor Class | ||||
PIMCO Low Duration Fund Institutional Class | ||||
T. Rowe Price Dividend Growth Fund | ||||
T. Rowe Price Growth Stock Fund | ||||
T. Rowe Price Mid-Cap Value Fund | ||||
T. Rowe Price Retirement 2005 Fund | ||||
T. Rowe Price Retirement 2010 Fund | ||||
T. Rowe Price Retirement 2015 Fund | ||||
T. Rowe Price Retirement 2020 Fund | ||||
T. Rowe Price Retirement 2025 Fund | ||||
T. Rowe Price Retirement 2030 Fund | ||||
T. Rowe Price Retirement 2035 Fund | 16.13 | |||
T. Rowe Price Retirement 2040 Fund | 17.08 | |||
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| COMPENSATION OF EXECUTIVE OFFICERS |
| Name of Fund | Return (%) | |||
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T. Rowe Price Retirement 2045 Fund | ||||
T. Rowe Price Retirement 2050 Fund | ||||
T. Rowe Price Retirement 2055 Fund | ||||
T. Rowe Price Retirement 2060 Fund | ||||
T. Rowe Price Retirement Balanced Fund | ||||
Vanguard FTSE Social Index Fund Admiral | 21.59 | |||
Vanguard Small-Cap Index Fund Admiral Shares | ||||
Vanguard Total Bond Market Index Fund Admiral Shares | ||||
Vanguard Total International Stock Index Fund Admiral Shares | ||||
Vanguard Total Stock Market Index Fund Institutional Shares | ||||
Virtus Duff & Phelps Real Estate Securities Fund Class I | ||||
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Benefits under the deferred compensation plan are generally paid in a lump sum upon the executive’s termination of employment prior to attainment of retirement age (age(as defined in the plan to be age 55 with five years of service) or the executive’s death, or in a lump sum or annual installments for a period of up to 15 years (as previously selected by the executive)executive at the time of deferral) upon the executive’s retirement. Payment will generally start or be made by January 15 following the year of termination or retirement, or six months after the executive’s termination or retirement, whichever is later. Executives may also at the time of deferral elect a fixed distribution date, which must be at least five years after the end of the calendar year in which amounts are deferred. The deferred compensation plan also permits an in-service withdrawal of the executive’s account balance attributable to pre-2005 deferrals, subject to a withdrawal penalty equal to 10% of the amount withdrawn.
The following table shows deferrals made by our NEOs to the deferred compensation plan during the year ended December 31, 2019,2020, the earnings and withdrawals/distributions during the year, and the aggregate account balance of each NEO under the deferred compensation plan as of December 31, 2019.2020.
| Name | Executive Contributions in 2019 ($)(1)(2) | Registrant Contributions in 2019 ($) | Aggregate Earnings in 2019 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at 12/31/2019($)(3) | Executive Contributions in 2020(1)(2) | Registrant Contributions in 2020 | Aggregate Earnings in 2020 | Aggregate | Aggregate Balance at 12/31/2020(3) | ||||||||||||||||||||||||||||||
Owen D. Thomas | 179,615 | — | 223,096 | — | 1,312,203 | $ | 186,923 | — | $ | 247,622 | — | $ | 1,746,748 | |||||||||||||||||||||||||||
Douglas T. Linde | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Raymond A. Ritchey | 416,000 | — | 722,304 | — | 4,044,820 | — | — | $ | 629,566 | — | $ | 4,674,386 | ||||||||||||||||||||||||||||
Michael E. LaBelle | — | — | 278,115 | 161,133 | 1,165,973 | — | — | $ | 253,923 | $ | 199,519 | $ | 1,220,377 | |||||||||||||||||||||||||||
Bryan J. Koop | 235,108 | — | 270,293 | — | 1,791,769 | $ | 228,266 | — | $ | 294,960 | — | $ | 2,314,995 | |||||||||||||||||||||||||||
| (1) | These amounts do not include any contributions out of bonus payments that were made in February |
| (2) | Of the amounts reported in the contributions column, (a) |
| (3) | Of the amounts reported in the aggregate balance column, (a) $186,923 of Mr. Thomas’ aggregate balance and $63,866 of Mr. Koop’s aggregate balance are also included in the Summary Compensation Table as salary for 2020; (b) $179,615 of Mr. Thomas’ aggregate balance and $49,108 of Mr. Koop’s aggregate balance are also included in the Summary Compensation Table as salary for |
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82 | | | 2021 Proxy Statement |
| 8› | COMPENSATION OF EXECUTIVE OFFICERS |
We have employment agreements with each of our NEOs. The material terms of these agreements are summarized below.
› SUMMARY OF OWEN D. THOMAS’ EMPLOYMENT AGREEMENT
We originally hired Mr. Thomas to be our CEO effective April 2, 2013. The initial term of Mr. Thomas’ employment agreement was three years, with automatic one-year renewals commencing on the third and fourth anniversaries of the effective date unless prior written notice of termination was given. The term of Mr. Thomas’ original employment agreement expired on April 2, 2018 on which date we entered into a new employment agreement with him. The following is a summary of Mr. Thomas’ current employment agreement:
Term and Duties
April 2, 2018 through June 30, 2023
As CEO, Mr. Thomas reports directly to the Board of Directors, and must devote substantially all of his working time and efforts to the performance of his duties.
Our Board agreed to continue to nominate Mr. Thomas for re-election to the Board of Directors for so long as he remains CEO, and he has agreed to resign from the Board upon termination of employment.
| • | Mr. Thomas may participate as an officer or director of, or advisor to, any organization that is not engaged in commercial real estate activities (e.g., Nareit) and also engage in religious, charitable or other community activities, provided that they do not materially restrict his ability to fulfill his obligations to us as an officer. Mr. Thomas may also continue serving on the Board of Lehman Brothers Holdings Inc. and may engage in “Minority Interest Passive Investments,” which are defined as acquiring, holding and exercising the voting rights associated with an investment made through (1) a non-controlling, minority interest in an entity or (2) the lending of money, in either case with the purpose or intent of obtaining a return on such investment but without management of the property or business to which the investment directly or indirectly relates and without any business or strategic consultation by Mr. Thomas. |
Compensation and Benefits
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Target annual bonus equal to 250% of his annual base salary, with the actual amount to be determined at the discretion of the Compensation Committee.
Incentive equity in an amount determined at the discretion of the Compensation Committee based on Company and individual performance and competitive peer group information. LTI equity awards may be provided in the form of stock options, restricted stock, restricted stock units and/or LTIP units and may be subject to time-based or performance-based vesting, or both, as determined by the Compensation Committee.
Participation in all of our employee benefit plans or programs as in effect from time to time for our senior executive employees, including medical/dental insurance, life insurance, disability insurance and deferred compensation plans, plus the use of a Company-owned or leased automobile.
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Severance Benefits and Retirement Eligibility
| • | Mr. Thomas’ employment with us is at-will, but his employment agreement provides for certain payments and benefits to him upon his separation from the Company in certain circumstances (see “– Potential Payments upon Termination or Change in Control” below). |
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| 8› | COMPENSATION OF EXECUTIVE OFFICERS |
| • | Mr. Thomas’ employment agreement provides for the acceleration of vesting of equity awards granted after April 2, 2018 upon attainment of age 62 with 10 years of service (see “– Potential Payments upon Termination or Change in Control”below). |
Mr. Thomas is not entitled to participate in any of the Company’s change in control severance plans or programs. As such, Mr. Thomas is not entitled to receive any tax gross-up payments. In the event that any payment or benefit to be paid or provided to Mr. Thomas would be subject to the golden parachute excise tax, the payments and benefits will be reduced to the extent necessary to avoid the imposition of the excise tax if doing so would result in a greater after-tax benefit to Mr. Thomas.
The expiration of Mr. Thomas’ agreement on June 30, 2023 will not constitute or result in a termination of employment by the Company without cause, and the severance provisions (other than retirement eligibility and related benefits) shall not apply.
Restrictive Covenants
While he is an officer and until the later of (1) one year after the termination of his employment for any reason or (2) the latest date of full vesting of any performance-based LTI equity award, Mr. Thomas is prohibited from:
engaging, participating or assisting, directly or indirectly, in the acquisition, development, construction, operation, management, or leasing of any commercial real estate property of a type which is the subject of a significant portion of the Company’s business (measured as at least 10% of the Company’s revenues on a trailing 12-month basis) at the time of termination of his employment;
| › | engaging, participating or assisting, directly or indirectly, in the acquisition, development, construction, operation, management, or leasing of any commercial real estate property of a type which is the subject of a significant portion of the Company’s business (measured as at least 10% of the Company’s revenues on a trailing 12-month basis) at the time of termination of his employment; |
intentionally interfering with the Company’s relationships with its tenants, suppliers, contractors, lenders or employees or with any governmental agency; or
| › | intentionally interfering with the Company’s relationships with its tenants, suppliers, contractors, lenders or employees or with any governmental agency; or |
competing for, soliciting or diverting the Company’s tenants or employees, either for himself or any other business, person or entity.
| › | competing for, soliciting or diverting the Company’s tenants or employees, either for himself or any other business, person or entity. |
Mr. Thomas is also subject to confidentiality requirements and post-termination litigation and regulatory cooperation obligations.
In addition, the non-competition covenant shall not apply if Mr. Thomas’ employment is terminated following a change in control (as defined in the Boston Properties, Inc. 2012 Stock Option and Incentive Plan, as amended from time to time)time (the ”2012 Plan”)).
› SUMMARY OF EMPLOYMENT AGREEMENTS WITH MESSRS. LINDE, RITCHEY, LABELLE AND KOOP
We also have employment agreements with the other NEOs –i.e., Messrs. Linde, Ritchey, LaBelle and Koop – under which each has agreed to devote substantially all of his business time to our business and affairs. The initial term of each of these employment agreements was two years beginning November 29, 2002 (January 24, 2008 in the case of Mr. LaBelle), with automatic one-year renewals commencing on each anniversary date unless written notice of termination is given at least 90 days prior to such date by either party. The base salary for each of these NEOs is reviewed annually by the Compensation Committee and may be increased but not decreased in its discretion. Each NEO is also eligible to receive a cash bonus and equity-based compensation to be determined at the discretion of the Compensation Committee.
Similar to Mr. Thomas’ employment agreement, the other NEOs’ employment agreements contain non-competition, non-interference and non-solicitation restrictions (which shall not apply if the NEO’s employment is terminated following a change in control (as defined in the senior executive severance plan)) and permit them to participate as an officer or director of, or advisor to, any charitable or other tax exempt organization only and the scope of the noncompetition provision in each employment agreement is limited to our markets at the time of termination of their employment. In consideration for the benefits and protections afforded by the employment agreements, each of these NEOs agreed to confidentiality, non-competition,non-interference and non-solicitation covenants and to provide to the Company post-termination litigation and regulatory
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cooperation. These NEOs’ employment with us is at-will, but their employment agreements also provide for certain payments and benefits to them upon separation from the Company in certain circumstances as described under “– Potential Payments upon Termination or Change in Control” below.
84 | | | 2021 Proxy Statement |
| 8› | COMPENSATION OF EXECUTIVE OFFICERS |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Each NEO has the right to receive severance and other benefits in the event of a termination of theirhis employment under different circumstances pursuant to their employment agreements (discussed under“– Employment Agreements”above) and, except for Mr. Thomas, the Company’s Senior Executive Severance Plan. In addition, our LTI equity award agreements (including performance-based MYLTIP awards) provide for the vesting and forfeiture of LTI equity awards under different circumstances. The availability, nature and amount of severance and other benefits differ depending on whether the triggering event is:
a termination by the Company without “cause” (as defined in the applicable agreement or plan) or by the NEO with “good reason” (as defined in the applicable agreement or plan) prior to a change in control,
a termination by the Company without “cause” or by the NEO with “good reason” within 24 months following a change in control,
a change in control without termination,
termination due to death or disability, or
a qualified retirement.
Upon a voluntary termination by the NEO, other than for “good reason” or a qualified retirement, or a termination by the Company with “cause,” the NEOs are not entitled to any additional or special payments under their employment agreements, our Senior Executive Severance Plan, equity award agreementsany plan, agreement or other contractual arrangements,arrangement, and any unvested LTI equity awards will be immediately forfeited.
› EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL SEVERANCE PLAN
The following chart summarizes payments and benefits (1) our CEO is eligible to receive under his employment agreement and (2) the Other NEOs other than our CEO are eligible to receive under their respective employment agreements and our Senior Executive Severance Plan. NEOs other than our CEO participate in our Senior Executive Severance Plan, whereas the severance and benefits to which our CEO is entitled following a termination within twenty-four (24) months after a change in control are provided in his employment agreement.
| Scenario | Component(1) | |||
Termination by the Company without “Cause” or by the NEO for “Good Reason” without a Change in Control(2) | Bonus | • All NEOs: Target bonus prorated for number of days employed in year of termination | ||
| Cash Severance | • Mr. Thomas: 2x the sum of base salary plus amount of cash bonus, if any, received or payable with respect to the preceding year (but, not less than his target bonus)
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• Other NEOs: 1x the sum of base salary plus amount of cash bonus, if any, received or payable with respect to the preceding year | ||||
| Time-Based LTI Equity Awards | • Mr. Thomas: Additional 24 months of vesting
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• Other NEOs: Additional 12 months of vesting | ||||
| Health Benefits | • Participation by the NEO, his spouse and dependents, subject to payment of premiums at active employees’ rate
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• Mr. Thomas: Up to 24 months
• Other NEOs: Up to 12 months | ||||
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| COMPENSATION OF EXECUTIVE OFFICERS |
| Scenario | Component(1) | |||
Termination by the Company without “Cause” or by the NEO for “Good Reason” within 24 Months after a Change in Control | Bonus | • Mr. Thomas: Target bonus prorated for number of days employed in year of termination
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• Other NEOs: Not applicable | ||||
| Cash Severance | • Mr. Thomas: Lump-sum equal to 3x the sum of (a) Mr. Thomas’ base salary plus (b) the amount of his average annual cash bonus (or his target bonus, if greater) with respect to the three calendar years preceding the change in control
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• Other NEOs: Lump-sum equal to 3x the sum of (a) the NEO’s base salary plus (b) the amount of his average annual cash bonus with respect to the three calendar years preceding the change in control | ||||
| Time-Based LTI Equity Awards | • Full vesting for all NEOs | |||
| Health Benefits | • Participation by the NEO, his spouse and dependents for up to 36 months, subject to payment of premiums at active employees’ rate | |||
| Other Benefits | • Financial counseling, tax preparation assistance and outplacement counseling for up to 36 months | |||
| Tax Gross-Up Payment | • Mr. Thomas is not entitled to receive any tax gross-up payments from the Company. In the event that any payment or benefit would be subject to the golden parachute excise tax, the payments and benefits will be reduced to the extent necessary to avoid the imposition of such excise tax if the reduction would result in a greater after-tax benefit to Mr. Thomas.
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• Other NEOs | ||||
Termination due to Death or Disability | Bonus | • Target bonus prorated for number of days employed in year of termination | ||
| Time-Based LTI Equity Awards |
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| Health Benefits | • Participation by the NEO, his spouse and dependents for up to 18 months, subject to payment of premiums at active employees’ rate | |||
| (1) | Performance-based LTI equity awards are governed by the relevant award agreements. The treatment of these awards under certain termination scenarios, |
| (2) | Receipt of these payments and benefits (other than the prorated target bonus) is subject to the NEO’s execution of a general release of claims with us. |
› DOUBLE-TRIGGER ACCELERATION OF VESTING OF EQUITY AWARDS UPON A CHANGE OFIN CONTROL
Time-based LTI equity award agreements include “double-trigger” vesting, meaning that, if there is a “change ofin control” (as defined in the 2012 Plan) and the awards are not otherwise cancelled in connection with the change ofin control transaction, then they only become fully vested if, within 24 months after the change ofin control, the NEO’s employment is terminated by the Company or its successor without “cause” or the NEO resigns for “good reason.”
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| COMPENSATION OF EXECUTIVE OFFICERS |
› PERFORMANCE-BASED LTI EQUITY AWARDS
The treatment of performance-based LTI equity awards (e.g., MYLTIP awards) upon certain terminations of employment or a change in control is governed by the NEOs’ relevant award agreements. The following chart summarizes the treatment of these awards under each scenario assuming it occurs prior to the end of the applicable three-year performance period.
| Scenario | Treatment of Award | |
Termination by the Company without “Cause” or by the NEO for “Good Reason” without a Change in Control | • The number of
• Any earned | |
Termination due to Death or Disability | • The number of
• Any earned | |
Change in Control Without Termination | • The number of
• Any earned | |
In the case of each of the foregoing scenarios following the end of the applicable three-year performance period, any MYLTIPLTIP units that had been earned prior to the date of such termination or change in control will become fully vested, but, in the case of a termination by the Company without “cause” or by the NEO for “good reason” without a change in control, the NEO will not be permitted to transfer the MYLTIPLTIP units until they otherwise would have vested under the terms of the awards.
› RETIREMENT ELIGIBILITY PROVISIONS FOR LTI EQUITY AWARDS
LTI Equity Awards Granted to Mr. ThomasRetirement Provisions
Retirement Provision.Mr. Thomas. Pursuant to Mr. Thomas’ employment agreement, all award agreements for LTI equity granted after April 2, 2018 shall provide that if Mr. Thomas is employed by us when he attains age 62 and has completed at least ten (10) years of employment with us, then his time-based LTI equity awards and performance-based LTI equity awards that are earned will vest in full (without any proration of the award due tobased on service time).
Unearned performance-based LTI equity awards.The full number of MYLTIPLTIP units Mr. Thomas earns (if any) under any performance-based LTI equity awards for which the performance period has not ended will be determined in the same manner and at the same time as otherwise would have been the case if he had remained employed through the full vestingperformance period for the applicable award, including without limitation with respect to performance hurdles and lapse of restrictions on transfer, without any proration of the award due to service time, and with anyall service-based vesting requirements deemed satisfied, over the relevant service-vesting schedule, so long as he agrees to be bound by the post-employment non-competition, non-interference and non-solicitation covenants (which are otherwise applicable until the later of (1) one (1) year following termination and (2) the latest date of full vesting of any performance-based LTI equity award.award).
