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62021 Proxy Statement | Extra Space Storage7 |
INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
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| ROGER B. PORTER AGE: 7174 LEAD INDEPENDENT DIRECTOR
COMMITTEES: AuditCompensation (Chairman) and
CNG (Chairman) Nominating and Governance
| | | ASHLEY DREIERJOSEPH J. BONNER
AGE: 4565 NOMINEE FOR DIRECTOR
COMMITTEES: Compensation and Nominating and Governance |
Experience: Mr. Roger B. Porter is the IBM Professor of Business and Government at Harvard University. Mr. Porter has twice served as athe director forof Harvard's Center for Business and Government and chairs the Program for Senior Managers in Government. Mr. Porter served for more than a decade in various senior economic policy positions in the Ford, Reagan and George H.W. Bush White Houses. Under President Reagan he served as Director of the White House Office of Policy Development. Under President George H.W. Bush, Mr. Porter served as the Assistant to the President for Economic and Domestic Policy from 1989 to 1993. Mr. Porter is a director of Tenneco, Inc., Zions Bancorporation and Packaging Corporation of America. Mr. PorterHe served as a director of Pactiv CorporationZions Bancorporation from November 1999 through November 2010.1993 to May 2019 and of Tenneco Inc from 1998 to 2020. Mr. Porter holds a B.A. from Brigham Young University and was selected as a Rhodes Scholar and Woodrow Wilson Fellow, receiving his B.Phil.B. Phil. from Oxford University. He received his M.A. and Ph.D. from Harvard University. He is a Trustee of the Gerald R. Ford Presidential Foundation and a member of the President’s Commission on White House Fellowships. He has served on the boards of domestic and multinational corporations dealing with manufacturing, financial services, health care, insurance, and real estate. He received presidential appointments from nine U.S. presidents. Mr. Porter has been a member of our board of directors since August 2004.
Qualifications: Mr. Porter was selected to serve as our lead independent director, as a member of our board and as our CNGCompensation Committee chairman based on his unique perspective on broad economic issues and trends, strategic management, insight into government regulations and policy and his leadership experience on several major public company boards. | | Experience: Ashley Dreier has served asJoseph J. Bonner is the Executive Vice President Chief Technology Officer and Chief Information Officer& CEO of HealthEquity, Inc., one of the nation’s largest health savings account custodians, since 2013. Ms. DreierSolana Beach Capital LLC, where he is responsible for leading HealthEquity’s technology initiatives and ensuring strategic alignment and executionadvising Owner/Operator/Developer clients on finding solutions for their real estate capital needs. He was previously the Chief Investment Officer of the platformUAE based company Mubadala Pramerica Real Estate Investors from 2010 to 2014. Mr. Bonner was responsible for executing the investment strategy acrossof the organization.company regionally as well as globally. He was a member of the Regional Investment Committee and the Regional Allocation Committee. From 1989 to 2010, Mr. Bonner held senior positions at Prudential Real Estate Investors in asset management and transactions where he was responsible for all real estate acquisitions in the Mid-Atlantic and Northeast Regions of the United States and the Eastern and Mid-Western Regions of Canada. From 1981 to 1987, Mr. Bonner was a senior engineer at Exxon Chemical Company, responsible for providing project management service to Exxon’s worldwide affiliates. Prior to joining HealthEquity, Ms. DreierExxon, Mr. Bonner served as Vice President Technology and Product Development at Krames StayWella Project Manager for IBM, where shehe was responsible for strategythe design and the deliveryconstruction of core product offerings. Her professional background also includescorporate office facilities. Mr. Bonner served as a Director of Product Development at General ElectricUSAA Real Estate Company through June 2018. He is currently an Independent Director of Software Project Management and Director of Information Systems at Wolters Kluwer and Sr. Financial Analyst atfor three mutual funds managed by The Boeing Company. Ms. DreierCapital Group. Mr. Bonner is recognized as an NACD Governance Fellow. Mr. Bonner holds a B.S.B.A. in Accounting andarchitecture from The Cooper Union, an M.S. in Information Systemscivil engineering from the UniversityMIT, and an M.B.A. from Harvard University. Mr. Bonner has been a member of Utah.
our board of directors since May 2019.
Qualifications: Ms. Dreier has been nominatedMr. Bonner was selected to serve as a member on our board based on her technological expertise as well as herhis extensive experience as an executive officer of a public company.
in real estate investing, global capital markets, acquisitions and finance.
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2018 Proxy Statement8 | 7Extra Space Storage |
INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
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| GARY L. CRITTENDEN AGE: 67 DIRECTOR
COMMITTEES: Audit, Nominating and Governance (Chairman) | | | SPENCER F. KIRK AGE: 56 DIRECTOR AND
FORMER CEO
| | | DENNIS J. LETHAM
AGE: 6659
DIRECTOR COMMITTEES:
Audit
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Experience: Gary L. Crittenden has served as an Executive Director at HGGC, LLC, a private equity firm, since January 2017. Mr. Crittenden previously served as the Chairman and Managing Partner of HGGC, LLC from December 2013 to December 2016, as its Chief Executive Officer from April 2012 to December 2013, and as its Managing Partner from 2009 to April 2012. Mr. Crittenden previously served as chairman of Citi Holdings, and as Chief Financial Officer at Citigroup, American Express Company, Monsanto, Sears Roebuck, Melville Corporation, and Filene’s Basement. Mr. Crittenden is a director of Primerica, Inc., Zions Bancorporation and Pluralsight, Inc. Mr. Crittenden holds a B.S. in management from Brigham Young University, and an M.B.A. from Harvard Business School. Mr. Crittenden has been a member of our board of directors since February 2020. Qualifications: Mr. Crittenden was selected to serve as a member of our board and as our Nominating and Governance committee chairman based on his public company operating experience, financial and accounting expertise and his leadership experience within large enterprises. | | Experience: Mr. Spencer F. Kirk served as the Company’s CEO from April 1, 2009 until his retirement on December 31, 2016. In addition, he has served as a director of the Company since its initial public offering in 2004, serving as the Company’s Chairman from April 1, 2009 until July 1, 2012. Previously, Mr. Kirk served as the Company’s President from September 2007 to April 2009 and as an Executive Vice President of the Company’s predecessor from 1998 to 2004. As the owner of more than 2.8approximately 1.8 million shares, Mr. Kirk is the Company’s largest private individual stockholder. Before his involvement with the Company, Mr. Kirk co-founded Megahertz Corporation in 1985, which became the leading manufacturer of modems for laptop computers in the world. With Mr. Kirk serving as Chairman and CEO, Megahertz grew from a basement operation to the leading supplier of solution-oriented mobile data communications products. Megahertz went public in 1993 and in 1995 was acquired by US Robotics, which was later acquired by 3Com Corporation. Mr. Kirk holds a B.A. in finance and an M.B.A. from the University of Utah. Mr. Kirk has been a member of our board of directors since August 2004.
Qualifications: Mr. Kirk was selected to serve as a member of our board based on his knowledge of theour Company and the self-storage industry and his extensive experience in the management of public companies. |
INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
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| DENNIS J. LETHAM AGE: 69 DIRECTOR
COMMITTEES: Audit (Chairman) and Compensation
| | | DIANE OLMSTEAD Experience :AGE: 68
DIRECTOR
COMMITTEES: Audit and Compensation |
Experience: Dennis J. Letham served as Executive Vice President and Chief Financial Officer of Anixter International Inc. from 1995 until his retirement in June 2011, where he oversaw the company’s finance, accounting, tax, legal, human resources and internal audit activities in 50 countries. Before assuming his role as Chief Financial Officer in 1995, Mr. Letham served as Executive Vice President and Chief Financial Officer of Anixter, Inc. the principal operating subsidiary of Anixter International Inc., which he joined in 1993. Previously, he had a 10-year career with National Intergroup Inc., where he was Senior Vice President and Chief Financial Officer, as well as Vice President and Controller, Director of Corporate Accounting and Manager for Internal Audit. Mr. Letham began his career at Arthur Andersen & Co. in 1973 where he held progressive responsibilities in the Audit Department. Mr. Letham holds a bachelor’s degree from Pennsylvania State University’s Accounting Honors program. He also is a Certified Public Accountant. Mr. Letham was a director of Interline Brands, Inc. through August 2015. He currently serves as a director forthe chair of the board of directors of Tenneco Inc. Mr. Letham has been a member of our board of directors since May 2016. Qualifications: Mr. Letham was selected to serve as a member of our board and as our Audit Committee chairman based on his extensive experience in finance and accounting and service as an executive officer and director of public companies.
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INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
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| DIANE OLMSTEAD
AGE: 65
DIRECTOR
COMMITTEES:
Audit and CNG
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Experience: Diane Olmstead is a managing partner at Haring Street Ventures where she provides clients with strategic planningPresident of Fillmore Capital Affordable Housing (FCAH), which is an affiliate of Fillmore Capital Partners. FCAH is in the business of Impact Investing focused on the sectors of affordable and capital formation consulting. Shework force housing as well as in health care. Prior to FCAH, Ms. Olmstead was previously the Chief Investment Officer at Bridge Housing Corporation from 2016 to 2018. Ms. Olmstead was responsible for balance sheet structureBRIDGE is a non-profit company engaged in the business of developing and management, capital formation and bridge lending through its Community Development Financial Institution and philanthropy.managing affordable housing. Prior to Bridge Housing, Ms. Olmstead was Co-CEO of W3 Partners from 2009-20162009 to 2016 where she oversaw W3’s real estate acquisitions, financing activities, fundraising and client relations. Prior to W3 Partners, Ms. Olmstead was a principal at CIM Group from 2005 to 2009, where she headed acquisitions and development in Northern California and the Pacific Northwest and was a voting member of the investment committee. Prior to CIM Group, from 2000 to 2005, Ms. Olmstead was an Executive VP of iStar, a publically traded REIT, and responsible for all activities in iStar’s Western Region, including origination of structured finance transactions and acquisitions of triple net leases. From 1983 to 2000, Ms. Olmstead worked in positions of asset management, lending, acquisitions and equity raising with Arthur Andersen LLP, USF&G Corporation, Cigna Corporation and Aetna, Inc. Ms. Olmstead received an MBAM.B.A. from Pepperdine University. She serves on the board of Synedgen, Inc. and is a member of the Urban Land Institute and the Policy Advisory Board of the Fisher Center for Real Estate and Urban Development (UC Berkeley). Ms. Olmstead has been a member of our board of directors since December 2013. Qualifications: Ms. Olmstead was selected to serve as a member of our board based on her experience in real estate investing, acquisitions and corporate finance.
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2018 Proxy Statement10 | 9Extra Space Storage |
INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
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| JULIE VANDER PLOEG AGE: 51 DIRECTOR
COMMITTEES: Audit and Nominating and Governance | | | |
Experience: Julia Vander Ploeg is Senior Vice President and Global Head of Digital for Hyatt Hotels Corporation, a position she has held since 2018. Ms. Vander Ploeg oversees the corporate technology organizations for Hyatt Hotels, including digital marketing, e-commerce, technology, and cyber security. Ms. Vander Ploeg has experience developing digital product teams that incorporate security best practices as part of their work, in addition to overseeing cyber security operations globally. Ms. Vander Ploeg also served as Vice President of Digital and Business Transformation for Volvo Car Group from 2017 through 2018, and as U.S. Vice President of Digital for McDonald’s Corporation from 2014 through 2017. In addition, she has served in various senior management roles at Ticketmaster Entertainment, Tribune Company, The Mills Corporation, United Airlines and the Ford Motor Company. Ms. Vander Ploeg received an M.B.A from Northwestern University and a Bachelor of Arts degree in Marketing from Michigan State University. Ms. Vander Ploeg has been a member of our board since November 2020. Qualifications: Ms. Vander Ploeg was selected to serve as a member of our board based on her experience with digital marketing, e-commerce, technology, and cyber security. | | |
Overview
The board of directors believes that the purpose of good corporate governance is to ensure that the board of directors is independent from management, adequately oversees management, and ensures that the interests of management and the board of directors align with the interests of our stockholders in order to maximize stockholder value in a manner consistent with all applicable legal requirements. Consequently, the Company haswe have adopted corporate governance guidelines, titled “Corporate Governance Guidelines,” which are available at www.extraspace.com under Company Info—Investor Relations—Corporate Governance.
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NAME | AGE | TITLE | 2017
2020 Director | 2018
2021 Nominee | Independent | Audit Committee
| CNG
Compensation Committee | Nominating & Governance Committee |
Kenneth M. Woolley | 71 | Executive Chairman | X | X | | | | |
Joseph D. Margolis | 57 | Director and CEO | X | X | | | | |
Roger B. Porter (1) | 71 | Lead Independent Director | X | X | X | X | C | X |
Ashley Dreier | 45 | Director nominee | | X | X | | |
Spencer F. Kirk | 56Joseph J. Bonner | Director | X | X | X | | X | X |
Dennis J. Letham | 66Gary L. Crittenden | Director | X | X | X | X | | C |
Ashley Dreier (2) | Director | X | | X | X | | X |
Spencer F. Kirk | Director | X | X | X | | | |
Dennis J. Letham | Director | X | X | X | C | X | |
Diane Olmstead | 65 | Director | X | X | X | X | X | |
K. Fred SkousenJulia Vander Ploeg (2)
| 75 | Director | X | | X | X | X | X | | X |
The board anticipates nominatingC Committee Chair
(1) Lead Independent Director
(2) Ms. Dreier toresigned from the board on November 11, 2020 and Ms. Vander Ploeg joined the board of directors on November 11, 2020.