NEOs other than Mr. Thomas. The agreements governing time-based LTI equity awards and performance-based LTI equity awards granted to NEOs other than Mr. Thomas provide that the time-based equity awards and performance-based equity awards that are earned will fully vest when the employee retires after the date on which the sum of the employee’s years of service plus age (which must be at least 58) equals or exceeds 70 (the so-called “Rule of 70”) (“Qualified Retirement”); provided that the NEO satisfies the other conditions of a “Qualified Retirement,” which require the employee to: (1) give prior written notice to the Company of his retirement (for NEOs, six (6) months’ notice is required), (2) enter into a separation agreement with the Company and (3) remain employed by the Company until the retirement date specified in such notice, unless employment is terminated by the Company without “cause” or by the employee for “good reason.”
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| COMPENSATION OF EXECUTIVE OFFICERS |
If an NEO retires after satisfying the conditions for a Qualified Retirement, the number of LTIP units the NEO earns (if any) under performance-based LTI Equity Awards Grantedawards will be determined in the same manner and at the same time as otherwise would have been the case if he had remained employed through the entire performance period for the applicable award, including with respect to performance hurdles and lapse of restrictions on transfer, without any proration of the Other NEOSaward due to service time. Any earned, unvested LTIP units will no longer be subject to forfeiture but the NEO will not be permitted to transfer the LTIP units until they otherwise would have vested under the terms of the awards.
Pre-2019 Policy
For employees other than Mr. Thomas,Time-based LTI equity awards granted prior to 2019 provide that when an employee attains age 65, or attains age 62 and completes 20 years of service with us, the agreements governingemployee becomes fully vested in all time-based LTI equity awards and performance-based(the “Pre-2019 Policy”). In addition, time-based LTI equity awards provide as follows:
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NEOs Eligible for Retirement as of December 31, 20192020
Based on their respective ageages and tenure as of December 31, 2019, each2020:
Each of Messrs. Ritchey and Koop is eligible for a Qualified Retirement with respect to awards granted in 2019. In addition, 2020 and subsequent thereto.
Mr. Ritchey satisfied the Pre-2019 Policy and is grandfathered under such policy with respect to his time-based LTI equity awards. Therefore, all of Mr. Ritchey’s time-based equity awards (other than LTIP units granted on February 6, 2018 (that provide that if an employee had attained age 65, or attained age 62 and completed 20 years of service with us prior to the grant date, the award will vest ratably over two years)) were fully vested as of December 31, 20192020 and subsequent awards will continue to be vestedvest on the grant date.
Mr. Koop attained age 62 with 20 years of service on August 18, 2020, and as a result, all of Mr. Koop’s unvested time-based equity awards that were granted prior to January 1, 2019 fully vested on that date.
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› ESTIMATED PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following tables show the potential payments and benefits that would have been provided to our NEOs assuming each scenario occurred on December 31, 2019.2020.
| Scenario | Payments and Benefits Upon Termination | Owen D. ($) | Douglas T. ($) | Raymond ($) | Michael E. ($) | Bryan J. Koop ($) | ||||||||||||||||
Involuntary Not for Cause or Good Reason Termination | Bonus | 2,250,000 | 750,000 | 740,000 | 510,000 | 410,000 | ||||||||||||||||
| Severance | 7,550,000 | 2,930,000 | 2,820,000 | 1,960,000 | 1,960,000 | |||||||||||||||||
| Unvested Equity Awards(1)(2) | 8,078,872 | 3,598,008 | 1,320,975 | 1,561,265 | 1,061,798 | |||||||||||||||||
| 2017 MYLTIP Awards(1)(3) | 4,918,948 | 3,422,312 | 2,622,950 | 1,203,447 | 651,901 | |||||||||||||||||
| 2018 MYLTIP Awards(1)(3) | 3,182,734 | 2,098,585 | 1,540,370 | 669,370 | 410,765 | |||||||||||||||||
| 2019 MYLTIP Awards(1)(3) | 847,431 | 522,493 | 406,785 | 188,872 | 125,887 | |||||||||||||||||
| Benefits Continuation | 45,668 | 22,834 | 20,759 | 22,834 | 20,759 | |||||||||||||||||
| Total | 26,873,653 | 13,344,232 | 9,471,839 | 6,115,788 | 4,641,110 | |||||||||||||||||
Involuntary Not for Cause or Good Reason Termination Following Change in Control(4) | Bonus | 2,250,000 | — | — | — | |||||||||||||||||
| Severance | 10,558,333 | 8,212,500 | 7,935,000 | 5,205,000 | 4,895,000 | |||||||||||||||||
| Unvested Equity Awards(1)(2) | 11,489,666 | 7,465,808 | 1,320,975 | 3,212,689 | 2,190,044 | |||||||||||||||||
| 2017 MYLTIP Awards(1)(3) | 5,081,520 | 3,535,420 | 2,709,638 | 1,243,221 | 673,446 | |||||||||||||||||
| 2018 MYLTIP Awards(1)(3) | 5,028,995 | 3,315,947 | 2,433,918 | 1,057,662 | 649,045 | |||||||||||||||||
| 2019 MYLTIP Awards(1)(3) | 2,811,930 | 1,733,727 | 1,349,787 | 626,712 | 417,716 | |||||||||||||||||
| Benefits Continuation | 68,502 | 70,482 | 64,257 | 70,482 | 64,257 | |||||||||||||||||
| Other Benefits(5) | 150,000 | 150,000 | 150,000 | 150,000 | 150,000 | |||||||||||||||||
| Excise Tax Gross-Up(6) | — | 8,228,447 | 7,066,035 | 4,044,683 | 3,351,083 | |||||||||||||||||
| Total | 37,438,946 | 32,712,331 | 23,029,610 | 15,610,449 | 12,390,591 | |||||||||||||||||
Change in Control Without Termination | 2017 MYLTIP Awards(1)(3) | 5,081,520 | 3,535,420 | 2,709,638 | 1,243,221 | 673,446 | ||||||||||||||||
| 2018 MYLTIP Awards(1)(3) | 5,028,995 | 3,315,947 | 2,433,918 | 1,057,662 | 649,045 | |||||||||||||||||
| 2019 MYLTIP Awards(1)(3) | 2,811,930 | 1,733,727 | 1,349,787 | 626,712 | 417,716 | |||||||||||||||||
| Total | 12,922,445 | 8,585,094 | 6,493,343 | 2,927,595 | 1,740,207 | |||||||||||||||||
Death or Disability | Bonus | 2,250,000 | 750,000 | 740,000 | 510,000 | 410,000 | ||||||||||||||||
| Unvested Equity Awards(1)(2) | 11,489,666 | 7,465,808 | 1,320,975 | 3,212,689 | 2,190,044 | |||||||||||||||||
| 2017 MYLTIP Awards(1)(3) | 5,081,520 | 3,535,420 | 2,709,638 | 1,243,221 | 673,446 | |||||||||||||||||
| 2018 MYLTIP Awards(1)(3) | 5,028,995 | 3,315,947 | 2,433,918 | 1,057,662 | 649,045 | |||||||||||||||||
| 2019 MYLTIP Awards(1)(3) | 2,811,930 | 1,733,727 | 1,349,787 | 626,712 | 417,716 | |||||||||||||||||
| Benefits Continuation | 34,251 | 34,251 | 31,139 | 34,251 | 31,139 | |||||||||||||||||
| Total | 26,696,362 | 16,835,153 | 8,585,457 | 6,684,535 | 4,371,390 | |||||||||||||||||
Qualified Retirement(7) | Unvested Equity Awards(1)(2) | — | — | 1,320,975 | — | 683,096 | ||||||||||||||||
| 2017 MYLTIP Awards(1)(3) | — | — | 2,709,638 | — | — | |||||||||||||||||
| 2018 MYLTIP Awards(1)(3) | — | — | 2,433,918 | — | — | |||||||||||||||||
| 2019 MYLTIP Awards(1)(3) | — | — | 1,349,787 | — | 417,716 | |||||||||||||||||
| Total | — | — | 7,814,318 | — | 1,100,812 | |||||||||||||||||
| Scenario | Payments and Benefits Upon Termination | Owen D. Thomas | Douglas T. Linde | Raymond A. Ritchey | Michael E. LaBelle | Bryan J. Koop | ||||||||||||||||
Involuntary Not for Cause or Good Reason Termination | Bonus | $ | 2,350,000 | $ | 1,900,000 | $ | 1,650,000 | $ | 1,250,000 | $ | 1,250,000 | |||||||||||
| Severance | $ | 6,900,000 | $ | 2,845,000 | $ | 2,560,000 | $ | 1,805,000 | $ | 1,780,000 | ||||||||||||
| Unvested Equity Awards(1)(2) | $ | 6,482,395 | $ | 2,859,533 | $ | 921,573 | $ | 1,137,385 | $ | 459,038 | ||||||||||||
| 2018 MYLTIP Awards(1)(3) | $ | 1,652,730 | $ | 1,089,752 | $ | 799,853 | $ | 347,587 | $ | 213,288 | ||||||||||||
| 2019 MYLTIP Awards(1)(3) | $ | 708,522 | $ | 436,849 | $ | 340,071 | $ | 157,916 | $ | 105,237 | ||||||||||||
| 2020 MYLTIP Awards(1)(3) | $ | 84,153 | $ | 47,806 | $ | 35,833 | $ | 16,431 | $ | 11,573 | ||||||||||||
| Benefits Continuation | $ | 48,523 | $ | 24,261 | $ | 22,056 | $ | 24,261 | $ | 22,056 | ||||||||||||
| Total | $ | 18,226,323 | $ | 9,203,201 | $ | 6,329,386 | $ | 4,738,580 | $ | 3,841,192 | ||||||||||||
| | | |
| COMPENSATION OF EXECUTIVE OFFICERS |
| Scenario | Payments and Benefits Upon Termination | Owen D. Thomas | Douglas T. Linde | Raymond A. Ritchey | Michael E. LaBelle | Bryan J. Koop | ||||||||||||||||
Involuntary Not for Cause or Good Reason Termination Following Change in Control(4) | Bonus | $ | 2,350,000 | — | — | — | — | |||||||||||||||
| Severance | $ | 10,550,000 | $ | 8,460,000 | $ | 8,200,000 | $ | 5,600,000 | $ | 5,430,000 | ||||||||||||
| Unvested Equity Awards(1)(2) | $ | 8,613,385 | $ | 5,719,065 | $ | 921,573 | $ | 2,196,499 | $ | 1,032,079 | ||||||||||||
| 2018 MYLTIP Awards(1)(3) | $ | 1,708,913 | $ | 1,126,798 | $ | 827,043 | $ | 359,403 | $ | 220,538 | ||||||||||||
| 2019 MYLTIP Awards(1)(3) | $ | 1,116,305 | $ | 688,273 | $ | 535,796 | $ | 248,803 | $ | 165,806 | ||||||||||||
| 2020 MYLTIP Awards(1)(3) | $ | 278,391 | $ | 158,149 | $ | 118,541 | $ | 54,355 | $ | 38,285 | ||||||||||||
| Benefits Continuation | $ | 72,784 | $ | 75,214 | $ | 68,598 | $ | 75,214 | $ | 68,598 | ||||||||||||
| Other Benefits(5) | $ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | ||||||||||||
| Excise Tax Gross-Up(6) | — | $ | 4,364,986 | $ | 3,865,898 | $ | 2,747,823 | $ | 2,647,611 | |||||||||||||
| Total | $ | 24,839,778 | $ | 20,742,485 | $ | 14,687,449 | $ | 11,432,097 | $ | 9,752,917 | ||||||||||||
Change in Control Without Termination | 2018 MYLTIP Awards(1)(3) | $ | 1,708,913 | $ | 1,126,798 | $ | 827,043 | $ | 359,403 | $ | 220,538 | |||||||||||
| 2019 MYLTIP Awards(1)(3) | $ | 1,116,305 | $ | 688,273 | $ | 535,796 | $ | 248,803 | $ | 165,806 | ||||||||||||
| 2020 MYLTIP Awards(1)(3) | $ | 278,391 | $ | 158,149 | $ | 118,541 | $ | 54,355 | $ | 38,285 | ||||||||||||
| Total | $ | 3,103,609 | $ | 1,973,220 | $ | 1,481,380 | $ | 662,561 | $ | 424,629 | ||||||||||||
Death or Disability | Bonus | $ | 2,350,000 | $ | 1,900,000 | $ | 1,650,000 | $ | 1,250,000 | $ | 1,250,000 | |||||||||||
| Unvested Equity Awards(1)(2) | $ | 8,613,385 | $ | 5,719,065 | $ | 921,573 | $ | 2,196,499 | $ | 1,032,079 | ||||||||||||
| 2018 MYLTIP Awards(1)(3) | $ | 1,708,913 | $ | 1,126,798 | $ | 827,043 | $ | 359,403 | $ | 220,538 | ||||||||||||
| 2019 MYLTIP Awards(1)(3) | $ | 1,116,305 | $ | 688,273 | $ | 535,796 | $ | 248,803 | $ | 165,806 | ||||||||||||
| 2020 MYLTIP Awards(1)(3) | $ | 278,391 | $ | 158,149 | $ | 118,541 | $ | 54,355 | $ | 38,285 | ||||||||||||
| Benefits Continuation | $ | 36,392 | $ | 36,392 | $ | 33,084 | $ | 36,392 | $ | 33,084 | ||||||||||||
| Total | $ | 14,103,386 | $ | 9,628,677 | $ | 4,086,037 | $ | 4,145,452 | $ | 2,739,792 | ||||||||||||
Qualified Retirement | Unvested Equity Awards(1)(2) | — | — | $ | 921,573 | — | $ | 1,032,079 | ||||||||||||||
| 2018 MYLTIP Awards(1)(3) | — | — | $ | 827,043 | — | $ | 220,538 | |||||||||||||||
| 2019 MYLTIP Awards(1)(3) | — | — | $ | 535,796 | — | $ | 165,806 | |||||||||||||||
| 2020 MYLTIP Awards(1)(3) | — | — | $ | 118,541 | — | $ | 38,285 | |||||||||||||||
| Total | — | — | $ | 2,402,953 | — | $ | 1,456,708 | |||||||||||||||
| (1) | Restricted common stock, LTIP units and LTIP units that would have been earned pursuant to |
| (2) | Includes the following unvested shares of restricted common stock and LTIP units (including outstanding performance-based LTI equity awards for which the three-year performance period has ended and that have been earned (i.e., |
| • |
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| • | Involuntary not for cause termination or a good reason termination within 24 months following a change in control and death or disability: Mr. Thomas — |
| • | Qualified Retirement: Mr. Ritchey — |
| (3) | As of December 31, |
| | 2021 Proxy Statement | 89 |
| 8› | COMPENSATION OF EXECUTIVE OFFICERS |
| (4) | Assumes termination occurs simultaneously with a change in control. |
| (5) | Includes outplacement services valued at 15% of the sum of current base salary plus bonus with respect to the immediately preceding year up to a maximum of $75,000 paid in a lump sum, and financial counseling and tax preparation services valued at $25,000 per year for 36 months. |
| (6) | Under his employment agreement, Mr. Thomas is not entitled to receive tax gross-up payments in the event he becomes subject to the golden parachute excise tax. Instead, if any payment or benefit to be paid or provided to Mr. Thomas would |
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The above discussion and the amounts shown in the above tables do not include payments and benefits to the extent they have been earned prior to the termination of employment or are provided on a non-discriminatory basis to salaried employees upon termination of employment. These include:
accrued salary and vacation pay;
| • | accrued salary and vacation pay; |
| • | distribution of plan balances under our 401(k) plan and the non-qualified deferred compensation plan (see “ |
life insurance proceeds in the event of death.
As required by SEC regulations, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Thomas, our CEO:
For 2019,2020, our last completed fiscal year:
the median of the annual total compensation of all employees of the Company (other than our CEO) was $115,266;$108,126; and
the annual total compensation of our CEO, as reported in the Summary Compensation Table on page 68,77, was $11,917,600.$10,737,289.
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Based on this information, for 2019,2020, the ratio of the annual total compensation of Mr. Thomas to the median of the annual total compensation of all other employees was 10399 to 1.1.
The median employee that was used for purposes of calculating the ratio of the annual total compensation of our CEO to the median of the total compensation of all employees is the same employee that was identified for purposes of our 2017 disclosure. The median employee works in Boston, Massachusetts. There has been no change in our employee population or employee compensation arrangement since that median employee was identified that we believe would significantly impact our pay ratio disclosure. We identified the median employee by totaling (1) cash compensation (i.e., wages, overtime and bonus) as reflected on our payroll records for 20172020 and (2) the value of LTI equity awards that were granted in 20172020 and subject to time-based vesting, for all individuals, excluding our CEO, who we employed on December 31, 20172020 (whether on a full-time, part-time, temporary or seasonal basis). In addition, we annualized the wages of full-time employees who were hired during 20172020 but did not work for us the entire fiscal year. We did not make any other assumptions, adjustments, or estimates with respect to total cash compensation or LTI compensation.
WeAfter identifying the median employee, we calculated annual total compensation for 20192020 for the median employee using the same methodology we use for our NEOs as set forth in the Summary Compensation Table.
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| 8› | COMPENSATION OF EXECUTIVE OFFICERS |
As of December 31, 2019, our employee population consisted of 769 individuals2020, we employed 740 full-time and 10 part-time employees, all of whom are located in the United States. This population consisted of 757 full-time and 12 part-time employees. The average tenure of our employee population was 10.19.8 years. The average tenure of our officers and non-officers was 18.018.2 years and 9.18.7 years, respectively. Our employees are organized into the following functions:
| Function | Number of Employees | |||
Accounting | ||||
Accounting Operations | ||||
Administrative Management | 19 | |||
Construction | ||||
Development | ||||
Executive Management | 12 | |||
Finance & Capital Markets | ||||
Human Resources | 11 | |||
| Function | Number of Employees | |||
Information Systems | ||||
Internal Audit | 3 | |||
Leasing | 31 | |||
Legal | 37 | |||
Marketing | ||||
Property Management | ||||
Risk Management | 3 | |||
SEC regulations permit registrants to use reasonable estimates and certain prescribed alternative methodologies. As a result, our calculation of the CEO pay ratio may differ from the calculations used by other companies and therefore may not be comparable.
The Compensation Committee of Boston Properties has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by the Compensation Committee:
Bruce W. Duncan, Chair
Kelly A. Ayotte, Chair
Carol B. Einiger
David A. Twardock
William H. Walton, III
| | | | 91 |
| PROPOSAL 2: ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION |
ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
Section 14A(a)(1) of the Exchange Act generally requires each public company to include in its proxy statement a separate resolution subject to a non-binding stockholder vote to approve the compensation of the Company’s NEOs, as disclosed in its proxy statement pursuant to Item 402 of Regulation S-K, not less frequently than once every three years. This is commonly known as a “Say-on-Pay”“Say-on-Pay” proposal or resolution.
At our 2017 annual meeting of stockholders, our stockholders voted on, among other matters, a proposal regarding the frequency of holding a non-binding, advisory vote on the compensation of our NEOs. More than 85% of the votes cast on the frequency proposal were cast in favor of holding a non-binding, advisory vote on the compensation of the Company’s NEOs every year, which was consistent with the recommendation of our Board of Directors. Our Board of Directors considered the voting results with respect to the frequency proposal and other factors, and the Board of Directors currently intends for the Company to hold a non-binding, advisory vote on the compensation of the Company’s NEOs every year until the next required advisory vote on the frequency of holding the non-binding, advisory vote on the compensation of our NEOs, which will occur not later than the 2023 annual meeting of stockholders.
Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the 20202021 annual meeting:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement pursuant to the Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
The vote is advisory, and therefore not binding on Boston Properties, our Board of Directors or the Compensation Committee. However, our Board of Directors and our Compensation Committee value the opinions of our stockholders and intend to take into account the results of the vote when considering future compensation decisions for our NEOs.
The affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the approval of this proposal. Abstentions shall be included in determining the number of shares present and entitled to vote on the proposal, thus having the effect of a vote against the proposal. Broker non-votes, if any, are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFOR THE APPROVAL OF THE
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| PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN
On March 18, 2021, following the recommendation of the Compensation Committee, our Board of Directors approved the Boston Properties, Inc. 2021 Stock Incentive Plan (the “2021 Plan”), subject to the approval of our stockholders. The 2021 Plan will become effective if and when it is approved by our stockholders, and it will replace the Company’s existing equity plan, originally adopted in 2012 (the “Prior Plan”). From and after the effective date of the 2021 Plan, no further awards will be made under the Prior Plan.
We believe that having an equity incentive plan in place is critical to our ability to attract, retain and motivate employees in a highly competitive marketplace and to ensure that the Company’s compensation program is structured in a manner that aligns employee interests with the success of the Company. By adopting the 2021 Plan, we will be able to continue using equity awards to attract, retain and motivate employees.
The following highlights key reasons why we believe stockholders should approve the 2021 Plan:
› Reasonable Plan Cost
We requested a reasonable number of shares of common stock – 5,400,000 shares less one (1) share for every one (1) share that was granted after March 4, 2021 under the Prior Plan. Following the effective date of the 2021 Plan, no awards may be granted under the Prior Plan.
Awards would not have a substantially dilutive effect (issuance of all shares is 3.1% the sum of the number of shares of common stock and common units of partnership interest in our Operating Partnership of outstanding as of the record date).
› Stockholder-Friendly Plan Features
Liberal share recycling shall be limited to full-value awards; shares of stock tendered or withheld upon the exercise of a stock option or stock appreciation right for tax withholding, net settlement or exercise payment shall not be added back.
No evergreen feature providing for automatic increases.
| • | We may not reprice stock options, nor exchange “underwater” stock options (i.e., options for which the exercise price is greater than the market value of the underlying common stock) for another award or cash, without stockholder approval. |
No liberal change in control definition.
› Responsible Grant Practices by the Company
Our Compensation Committee designs our executive compensation program to be competitive with our peers.
Low three-year average burn rate
Performance-based equity awards (in the form of LTIP units) for executive officers are tied to performance metrics, such as TSR, over three-year, overlapping measurement periods.
55% of our Chief Executive Officer’s LTI equity awards (and 50% of our other NEO’s LTI equity awards) for 2020 consisted of performance-based MYLTIP awards earned based on TSR performance over a three-year performance period.
Time-based restricted stock and LTIP unit awards generally vest ratably over four years for all executive officers.
Robust stock ownership requirements for our executive officers.
“Double-trigger” acceleration of vesting upon change in control, which requires a qualified termination of employment following a change in control before vesting of time-based equity awards is accelerated for executive officers.
Our clawback policy applies to equity awards granted to executive officers and certain other specified officers.
| | 2021 Proxy Statement | 93 |
| 10› | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
| ✓ | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE BOSTON | |
Shares Available for Issuance and Outstanding Awards
Under the 2021 Plan, the number of shares of common stock to be available for issuance for new awards will be 5,400,000 shares less one (1) share for every one (1) share that was granted after March 4, 2021 under the Prior Plan. Following the effective date of the 2021 Plan, no awards may be granted under the Prior Plan.
› Overhang as of March 4, 2021
The following table sets forth, as of March 4, 2021:
all outstanding stock options granted pursuant to our equity compensation plans (including the weighted average exercise price and weighted average remaining term),
the number of shares of common stock subject to all outstanding unvested full value awards granted pursuant to our equity compensation plans,
the number of shares of common stock to be available for issuance of new awards under the 2021 Plan, and
the total number of outstanding shares of common stock and common units in our Operating Partnership (other than common units held by Boston Properties).
| Overhang Detail | Status as of March 4, 2021 | |||
Stock options outstanding | 297,558 | |||
Weighted-average exercise price | $98.80 | |||
Weighted-average remaining term | 0.86 years | |||
Unvested full value shares outstanding(1) | 1,329,611 | |||
Proposed shares reserved under 2021 Plan(2) | 5,400,000 | |||
Total Common Stock and Common Units outstanding(3) | 171,916,558 | |||
| (1) | Includes (x) 486,716 LTIP units and 67,680 restricted shares of common stock that remain subject to vesting based solely on continued employment or service and (y) 775,215 LTIP units granted pursuant to 2019, 2020 and 2021 MYLTIP Awards, which remain subject to performance-based vesting conditions in addition to vesting conditions based on continued employment or service. |
| (2) | Proposed share reserve is subject to reduction for any awards granted under the Prior Plan after March 4, 2021. Upon stockholder approval of the 2021 Plan, no awards may be granted under the Prior Plan. |
| (3) | Includes 155,858,332 shares of common stock and 16,058,226 common units in our Operating Partnership outstanding as of March 4, 2021. Excludes 1,576,297 LTIP units outstanding as of March 4, 2021 and common units in our Operating Partnership held by Boston Properties. |
Other than the foregoing and vested LTIP units (or common units into which they were converted) and vested deferred stock units that were outstanding but not yet settled or exchanged for shares of common stock, no other awards pursuant to which shares of common stock were issuable under any of our existing or prior equity compensation plans, including the Prior Plan, were outstanding as of March 4, 2021.
94 | | | 2021 Proxy Statement |
| 10› | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
The following table sets forth information regarding historical awards granted during 2018, 2019 and 2020, and the corresponding “burn rate,” which is defined as the number of stock options and time-based, full value shares/units granted plus the number of performance-based, full-value shares/units earned in a year divided by the weighted-average number of shares of common stock and common units outstanding for that year, for each of the last three fiscal years:
› Burn Rate Detail: 2018-2020
| Award Type | 2018 | 2019 | 2020 | |||||||||
Stock options granted (A) | 0 | 0 | 0 | |||||||||
Time-based, full-value shares/units granted(1) (B) | 232,481 | 216,998 | 249,101 | |||||||||
Performance-based, full-value shares/units earned(2) (C) | 28,771 | 106,599 | 123,979 | |||||||||
Total (A+B+C) | 261,252 | 323,597 | 373,080 | |||||||||
Weighted-average common shares + units(3) (D) | 171,912,377 | 172,199,852 | 172,642,577 | |||||||||
Burn Rate ((A+B+C)/D) | 0.15% | 0.19% | 0.22% | |||||||||
| (1) | Time-based, full-value shares/units granted consists of all restricted stock awards, deferred stock units and LTIP units granted during the applicable year that, upon grant, either were vested or were subject to vesting based solely on continued employment or service. |
| (2) | Performance-based, full-value shares/units earned consists of all LTIP units for which performance-based vesting occurred with respect to a performance period that ended during such year even if the LTIP units remained subject to vesting based on continued employment or service. All performance-based, full-value awards granted or earned during 2018 – 2020 were LTIP unit awards. 2018 performance-based, full-value shares/units earned reflects LTIP units earned from the 2015 MYLTIP awards. 2019 performance-based, full-value share/units earned reflects LTIP units earned from the 2016 MYLTIP awards. 2020 performance-based full-value share/units earned reflects LTIP units earned from the 2017 MYLTIP awards. The following table provides further detail regarding performance-based, full-value awards that were granted, earned, forfeited and outstanding during 2018, 2019 and 2020: |
| 2018 | 2019 | 2020 | ||||||||||
| Unearned at beginning of period(a)(b) | 1,239,978 | 1,211,816 | 951,850 | |||||||||
| Units granted(b) | 342,659 | 220,734 | 203,278 | |||||||||
| Units earned | 28,771 | 106,599 | 123,979 | |||||||||
| Units forfeited(c) | 342,050 | 374,101 | 271,760 | |||||||||
| Unearned at end of period(a)(b) | 1,211,816 | 951,850 | 759,389 | |||||||||
| (a) | Includes the outstanding number of LTIP units subject to performance-based vesting. |
| (b) | For performance-based LTIP unit awards granted prior to 2019, the number of LTIP units that could be earned was based on a dollar amount earned divided by an average of the closing prices of our common stock measured at the end of the performance period. As a result, the number of LTIP units issued was an estimate of the maximum number of LTIP units that could be earned based on certain assumptions. The number of units granted and unearned is based on the number of LTIP units actually issued and outstanding, respectively. |
| (c) | Represents LTIP units forfeited (based on the number initially issued, which, for awards granted prior to 2019, was an estimate of the maximum number of LTIP units that could be earned based on certain assumptions) upon determination of performance-based vesting or due to termination of employment or service relationship. |
| (3) | For each applicable year, represents the weighted-average number of shares of common stock of the Company and common units in our Operating Partnership (other than common units held by Boston Properties) outstanding during the year. Because the Company is a REIT that conducts substantially all of its operations through the Operating Partnership, both shares of common stock of the Company and common units in our Operating Partnership not owned by Boston Properties are included for purposes of calculating our burn rate. Each common unit in our Operating Partnership is exchangeable into shares of common stock on a one-for-one basis, subject to certain conditions. |
| | 2021 Proxy Statement | 95 |
| 10› | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
The following description of certain material features of the 2021 Plan is intended to be a summary only. This summary is qualified in its entirety by the full text of the 2021 Plan that is attached hereto as Appendix A.
Shares of Common Stock Available. The maximum number of shares of common stock to be available for issuance for new awards will be 5,400,000 shares less one (1) share for every one (1) share that was granted after March 4,2021 under the Prior Plan. Following the effective date of the 2021 Plan, no awards may be granted under the Prior Plan. Based solely on the closing price of our common stock as reported on the NYSE on March 24, 2021, the maximum aggregate market value of the 5,400,000 shares that could potentially be issued under the 2021 Plan is $554,850,000.
Shares of common stock underlying awards granted under the 2021 Plan or the Prior Plan that are forfeited, canceled or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2021 Plan. Additionally, with respect to full-value awards under the 2021 Plan or the Prior Plan (i.e., an award other than a stock option, stock appreciation right or partnership unit with an economic structure similar to that of a stock option or stock appreciation right), shares tendered, held back or otherwise reacquired to cover tax withholding and shares previously reserved for issuance pursuant to such an award to the extent that such shares are not issued and are no longer issuable pursuant to such an award (e.g., in the event that a full-value award that may be settled in cash or by issuance of shares of Stock is settled in cash) will be added back to the shares available for issuance under the 2021 Plan. Shares of common stock tendered or held back for taxes or to cover the exercise price of an option or stock appreciation right will not be added back to the reserved pool under the 2021 Plan. Upon the exercise of a stock appreciation right that is settled in shares of common stock, the full number of shares of common stock underlying the award will be charged to the reserved pool. In the event we repurchase shares of common stock on the open market, the shares shall not be added to the shares of common stock available for issuance under the 2021 Plan.
In addition, in connection with the acquisition of another company, the Company may assume outstanding awards granted by another company as if they had been granted under the 2021 Plan or grant awards under the 2021 Plan in substitution of such outstanding awards, in each case, to the extent the applicable award recipient is eligible to be granted such an award under the 2021 Plan. Any shares of common stock issued pursuant to such assumed or substituted awards will not reduce the number of shares authorized for grant under the 2021 Plan.
Plan Administration. The 2021 Plan will be administered by either the Compensation Committee, the Board or by such other committee of the Board performing the functions of the Compensation Committee (in either case, the “Administrator”). The Administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, to determine the specific terms and conditions of each award, subject to the provisions of the 2021 Plan, to accelerate the exercisability or vesting of any award, to interpret the 2021 Plan and awards granted thereunder, and to otherwise administer the 2021 Plan and the awards granted thereunder. Subject to applicable law, the Administrator, in its sole discretion, may delegate to our Chief Executive Officer, all or part of the Administrator’s authority and duties with respect to the granting of awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act, subject to certain limitations.
Types of Awards. The types of awards permitted under the 2021 Plan include stock options, stock appreciation rights, restricted stock unit awards, restricted stock awards, unrestricted stock awards, dividend equivalent rights, cash-based awards and other equity-based awards. Subject to the overall limit on the number of shares that may be issued under the 2021 Plan, shares of common stock may be issued up to such maximum number pursuant to any type of award; provided that no more than 5,400,000 shares of common stock (plus, to the extent permitted by the Code, any shares added back to the 2021 Plan as described above) may be issued in the form of incentive stock options.
Eligibility. All officers, employees, non-employee directors, consultants and advisors of the Company and its subsidiaries will be eligible to receive awards under the 2021 Plan. Persons eligible to participate in the 2021 Plan will be those officers, employees, non-employee directors, consultants and advisors of the Company and its subsidiaries as selected from time to time by the Administrator, as well as such other persons selected from time to time by the Administrator to whom issuances of shares
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| 10› | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
under the 2021 Plan may be registered and permitted under applicable securities laws. As of March 24, 2021, approximately 700 individuals would have been eligible to participate in the 2021 Plan had it been effective on such date. All persons who are eligible to receive awards form a single class under the 2021 Plan, as awards are made on a discretionary basis and the terms of the 2021 Plan do not distinguish among various eligible persons.
Adjustments for Stock Dividends, Stock Splits, Etc. The 2021 Plan requires the Administrator to make appropriate equitable adjustments to the number and kind of shares of common stock that are subject to issuance under the 2021 Plan, to certain limits in the 2021 Plan, and to any outstanding awards under the 2021 Plan, as well as equitable adjustments to the purchase price or exercise price, as applicable, of outstanding awards under the 2021 Plan, to reflect any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or similar change in the Company’s capital stock, including as a result of any merger or consolidation or sale of all or substantially all of the assets of the Company.
Treatment of Awards in Certain Transactions. In the event of a “Transaction,” as defined in the 2021 Plan, the Board or the board of directors of any corporation assuming the obligations of the Company, may, in its discretion, take any one or more of the following actions as to outstanding awards under the 2021 Plan: provide that the awards may be assumed or substituted, or upon written notice to participants provide that all awards will terminate upon consummation of the Transaction. In the event that awards are not assumed or substituted, except as otherwise provided by the Compensation Committee in the award agreement or other agreement between the holder of an award and the Company, upon the effective time of the Transaction, all awards will become vested and exercisable and vested awards, other than stock options, shall be fully settled in cash or in kind at such appropriate consideration as determined by the Compensation Committee in its sole discretion after taking into account the consideration payable per share pursuant to the Transaction, or the “merger price”, and all stock options shall be fully settled in cash or in kind in an amount equal to the difference between the merger price and the exercise price of the options; provided that each participant may be permitted to exercise all outstanding options within a specified period determined by the Compensation Committee prior to the Transaction.
Term. No awards may be granted under the 2021 Plan ten years or more after the date of stockholder approval, and no incentive stock options may be granted after the tenth anniversary of the date the 2021 Plan is approved by the Board.
Repricing. The Administrator may not, without stockholder approval, reduce the exercise price of outstanding stock options or stock appreciation rights or effect repricing through cancellation and re-grants or cancellation of stock options or stock appreciation rights in exchange for cash or other awards, other than as a result of a proportionate adjustment made in connection with a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar event.
Stock Options. The 2021 Plan permits the granting of (1) options intended to qualify as incentive stock options under Section 422 of the Code and (2) options that do not so qualify. Options granted under the 2021 Plan will be non-qualified stock options if they fail to qualify as incentive stock options or exceed the annual limit on incentive stock options. Non-qualified stock options may be granted to any persons eligible to receive incentive stock options and to non-employee directors, consultants and advisors. Incentive stock options may be granted only to employees of the Company or any subsidiary. To qualify as incentive stock options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares of common stock subject to incentive stock options that first become exercisable by a participant in any one calendar year.
The exercise price of each option will be determined by the Administrator but may not be less than 100% of the fair market value of our shares of common stock on the date of grant, subject to certain exceptions set forth in the 2021 Plan. The term of each option will be fixed by the Administrator and may not exceed ten years from the date of grant. The Administrator will determine at what time or times each option may be exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Administrator. Options may be exercised in whole or in part by giving written or electronic notice to the Company. Upon exercise of options, the option exercise price must be paid in full either in cash, by certified or bank check or other instrument acceptable to the Administrator or by delivery (or attestation to the ownership following such procedures as we may prescribe) of shares of common stock that are not subject to restrictions under any Company plan. Subject to applicable law, the exercise price may also be delivered to the Company by a broker pursuant to irrevocable instructions to the broker from the optionee. In addition, the Administrator may permit non-qualified stock options to be exercised using a net exercise feature which reduces the number of shares of common stock issued to the optionee by the number of shares of common stock with a fair market value equal to the exercise price.
| | 2021 Proxy Statement | 97 |
| 10› | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
Stock Appreciation Rights. The Administrator may award stock appreciation rights to participants subject to such conditions and restrictions as the Administrator may determine, provided that the exercise price may not be less than 100% of the fair market value of our shares of common stock on the date of grant, subject to certain exceptions set forth in the 2021 Plan. Stock appreciation rights are settled in cash or shares of common stock. In addition, no stock appreciation right shall be exercisable more than ten years after the date the stock appreciation right is granted.