Director Independence
We require that a majority of the board of directors, and all members of the Audit Committee, the Compensation Committee and Mr. Letham to the CNGNominating and Governance Committee, at the next board meeting.
(1) Current CNG Committee Chairman.
(2) Current Audit Committee Chairman. Mr. Skousen is not standing for re-election at the 2018 annual meeting.
Director Independence
Inbe independent in accordance with the New York Stock Exchange (“NYSE”) rules,rules. In order to determine whether a director is independent, the board of directors affirmatively determines that there is no direct or indirect material relationship between the independence of each directorCompany and nominee for election as a director in accordance with the listing standardsdirector. If all nine of the NYSE. We have not adopted any additional standards for independence outside those listed by the NYSE. The listing requirements of the NYSE require that a majority of the members of a listed company’s board ofnominated directors and that all members of its audit committee and compensation, nominating and governance committee be independent.
To determine which of its membersin 2021 are independent, the board of directors used the independence standards adopted by the NYSE for companies listed on such exchange. In addition, the board of directors considers whether a director has or had any other past or present relationships with the Company which created conflicts. Based on these standards,elected, the board of directors has determined that allmore than 2/3 of the Company’s non-employee directors withwill be independent (seven of nine directors). The board reached this determination after considering all relevant facts and circumstances, responses to director questionnaires and considering transactions and relationships, if any, between us, our affiliates, our executive officers and their affiliates, and each of the exceptiondirector and applicable affiliates. The board also determined that all members of Spencer F. Kirk,the Audit Committee, the Compensation Committee and the Nominating and Governance Committee are independent in accordance with NYSE and have no relationship with the Company, except as a directorSecurities and stockholder of the Company.Exchange Commission ("SEC") rules.
Nomination of Directors
Nominees for director are selected by the CNGNominating and Governance Committee. The board of directors has developed criteria that are designed to describe the qualities and characteristics desirable for the board of directors as a whole. In addition, the boardThe Nominating and Governance Committee considers diversity of directors understands the importance of diversity among its directors.gender, race, age, experience, perspective and skills as important factors in choosing qualified candidates. The CNGNominating and Governance Committee's goal in the nominating process is to achieve an appropriate balance of knowledge and experience amongst itsamong the directors. The CNG Committee considers diversity of gender, age, experience, perspective and skills as important factors in choosing the most qualified candidates. In evaluating potential candidates to nominate to our board, the CNGNominating and Governance Committee seeks diverse candidates who will best serve the Company and whose expertise align with the Company'sour long-term strategy to maximize stockholder value. The criteria and the effectiveness of our nomination policies are reviewed annually by the CNGNominating and Governance Committee and the board of directors. In general, they require that each director or nominee:
• is committed to enhancing long-term stockholder value and possesses a high level of personal and professional ethics;
• has sound business judgment and integrity;
• has financial literacy or other business or professional experience relevant to understanding our business;
• has experience with businesses and other organizations of comparable size;
• has the ability to think and act independently; and
• has demonstrated the capacity to work constructively with others.
The CNGNominating and Governance Committee will consider nominees recommended by stockholders. Stockholder recommendations of directors must be made in writing and include the candidate's written consent to be nominated and sufficient background information on the candidate to enable the committee to assess his or her qualifications. Stockholder recommendations should be addressed to the Company’sour Corporate Secretary at the following address:
Extra Space Storage Inc.
Attn: Corporate Secretary
2795 East Cottonwood Parkway, Suite 300
Salt Lake City, Utah 84121
Recommendations received from stockholders will be considered and processed subject to the same criteria as candidates nominated by the CNGNominating and Governance Committee, as discussed above.
Communications with the Board and its Committees
Any stockholder or other interested party may communicate with the board of directors, the independent board members, the Chairman, any of the committees of the board of directors, or one or more of its individual members, by directing correspondence to any such individual or group of individuals in care of the Corporate Secretary, Extra Space Storage Inc., 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121 or by referring to the “Stockholder Communication Policy” at www.extraspace.com under Company Info—Investor Relations—Corporate Governance.
Claw-backs to Recoup CompensationBoard Evaluations
The CompanyNominating and Governance Committee evaluates our Directors in light of the current needs of the Board and the Company. In addition, during the course of the year, the Nominating and Governance Committee discusses Board succession and reviews potential director candidates. The Nominating and Governance Committee has a Compensation Recovery Policy (claw-back policy) that covers all executive officers. If any executive officers are involved in fraudulent, willful or negligent misconduct that results in the Company being requiredpast retained third parties to prepare an accounting restatement dueassist in identifying potential nominees. The Nominating and Governance Committee has retained a third-party search firm to its material non-compliance with any financial reporting requirement, thenassist in identifying and reviewing potential director candidates.
Our annual evaluation process involves assessments at the CNG Committee may requireBoard, Board committees, and director levels under the executive officers to forfeit that portiondirection of the unvested or unpaid incentive compensation (annual cash bonusNominating and long-term equity incentive compensation) and/or recover that portionGovernance Committee Chair and the Lead Independent Director. In addition, the Nominating and Governance Committee takes into consideration its ongoing evaluation of potential new director candidates when recommending a slate of nominees for election to the after-tax portionBoard at each annual meeting of any incentive compensation paid to such officers preceding the publication of the restated financial statement that the CNG Committee determines was in excess of the amount that such officers would have received had such compensation been calculated based on the financial results reported in the restated financial statements.shareholders.
The CNG Committee may take into account any factors it deems reasonable in determining whether to seek recoupment of previously paid incentive compensation and how much incentive compensation to recoup from individual officers (which need not be the same amount or proportion for every officer), including any conclusion by the CNG Committee that an officer engaged in wrongdoing. The amount and form of the compensation
Prohibition Against Classified Board
Our Corporate Governance Guidelines prohibit a classified board as well as staggered terms. We require each director to be recouped will be determined by the CNG Committee in its discretion, and recoupment of compensation paid as annual cash bonuses or long term incentives may be made, in the CNG Committee’s discretion, through cancellation of vested or unvested restricted stock awards and/or cash payment. The CNG Committee intendselected annually, except for board actions to update the claw-back policy as necessary in the event that the Securities and Exchange Commission (“SEC”) requires any such updates.fill vacancies arising between stockholder elections.