Restricted Stock Units. Restricted stock unit awards are payable in the form of shares of common stock (or cash, to the extent explicitly provided in the award agreement) and may be subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may be based on, among other things, the achievement of certain performance goals and/or continued employment or service with the Company through a specified vesting period. To the extent permitted by the Administrator, restricted stock units may be deferred to one or more dates specified in the applicable award certificate or elected by the grantee. Restricted stock unit awards with a deferred settlement date may be referred to as “deferred stock unit awards.” In addition, in the Administrator’s sole discretion, and subject to the participant’s compliance with the procedures established by the Administrator, it may permit a participant to make an advance election to receive cash compensation otherwise due in the form of a restricted stock unit award.
Restricted Stock. The Administrator may award shares of common stock to participants subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of certain pre-established performance goals and/or continued employment or service through a specified restriction period. If the lapse of restrictions with respect to the shares of common stock is tied to attainment of vesting conditions, any cash dividends paid by the Company during the vesting period will be retained by, or repaid by the grantee to, the Company until and to the extent the vesting conditions are met with respect to the award; provided, that to the extent provided for in the applicable award agreement or by the Administrator, an amount equal to such cash dividends retained or repaid by the grantee may be paid by the grantee upon the lapsing of such restrictions.
Unrestricted Stock. The 2021 Plan gives the Administrator discretion to grant stock awards free of any restrictions. Unrestricted stock may be granted to any participant in recognition of past services or other valid consideration and may be issued in lieu of cash compensation due to such participant.
Dividend Equivalent Rights. Dividend equivalent rights are awards entitling the grantee to current or deferred payments equal to cash dividends on a specified number of shares of common stock. Dividend equivalent rights may be settled in cash or stock and are subject to other conditions as the Administrator shall determine. Dividend equivalent rights may be granted to any grantee as a component of an award or as a freestanding award. Unless provided by the Administrator, dividend equivalent rights may be paid currently, be deemed reinvested in additional shares of stock, which may thereafter accrue additional dividend equivalents, or may otherwise accrue.
Other Equity-Based Awards. The Administrator may grant units in the Company’s Operating Partnership or other units or any other membership or ownership interests (which may be expressed as units or otherwise) in a subsidiary, with any stock being issued in connection with the conversion of (or other distribution on account of) an interest granted under the provisions of the 2021 Plan.
Cash-Based Awards. The Administrator may grant cash-based awards, such as annual cash bonuses, under the 2021 Plan. The cash-based awards may be subject to the achievement of one or more performance criteria selected by the Administrator, including those specifically referenced in the definition of Performance Criteria in the 2021 Plan. Cash-based awards may be paid in cash or shares of common stock. Cash-based awards that are only payable or actually paid in cash are not subject to and will have no impact on the number of shares of common stock available for issuance under the 2021 Plan.
Tax Withholding. Participants in the 2021 Plan are responsible for the payment of any federal, state or local taxes that we are required by law to withhold upon any exercise, vesting or settlement of awards, as applicable. Subject to approval by the Administrator, participants may elect to have the tax withholding obligations satisfied by authorizing the Company to withhold shares of common stock to be issued (or, in the case of a restricted stock award, to reacquire shares previously issued pursuant to such award). Additionally, the Administrator may provide for mandatory share withholding up to the required withholding amount. The Administrator may also require tax withholding obligations to be satisfied by an arrangement where shares issued pursuant to an award are immediately sold and proceeds from such sale are remitted to the Company in an amount to satisfy such tax withholding obligations.
98 | | | 2021 Proxy Statement |
| 10› | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
Amendments and Termination. Generally, under current NYSE rules, all material amendments to the 2021 Plan, including those that materially increase the number of shares of common stock available (other than an increase solely to reflect a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or similar change), expand the types of awards available or the persons eligible to receive awards, extend the term of the 2021 Plan, change the method of determining the exercise price of options or delete or limit any provision prohibiting the repricing of options, must be approved by our common stockholders. The Board may determine to make amendments subject to the approval of the common stockholders for purposes of complying with the rules of the NYSE or to preserve the qualified status of incentive stock options. Otherwise, our Board may amend or discontinue the 2021 Plan at any time, provided that no such action will materially and adversely affect the rights under any outstanding awards without the holder’s consent.
United States Federal Income Tax Consequences – Options and Stock Appreciation Rights
The following is a summary of the principal federal income tax consequences of certain transactions under the 2021 Plan relating to options and stock appreciation rights. It does not describe all federal tax consequences under the 2021 Plan, nor does it describe state or local tax consequences.
Incentive Stock Options. No taxable income is generally realized by the optionee upon the grant or exercise of an incentive stock option. If shares of common stock issued to an optionee pursuant to the exercise of an incentive stock option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (1) upon sale of such shares of common stock, any amount realized in excess of the option price (the amount paid for the shares of common stock) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (2) we will not be entitled to any deduction for federal income tax purposes. The exercise of an incentive stock option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.
If shares of common stock acquired upon the exercise of an incentive stock option are disposed of prior to the expiration of the two-year and one-year holding periods described above, generally: (1) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of common stock at exercise (or, if less, the amount realized on a sale of such shares of common stock) over the option price thereof; and (2) we will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the incentive stock option is paid by tendering shares of common stock.
If an incentive option is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as a non-qualified option. Generally, an incentive option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply.
Non-Qualified Stock Options. No taxable income is generally realized by the optionee upon the grant of a non-qualified stock option. Generally: (1) at exercise, ordinary income is realized by the optionee in an amount equal to the difference between the option exercise price and the fair market value of the shares of common stock on the date of exercise, and we receive a tax deduction for the same amount; and (2) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of common stock have been held. Special rules will apply where all or a portion of the exercise price of the non-qualified stock option is paid by tendering shares of common stock. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.
Stock Appreciation Rights. No income will be recognized by a recipient upon the grant of either tandem or freestanding stock appreciation rights. For the year in which the stock appreciation right is exercised, the recipient will generally be taxed at ordinary income rates on the amount equal to the cash received plus the fair market value of any unrestricted shares received on the exercise.
| | 2021 Proxy Statement | 99 |
| 10› | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
Parachute Payments. The vesting of any portion of an option or stock appreciation right that is accelerated due to the occurrence of a change in control may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments,” as defined in the Code. Any such parachute payments may be non-deductible to us, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).
Limitation on Deductions. Under Section 162(m) of the Code, the Company’s deduction for awards under the 2021 Plan may be limited to the extent that any “covered employee” (as defined in Section 162(m) of the Code) receives compensation in excess of $1 million a year.
Because the grant of awards under the 2021 Plan is within the discretion of the Administrator, we cannot determine the dollar value or number of shares of common stock that will in the future be received by or allocated to any participant in the 2021 Plan.
Under our Charter and By-laws, the affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the approval of the 2021 Plan. Abstentions shall be included in determining the number of shares present and entitled to vote on the proposal, thus having the effect of a vote against the proposal. Broker non-votes are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome.
Equity Compensation Plan Information
The following table summarizes the Company’s equity compensation plans as of December 31, 2020.
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||||||
| (a) | (b) | (c) | |||||||||||||
Equity compensation plans approved by security holders(1) | 3,886,774 | (2) | $ | 96.97 | (2) | 8,069,531 | (3) | ||||||||
Equity compensation plans not approved by security holders(4) | N/A | N/A | 78,152 | ||||||||||||
Total | 3,886,774 | $ | 96.97 | 8,147,683 | |||||||||||
| (1) | Includes information related to the Boston Properties, Inc. 1997 Stock Option and Incentive Plan and the Prior Plan. |
| (2) | Includes (a) 351,561 shares of common stock issuable upon the exercise of outstanding options (all of which are vested and exercisable), (b) 1,336,115 LTIP units (914,572 of which are vested) that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by us for shares of our common stock, (c) 1,366,743 common units issued upon conversion of LTIP units, which may be presented to the Operating Partnership for redemption and acquired by us for shares of our common stock (all of which are vested), (d) 336,195 LTIP units issued in the form of 2018 MYLTIP awards that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by us for shares of our common stock, (e) 219,916 LTIP units issued in the form of 2019 MYLTIP awards that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by us for shares of our common stock, (f) 203,278 LTIP units issued in the form of 2020 MYLTIP awards that, upon the satisfaction of certain conditions, are convertible into common units, which may be presented to the Operating Partnership for redemption and acquired by us for shares of our common stock and (g) 72,966 deferred stock units (all of which are vested) which were granted pursuant to elections by certain of our non-employee directors to defer all cash compensation to be paid to such directors and to receive their deferred cash compensation in shares of our common stock upon their retirement from our Board of Directors. |
100 | | | 2021 Proxy Statement |
| 10› | PROPOSAL 3: APPROVAL OF THE BOSTON PROPERTIES, INC. 2021 STOCK INCENTIVE PLAN |
Does not include 55,616 shares of restricted stock, as they have been reflected in our total shares outstanding. Because there is no exercise price associated with LTIP units, common units, 2018 MYLTIP awards, 2019 MYLTIP awards, 2020 MYLTIP awards or deferred stock units, such awards are not included in the weighed-average exercise price calculation. |
| (3) | Represents awards available for issuance under the Prior Plan. “Full-value” awards (i.e., awards other than stock options) are multiplied by a 2.32 conversion ratio to calculate the number of shares available that are used for each full-value award (and thus the number that remains available) under the Prior Plan, as opposed to a 1.0 conversion ratio for each stock option awarded under the Prior Plan. |
| (4) | Includes information related to the 1999 Non-Qualified Employee Stock Purchase Plan (ESPP). The ESPP was adopted by our Board of Directors on October 29, 1998. The ESPP has not been approved by our stockholders. All of our employees are eligible to participate in the ESPP. Under the ESPP, each eligible employee may purchase shares of our common stock at semi-annual intervals each year at a purchase price equal to 85% of the average closing prices of our common stock on the NYSE during the last ten business days of the purchase period. Each eligible employee may contribute no more than $10,000 per year to purchase our common stock under the ESPP. |
| | 2021 Proxy Statement | 101 |
| 11› | PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors is directly responsible for the appointment, compensation, retention and oversight of the independent registered public accounting firm retained to audit our consolidated financial statements. The Audit Committee has selected and appointed PricewaterhouseCoopers LLP as our independent registered public accounting firm to audit our consolidated financial statements for the year ending December 31, 2020.2021. PricewaterhouseCoopers LLP has audited our consolidated financial statements continuously since our initial public offering in June 1997. In order to ensure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent registered public accounting firm. Further, in conjunction with the mandated rotation of the PricewaterhouseCoopers LLP’s lead engagement partner, the Audit Committee and its Chair were directly involved in the selection of PricewaterhouseCoopers LLP’s lead engagement partner. The members of the Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm is in the best interests of Boston Properties and its stockholders.
Although ratification by stockholders is not required by law or by our By-laws, the Audit Committee believes that submission of its selection to stockholders is a matter of good corporate governance. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm at any time if the Audit Committee believes that such a change would be in the best interests of Boston Properties and its stockholders. If our stockholders do not ratify the appointment of PricewaterhouseCoopers LLP, the Audit Committee will consider that fact, together with such other factors it deems relevant, in determining its next selection of independent auditors.
We expect that a representative of PricewaterhouseCoopers LLP will attend the annual meeting of stockholders, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
| ✓ | THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE | |
102 | | | 2021 Proxy Statement |
| 11› | PROPOSAL 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee is responsible for the audit fee negotiations associated with the retention of PricewaterhouseCoopers LLP (“PwC”). Aggregate fees for professional services rendered by PwC for the years ended December 31, 2020 and 2019 were as follows:
| 2020 | 2019 | |||||||
Audit Fees | ||||||||
Recurring audit, quarterly reviews and accounting assistance for new accounting standards and potential transactions | $ | 2,733,710 | $ | 2,681,649 | ||||
Comfort letters, consents and assistance with documents filed with the SEC and securities offerings | 189,000 | 168,644 | ||||||
Subtotal | 2,922,710 | 2,850,293 | ||||||
Audit-Related Fees | ||||||||
Audits required by lenders, joint ventures, tenants and other attestation reports | 416,648 | 447,575 | ||||||
Tax Fees | ||||||||
Recurring tax compliance and REIT and other compliance matters | 524,332 | (1) | 444,241 | |||||
Tax planning and research | 62,025 | 55,999 | ||||||
State and local tax examinations | 8,937 | 28,307 | ||||||
Subtotal | 595,294 | 528,547 | ||||||
All Other Fees | ||||||||
Software licensing fee | 2,756 | 2,756 | ||||||
Total | $ | 3,937,408 | $ | 3,829,171 | ||||
| (1) | Includes an annual subscription fee for tax allocation software of $50,000 for 2019 but billed in 2020. |
AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY
The Audit Committee has approved a policy concerning the pre-approval of audit and non-audit services to be provided by PwC, our independent registered public accounting firm. The policy requires that all services provided by PwC to us, including audit services, audit-related services, tax services and other services, must be pre-approved by the Audit Committee. In some cases, pre-approval is provided by the full Audit Committee for up to a year, relates to a particular category or group of services and is subject to a particular budgeted maximum. In other cases, specific pre-approval is required. The Audit Committee has delegated authority to the Chair of the Audit Committee to pre-approve additional services, and any such pre-approvals must then be communicated to the full Audit Committee.
The Audit Committee approved all audit and non-audit services provided to us by PwC during the 2020 and 2019 fiscal years and none of the services described above were approved pursuant to Rule 2-01(c)(7)(i)(c) of Regulation S-X, which relates to circumstances where the Audit Committee pre-approval requirement is waived.
The affirmative vote of a majority of shares of common stock present in person or represented by proxy at the meeting and entitled to vote on this proposal is required for the ratification of the appointment of PwC. Abstentions shall be included in determining the number of shares present and entitled to vote on the proposal, thus having the effect of a vote against the proposal. Broker non-votes, if any, are not counted in determining the number of shares present and entitled to vote and will therefore have no effect on the outcome.
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FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee is responsible for the audit fee negotiations associated with the retention of PricewaterhouseCoopers LLP (“PwC”). Aggregate fees for professional services rendered by PwC for the years ended December 31, 2019 and 2018 were as follows:
| 2019 | 2018 | |||||||
Audit Fees | ||||||||
Recurring audit, quarterly reviews and accounting assistance for new accounting standards and potential transactions | $ | 2,681,649 | $ | 2,711,004 | ||||
Comfort letters, consents and assistance with documents filed with the SEC and securities offerings | 168,644 | 115,107 | ||||||
Subtotal | 2,850,293 | 2,826,111 | ||||||
Audit-Related Fees | ||||||||
Audits required by lenders, joint ventures, tenants and other attestation reports | 447,575 | 420,350 | ||||||
Tax Fees | ||||||||
Recurring tax compliance and REIT and other compliance matters | 444,241 | 420,084 | ||||||
Tax planning and research | 55,999 | 84,595 | ||||||
State and local tax examinations | 28,307 | 28,447 | ||||||
Subtotal | 528,547 | 533,126 | ||||||
All Other Fees | ||||||||
Software licensing fee | 2,756 | 2,700 | ||||||
Total | $ | 3,829,171 | $ | 3,782,287 | ||||
AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY
The Audit Committee has approved a policy concerning the pre-approval of audit and non-audit services to be provided by PwC, our independent registered public accounting firm. The policy requires that all services provided by PwC to us, including audit services, audit-related services, tax services and other services, must be pre-approved by the Audit Committee. In some cases, pre-approval is provided by the full Audit Committee for up to a year, relates to a particular category or group of services and is subject to a particular budgeted maximum. In other cases, specific pre-approval is required. The Audit Committee has delegated authority to the Chair of the Audit Committee to pre-approve additional services, and any such pre-approvals must then be communicated to the full Audit Committee.
The Audit Committee approved all audit and non-audit services provided to us by PwC during the 2019 and 2018 fiscal years and none of the services described above were approved pursuant to Rule 2-01(c)(7)(i)(c) of Regulation S-X, which relates to circumstances where the Audit Committee pre-approval requirement is waived.
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| PROPOSAL |
The members of the Audit Committee of the Board of Directors of Boston Properties submit this report in connection with the committee’s review of the financial reports for the fiscal year ended December 31, 20192020 as follows:
| 1. | The Audit Committee has reviewed and discussed with management the audited financial statements for Boston Properties, Inc. for the fiscal year ended December 31, |
| 2. | The Audit Committee has discussed with representatives of PwC the matters required to be discussed with the Audit Committee by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. |
| 3. | The Audit Committee has received the written disclosures and the letter from the independent accountant required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. |
Based on the review and discussions referred to above, the Audit Committee recommended to our Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 for filing with the SEC.
The Audit Committee operates pursuant to a charter that was approved by our Board of Directors. A copy of the Audit Committee Charter is available on our website athttp://www.bxp.com under the heading “Corporate Governance.”
Submitted by the Audit Committee:
David A. Twardock, Chair
Bruce W. Duncan
Karen E. Dykstra
William H. Walton, III
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| INFORMATION ABOUT THE ANNUAL MEETING |
INFORMATION ABOUT THE ANNUAL MEETING
ATTENDING THE VIRTUAL ANNUAL MEETING
Our preference is to hold an in-person annual meeting. However, due to the ongoing public health concerns resulting from the COVID-19 pandemic and to support the health and well-being of our stockholders, employees and community, this year’s annual meeting will be a virtual meeting conducted via live audio webcast. We have structured our virtual annual meeting to provide stockholders the same rights as if the meeting were held in person, including the ability to vote shares electronically during the meeting and ask questions in accordance with the rules of conduct for the meeting.
All stockholders of record of shares of common stock of Boston Properties at the close of business on March 24, 2021, which is referred to in this proxy statement as the “record date,” or their designated proxies, are authorized to attend the annual meeting. Cameras, recording devices and other electronic devices will not be permitted and attendees may be subject to other security precautions.
› MEETING ACCESS
In order to attend the virtual annual meeting, you must be a holder of Boston Properties stock as of March 24, 2021. To participate in the virtual annual meeting, visit www.virtualshareholdermeeting.com/BXP2021 and enter your unique 16-digit voting control number found on your proxy card, email, notice of internet availability of proxy materials or voting instruction form. The annual meeting is scheduled to begin at 9:00 a.m., Eastern Time, on May 20, 2021. Online access will open at 8:45 a.m. Eastern Time to allow time for you to log in and test your device’s audio system. We encourage you to access the meeting prior to the start time. If you encounter any difficulties accessing the virtual annual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual annual meeting website. Technical support will be available starting at 8:45 a.m. Eastern Time and until the end of the meeting.