Code of Business Conduct and Ethics
Our Code of Business Conduct and Ethics (the “Code”) outlines the principles of conduct and ethics to be followed by our employees, officers and directors, including our principal executive officer, principal financial officer and principal accounting officer. The purpose of the Code is to:
• promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
promote avoidance of• avoid conflicts of interest, including disclosure to an appropriate person or committee of any material transaction or relationship that reasonably could be expected to give rise to such a conflict;
• promote full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by the Company;
promote compliance• comply with applicable governmental laws, rules and regulations;
• promote the prompt internal reporting to an appropriate person or committee of violations of the Code;
• promote accountability for adherence to the Code;
• provide guidance to employees, officers and directors to help them recognize and deal with ethical issues; and
• provide mechanisms to report unethical conduct and help foster our longstanding culture of honesty and accountability.
A copy of the Code has been provided to, and signed by, each of our directors, officers and employees. A copy of the Code may be foundis available on our website at http://ir.extraspace.comwww.extraspace.com under Company Info—Investor Relations—Corporate Governance.
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20182021 Proxy Statement | 1113 |
WhistleblowingProxy Access and Whistleblower Protection Policy
The Audit Committee has established procedures for (1) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (2) the confidential and anonymous submission by the Company’s employees of concerns regarding questionable accounting or auditing matters. If you wish to contact the Audit Committee to report complaints or concerns relating to the financial reporting of the Company, you may do so by (a) calling the Compliance Hotline at 1-800-637-9894, (b) emailing the Company’s Compliance Email Box at whistleblower@extraspace.com, or (c) delivering the report via regular mail, which may be mailed anonymously, to the Audit Committee, c/o Extra Space Storage Inc., 2795 East Cottonwood Parkway, Suite 300, Salt Lake City, Utah 84121.
Bylaw Amendments
In February 2018, our board of directors amended ourOur bylaws to implementpermit proxy access. A stockholder or a group of up to 20 stockholders, owning at least 3% of our shares for three years, may submit nominees for up to 20% of the board, or one "nominee", whichever is greater, for inclusion in our proxy materials, subject to complying with the requirements contained in our bylaws. In addition, the board amended our bylaws to allow stockholders the right to amend the bylaws by the affirmative vote of a majority of the votes entitled to be cast on the matter.
Stockholder Engagement
We encourage open communication and strong working relationships among the members of our board. Our directors have access to, and regularly meet with, senior management and other employees. We actively seek input from our stockholders through our stockholder engagement programs. In addition, stockholders may also contact members of our board or management through our website or by regular mail. We host quarterly earnings conference calls to which all stockholders have access. During the past threefour years we have adopted a number of significant governance changes as a result of outreach to our stockholders for their views. During each of the last three years, we have met or been in contact with a majority of our stockholders. Based on that outreach, we believe the combination of actions we have taken present an overall governance structure responsive to their views.
Retirement Age or Term Limits
Rather than imposing arbitrary limits on service, the CompanyNominating and Governance Committee regularly (and at least annually) reviews each director’s continued role on the board and the need for periodic board refreshment. Over the past four years,Five of our nine directors have joined the board has nominated and stockholders have electedin the last five new directors, including replacing three directors who had served since the Company's IPO.years.
Pledging Limitations & Hedging Prohibitions
The CNG Committee approved limitations onCompany has adopted a policy that limits pledging transactions by our directors and senior executives. Such pledges are only allowed with respect to shares held in excess of stock ownership requirements and only after obtaining the written permission of the CNGCompensation Committee. The CNGCompensation Committee believes that allowing pledges in excess of the stock ownership requirements is unlikely to result in adverse effects to stockholders. The CNGCompensation Committee also recognizes that by allowing such pledging arrangements, directors and senior executives are able to pursue their respective business interests without the need to sell Company shares to raise additional capital.
The Company has adopted a policy that applies to our directors and senior executives that prohibits all hedging and similar monetization transactions. Claw-backs to Recoup Compensation
We have a Compensation Recovery Policy (claw-back policy) that covers all executive officers. If any executive officers are involved in fraudulent, willful or negligent misconduct that results in the Company being required to prepare an accounting restatement due to its material non-compliance with any financial reporting requirement, then the Compensation Committee may require the executive officers to forfeit that portion of the unvested or unpaid incentive compensation (annual cash bonus and long-term equity incentive compensation) and/or recover that portion of the after-tax portion of any incentive compensation paid to such officers preceding the publication of the restated financial statement that the Compensation Committee determines was in excess of the amount that such officers would have received had such compensation been calculated based on the financial results reported in the restated financial statements.
The Compensation Committee may take into account any factors it deems reasonable in determining whether to seek recoupment of previously paid incentive compensation and how much incentive compensation to recoup from individual officers (which need not be the same amount or proportion for every officer), including any conclusion by the Compensation Committee that an officer engaged in wrongdoing. The amount and form of the compensation to be recouped will be determined by the Compensation Committee in its discretion, and recoupment of compensation paid as annual cash bonuses or long term incentives may be made, in the Compensation Committee’s discretion, through cancellation of vested or unvested restricted stock awards and/or cash payment. The Compensation Committee intends to update the claw-back policy as necessary in the event that the SEC requires any such updates.
Social EngagementResponsibility
Our greatest asset is our people. We strongly believe in training and retaining talented diverse employees and having management at manyall levels engage with our board. Furthermore,employees, our customers, our board and other stakeholders. At Extra Space, we fosterbelieve that as we take care of our employees, they will take care of our customers and our facilities. We do so by focusing on employee engagement, inclusion, wellness and safety.
We believe that our efforts have paid off. In 2020, Glassdoor ranked us number 90 out of over one million companies as a best place to work. Over 80% of our employees gave us a favorable score on our most recent annual employee engagement survey.
We offer an education assistance program through Western Governors University that allows our employees a path to an undergraduate degree in Business or Information Technology through scholarships and other assistance. We currently have over 100 employees enrolled in this program. We expect these numbers to increase and look forward to helping our employees to a better tomorrow by allowing them to pursue higher education through an online university while continuing their employment with the Company.
In 2020, we adapted many of our training programs to allow for more remote training in light of COVID-19. Our average full-time store employee completed 8.2 hours of training in 2020, that we believe will allow them to further develop personal skills. In 2021, we are on track to increase our training by 50% for our store employees. In addition, we have significantly expanded our development programs for employees at our corporate office.
We believe that promoting the health and well-being of our employees through their own personal wellness plans leads to an increase in employee productivity, improves morale, creates a positive and healthy work environment and reduces healthcare costs. We offer competitive health benefits and encourage community engagement. Beginning in 2018,our employees located at the corporate office canto participate in employee health and wellness programs. Over 70% of our volunteeremployees who are enrolled in our health plan participate in these programs. We offer individualized counseling to our employees to assist them with their journey towards better health. We also offer other health oriented benefits such as smoking cessation programs and a fitness program that allows themfor reimbursements to receive an amountemployees for expenses incurred relating to fit-friendly activities, sports or exercise equipment. During the pandemic, we closed our doors to in-person customers until we could install personal protective equipment for our employees. We understood that such a dramatic move would impact our revenues, but felt that as a company it was more important to ensure the safety of our employees. We moved quickly to put the necessary equipment in place, and reopened with a safer and more sanitized environment.