› SUBMITTING QUESTIONS
If you wish to submit a question during the annual meeting, type your question into the “Submit a question” field, and click “Submit.” Questions may be submitted beginning at 8:45 a.m. Eastern Time. We will endeavor to answer as many questions submitted by stockholders as time permits. We reserve the right to exclude questions regarding topics that are not pertinent to meeting matters or company business. If we receive substantially similar questions, we may group such questions together and provide a single response to avoid repetition. Responses to questions relevant to meeting matters that we do not have time to respond to during the meeting will be posted to our Investor Relations website following the meeting. Questions regarding personal matters or matters not relevant to meeting matters will not be answered.
› VOTING DURING THE VIRTUAL ANNUAL MEETING
You will be able to vote your shares electronically during the annual meeting, except that if you hold shares through a Shareworks account, voting instructions for those shares must be submitted by May 17, 2021 at 11:59 p.m., Eastern Time. Voting online during the annual meeting will replace any previous votes. See “– How to Vote” below for additional information on voting.
› ADDITIONAL MEETING INFORMATION
In the event of technical difficulties with the virtual annual meeting, we expect that an announcement will be made on www.virtualshareholdermeeting.com/BXP2021. If necessary, the announcement will provide updated information regarding the date, time, and location of the annual meeting. Any updated information regarding the annual meeting will also be posted on our Investor Relations website at http://www.bxp.com/proxy.
A replay of the annual meeting webcast, including the Q&A portion of the annual meeting, will be available on www.virtualshareholdermeeting.com/BXP2021 for at least 30 days following the annual meeting.
| | 2021 Proxy Statement | 105 |
| 12› | INFORMATION ABOUT THE ANNUAL MEETING |
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
In order to both save money and help conserve natural resources, we are making this proxy statement and our 20192020 Annual Report, including a copy of our annual report on Form 10-K and financial statements for the year ended December 31, 2019,2020, available to our stockholders electronically via the Internet instead of mailing the full set of printed proxy materials, in accordance with the rules of the SEC. On or about April 3, 2020,5, 2021, we began mailing to many of our stockholders a Notice of Internet Availability of Proxy Materials (“Notice”) containing instructions on how to access this proxy statement and our annual report online, as well as instructions on how to vote. Also on or about April 3, 2020,5, 2021, we began mailing printed copies of these proxy materials to stockholders that have requested printed copies. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy statement and annual report. The Notice also instructs you on how you may vote via the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. Our 20192020 annual report is not part of the proxy solicitation material.
At the annual meeting, stockholders will be asked to vote upon the matters set forth in the accompanying notice of annual meeting, including the election of directors, an advisory resolution on named executive officer compensation, the approval of the Boston Properties, Inc. 2021 Stock Incentive Plan and the ratification of the appointment of our independent registered public accounting firm.
PRESENTATION OF OTHER MATTERS AT THE ANNUAL MEETING
We are not currently aware of any other matters to be presented at the 20202021 annual meeting other than those described in this proxy statement. If any other matters not described in this proxy statement are properly presented at the meeting, any proxies received by us will be voted in the discretion of the proxy holders.
If you were a stockholder of record as of the close of business on March 25, 2020, which is referred to in this proxy statement as the “record date,”24, 2021, you are entitled to receive notice of the annual meeting and to vote the shares of common stock held as of the close of business on the record date. Each stockholder is entitled to one vote for each share of common stock you held as of the close of business on the record date. Holders of common units, LTIP units, preferred stock and deferred stock units are not entitled to vote such securities on any of the matters presented at the 20202021 annual meeting.
All stockholders of record of shares of common stock of Boston Properties, Inc. at the close of business on the record date, or their designated proxies, are authorized to attend the annual meeting. Each stockholder and proxy will be asked to present a valid government-issued photo identification, such as a driver’s license or passport, before being admitted. If you are not a stockholder of record but you hold your shares in “street name” (i.e., your shares are held in an account maintained by a bank, broker or other nominee), then you should provide proof of beneficial ownership as of the record date, such as an account statement reflecting your stock ownership as of the record date, a copy of the voting instruction card provided by your broker, bank or other nominee, or other similar evidence of ownership. We reserve the right to determine the validity of any purported proof of beneficial ownership. If you do not have proof of ownership, you may not be admitted to the annual meeting. Cameras, recording devices and other electronic devices will not be permitted, and attendees may be subject to security inspections and other security precautions. You may obtain directions to the annual meeting on our website athttp://www.bxp.com/proxy.
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The presence, in personvirtually or by proxy, of holders of at least a majority of the total number of outstanding shares of common stock entitled to vote is necessary to constitute a quorum for the transaction of business at the annual meeting. As of the record date, there were 155,309,004156,074,135 shares of common stock outstanding and entitled to vote at the annual meeting. Each share of common stock outstanding on the record date is entitled to one vote on each matter properly submitted at the annual meeting and, with respect to the election of directors, one vote for each director to be elected. Abstentions or “broker non-votes” (i.e., shares represented at the meeting held by brokers, as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and with respect to which, on one or more but not all matters, the broker does not have discretionary voting power to vote such shares) will be counted for purposes of determining whether a quorum is present for the transaction of business at the annual meeting.
106 | | | 2021 Proxy Statement |
| 12› | INFORMATION ABOUT THE ANNUAL MEETING |
› VOTING IN PERSON ATDURING THE VIRTUAL ANNUAL MEETING
If you are a stockholder of record and attend the virtual annual meeting you may vote in person at the meeting. If your shares of common stock electronically during the annual meeting using your 16-digit control number on your proxy card or Notice of Internet Availability, except that if you hold shares through a Shareworks account, voting instructions for those shares must be submitted by May 17, 2021 at 11:59 p.m., Eastern Time. See “ – Voting Shares Registered Directly in the Name of the Stockholder or Held in Shareworks” below. If you hold your shares of common stock in “street name” (i.e., your shares are held in an account maintained by a bank, broker or other nominee) and your voting instruction form or Notice of Internet Availability indicates that you may vote those shares through the http://www.proxyvote.com website, then you may vote at the annual meeting with the 16-digit control number indicated on your voting instruction form or Notice of Internet Availability. Voting online during the meeting will replace any previous votes. If you hold your shares of common stock in street name and you wish to vote in person at the meeting,do not have a 16-digit control number, you will need to obtain a “legal proxy” from the bank, broker bank or other nominee that holds your shares of common stock of record.record to attend, participate in and vote at the annual meeting.
› VOTING SHARES REGISTERED DIRECTLY IN THE NAME OF THE STOCKHOLDER OR HELD IN SOLIUM SHAREWORKS
If you hold your shares of common stock in your own name as a holder of record with our transfer agent, Computershare Trust Company, N.A., you may instruct the proxy holders named in the proxy card how to vote your shares of common stock in one of the following ways:
Vote by Internet. You may vote via the Internet by following the instructions provided in the Notice or, if you received printed materials, on your proxy card. The website for Internet voting is printed on the Notice and also on your proxy card. Please have your Notice or proxy card in hand. Internet voting is available 24 hours per day until 11:59 p.m., Eastern Time, on May 19, 2020.2021. You will receive a series of instructions that will allow you to vote your shares of common stock. You will also be given the opportunity to confirm that your instructions have been properly recorded.
If you vote via the Internet, you do not need to return your proxy card.
Vote by Telephone. If you received printed copies of the proxy materials, you also have the option to vote by telephone by calling the toll-free number listed on your proxy card. Telephone voting is available 24 hours per day until 11:59 p.m., Eastern Time, on May 19, 2020. When you call, please have your proxy card in hand. You will receive a series of voice instructions that will allow you to vote your shares of common stock. You will also be given the opportunity to confirm that your instructions have been properly recorded. If you did not receive printed materials and would like to vote by telephone, you must request printed copies of the proxy materials by following the instructions on your Notice.
| • | Vote by Telephone. If you received printed copies of the proxy materials, you also have the option to vote by telephone by calling the toll-free number listed on your proxy card. Telephone voting is available 24 hours per day until 11:59 p.m., Eastern Time, on May 19, 2021. When you call, pleasehave your proxy card in hand. You will receive a series of voice instructions that will allow you to vote your shares of common stock. You will also be given the opportunity to confirm that your instructions have been properly recorded. If you did not receive printed materials and would like to vote by telephone, you must request printed copies of the proxy materials by following the instructions on your Notice. |
If you vote by telephone, you do not need to return your proxy card.
Vote by Mail. If you received printed materials, and would like to vote by mail, then please mark, sign and date your proxy card and return it promptly in the postage-paid envelope provided. If you did not receive printed materials and would like to vote by mail, you must request printed copies of the proxy materials by following the instructions on your Notice.
If you are a Boston Properties employee or former employee holding shares of common stock on the Solium Shareworks equity portal, the control number you receive on your Notice or proxy card also covers shares of common stock held in your Solium Shareworks account. You may vote these shares via the Internet, by telephone or by completing and returning a proxy card as described above. Your submission of voting instructions for shares of common stock held in your Solium Shareworks account instructs the plan administrator how to vote those shares; it does not result in the appointment of a proxy to vote those shares. Instructions regarding shares held in your Solium Shareworks account must be received by 11:59 p.m., Eastern Time, on May 17, 2020.
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2021.
› VOTING BY PROXY FOR SHARES REGISTERED IN STREET NAME
If your shares of common stock are held in street name, then you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares of common stock voted.
| | 2021 Proxy Statement | 107 |
| 12› | INFORMATION ABOUT THE ANNUAL MEETING |
You may revoke your proxy at any time before it has been exercised by:
filing a written revocation with the Secretary of Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103;
submitting a new proxy by telephone, Internet or proxy card after the time and date of the previously submitted proxy; or
appearing in personattending the virtual annual meeting and voting by ballot atelectronically during the annual meeting.
If you are a stockholder of record as of the record date attending the virtual annual meeting, you may vote in personelectronically during the meeting whether or not a proxy has been previously given, but your presence (without further action) at the virtual annual meeting will not constitute revocation of a previously given proxy.
ACCESSING BOSTON PROPERTIES’ PROXY MATERIALS ELECTRONICALLY
This proxy statement and our 20192020 annual report are available athttp://www.bxp.com/proxy. Instead of receiving copies of our future annual reports, proxy statements, proxy cards and, when applicable, Notices of Internet Availability of Proxy Materials, by mail, we encourage you to elect to receive an email that will provide electronic links to our proxy materials and also will give you an electronic link to the proxy voting site. Choosing to receive your future proxy materials online will save us the cost of producing and mailing the proxy materials or Notices of Internet Availability of Proxy Materials to you and help conserve natural resources. You may sign up for electronic delivery by visitinghttp://www.bxp.com/proxy.
If you and other residents at your mailing address own shares of common stock in street name, your broker, bank or other nominee may have sent you a notice that your household will receive only one annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement. This procedure, known as “householding,” is intended to reduce the volume of duplicate information stockholders receive and also reduce our printing and postage costs. Under applicable law, if you consented or were deemed to have consented, your broker, bank or other nominee may send one copy of our annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement to your address for all residents that own shares of common stock in street name. If you wish to revoke your consent to householding, you must contact your broker, bank or other nominee. If you are receiving multiple copies of our annual report, Notice of Internet Availability of Proxy Materials, notice of annual meeting and/or proxy statement, you may be able to request householding by contacting your broker, bank or other nominee.
If you wish to request extra copies free of charge of our 2020 annual report or proxy statement, please send your request to Investor Relations, Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103; call us with your request at (617) 236-3822; or visit our website athttp://www.bxp.com.
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The cost of solicitation of proxies will be borne by Boston Properties. In an effort to have as many votes cast at the annual meeting as possible, special solicitation of proxies may, in certain instances, be made personally or by telephone, electronic communication or mail by one or more employees of Boston Properties. We also may reimburse brokers, banks, nominees and other fiduciaries for postage and reasonable clerical expenses of forwarding the proxy material to their principals who are beneficial owners of shares of our common stock. In addition, MacKenzie Partners, Inc., a proxy solicitation firm, has been engaged by Boston Properties to act as proxy solicitor and will receive a fee of $7,500 plus reimbursement of reasonableout-of-pocket expenses.
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| OTHER MATTERS |
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The Board of Directors has adopted a Related Person Transaction Approval and Disclosure Policy for the review, approval or ratification of any related person transaction. This written policy provides that all related person transactions, other than a transaction for which an obligation to disclose under Item 404 of Regulation S-K (or any successor provision) arises solely from the fact that a beneficial owner of more than 5% of a class of the Company’s voting securities (or an immediate family member of any such beneficial owner) has an interest in the transaction, must be reviewed and approved by a majority of the disinterested directors on our Board of Directors in advance of us or any of our subsidiaries entering into the transaction; provided that if we or any of our subsidiaries enter into a transaction without recognizing that such transaction constitutes a related person transaction, the approval requirement will be satisfied if such transaction is ratified by a majority of the disinterested directors on the Board of Directors promptly after we recognize that such transaction constituted a related person transaction. Disinterested directors are directors that do not have a personal financial interest in the transaction that is adverse to our financial interest or that of our stockholders. The term “related person transaction” refers to a transaction required to be disclosed by us pursuant to Item 404 of Regulation S-K (or any successor provision) promulgated by the SEC. For purposes of determining whether such disclosure is required, a related person will not be deemed to have a direct or indirect material interest in any transaction that is deemed to be not material (or would be deemed not material if such related person was a director) for purposes of determining director independence pursuant to the Company’s categorical standards of director independence. Please refer to the categorical standards under “Proposal 1: Election of Directors —– Director Independence” beginning on page 9.21.
Since January 1, 2019,2020, the Company has paid a firm controlled by Mr. Raymond A. Ritchey’s brother aggregate leasing commissions of approximately $21,000.$3,587,393. The Company expects to pay additional commissions to this firm during 2020.2021. In January 2018, Mr. Ritchey’s brother became an employee of a real estate firm with which the Company has entered into a contract for services that is nearly identical to the previous contract with the firm controlled by Mr. Ritchey’s brother. Given current and anticipated leasing activity, it is currently expected that the Company willexpects to pay equivalent or increased leasing commissions to the real estate firm that currently employs Mr. Ritchey’s brother in 2020,2021 as compared to leasing commissions paid to the firm controlled by him.him in prior years. Mr. Ritchey is the Senior Executive Vice President of Boston Properties. The Company believes the terms of the related agreements are comparable to, and in most cases more favorable to us than, similar arrangements with other brokers in relevant markets.
We are partners with affiliates of Norges Bank Investment Management in joint ventures relating tothat own Times Square Tower, 601 Lexington Avenue, 100 Federal Street and Atlantic Wharf Office. Based on a Schedule 13G/A filed with the SEC on February 11, 2020,1, 2021, Norges Bank (The Central Bank of Norway), an affiliate of Norges Bank Investment Management, is the beneficial owner of more than 5% of our common stock.
We lease office space at our Santa Monica Business Park property to an entity that was acquired by an affiliate of BlackRock, Inc. in August 2018. Based on a Schedule 13G/A filed with the SEC on January 27, 2021, BlackRock is the beneficial owner of more than 5% of our common stock. Since January 1, 2020, BlackRock paid the Company $1,413,434 in lease payments.
STOCKHOLDER NOMINATIONS FOR DIRECTOR AND PROPOSALS FOR THE 20212022 ANNUAL MEETING OF STOCKHOLDERS
› STOCKHOLDER PROPOSALS SUBMITTED FOR INCLUSION IN OUR PROXY STATEMENT
Any stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 for inclusion in Boston Properties’ proxy statement and form of proxy for its 20212022 annual meeting of stockholders must be received by Boston Properties on or before December 4, 20206, 2021 in order to be considered for inclusion in our proxy statement and form of proxy. The proposals must also comply with the requirements as to form and substance established by the SEC if they are to be included in the proxy statement and form of proxy. Any such proposal should be mailed to: Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103, Attn.: Secretary.
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| OTHER MATTERS |
› PROXY ACCESS DIRECTOR NOMINATIONS FOR INCLUSION IN OUR PROXY STATEMENT
In order for an eligible stockholder or group of stockholders to nominate a director nomineecandidate for election at Boston Properties’ 20212022 annual meeting pursuant to the proxy access provision of our By-laws, notice of such nomination and other required information must be received by Boston Properties on or before December 4, 20206, 2021, unless our 20212022 annual meeting of stockholders is scheduled to take place before April 20, 20212022 or after July 19, 2021.2022. Our By-laws state that such notice and other required information must be received by Boston Properties not less than 120 days prior to the anniversary of the date of the proxy statement for the prior year’s annual meeting of stockholders; provided, however, that in the event the annual meeting is scheduled to be held on a date more than 30 days before the anniversary of the date of the immediately preceding annual meeting, or the annual meeting anniversary date, or more than 60 days after the annual meeting anniversary date, or if no annual meeting was held in the preceding year, the deadline for the receipt of such notice and other required information shall be the close of business on the later of (1) the 180th day prior to the scheduled date of such annual meeting or (2) the 15th day following the day on which public announcement of the date of such annual meeting is first made.
In addition, our By-laws require the eligible stockholder or group of stockholders to update and supplement such information (or provide notice stating that there are no updates or supplements) as of specified dates. Notices and other required information must be received by our Secretary at our principal executive office, which is currently Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103.
› OTHER PROPOSALS OR NOMINATIONS
Stockholder proposals and nominations of directors to be presented at Boston Properties’ 20212022 annual meeting, other than stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 for inclusion in Boston Properties’ proxy statement and form of proxy for our 20212022 annual meeting or submitted pursuant to the proxy access provision of our By-laws, must be received in writing at our principal executive office not earlier than January 20, 2021,2022, nor later than March 6, 2021,2022, unless our 20212022 annual meeting of stockholders is scheduled to take place before April 20, 20212022 or after July 19, 2021.2022. Our By-laws state that the stockholder must provide timely written notice of such proposal or a nomination and supporting documentation as well as be present at such meeting, either in person or by a representative. A stockholder’s notice shall be timely received by Boston Properties at its principal executive office not less than seventy-five (75)75 days nor more than one hundred twenty (120)120 days prior to the annual meeting anniversary date; provided, however, that in the event the annual meeting is scheduled to be held on a date more than thirty (30)30 days before the annual meeting anniversary date or more than sixty (60)60 days after the annual meeting anniversary date, a stockholder’s notice shall be timely if received by Boston Properties at its principal executive office not later than the close of business on the later of (1) the seventy-fifth (7575th) day prior to the scheduled date of such annual meeting or (2) the fifteenth (1515th) day following the day on which public announcement of the date of such annual meeting is first made by Boston Properties. Proxies solicited by our Board of Directors will confer discretionary voting authority with respect to these proposals, subject to SEC rules and regulations governing the exercise of this authority. Any such proposals must be received by our Secretary at our principal executive office, which is currently Boston Properties, Inc., 800 Boylston Street, Suite 1900, Boston, Massachusetts 02199-8103.
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ReconciliationBOSTON PROPERTIES, INC.
2021 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of Net Income Attributable tothe plan is the Boston Properties, Inc. Common Shareholders2021 Stock Incentive Plan (the “Plan”). The purpose of the Plan is to BXP’s Shareencourage and enable the officers, employees, Non-Employee Directors, Consultants and other key persons of Boston Properties, Inc. (the “Company”) and the employees and other key persons of Boston Properties Limited Partnership (the “Operating Partnership”) and the Company’s other Subsidiaries, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.
Same Property Net Operating Income (NOI) (excluding termination income)The following terms shall be defined as set forth below:
“Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation committee that is designated by the Board as the administrator of the Plan.
| For the year ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| (unaudited and in thousands) | ||||||||
Net Income Attributable to Boston Properties, Inc. Common Shareholders | $ | 511,034 | $ | 572,347 | ||||
Preferred dividends | 10,500 | 10,500 | ||||||
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Net Income Attributable to Boston Properties, Inc. | 521,534 | 582,847 | ||||||
Net Income Attributable to Noncontrolling Interests: | ||||||||
Noncontrolling interest — common units of the Operating Partnership | 59,345 | 66,807 | ||||||
Noncontrolling interests in property partnerships | 71,120 | 62,909 | ||||||
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Net Income | 651,999 | 712,563 | ||||||
Add: | ||||||||
Interest expense | 412,717 | 378,168 | ||||||
Losses from early extinguishments of debt | 29,540 | 16,490 | ||||||
Impairment losses | 24,038 | 11,812 | ||||||
Depreciation and amortization | 677,764 | 645,649 | ||||||
Transaction costs | 1,984 | 1,604 | ||||||
Payroll and related costs from management services contracts | 10,386 | 9,590 | ||||||
General and administrative expense | 140,777 | 121,722 | ||||||
Less: | ||||||||
Gains (losses) from investments in securities | 6,417 | (1,865 | ) | |||||
Interest and other income | 18,939 | 10,823 | ||||||
Gains on sales of real estate | 709 | 182,356 | ||||||
Income from unconsolidated joint ventures | 46,592 | 2,222 | ||||||
Direct reimbursements of payroll and related costs from management services contracts | 10,386 | 9,590 | ||||||
Development and management services | 40,039 | 45,158 | ||||||
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Net Operating Income (NOI) | 1,826,123 | 1,649,314 | ||||||
Less: | ||||||||
Termination income | 15,203 | 8,205 | ||||||
NOI from non Same Properties (excluding termination income) | 113,538 | 45,591 | ||||||
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Same Property NOI (excluding termination income) | 1,697,382 | 1,595,518 | ||||||
Less: | ||||||||
Partners’ share of NOI from consolidated joint ventures (excluding termination income and after income allocation to private REIT shareholders and priority allocations)(1) | 183,880 | 177,278 | ||||||
BXP’s share of NOI from non Same Properties from unconsolidated joint ventures (excluding termination income) | 33,893 | 19,858 | ||||||
Add: | ||||||||
Partners’ share of NOI from non Same Properties from consolidated joint ventures (excluding termination income and after income allocation to private REIT shareholders and priority allocations) | 1,240 | 777 | ||||||
BXP’s share of NOI from unconsolidated joint ventures (excluding termination income)(2) | 97,630 | 79,588 | ||||||
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BXP’s Share of Same Property NOI (excluding termination income) | $ | 1,578,479 | $ | 1,478,747 | ||||
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“Award” or “Awards,” means an award under the Plan and, except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Unit Awards, Unrestricted Stock Awards, Dividend Equivalent Rights, Cash-Based Awards and other equity-based awards as contemplated herein.
“Award Certificate” means a written or electronic agreement or document setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Certificate is subject to the terms and conditions of the Plan.
“Board” means the Board of Directors of the Company.
“Cash-Based Award” means an Award granted pursuant to Section 12 entitling the recipient to receive a cash denominated payment.
“Change in Control” means the occurrence of any one of the following events:
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| (iii) | the consummation of (A) any consolidation or merger of the Company as a result of which the Voting Securities outstanding immediately prior to the consolidation or merger do not either (x) continue to represent 60 percent or more of the outstanding stock or other equity interests having the right to vote in an election of the board of directors (or other equivalent governing body) of the resulting or successor entity (or its ultimate parent, if applicable) immediately upon completion of such transaction or (y) convert into, or become immediately exchangeable for, |
| | | A-1 |
Reconciliation of Net Income Attributable to Boston Properties, Inc. Common Shareholders to BXP’s Share of Same Property Net Operating Income (NOI) — Cash (excluding termination income)
| For the year ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| (unaudited and in thousands) | ||||||||
Net Income Attributable to Boston Properties, Inc. Common Shareholders | $ | 511,034 | $ | 572,347 | ||||
Preferred dividends | 10,500 | 10,500 | ||||||
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Net Income Attributable to Boston Properties, Inc. | 521,534 | 582,847 | ||||||
Net Income Attributable to Noncontrolling Interests: | ||||||||
Noncontrolling interest — common units of the Operating Partnership | 59,345 | 66,807 | ||||||
Noncontrolling interests in property partnerships | 71,120 | 62,909 | ||||||
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Net Income | 651,999 | 712,563 | ||||||
Add: | ||||||||
Interest expense | 412,717 | 378,168 | ||||||
Losses from early extinguishments of debt | 29,540 | 16,490 | ||||||
Impairment losses | 24,038 | 11,812 | ||||||
Depreciation and amortization | 677,764 | 645,649 | ||||||
Transaction costs | 1,984 | 1,604 | ||||||
Payroll and related costs from management services contracts | 10,386 | 9,590 | ||||||
General and administrative expense | 140,777 | 121,722 | ||||||
Less: | ||||||||
Gains (losses) from investments in securities | 6,417 | (1,865 | ) | |||||
Interest and other income | 18,939 | 10,823 | ||||||
Gains on sales of real estate | 709 | 182,356 | ||||||
Income from unconsolidated joint ventures | 46,592 | 2,222 | ||||||
Direct reimbursements of payroll and related costs from management services contracts | 10,386 | 9,590 | ||||||
Development and management services | 40,039 | 45,158 | ||||||
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Net Operating Income (NOI) | 1,826,123 | 1,649,314 | ||||||
Less: | ||||||||
Straight-line rent | 63,157 | 48,054 | ||||||
Straight-line rent from deferred revenue(1) | 36,926 | — | ||||||
Fair value lease revenue | 20,186 | 23,811 | ||||||
Termination income | 15,203 | 8,205 | ||||||
Add: | ||||||||
Straight-line ground rent expense adjustment(2) | 3,384 | 3,559 | ||||||
Lease transaction costs that qualify as rent inducements | 6,627 | 8,692 | ||||||
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NOI — cash (excluding termination income) | 1,700,662 | 1,581,495 | ||||||
Less: | ||||||||
NOI — cash from non Same Properties (excluding termination income) | 111,998 | 69,123 | ||||||
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Same Property NOI — cash (excluding termination income) | 1,588,664 | 1,512,372 | ||||||
Less: | ||||||||
Partners’ share of NOI — cash from consolidated joint ventures (excluding termination income and after income allocation to private REIT shareholders and priority allocations)(3) | 168,791 | 163,854 | ||||||
BXP’s share of NOI — cash from non Same Properties from unconsolidated joint ventures (excluding termination income) | 31,092 | 16,779 | ||||||
Add: | ||||||||
Partners’ share of NOI — cash from non Same Properties from consolidated joint ventures (excluding termination income and after income allocation to private REIT shareholders and priority allocations) | 1,511 | 1,950 | ||||||
BXP’s share of NOI — cash from unconsolidated joint ventures (excluding termination income)(4) | 86,459 | 66,742 | ||||||
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BXP’s Share of Same Property NOI — cash (excluding termination income) | $ | 1,476,751 | $ | 1,400,431 | ||||
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Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of shares of Voting Securities beneficially owned by any person (as defined in the foregoing clause (i)) to 25 percent or more of the combined voting power of all then outstanding Voting Securities; provided, however, that if such person shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company), then a “Change in Control” shall be deemed to have occurred for purposes of the foregoing clause (i).
“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations. “Common Units” shall have the meaning set forth in the Partnership Agreement. “Consultant” means any natural person that provides bona fide services to the Company, and such services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities. “Dividend Equivalent Right” means an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the grantee. “Effective Date” means the date on which the Plan becomes effective as set forth in Section 20. “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. “Fair Market Value” on any given date means the last reported sale price at which Stock is traded on such date or, if no Stock is traded on such date, the next preceding date on which Stock was traded, as reflected on the principal stock exchange or, if applicable, any other national stock exchange on which the Stock is traded or admitted to trading. “Family Member” of a grantee means a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50% of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these persons (or the grantee) own more than 50% of the voting interests. “Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code. “LTIP Units” shall have the meaning set forth in the Partnership Agreement. “Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary. “Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option. “Operating Partnership” means Boston Properties Limited Partnership, a Delaware limited partnership, and any successor thereto. “Partnership Agreement” means the Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of June 29, 1998, among the Company, as general partner, and the limited partners who are parties thereto, as amended, restated or supplemented from time to time. “Performance Criteria” means the performance objectives that the Administrator selects for purposes of earning or attaining an Award for a Performance Cycle. The Performance Criteria which shall be applicable to the organizational level specified by the Administrator, including, but not limited to, the Company or a unit, division, group, region, or Subsidiary of the Company, may include, but will not be limited to, any one or more of the following as selected by the Administrator: funds from operations (“FFO”), adjusted FFO, growth in FFO per share, leasing, rent growth, occupancy or percentage |
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A-2 | | | |
Consolidated Joint Venturesleased, operating income and/or net annual recurring revenue, net operating income, total stockholder return, revenue, earnings per share, earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”), cash flow (including, but not limited to, operating cash flow and free cash flow), balance sheet management, ratios of net debt to EBITDAre and ratios of market capitalization, net income (loss) (either before or after interest, taxes, depreciation and/or amortization), stock price, economic value-added, acquisitions, dispositions, strategic transactions, portfolio or regional occupancy rates, return on capital, assets, equity, development, re-development, investment, capital deployment, development milestones or any other operational, financial or other performance metric selected by the Administrator, any of which may be (A) measured in absolute terms or compared to any incremental increase, (B) measured in terms of rate of change, (C) compared to another company or companies or to results of a peer group, (D) measured against the market as a whole and/or as compared to applicable market indices, (E) measured on an adjusted basis, by including or excluding categories of items specifically identified in advance by the Compensation Committee or, if not so specified, items that the Compensation Committee determines, in its discretion, are appropriate to include or exclude whether or not specifically identified in advance, (F) measured on a pre-tax or post-tax basis (if applicable), (G) measured on an annualized basis, and/or (H) measured for all or a portion of the Company’s portfolio, including on a same property basis and/or relating to “BXP’s share” (calculated as the consolidated amount calculated in accordance with GAAP, plus the Company’s share of the amount from the Company’s unconsolidated joint ventures (calculated based upon the Company’s percentage ownership interest and, in some cases, after priority allocations), minus the Company’s partners’ share of the amount from the Company’s consolidated joint ventures (calculated based upon the partners’ percentage ownership interests and, in some cases, after income allocation to private REIT shareholders and their share of fees due to the Company)).
“Performance Cycle” means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Criteria will be measured.
“Person” means any natural person, corporation, partnership, association, limited liability company, estate, trust, joint venture, any federal, state or municipal government or any bureau, department or agency thereof, any other legal entity, or a “group” as that term is used for purposes of Rule 13d-5(b) or Section 13(d) of the year ended December 31, 2019Exchange Act and any fiduciary acting in such capacity on behalf of the foregoing.
(unaudited“Restricted Stock” means the shares of Stock underlying a Restricted Stock Award that remain subject to a risk of forfeiture or the Company’s right of repurchase.
“Restricted Stock Award” means an Award of Restricted Stock subject to such restrictions and dollarsconditions as the Administrator may determine at the time of grant.
“Restricted Stock Units” means the units underlying a Restricted Stock Unit Award, each of which represents the right to receive one share of Stock or a cash payment equal to the Fair Market Value of one share of Stock at the time and upon the conditions applicable to the Restricted Stock Unit Award.
“Restricted Stock Unit Award” means an Award of Restricted Stock Units subject to such restrictions and conditions as the Administrator may determine at the time of grant.
“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.
“Service Relationship” means any relationship as an employee, director or Consultant of the Company or any Subsidiary; provided, however, a change in thousands)an individual’s status from a full-time employee or director to part-time employee or Consultant or from a director or Consultant to an employee shall be deemed to continue the Service Relationship.
“Stock” means the Common Stock, par value $0.01 per share, of the Company, subject to adjustments pursuant to Section 3.
| Norges Joint Ventures | ||||||||||||||||
| 767 Fifth Avenue (The GM Building) | Times Square Tower 601 Lexington Avenue / One Five Nine East 53rd Street 100 Federal Street Atlantic Wharf Office | Salesforce Tower | Total Consolidated Joint Ventures | |||||||||||||
Revenue | ||||||||||||||||
Lease(1) | $ | 308,338 | $ | 385,628 | $ | 27,572 | $ | 721,538 | ||||||||
Straight-line rent | (25,026 | ) | 10,859 | 176 | (13,991 | ) | ||||||||||
Fair value lease revenue | 14,006 | 621 | — | 14,627 | ||||||||||||
Termination income | 227 | 40 | — | 267 | ||||||||||||
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| |||||||||
Total lease revenue | 297,545 | 397,148 | 27,748 | 722,441 | ||||||||||||
Parking and other | 8 | 6,109 | 229 | 6,346 | ||||||||||||
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|
|
| |||||||||
Total rental revenue | 297,553 | 403,257 | 27,977 | 728,787 | ||||||||||||
Expenses | ||||||||||||||||
Operating | 120,185 | 139,626 | 12,336 | 272,147 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Net Operating Income (NOI) | 177,368 | 263,631 | 15,641 | 456,640 | ||||||||||||
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|
|
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| |||||||||
Other income (expense) | ||||||||||||||||
Development and management services revenue | — | 82 | 126 | 208 | ||||||||||||
Interest and other income | 1,848 | 2,417 | 78 | 4,343 | ||||||||||||
Interest expense | (82,377 | ) | (22,115 | ) | — | (104,492 | ) | |||||||||
Depreciation and amortization expense | (83,766 | ) | (83,835 | ) | (7,668 | ) | (175,269 | ) | ||||||||
General and administrative expense | (155 | ) | (547 | ) | (3 | ) | (705 | ) | ||||||||
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|
| |||||||||
Total other income (expense) | (164,450 | ) | (103,998 | ) | (7,467 | ) | (275,915 | ) | ||||||||
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| |||||||||
Net income | $ | 12,918 | $ | 159,633 | $ | 8,174 | $ | 180,725 | ||||||||
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| |||||||||
BXP’s nominal ownership percentage | 60.00 | % | 55.00 | % | 95.00 | % | ||||||||||
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| |||||||||||
Reconciliation of Partners’ share of NOI(2) | ||||||||||||||||
Rental revenue | $ | 119,022 | $ | 181,466 | $ | 1,399 | $ | 301,887 | ||||||||
Less: Termination income | 91 | 18 | — | 109 | ||||||||||||
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| |||||||||
Rental revenue (excluding termination income) | 118,931 | 181,448 | 1,399 | 301,778 | ||||||||||||
Less: Operating expenses (including partners’ share of management and other fees) | 50,682 | 66,307 | 665 | 117,654 | ||||||||||||
Income allocation to private REIT shareholders and priority allocations | — | (42 | ) | 286 | 244 | |||||||||||
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| |||||||||
NOI (excluding termination income and after income allocation to private REIT shareholders and priority allocations) | $ | 68,249 | $ | 115,183 | $ | 448 | $ | 183,880 | ||||||||
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| |||||||||
Rental revenue (excluding termination income) | $ | 118,931 | $ | 181,448 | $ | 1,399 | $ | 301,778 | ||||||||
Less: Straight-line rent | (10,010 | ) | 4,886 | 9 | (5,115 | ) | ||||||||||
Straight-line rent from deferred revenue(3) | 14,770 | — | — | 14,770 | ||||||||||||
Fair value lease revenue | 5,602 | 281 | — | 5,883 | ||||||||||||
Add: Lease transaction costs that qualify as rent inducements | — | 449 | — | 449 | ||||||||||||
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| |||||||||
Subtotal | $ | 108,569 | $ | 176,730 | $ | 1,390 | $ | 286,689 | ||||||||
Less: Operating expenses (including partners’ share of management and other fees) | 50,682 | 66,307 | 665 | 117,654 | ||||||||||||
Income allocation to private REIT shareholders and priority allocations | — | (42 | ) | 286 | 244 | |||||||||||
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| |||||||||
NOI — cash (excluding termination income and after income allocation to private REIT shareholders and priority allocations) | $ | 57,887 | $ | 110,465 | $ | 439 | $ | 168,791 | ||||||||
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“Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.
“Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5. “Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or indirectly. “Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation. |
|
|
| | | A-3 |
Consolidated Joint Ventures“Unit” means units of partnership interest in the Operating Partnership, including, without limitation, Common Units, LTIP Units or one or more other classes of units that are convertible into Common Units or LTIP Units on a specified date or at the election of the recipient based on appreciation in the value of the Stock, appreciation in the value of the assets of the Operating Partnership, total return generated by a specified number of shares of Stock or Common Units or such other basis as may be determined by the Administrator. Units may include units of partnership interest in the Operating Partnership that are intended to constitute profits interests for U.S. federal income tax purposes.
for the year ended December 31, 2018“Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.