We have always valued diversity and inclusion as is summarized in our Diversity and Inclusion Commitment Statement which can be found at https://ir.extraspace.com/sustainability. During 2020, our diversity and inclusion efforts included implicit bias and allyship training for all employees, creation of subcommittees as a result of direct feedback from our employees focused on how to expand our efforts to include social involvement, employee resource groups and further education. Additional initiatives included video roundtables with our CEO on racism and with the Diversity and Inclusion Committee. We will continue to implement and pursue diversity and inclusion initiatives that allow us to attract and retain top talent, improve employee engagement, increase innovation and customer insight and enhance the quality of our decision making, all of which ultimately leads to increased stockholder value. We are proud of the fact that we were named as a Best Employer for Diversity for 2020 by Forbes Magazine.
We sponsored volunteer hours by our employees, benefiting both local and national nonprofit organizations. Included among these organizations are The Good Samaritan Program, The Ronald McDonald House, Utah Animal Adoption Center, Principal Pantry for Kids, Utah Food Bank and The American Red Cross. By allowing our employees to give back to the community in a format of their choice, we believe that we increase our employees' engagement while doing good within our community.
In November, we made available four hours of paid time off for our store employees to use toward community service.be able to take the time to vote in the general election.
Environmental Sustainability
Focusing on environmental sustainability is not only the right, thing to do, it is the smart thing to do.smart. Our goal is to be the provider of choice for energy efficient and sustainable self-storage facilities nationwide. Our board plays an active role in the oversight of the Company’s sustainability practices, recognizing that sustainability and energy efficiency are central to Extra Space’s business strategy. Our efforts in promoting sustainability and energy efficiency are backed by a record of action. Across our portfolio we focus on:on the following:
•Improving energy efficiency through lighting retrofits. Since we started this initiative, retrofitsAt December 31, 2020, 95% of our REIT owned stores have been completed at 351 stores;upgraded to LED or T-8 lighting systems, with LED fixtures used on all projects since 2017. These lighting retrofit initiatives result in an estimated savings of over 10 million kilowatt-hours annually.
•Installing solar panels. Since we started this initiative, we haveWe installed solar at 111 of our stores in 2020, resulting in 50% of our REIT owned stores utilizing solar power systems. We have generated 149 gigawatt-hours through on-site solar panels at 221 stores;since we initiated our solar initiative in 2010. In 2020, our clean energy production could power over 4,600 homes for an entire year according to U.S. Environmental Protection Agency Metrics.
•Decreasing heating and air-conditioning expenses by controlling temperatures and updating to more energy efficient systems;systems.
•Reducing water consumption with efficient plumbing devices and irrigations systems;irrigation systems.
•Reducing the non-recyclable waste disposed of at our facilities by 3.1% in 2020 (like-for-like pool).
•Diverting waste to recycling centers rather than landfills. Over 13% of total 2020 waste was diverted to a recycling center.
•Recycled 1,335 computers and 180 cellular phones
•Using recycled materials in the products we sell in our stores.
Our sustainability effortsboxes are certified by the Sustainable Forestry Initiative (SFI), demonstrating that they have been produced by responsible sources.
In 2020, we received NAREIT's Leader in the Light award, the first self-storage REIT recognized havingin the award's history. We also participated in the GRESB Real Estate Assessment, and increased our score over 2019 levels. We received the highest real estate assessment score of any North American company in the storage sector, and received an "A" public disclosure score compared to the Global Average score of "C." We have joined GRESB as a full member, and will continue to participate in the GRESB Real Estate Assessment annually. We will continue to participate in other industry related surveys focused on sustainability reporting. We will also pursue opportunities for green building certifications for our portfolio, initially focused on states where incentives are offered for such certifications. Today, we have LEED Gold Certification at 16 of our stores.
For additional information on our environmental initiatives, visit our sustainability web page at: http://ir.extraspace.com/sustainability.
LEADERSHIP STRUCTURE, RISK OVERSIGHT, MEETINGS AND COMMITTEES OF THE BOARD
Leadership Structure
Independent directors and management have different perspectives and roles in strategy development and execution. Our independent directors bring experience, oversight and expertise from outside the Company and across various industries and disciplines, including the self-storage industry, finance, public company managementmanufacturing, real estate, technology, financial services, academia and academics.government. Our Executive Chairman CEO and our former CEO bring extensive company-specific experience and expertise to their roles.
Our board of directors has separated the positions of chairman of the board and chief executive officer.CEO. Mr. Woolley serves as the Company’sour Chairman, and Mr. Margolis serves as the Company’sour CEO and director. Our board of directors has determined that this leadership structure is appropriate at this time as it allows the CEO to focus on our day-to-day business, while allowing the Executive Chairmanchairman of the board of directors to lead the board in its fundamental role of providing advice to and independent oversight of management.
The board has a governance structure that includes regular meetings of the independent directors in executive session and with the Company’sour internal auditors, external auditors and other consultants. Our lead independent director helps to facilitate and strengthen the role of the independent directors. The specific responsibilities of the lead independent director are currently as follows:
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Executive Sessions/ Committee Meetings | - Presides at all meetings of the board at which the chairmanChairman is not present, including executive sessions of the independent directors (generally held at every regular board meeting) - Attends meetings of the various board committees regularly |
Meetings of Independent Directors | - Has the authority to callCalls meetings of the independent directors and setsets the agenda |
Board Evaluations | - Oversees annual evaluations of the board, board committees and individual directors, including an evaluation of the chairman’s effectiveness as the chairman |
Liaison with Chairman and CEO | - Serves as liaison between the independent directors, the Chairman and the chairmanCEO - Meets regularly between board meetings with the chairmanChairman and CEO |
Board Processes and Information | - Helps ensure the quality, quantity, appropriateness and timeliness of information provided to the board and meeting agendas - Ensures feedback is properly communicated to the board and chairmanChairman |
Retention of Outside Advisors and Consultants | - Has authority to retainRetains outside advisors and consultants who report directly to the board |
Communications with Stockholders | - Responds to stockholderand communicates with stockholders on inquiries when appropriate, following consultation with the chairmanChairman and CEO - Communicates with stockholders when appropriate, following consultation with the chairman and CEO
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Risk Oversight
The board of directors believes that an important part of its responsibilities is to oversee and coordinate with management to assess the major risks that we face and to reviewresponsible for overseeing our options for monitoring and controlling these risks. At board meetings, management discusses with the board of directors matters of particular importance or concern, including any significant areas of risk meriting board attention. The Board considers cybersecurity an important risk and receives regular updates on cyber risks specificCompany-wide approach to the Company. identification, assessment and management of major risks. Oversight for certain specific risks falls under the responsibilities of our Board committees.
•The Audit Committee has specific responsibility for discussingfocuses on financial and reviewingother risks, including legal, reputational and cybersecurity related risks. The Audit Committee receives a quarterly update on our policies with respect to risk assessment and risk management including setting guidelines and policies to govern the process by which risk assessment and risk management is undertaken. The Audit Committee takesplays an active role in this process and communicatesensuring that the results torisk management plan is effective in mitigating the full board of directors. major risks we face.
•The CNGCompensation Committee overseesfocuses on risks relatingrelated to our compensation policies and practices, as well as CEO and executive officer succession, and provides reportsprogram, including evaluating appropriate compensation incentives relating to the full boardcompensation of directors.our executives and employees. The CNGCompensation Committee works with a compensation risk analysis committee that is comprised of members of management, which has the responsibility to review our compensation policies as they relate to risk management practices and risk-taking incentives. We have conducted a risk assessment ofreviews our compensation programs and policies from a legal and human resources perspective and reviewedregularly considers whether our compensation policies and discussed this assessment with the CNG Committee.practices encourage unnecessary or excessive risk taking. Based on thisthe Compensation Committee's regular assessment, we concludedbelieve that weour compensation policies and practices do not have any compensation programs or practicespresent risks that wouldare reasonably be likely to have a material adverse effect on the Company.
•The Nominating and Governance Committee focuses on risks associated with succession planning, corporate governance, board effectiveness and Environmental, Social and Governance matters.
The committees regularly advise the full board of their oversight activities. The risks identified in our Company.
risk management plan are discussed with the board to ensure that all known material risks are properly identified, assessed and managed. On an annual basis, we provide an update to the board on our key risks, risk assessment and risk management, including soliciting feedback from each director to ensure that we have properly identified, assessed and managed all known material risks. At most regularly scheduled board meetings, the board reviews key matters relating to the our finances, liquidity, operations and investment activity. In addition, the board receives quarterly presentations from senior information technology personnel to discuss recent trends in cyber risks and our strategy to defend its business systems and information against cyber attacks. Additionally, all directors have access to members of management if a director wishes to follow up on items discussed outside of the board or committee meeting.
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20182021 Proxy Statement | 1317 |
LEADERSHIP STRUCTURE, RISK OVERSIGHT, MEETINGS
AND COMMITTEES OF THE BOARD
Attendance at Meetings of the Board and its Committees
The board of directors holds at least four regularly scheduled meetings per year and additional special meetings as necessary. Each director is expected to attend all regularly scheduled and special meetings, unless unusual circumstances make attendance impractical. The board of directors may also take action from time to time by written or electronic consent. For the year ended December 31, 2017,2020, our board and its committees maintained strong oversight over our management and business in holding a total of eightseven meetings on financial and operational results, corporate strategy, governance, compensation and other topics. Each director attended at least 75% of the meetings of the board of directors and of any committees on which he or she served during this period.
Committees of the Board of Directors
TheAt the start of 2020, the board of directors hashad two standing committees: the Audit Committee and the Compensation, Nominating and Governance ("CNG") Committee. The Board of Directors voted to split the CNG Committee.Committee into two committees, the Compensation Committee and the Nominating and Governance Committee, effective as of July 1, 2020. The committees on which each director serves are listed above in “Information about the Board of Directors and its Committees—Nominees for Directors.”
AUDIT COMMITTEE
The Audit Committee has direct responsibility for the appointment, compensation, retention and oversight of the independent auditors for the Company, and sole authority to establish pre-approval policies and procedures for audit and non-audit engagements with the independent auditors. The Audit Committee also oversees the operation of a comprehensive system of internal controls designed to ensure the integrity of the financial statements and reports and compliance with laws, regulations and corporate policies of the Company. Additionally, the Audit Committee oversees the independent auditor’s qualifications, performance and independence; monitors communications with the independent auditor; and monitors the performance of the internal audit function at the Company. A copy of the Audit Committee’s charter is available at the Company’s website http://ir.extraspace.comwww.extraspace.com under Company Info—Investor Relations—Corporate Governance. In accordance with the rules of the NYSE, the board of directors has determined that each of the current members of the Audit Committee is independent as defined by the Audit Committee’s charter and Section 303A of the NYSE Listing Standards.
As set forth in the Audit Committee’s charter, management of the Company is responsible for the preparation, presentation and integrity of the Company’sour financial statements. Management is also responsible for maintaining appropriate accounting and financial reporting principles and policies, and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The internal auditors are responsible for independently assessing the principles, policies, internal controls and procedures surrounding the financial statements as well as monitoring management’s follow-up to any internal audit reports. The external auditors are responsible for planning and carrying out a proper audit of the Company’sour annual financial statements, reviews of the Company’sour quarterly financial statements prior to the filing of each Quarterly Report on Form 10-Q, and annually auditing the effectiveness of the Company’sour internal controls over financial reporting and other procedures. The members of the Audit Committee are not full-time employees of the Company and are not performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards.
The boardEach of directorsMs. Olmstead and Messrs. Letham and Crittenden has been designated Mr. Skousen as an “audit committee financial expert” as defined in the SEC’s Regulation S-K, Item 407(d)(5).
REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the board of directors in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Company, as well as the Company’s compliance with corporate policies and legal and regulatory requirements, including the Sarbanes-Oxley Act of 2002. During fiscal year 2017,2020, the Audit Committee met eleven10 times, and discussed with the CEO, Chief Financial Officer (“CFO”), Principal Accounting Officer, internal auditors and independent registered public accounting firm (external auditors), the SEC filings that contained financial information, prior to their public release. The Audit Committee’s meetings include executive sessions with the Company’s external and internal auditors, in each case without the presence of the Company’s management.
In discharging its oversight responsibility, the Audit Committee received from the external auditors a formal written statement describing all relationships between the external auditors and the Company that might bear on the external auditors’ independence and discussed with the external auditors their independence and any relationships that may impact their objectivity and independence. The Audit Committee also discussed with management, internal auditors and external auditors the quality and adequacy of the Company’s internal controls and the internal audit function’s organization and responsibilities. The Audit Committee reviewed both with the external and internal auditors their audit plans, audit scope and identification of audit risks. After careful consideration of the best interests of our stockholders, the Audit Committee has chosen Ernst & Young LLP as our independent public accountants for fiscal year 2021.