(unaudited and dollars in thousands)SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
| Norges Joint Ventures | ||||||||||||||||
| 767 Fifth Avenue (The GM Building) | Times Square Tower 601 Lexington Avenue / One Five Nine East 53rd Street 100 Federal Street Atlantic Wharf Office | Salesforce Tower | Total Consolidated Joint Ventures | |||||||||||||
Revenue | ||||||||||||||||
Rent | $ | 220,509 | $ | 299,299 | $ | 48,951 | $ | 568,759 | ||||||||
Straight-line rent | 4,593 | 12,095 | (21,370 | ) | (4,682 | ) | ||||||||||
Fair value lease revenue | 17,644 | 960 | — | 18,604 | ||||||||||||
Termination income | 275 | 16 | — | 291 | ||||||||||||
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| |||||||||
Base rent | 243,021 | 312,370 | 27,581 | 582,972 | ||||||||||||
Recoveries from tenants | 50,625 | 62,926 | 13,952 | 127,503 | ||||||||||||
Parking and other | 2,976 | 6,095 | 736 | 9,807 | ||||||||||||
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|
|
|
|
|
| |||||||||
Total rental revenue | 296,622 | 381,391 | 42,269 | 720,282 | ||||||||||||
Expenses | ||||||||||||||||
Operating | 116,403 | 134,219 | 20,166 | 270,788 | ||||||||||||
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|
|
|
|
|
| |||||||||
Net Operating Income (NOI) | 180,219 | 247,172 | 22,103 | 449,494 | ||||||||||||
Other income (expense) | ||||||||||||||||
Development and management services revenue | 1,942 | 3,008 | 1,219 | 6,169 | ||||||||||||
Interest and other income | 2,027 | 1,961 | 362 | 4,350 | ||||||||||||
Interest expense | (82,158 | ) | (25,455 | ) | — | (107,613 | ) | |||||||||
Depreciation and amortization expense | (90,955 | ) | (82,823 | ) | (10,207 | ) | (183,985 | ) | ||||||||
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| |||||||||
Total other income (expense) | (169,144 | ) | (103,309 | ) | (8,626 | ) | (281,079 | ) | ||||||||
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|
| |||||||||
Net income | $ | 11,075 | $ | 143,863 | $ | 13,477 | $ | 168,415 | ||||||||
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|
| |||||||||
BXP’s nominal ownership percentage | 60.00 | % | 55.00 | % | 95.00 | % | ||||||||||
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|
| |||||||||||
Reconciliation of Partners’ share of NOI(1) |
| |||||||||||||||
Rental revenue | $ | 118,650 | $ | 171,627 | $ | 2,114 | $ | 292,391 | ||||||||
Less: Termination income | 110 | 7 | — | 117 | ||||||||||||
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| |||||||||
Rental revenue (excluding termination income) | 118,540 | 171,620 | 2,114 | 292,274 | ||||||||||||
Less: Operating expenses (including partners’ share of management and other fees) | 49,282 | 63,615 | 1,091 | 113,988 | ||||||||||||
Income allocation to private REIT shareholders and priority allocations | — | (42 | ) | 1,050 | 1,008 | |||||||||||
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|
|
|
| |||||||||
NOI (excluding termination income and after income allocation to private REIT shareholders and priority allocations) | $ | 69,258 | $ | 108,047 | $ | (27 | ) | $ | 177,278 | |||||||
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|
|
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| |||||||||
Rental revenue (excluding termination income) | $ | 118,540 | $ | 171,620 | $ | 2,114 | $ | 292,274 | ||||||||
Less: Straight-line rent | 1,837 | 5,442 | (1,068 | ) | 6,211 | |||||||||||
Fair value lease revenue | 7,059 | 431 | — | 7,490 | ||||||||||||
Add: Lease transaction costs that qualify as rent inducements | — | 277 | — | 277 | ||||||||||||
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|
|
|
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| |||||||||
Subtotal | 109,644 | 166,024 | 3,182 | 278,850 | ||||||||||||
Less: Operating expenses (including partners’ share of management and other fees) | 49,282 | 63,615 | 1,091 | 113,988 | ||||||||||||
Income allocation to private REIT shareholders and priority allocations | — | (42 | ) | 1,050 | 1,008 | |||||||||||
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| |||||||||
NOI — cash (excluding termination income and after income allocation to private REIT shareholders and priority allocations) | $ | 60,362 | $ | 102,451 | $ | 1,041 | $ | 163,854 | ||||||||
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| (a) |
|
| (b) | Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan and otherwise administer the Plan and the Awards granted hereunder, including, without limitation, the power and authority: |
| (i) | to select the individuals to whom Awards may from time to time be granted; |
| (ii) | to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Unit Awards, Unrestricted Stock Awards, Dividend Equivalent Rights and other equity-based awards, or any combination of the foregoing, granted to any one or more grantees; |
| (iii) | to determine the number of shares of Stock to be covered by any Award; |
| (iv) | to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award Certificates; provided, however, that except as otherwise provided in Section 3(b), the Administrator is not permitted to reduce the exercise price of Stock Options through cancellation and re-grants or cancellation in exchange for cash; |
| (v) | to accelerate at any time the exercisability or vesting of all or any portion of any Award; |
| (vi) | subject to the provisions of Section 5(c), to extend at any time the period in which Stock Options may be exercised; |
| (vii) | to determine at any time whether, to what extent, and under what circumstances Stock and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the participant and whether and to what extent the Company shall pay or credit amounts constituting deemed interest, dividends, distributions or other earnings; and |
| (viii) | at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan. |
All decisions and interpretations of the Administrator shall be made in the Administrator’s sole and absolute discretion and shall be binding and conclusive on all persons, including the Company, the Operating Partnership, the Company’s other Subsidiaries and Plan grantees.
| (c) | Delegation of Authority to Grant Awards. Subject to applicable law, the Administrator, in its discretion, may delegate to the Chief Executive Officer of the Company all or part of the Administrator’s authority and duties with respect to the granting of Awards to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act. Any such delegation by the Administrator shall include a limitation as to the amount of Stock underlying Awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s delegate or delegates that were consistent with the terms of the Plan. |
| (d) | Award Certificate. Awards under the Plan shall be evidenced by Award Certificates that set forth the terms, conditions and limitations for each Award, which may include, without limitation, the term of an Award, and the provisions applicable in the event employment or service terminates. |
A-4 | | | |
| (e) | Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries may from time to time operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take any action, before or after an Award is made, that the Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law. |
Unconsolidated Joint VenturesSECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
for the year ended December 31, 2019
(unaudited and dollars in thousands)
| Market Square North | Metropolitan Square | 901 New York Avenue | Annapolis Junction (1) | 500 North Capitol Street, N.W. | Colorado Center | Santa Monica Business Park | The Hub on Causeway | Other Joint Ventures (2) | Total Unconsolidated Joint Ventures | |||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||||
Lease(3) | $ | 20,522 | $ | 16,460 | $ | 33,041 | $ | 7,445 | $ | 18,109 | $ | 72,114 | $ | 61,241 | $ | 5,411 | $ | 19,161 | $ | 253,504 | ||||||||||||||||||||
Straight-line rent | 2,071 | 11,201 | 239 | 532 | (110 | ) | 3,943 | 4,615 | 6,825 | 3,111 | 32,427 | |||||||||||||||||||||||||||||
Fair value lease revenue | — | — | — | — | — | 189 | 3,785 | — | — | 3,974 | ||||||||||||||||||||||||||||||
Termination income | — | (31 | ) | 50 | — | — | — | 101 | — | 18 | 138 | |||||||||||||||||||||||||||||
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Total lease revenue | 22,593 | 27,630 | 33,330 | 7,977 | 17,999 | 76,246 | 69,742 | 12,236 | 22,290 | 290,043 | ||||||||||||||||||||||||||||||
Parking and other | 851 | 2,501 | 1,533 | 220 | 499 | 11,173 | 7,844 | 215 | 5,081 | 29,917 | ||||||||||||||||||||||||||||||
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Total rental revenue | 23,444 | 30,131 | 34,863 | 8,197 | 18,498 | 87,419 | 77,586 | 12,451 | 27,371 | 319,960 | ||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Operating | 10,208 | 13,844 | 14,335 | 3,077 | 7,295 | 24,803 | 29,934 | 5,411 | 14,032 | (4) | 122,939 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Net Operating Income | 13,236 | 16,287 | 20,528 | 5,120 | 11,203 | 62,616 | 47,652 | 7,040 | 13,339 | 197,021 | ||||||||||||||||||||||||||||||
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Other income/(expense) | ||||||||||||||||||||||||||||||||||||||||
Development and management services income | 23 | — | 5 | 4 | — | — | — | — | — | 32 | ||||||||||||||||||||||||||||||
Interest and other income | 356 | 1 | 418 | 317 | 99 | 878 | 5 | 269 | 1,026 | 3,369 | ||||||||||||||||||||||||||||||
Interest expense | (5,775 | ) | (7,833 | ) | (8,300 | ) | (2,329 | ) | (4,476 | ) | (19,969 | ) | (28,037 | ) | (3,156 | ) | (4,530 | ) | (84,405 | ) | ||||||||||||||||||||
Transaction costs | — | — | — | — | — | — | — | — | (1,000 | ) | (1,000 | ) | ||||||||||||||||||||||||||||
Depreciation and amortization expense | (4,390 | ) | (11,664 | ) | (6,141 | ) | (2,831 | ) | (3,702 | ) | (20,258 | ) | (38,018 | ) | (3,415 | ) | (11,875 | ) | (102,294 | ) | ||||||||||||||||||||
General and administrative expense | (29 | ) | (77 | ) | (64 | ) | (1 | ) | (6 | ) | (8 | ) | (92 | ) | (260 | ) | (61 | ) | (598 | ) | ||||||||||||||||||||
Gain on sale of real estate | — | — | — | — | — | — | — | — | 33,707 | 33,707 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total other income/(expense) | (9,815 | ) | (19,573 | ) | (14,082 | ) | (4,840 | ) | (8,085 | ) | (39,357 | ) | (66,142 | ) | (6,562 | ) | 17,267 | (151,189 | ) | |||||||||||||||||||||
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| |||||||||||||||||||||
Net income/(loss) | $ | 3,421 | $ | (3,286 | ) | $ | 6,446 | $ | 280 | $ | 3,118 | $ | 23,259 | $ | (18,490 | ) | $ | 478 | $ | 30,606 | $ | 45,832 | ||||||||||||||||||
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| |||||||||||||||||||||
BXP’s nominal ownership percentage | 50 | % | 20 | % | 25 | % | 50 | % | 30 | % | 50 | % | 55 | % | 50 | % | ||||||||||||||||||||||||
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| |||||||||||||||||||||||||
Reconciliation of BXP’s share of Net Operating Income | ||||||||||||||||||||||||||||||||||||||||
BXP’s share of rental revenue | $ | 11,723 | $ | 6,027 | $ | 17,432 | (5) | $ | 4,099 | $ | 5,550 | $ | 47,532 | (6) | $ | 42,672 | $ | 6,227 | $ | 13,792 | $ | 155,054 | ||||||||||||||||||
BXP’s share of operating expenses | 5,105 | 2,768 | 7,168 | (5) | 1,540 | 2,189 | 12,402 | 16,463 | 2,705 | 6,998 | 57,338 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
BXP’s share of net operating income | 6,618 | 3,259 | 10,264 | (5) | 2,559 | 3,361 | 35,130 | 26,209 | 3,522 | 6,794 | 97,716 | |||||||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||||||||||
BXP’s share of termination income | — | (6 | ) | 25 | (5) | — | — | — | 56 | — | 11 | 86 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
BXP’s share of net operating income (excluding termination income) | 6,618 | 3,265 | 10,239 | (5) | 2,559 | 3,361 | 35,130 | 26,153 | 3,522 | 6,783 | 97,630 | |||||||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||||||||||
BXP’s share of straight-line rent | 1,037 | 2,240 | 120 | (5) | 268 | (33 | ) | 4,090 | (6) | 2,538 | 3,413 | 1,560 | 15,233 | |||||||||||||||||||||||||||
BXP’s share of fair value lease revenue | — | — | — | (5) | — | — | 1,801 | (6) | 2,082 | — | — | 3,883 | ||||||||||||||||||||||||||||
Add: | ||||||||||||||||||||||||||||||||||||||||
BXP’s share of straight-line ground rent adjustment | — | — | — | (5) | — | — | — | — | — | 40 | 40 | |||||||||||||||||||||||||||||
BXP’s share of lease transaction costs that qualify as rent inducements | 61 | 382 | 106 | (5) | — | 4 | 591 | — | 2,109 | 4,652 | 7,905 | |||||||||||||||||||||||||||||
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BXP’s share of net operating income — cash (excluding termination income) | $ | 5,642 | $ | 1,407 | $ | 10,225 | (5) | $ | 2,291 | $ | 3,398 | $ | 29,830 | (6) | $ | 21,533 | $ | 2,218 | $ | 9,915 | $ | 86,459 | ||||||||||||||||||
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Unconsolidated Joint Ventures
for the year ended December 31, 2018
(unaudited and dollars in thousands)
| 540 Madison Avenue | Market Square North | Metropolitan Square | 901 New York Avenue | Annapolis Junction (1) | 500 North Capitol Street, N.W. | Colorado Center | Santa Monica Business Park | Other Joint Ventures (2) | Total Unconsolidated Joint Ventures | |||||||||||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||||||||||||
Rental | $ | 22,049 | $ | 17,439 | $ | 23,262 | $ | 27,977 | $ | 10,558 | $ | 11,517 | $ | 52,325 | $ | 22,722 | $ | 6,301 | $ | 194,150 | ||||||||||||||||||||
Straight-line rent | 553 | 1,125 | (214 | ) | 78 | 230 | (31 | ) | 10,774 | 3,661 | (243 | ) | 15,933 | |||||||||||||||||||||||||||
Fair value lease revenue | — | — | — | — | — | — | 384 | 1,651 | — | 2,035 | ||||||||||||||||||||||||||||||
Termination income | 3 | — | (16 | ) | 50 | — | — | — | — | — | 37 | |||||||||||||||||||||||||||||
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Base rent | 22,605 | 18,564 | 23,032 | 28,105 | 10,788 | 11,486 | 63,483 | 28,034 | 6,058 | 212,155 | ||||||||||||||||||||||||||||||
Recoveries from tenants | 2,300 | 3,714 | 4,730 | 5,168 | 1,980 | 5,346 | 2,578 | 3,312 | 2,630 | 31,758 | ||||||||||||||||||||||||||||||
Parking and other | 91 | 868 | 2,698 | 1,676 | 223 | 503 | 10,961 | 3,111 | 4,719 | 24,850 | ||||||||||||||||||||||||||||||
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Total rental revenue | 24,996 | 23,146 | 30,460 | 34,949 | 12,991 | 17,335 | 77,022 | 34,457 | 13,407 | 268,763 | ||||||||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||||||||
Operating | 14,012 | 9,585 | 14,804 | 14,229 | 6,409 | 5,983 | 22,805 | 13,412 | 5,380 | 106,619 | ||||||||||||||||||||||||||||||
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Net operating income | 10,984 | 13,561 | 15,656 | 20,720 | 6,582 | 11,352 | 54,217 | 21,045 | 8,027 | 162,144 | ||||||||||||||||||||||||||||||
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Other income/(expense) | ||||||||||||||||||||||||||||||||||||||||
Development and management services revenue | 283 | 10 | 18 | — | — | — | 29 | 16 | 3 | 359 | ||||||||||||||||||||||||||||||
Interest and other income | 249 | 256 | 17 | 249 | 284 | 65 | 508 | — | 1,185 | 2,813 | ||||||||||||||||||||||||||||||
Interest expense | (4,077 | ) | (5,896 | ) | (8,864 | ) | (8,300 | ) | (5,458 | ) | (4,476 | ) | (19,970 | ) | (12,758 | ) | (1,510 | ) | (71,309 | ) | ||||||||||||||||||||
Depreciation and amortization expense | (7,763 | ) | (4,109 | ) | (34,024 | ) | (6,007 | ) | (4,064 | ) | (3,779 | ) | (18,811 | ) | (17,424 | ) | (7,094 | ) | (103,075 | ) | ||||||||||||||||||||
Gain on distribution of real estate | — | — | — | — | 16,959 | — | — | — | — | 16,959 | ||||||||||||||||||||||||||||||
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Total other income/(expense) | (11,308 | ) | (9,739 | ) | (42,853 | ) | (14,058 | ) | 7,721 | (8,190 | ) | (38,244 | ) | (30,166 | ) | (7,416 | ) | (154,253 | ) | |||||||||||||||||||||
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Net income/(loss) | $ | (324 | ) | $ | 3,822 | $ | (27,197 | ) | $ | 6,662 | $ | 14,303 | $ | 3,162 | $ | 15,973 | $ | (9,121 | ) | $ | 611 | $ | 7,891 | |||||||||||||||||
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BXP’s nominal ownership percentage | 60 | % | 50 | % | 20 | % | 25 | % | 50 | % | 30 | % | 50 | % | 55 | % | ||||||||||||||||||||||||
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Reconciliation of BXP’s share of Net Operating Income | ||||||||||||||||||||||||||||||||||||||||
BXP’s share of rental revenue | $ | 14,998 | $ | 11,574 | $ | 6,093 | $ | 17,004 | (3) | $ | 6,497 | $ | 5,201 | $ | 42,580 | (4) | $ | 18,952 | $ | 5,837 | $ | 128,736 | ||||||||||||||||||
BXP’s share of operating expenses | 8,408 | 4,793 | 2,961 | 6,922 | (3) | 3,206 | 1,796 | 11,404 | 7,377 | 2,257 | 49,124 | |||||||||||||||||||||||||||||
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BXP’s share of net operating income | 6,590 | 6,781 | 3,132 | 10,082 | (3) | 3,291 | 3,405 | 31,176 | 11,575 | 3,580 | 79,612 | |||||||||||||||||||||||||||||
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BXP’s share of termination income | 2 | — | (3 | ) | 25 | (3) | — | — | — | — | — | 24 | ||||||||||||||||||||||||||||
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BXP’s share of net operating income (excluding termination income) | 6,588 | 6,781 | 3,135 | 10,057 | (3) | 3,291 | 3,405 | 31,176 | 11,575 | 3,580 | 79,588 | |||||||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||||||||||
BXP’s share of straight-line rent | 331 | 563 | (43 | ) | 42 | (3) | 115 | (9 | ) | 7,822 | (4) | 2,014 | (122 | ) | 10,713 | |||||||||||||||||||||||||
BXP’s share of fair value lease revenue | — | — | — | — | (3) | — | — | 1,826 | (4) | 908 | — | 2,734 | ||||||||||||||||||||||||||||
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BXP’s share of lease transaction costs that qualify as rent inducements | — | 241 | 50 | 84 | (3) | — | — | 180 | 46 | — | 601 | |||||||||||||||||||||||||||||
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BXP’s share of net operating income — cash (excluding termination income) | $ | 6,257 | $ | 6,459 | $ | 3,228 | $ | 10,099 | (3) | $ | 3,176 | $ | 3,414 | $ | 21,708 | $ | 8,699 | $ | 3,702 | $ | 66,742 | |||||||||||||||||||
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SECTION 4. ELIGIBILITY
Grantees under the Plan will be such full- or part-time officers and other employees, Non-Employee Directors and Consultants of the Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion and such other Persons (to the extent the issuance of shares of Stock to such Person under the Plan may be registered by the Company on Form S-8 and would be permitted in an “employee benefit plan” as defined in Rule 405 under the Securities Act of 1933, as amended) as are selected from time to time by the Administrator in its sole discretion. For avoidance of doubt, no Award may be granted under the Plan to a Person unless the issuance of shares of Stock to such Person under the Plan may be registered by the Company on Form S-8 and such Person is permitted to participate in an “employee benefit plan” as defined in Rule 405 under the Securities Act of 1933, as amended.