In carrying out its responsibilities, the Audit Committee, among other things:
• monitors preparation of quarterly and annual financial reports by the Company’s management;
LEADERSHIP STRUCTURE, RISK OVERSIGHT, MEETINGS
AND COMMITTEES OF THE BOARD
• supervises the relationship between the Company and its external auditors, including: having direct responsibility for their appointment, compensation and retention; reviewing the scope of their audit services; approving audit and non-audit services; and confirming the independence of the external auditors;
• oversees management’s implementation and maintenance of effective systems of internal and disclosure controls, including review of the Company’s policies relating to legal and regulatory compliance, ethics and conflicts of interests and review of the Company’s internal auditing program; and
• reviews, approves and/or ratifies related-party transactions for which such approval is required under applicable law, including SEC and NYSE rules.
During fiscal year 2017,2020, management advised the Audit Committee that each set of financial statements reviewed and discussed by management with the committee had been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In addition, management reviewed significant accounting and disclosure issues with the Audit Committee. These reviews included discussion with the external auditors of matters required to be discussed pursuant to AS 1301(Communications with Audit Committees), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) including the quality of the Company’s accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee also discussed with Ernst & Young LLP matters relating to its independence, including a review of audit and non-audit fees and the written disclosures and letter from Ernst & Young LLP to the Audit Committee pursuant to Rule 3526 of the PCAOB (Communication with Audit Committees Concerning Independence).
In addition, the Audit Committee reviewed key initiatives and programs aimed at strengthening the effectiveness of the Company’s internal and external disclosure control structure. As part of this process, the Audit Committee met privately with the Company’s Director of Internal Audit and continued to monitor the scope and adequacy of the Company’s internal auditing program, reviewing internal audit department staffing levels and steps taken to implement recommended improvements in internal procedures and controls. The Audit Committee conducted a performance self-evaluation for review with the board of directors that included a comparison of the performance of the Audit Committee with the requirements of its charter.
Taking all of these reviews and discussions into account, the Audit Committee members listed below recommended to the board of directors that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017,2020, for filing with the SEC.
Submitted by the Audit Committee,
K. Fred Skousen, Chairman
Dennis J. Letham, Chairman
Gary L. Crittenden
Diane Olmstead
Roger B. PorterJulia Vander Ploeg
COMPENSATION NOMINATING AND GOVERNANCE COMMITTEE
The CNGCompensation Committee operates under a written charter adopted by the board of directors, a copy of which is posted on the Company’s website at www.extraspace.com under Company Info—Investor Relations—Corporate Governance. The CNGCompensation Committee assesses the adequacy of its charter annually. The charter, which reflects the standards set forth in the SEC and NYSE rules and regulations, identifies the CNGCompensation Committee’s primary duties and responsibilities as follows:with respect to compensation are to:
set corporate governance principles;
adopt a code of ethics;
monitor the Company’s compliance with corporate governance requirements of federal and state law and the rules and regulations of the NYSE;
review and determine the desirable balance and diversity of experience, qualifications and expertise among members of the board of directors;
review possible candidates for membership on the board of directors (including recommendations proposed by stockholders) and recommend a slate of nominees for election as directors at the Company’s annual meeting of stockholders;
review the function and composition of the committees of the board of directors and recommend membership on such committees;
oversee the board of directors’ evaluation of itself and its committees;
• examine periodically the philosophy and structure of the Company’s compensation programs; and
• oversee and act on behalf of the board of directors with respect to the benefit and compensation plans of the Company.Company;
LEADERSHIP STRUCTURE, RISK OVERSIGHT, MEETINGS
AND COMMITTEES OF THE BOARD
The CNG Committee’s primary responsibilities with respect to compensation are to:
• establish the Company’s total compensation philosophy, and ensure that the compensation programs of the Company reflect that philosophy;
• evaluate the CEO's performance in light of clearly established goals and objectives and establish the compensation of the CEO;
• review and approve the CEO’s compensation recommendations with respect to other executives;
• monitor awards under the Company’s equity compensation plans; and
• report to the board of directors in its meetings and executive sessions.
The CNG Committee regularly reviews communications from stockholders and responds directly or through the Chief Legal Officer. In performing its duties, the CNGCompensation Committee has the authority to take such action as it deems appropriate to implement the purposes of the CNGCompensation Committee. The CNGCompensation Committee may retain legal, accounting or other consultants, and meet in separate executive sessions with the Company’s management and employees and its compensation consultant.
LEADERSHIP STRUCTURE, MEETINGS AND COMMITTEES OF THE BOARD
The CNGCompensation Committee has retained Mercer as its independent compensation consultant to advise the CNGCompensation Committee in connection with matters pertaining to director and executive compensation, including advising as to market levels and practices, plan design and implementation, peer group,comparable company data, consulting best practices and governance principles. Mercer also provides other services to the Company. Fees paid to Mercer during 20172020 for director and executive compensation consulting services totaled $63,310.$12,870. Fees paid to Mercer for healthcare administration services in 20172020 totaled $49,000.$17,000. The CNGCompensation Committee has determined, and Mercer has affirmed, that Mercer’s work does not present any conflicts of interest and that Mercer is independent. In reaching these conclusions, the CNGCompensation Committee considered the factors set forth in Exchange Act Rule 10C-1 and NYSE listing standards. During 20172020, the Compensation Committee held two meetings, in addition to the three meetings held during the first half of 2020 when the Nominating and Governance Committee and the Compensation Committee were combined into the CNG Committee held five meetings.Committee.
COMPENSATION NOMINATING AND GOVERNANCE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members of the CNGCompensation Committee are independent under NYSE listing standards. During 2017,2020, none of the executive officers of the Company served on the board of directors or compensation committee of any entity whose officers served either on the board of directors of the Company or on the CNGCompensation Committee of the board of directors. No member of the CNGCompensation Committee has ever been an officer or employee of the Company or any of its subsidiaries. No interlocking relationships existed during the year ended December 31, 2020, between any member of the Board or the Compensation Committee and an executive officer of the Company.
NOMINATING AND GOVERNANCE COMMITTEE
The Nominating and Governance Committee operates under a written charter adopted by the board of directors, a copy of which is posted on the Company’s website at www.extraspace.com under Company Info—Investor Relations—Corporate Governance. The Nominating and Governance Committee assesses the adequacy of its charter annually. The charter, which reflects the standards set forth in the SEC and NYSE rules and regulations, identifies the Nominating and Governance Committee’s primary duties and responsibilities as follows:
• identify potential board members and recommend to the Board a slate of nominees for election to the Board and recommend directors to serve on the committees of the Board;
• develop and recommend to the Board corporate governance guidelines applicable to the Company, including a code of ethics and monitor Company's compliance with such guidelines;
• engage in succession planning for the CEO;
• oversee the board of directors’ annual evaluation of itself and its committees; and
•monitor and oversee management's efforts and activities on sustainability initiatives, including environmental, social and governance matters.