SECTION 5. STOCK OPTIONS
| (a) | Award of Stock Options. The |
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent that any Stock Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.
Stock Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock Options may be granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator may establish. |
A-6 | | | |
| (b) | Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the exercise price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the grant date. Notwithstanding the foregoing, Stock Options may be granted with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals who are not subject to U.S. income tax on the date of grant or (iii) the Stock Option is otherwise compliant with Section 409A. |
| (c) | Stock Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after the date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be no more than five years from the date of grant. |
| (d) | Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the grant date. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options. |
| (e) | Method of Exercise. Stock Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods to the extent provided in the applicable Award Certificate: |
| (i) | In cash, by certified or bank check or other instrument acceptable to the Administrator; |
| (ii) | Through the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of shares of Stock that are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date; |
| (iii) | By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Company shall prescribe as a condition of such payment procedure; or |
| (iv) | With respect to Stock Options that are not Incentive Stock Options, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price and the remainder of the aggregate exercise price to be paid by the optionee in cash or other method of payment permitted hereunder. |
Payment instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the applicable Award Certificate or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Stock Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through the use of such an automated system.
| (f) | Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option. |
| | 2021 Proxy Statement | A-7 |
SECTION 6. STOCK APPRECIATION RIGHTS
| (a) | Award of Stock Appreciation Rights. The Administrator may grant Stock Appreciation Rights under the Plan. A Stock Appreciation Right is an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Certificate) having a value equal to the excess of the Fair Market Value of a share of Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised. |
| (b) | Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market Value of the Stock on the date of grant. Notwithstanding the foregoing, Stock Appreciation Rights may be granted with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals who are not subject to U.S. income tax on the date of grant or (iii) the Stock Appreciation Right is otherwise compliant with, or is not subject to, Section 409A. |
| (c) | Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock Option granted pursuant to Section 5 of the Plan. |
| (d) | Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined on the date of grant by the Administrator. The term of a Stock Appreciation Right may not exceed ten years. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. |
SECTION 7. RESTRICTED STOCK AWARDS
| (a) | Nature of Restricted Stock Awards. The Administrator may grant Restricted Stock Awards under the Plan. A Restricted Stock Award is any Award of Restricted Stock subject to such restrictions and conditions as the Administrator may determine at the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives. |
| (b) | Rights as a Stockholder. Upon the grant of a Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to the Restricted Stock granted thereunder, including voting of the Restricted Stock and receipt of dividends; provided that if the lapse of restrictions with respect to the Restricted Stock Award is tied to the attainment of vesting conditions, the Administrator may require any cash dividends paid by the Company during the vesting period with respect to unvested Restricted Stock to be retained by, or repaid by the grantee to, the Company. Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Stock shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such Restricted Stock is vested as provided in Section 7(d) below, and (ii) certificated Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe. |
| (c) | Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Award Certificate. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 17 below, in writing after the Award is issued, if a grantee’s employment (or other Service Relationship) with the Company and its Subsidiaries terminates for any reason, any Restricted Stock that has not vested at the time of termination shall automatically and without any requirement of notice to such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if any) from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other Service Relationship), and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a stockholder. Following such deemed reacquisition of Restricted Stock that is represented by physical certificates, a grantee shall surrender such certificates to the Company upon request without consideration. |
| (d) | Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Stock and the Company’s right of repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be deemed “vested.” |
A-8 | | | 2021 Proxy Statement |
SECTION 8. RESTRICTED STOCK UNIT AWARDS
| (a) | Nature of Restricted Stock Unit Awards. The Administrator may grant Restricted Stock Unit Awards under the Plan. A Restricted Stock Unit Award is an Award of Restricted Stock Units that, subject to the terms and conditions of the applicable Award Certificate, may be settled in shares of Stock (or cash, to the extent explicitly provided for in the Award Certificate) upon the satisfaction of applicable restrictions and conditions at the time of grant. Conditions may be based on, among other things, continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. To the extent permitted by the Administrator, the settlement of Restricted Stock Units may be deferred to one or more dates specified in the applicable Award Certificate or elected by the grantee. Restricted Stock Unit Awards with a deferred settlement date may be referred to as Deferred Stock Unit Awards. Each Restricted Stock Unit Award that is subject to Section 409A may contain such additional terms and conditions as the Administrator shall determine in its sole discretion in order to comply with the requirements of Section 409A. |
| (b) | Election to Receive Restricted Stock Unit Awards in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee to elect to receive cash compensation otherwise due to such grantee in the form of a Restricted Stock Unit Award. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with such rules and procedures established by the Administrator, which shall include rules and procedures intended to ensure compliance with Section 409A. Unless provided by the Administrator, any such cash compensation that the grantee elects to receive in Restricted Stock Units shall be converted to a fixed number of Restricted Stock Units based on the Fair Market Value of Stock on the date the compensation would otherwise have been paid to the grantee if such election had not been made. The Administrator shall have the sole right to determine whether and under what circumstances to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate. Any Restricted Stock Units that are elected to be received in lieu of cash compensation shall be fully vested, unless otherwise provided in the Award Certificate. |
| (c) | Rights as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon settlement of Restricted Stock Units; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the stock units underlying his Restricted Stock Units, subject to the provisions of Section 10 and such terms and conditions as the Administrator may determine. |
| (d) | Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 17 below, in writing after the Award is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically terminate upon the grantee’s termination of employment (or cessation of Service Relationship) with the Company and its Subsidiaries for any reason. |
SECTION 9. UNRESTRICTED STOCK AWARDS
Grant or Sale of Unrestricted Stock. The Administrator may grant (or sell at par value or such higher purchase price determined by the Administrator) an Unrestricted Stock Award under the Plan. An Unrestricted Stock Award is an Award of Stock free of any restrictions under the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.
SECTION 10. DIVIDEND EQUIVALENT RIGHTS
| (a) | Dividend Equivalent Rights. The Administrator may grant Dividend Equivalent Rights under the Plan. A Dividend Equivalent Right is an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other Award to which it relates) if such shares had been issued to the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee as a component of an Award, including a Restricted Stock Unit Award, or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified in the applicable Award Certificate. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently, may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents, or may otherwise accrue. Unless otherwise provided in the Award Certificate or by the Administrator, any such reinvestment shall be at Fair Market Value on the date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments. |
| | 2021 Proxy Statement | A-9 |
| (b) | Termination. Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 17 below, in writing after the Award is issued, a grantee’s rights in all Dividend Equivalent Rights shall automatically terminate upon the grantee’s termination of employment (or cessation of Service Relationship) with the Company and its Subsidiaries for any reason. |
SECTION 11. OTHER EQUITY-BASED AWARDS
The Administrator shall have the right (i) to grant other Awards based upon the Stock having such terms and conditions as the Administrator may determine, including, without limitation, the grant of convertible preferred shares, convertible debentures and other exchangeable or redeemable securities or equity interests, (ii) to grant limited-partnership or any other membership or ownership interests (which may be expressed as units or otherwise) in a Subsidiary or operating or other partnership, including, without limitation, Units, with any Stock being issued in connection with the conversion of (or other distribution on account of) an interest granted under the authority of this clause (ii) to be subject, for the avoidance of doubt, to Section 3 and the other provisions of the Plan, and (iii) to grant Awards valued by reference to book value, fair value or performance parameters relative to the Company or any Subsidiary or group of Subsidiaries.
SECTION 12. CASH-BASED AWARDS
The Administrator may, in its sole discretion, grant Cash-Based Awards to any participant in such number or amount and upon such terms, and subject to such conditions, as the Administrator shall determine at the time of grant. The Administrator shall determine the Performance Cycle and Performance Criteria applicable to such Cash-Based Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based Awards shall become vested or payable, and such other provisions as the Administrator shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Administrator, which may include either a “target” (100 percent attainment of the Performance Criteria) and/or a “minimum” hurdle and/or a “maximum” amount. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and may be made in cash or in shares of Stock, as the Administrator determines.
SECTION 13. TRANSFERABILITY OF AWARDS
| (a) | Transferability. Unless otherwise provided in the Award Certificate or by the Administrator, during a grantee’s lifetime, his or her Stock Options and Stock Appreciation Rights shall be exercisable only by the grantee, or by the grantee’s legal representative or guardian in the event of the grantee’s incapacity. Except as provided in Section 13(b) below and unless otherwise provided in the Award Certificate or by the Administrator, no Awards shall be sold, assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order; provided that, for the avoidance of doubt, the foregoing shall not apply to shares of Stock issued pursuant to an Award following the date on which such shares are vested. No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void. |
| (b) | Administrator Action. Notwithstanding Section 13(a), the Administrator, in its discretion, may provide either in the Award Certificate regarding a given Award or by subsequent written approval that the grantee may transfer his or her Awards (other than Incentive Stock Options) to his or her Family Members for no value or consideration; provided that the transferee agrees in writing to be bound by all of the terms and conditions of this Plan and the applicable Award. |
| (c) | Designation of Beneficiary. To the extent permitted by the Company, each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form provided for that purpose by the Company and shall not be effective until received by the Company. If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate. |
SECTION 14. TAX WITHHOLDING
| (a) | Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any |
A-10 | | | 2021 Proxy Statement |
Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee. |
| (b) | Payment in Stock. Subject to approval by the Administrator, a grantee may elect to have the Company’s required tax withholding obligation satisfied, in whole or in part, by authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award (or, in the case of a Restricted Stock Award, to reacquire shares of Stock previously issued pursuant such Restricted Stock Award) a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid adverse accounting treatment or as determined by the Administrator. The Administrator may also require Awards to be subject to mandatory share withholding up to the required withholding amount. For purposes of share withholding, the Fair Market Value of withheld shares shall be determined in the same manner as the value of Stock includible in income of the grantees. The Administrator may also require the Company’s tax withholding obligation to be satisfied, in whole or in part, by an arrangement whereby a certain number of shares of Stock issued pursuant to any Award are immediately sold and proceeds from such sale are remitted to the Company in an amount that would satisfy the withholding amount due. |
SECTION 15. SECTION 409A AWARDS
Awards are intended to be exempt from Section 409A to the greatest extent possible and to otherwise comply with Section 409A. The Plan and all Awards shall be interpreted in accordance with such intent. To the extent that any Award is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A (a “409A Award”), the Award shall be subject to such additional rules and requirements as specified by the Administrator from time to time in order to comply with Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” (within the meaning of Section 409A) to a grantee who is then considered a “specified employee” (within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the grantee’s separation from service, or (ii) the grantee’s death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Further, the settlement of any 409A Award may not be accelerated except to the extent permitted by Section 409A.
SECTION 16. TERMINATION OF SERVICE RELATIONSHIP, TRANSFER, LEAVE OF ABSENCE, ETC.
| (a) | Termination of Service Relationship. If the grantee’s Service Relationship is with a Subsidiary and such Subsidiary ceases to be a Subsidiary, the grantee shall be deemed to have terminated his or her Service Relationship for purposes of the Plan. |
| (b) | For purposes of the Plan, the following events shall not be deemed a termination of a Service Relationship: |
| (i) | a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or |
| (ii) | an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing. |
SECTION 17. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall materially and adversely affect rights under any outstanding Award without the holder’s consent. Except as provided in Section 3(b), without prior stockholder approval, in no event may the Administrator exercise its discretion to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or effect repricing through cancellation and re-grants or cancellation of Stock Options or Stock Appreciation Rights in exchange for cash or other Awards. The Board, in its discretion, may determine to make any Plan amendments subject to the approval of the Company’s stockholders for purposes of complying with the rules of any securities exchange or market system on which the Stock is listed or ensuring that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code. Nothing in this Section 17 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(b).
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SECTION 18. STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
SECTION 19. GENERAL PROVISIONS
| (a) | No Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof. |
| (b) | Delivery of Stock. Notwithstanding anything herein to the contrary, the Company shall not be required to issue shares of Stock or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent the Administrator deems such advice necessary or advisable), that the issuance and/or delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. All Stock delivered pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator may place legends on any Stock certificate or in the records of the Company or the transfer agent to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator. |
| (c) | Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary. |
| (d) | Trading Policy Restrictions. All actions taken with respect to Awards under the Plan shall be subject to the Company’s insider trading policies and procedures, as in effect from time to time. |
| (e) | Clawback Policy. Awards under the Plan shall be subject to the Company’s Policy for Recoupment of Incentive Compensation, as in effect from time to time, to the extent holders thereof are subject to such policy. |
| (f) | No Further Awards Under the Prior Plan. On and after the Effective Date, no further awards will be issued under the Prior Plan, but outstanding awards granted under the Prior Plan prior to the Effective Date shall continue to be governed by the terms and conditions of the Prior Plan. |
SECTION 20. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon stockholder approval in accordance with Delaware law and the Company’s certificate of incorporation and bylaws, each as amended. No grants of Awards may be made hereunder after the tenth anniversary of the Effective Date and no grants of Incentive Stock Options may be made hereunder after the tenth anniversary of the date the Plan is approved by the Board.
SECTION 21. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: March 18, 2021
DATE APPROVED BY STOCKHOLDERS:
A-12 | | | 2021 Proxy Statement |
BOSTON PROPERTIES, INC.
800 BOYLSTON STREET, SUITE 1900 BOSTON, MA 02199 ATTN: INVESTOR RELATIONS
VOTE BY INTERNET—INTERNET
Before The Meeting - Go to www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on May 19, 20202021 for shares held directly and by 11:59 P.M. ET on May 17, 20202021 for shares held in a Plan.Shareworks account. Have your proxy card in hand when you access the web site and follow the instructions to obtain BOSTON PROPERTIES, INC. your records and to create an electronic voting instruction form.800 BOYLSTON STREET, SUITE 1900 During The Meeting - Go to www.virtualshareholdermeeting.com/BXP2021BOSTON, MA 02199 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSATTN: INVESTOR RELATIONS If you would like to reduceYou may attend the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronicallymeeting viae-mail or the Internet. To sign up for electronic delivery, pleaseHave the information that is printed in the box marked with the arrow available and follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. instructions.
VOTE BY PHONE - PHONE—1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on May 19, 20202021 for shares held directly and by 11:59 P.M. ET on May 17, 20202021 for shares held in a Plan.Shareworks account. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK THE BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D04987-P38343
D40576-P49725
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
BOSTON PROPERTIES, INC.
The Board of Directors recommends you vote FOR all of the nominees for director listed.
For Against Abstain
1. Election of Directors: For Against Abstain
Nominees: 1a.Joel
1a. Joel I. Klein !!!
1b. Kelly A. Ayotte !!!
1c. Bruce W. Duncan
1d. Karen E. Dykstra
1e. Carol B. Einiger
1f. Diane J. Hoskins
1g. Douglas T. Linde
1h. Matthew J. Lustig
1i. Owen D. Thomas
1j. David A. Twardock
1k. William H. Walton, III
For Against Abstain
The Board of Directors recommends you vote FOR For Against Abstain
proposals 2, 3 and 3.4.1c. Bruce W. Duncan !!!2. To approve, bynon-binding, advisory resolution, the !!!
Company’s named executive officer compensation.1d. Karen E. Dykstra !!!3. To approve the Boston Properties, Inc. 2021 Stock Incentive Plan.
4. To ratify the Audit Committee’s appointment of !!!
PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for the1e. Carol B. Einiger !!!fiscal year ending December 31, 2020.2021.1f. Diane J. Hoskins !!!NOTE: In their discretion, the proxies are authorized to vote
upon any other matters that are properly brought by or at the
direction of the Board of Directors before the Annual Meeting1g. Douglas T. Linde !!!and at any adjournments or postponements thereof.1h. Matthew J. Lustig !!!1i. Owen D. Thomas !!!1j. David A. Twardock !!!1k. William H. Walton, III !!!
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] Date
Signature (Joint Owners)
Date
Important Notice Regarding the Availability of Proxy Materials for the Stockholders Meeting to be Held on May 20, 2020:2021: The Notice and Proxy Statement and Annual Report to Stockholders are available at www.proxyvote.comD04988-P38343D40577-P49725
BOSTON PROPERTIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 20202021 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 20202021
The undersigned hereby appoints Douglas T. Linde and Frank D. Burt, and each of them, as proxies for the undersigned, each with the power to appoint his substitute, and hereby authorizes them to attend the 20202021 Annual Meeting of Stockholders of Boston Properties, Inc. (the “Annual Meeting”) to be held virtually via live audio webcast at Metropolitan Square, 655 15th St, NW, 2nd Floor, Washington, D.C. 20005www.virtualshareholdermeeting.com/BXP2021 on May 20, 20202021 at 9:00 a.m., Eastern Time, and at any adjournments or postponements thereof, to vote, as designated on the reverse side, all of the shares that the undersigned is entitled to vote at the Annual Meeting and otherwise to represent the undersigned with all of the powers the undersigned would possess if personally present at the Annual Meeting. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders, the Proxy Statement and the Annual Report to Stockholders and revokes any proxy heretofore given with respect to the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN. UNLESS DIRECTION IS GIVEN TO THE CONTRARY, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES FOR DIRECTOR AND “FOR” PROPOSALS 2, 3 AND 3.4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER MATTERS THAT ARE PROPERLY BROUGHT BY OR AT THE DIRECTION OF THE BOARD OF DIRECTORS BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON THE PROXIES TO VOTE WITH RESPECT TO THE ELECTION OF ANY INDIVIDUAL FOR DIRECTOR WHERE ONE OR MORE NOMINEES ARE UNABLE TO SERVE, OR FOR GOOD CAUSE WILL NOT SERVE, AND WITH RESPECT TO MATTERS INCIDENTAL TO THE CONDUCT OF THE ANNUAL MEETING.
Continued and to be signed on reverse side