The Nominating and Governance Committee reviews communications from stockholders and responds directly or through the Chief Legal Officer. In performing its duties, the Compensation and Governance Committee has the authority to take such action as it deems appropriate to implement the purposes of the Nominating and Governance Committee. The Nominating and Governance Committee may retain legal, accounting or other consultants, and meet in separate executive sessions with the Company’s management and employees and its compensation consultant.
During 2020, the Nominating and Governance Committee held two meetings, in addition to the three meetings held during the first half of 2020 when the Nominating and Governance Committee and the Compensation Committee were combined.
POLICY REGARDING BOARD ATTENDANCE AT STOCKHOLDERS MEETINGS
We encourage attendance at stockholders meetings by members of the board of directors and senior executives so that stockholders will have the opportunity to meet our directors and senior executives. All of our then-current board members attended the 2017 annual meeting2020 Annual Meeting of stockholders, with the exception of Roger B. Porter who was unable to attend due to a family emergency.Stockholders.
All non-employee directors receive an annual board retainer feecompensation for their service. The Board determines the form and amount of $65,000 to becompensation for non-management directors after consideration of the recommendation of the Compensation Committee. The Board has approved the mix of cash and equity compensation described below.
Retainers are paid quarterly in cash and are prorated when a director joins the Board. Below are the annual retainers that non-employee directors were entitled to receive during 2020 for Board service:
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Compensation | Amount |
Chairman | $ | 300,000 | |
Directors | $ | 65,000 | |
Lead Independent Director, supplemental | $ | 10,000 | |
Audit Committee Chair, supplemental | $ | 20,000 | |
Compensation Committee Chair, supplemental (1) | $ | 10,000 | |
Nominating & Governance Committee, Chair, supplemental (1) | $ | 10,000 | |
Non-Chair Committee Member, supplemental | $ | 7,500 | |
(1) The board of directors voted to split the CNG Committee into two committees effective July 1, 2021. These figures include the mid-year change in the committee structure.
In addition, all non-employee directors receive an award on the date of each annual meeting of shares of common stock equivalent in value to $100,000$120,000 (to the nearest share), with the number of shares determined by the closing price of our common stock on the date of the annual meeting. The lead independent director receives an additional annual retainer fee of $10,000. Directors who serve asCommencing in 2020, these shares vest on the chairfirst anniversary of the Audit Committee and CNG Committee receive an annual committee retainer feedate of $20,000. Directors who serve ongrant, subject to a director’s continued service through the Audit Committee and CNG Committee receive an annual committee retainer fee of $7,500. The Company doesvesting date. We do not pay any meeting fees to itsour directors. The following table presents the compensation paid to the Company’sour non-employee directors in 2017:2020:
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Name | Fees earned or paid in cash | Stock awards (1) | | Total |
Kenneth M. Woolley | $ | 300,000 | | $ | 120,000 | | | $ | 420,000 | |
Roger B. Porter | 97,500 | | 120,000 | | | 217,500 | |
Joseph J. Bonner | 76,250 | | 120,000 | | | 196,250 | |
Gary Crittenden (2) | 69,135 | | 120,000 | | | 189,135 | |
Ashley Dreier (3) | 65,163 | | 60,000 | | | 125,163 | |
Spencer F. Kirk | 65,000 | | 120,000 | | | 185,000 | |
Dennis Letham | 92,500 | | 120,000 | | | 212,500 | |
Diane Olmstead | 80,000 | | 120,000 | | | 200,000 | |
Julia Vander Ploeg (4) | 11,087 | | 60,000 | | | 71,087 | |
Total | $ | 856,635 | | $ | 960,000 | | | $ | 1,816,635 | |
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Name | Fees earned or paid in cash | Stock awards (1) | Total |
Karl Haas (2) | $ | 16,250 |
| $ | — |
| $ | 16,250 |
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Spencer F. Kirk | 65,000 |
| 100,000 |
| 165,000 |
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Dennis Letham | 72,500 |
| 100,000 |
| 172,500 |
|
Diane Olmstead | 80,000 |
| 100,000 |
| 180,000 |
|
Roger B. Porter | 102,500 |
| 100,000 |
| 202,500 |
|
K. Fred Skousen (3) | 92,500 |
| 100,000 |
| 192,500 |
|
Total | $ | 428,750 |
| $ | 500,000 |
| $ | 928,750 |
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(1) Each non-employee director received 1,426 shares of common stock on May 22, 2020 which cliff vest after one year. Dollar amounts represent grant date fair value of such grants as determined in accordance with Accounting Standards Codification 718, "Stock Compensation" ("ASC 718") using the assumptions to value such awards reported in the notes to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021. Adjustments are made to prorate any stock awards as directors join or leave the board of directors. | |
(1) | Each non-employee director received 1,318 shares of vested common stock on May 18, 2017. Dollar amounts represent grant date fair value of such grants as determined in accordance with Accounting Standards Codification 718, “Stock Compensation” (“ASC 718”) using the assumptions to value such awards reported in the notes to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 1, 2018. None of our non-employee directors held any unvested stock awards or stock options as of December 31, 2017. |
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(2) | Mr. Haas served on the board of directors through May 18, 2017. The cash fees paid are a pro-rated amount for his service from January 1, 2017 through May 18, 2017. |
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(3) | Mr. Skousen is not standing for re-election at the 2018 Annual Meeting. |
(2) Mr. Crittenden joined the board of directors on February 12, 2020. The cash fees paid are a pro-rated amount for his service starting February 12, 2020.
(3) Ms. Dreier resigned from the board of directors on November 11, 2020. The cash fees paid and stock awards granted were pro-rated for her service through November 11, 2020.
(4) Ms. Vander Ploeg joined the board of directors on November 11, 2020. The cash fees paid and stock awards granted were a pro-rated amount for her service starting November 11, 2020.
During 2017,2020, Mr. Margolis and Mr. Woolley served as directorsa director and werewas also executive officers of the Company (although Mr. Woolley is not a named executive officer for 2017 and, thus, does not appear in the compensation tables included elsewhere in this proxy statement).our CEO. As employees, theyan employee, he did not receive any additional compensation for theirhis services as directors.a director. In accordance with SEC rules, we have excluded Messrs.not included Mr. Margolis and Woolley fromin the table above.
Stock Ownership Guidelines for Directors
We have stock ownership guidelines that require each of our non-employee directors, within five years after appointment to the board, to hold shares of our common stock, restricted stock or stock options (whether or not vested) with a value equal to the sum of five times the annual cash portion of the board retainer. These stock ownership guidelines align our directors’ interests with those of our stockholders by ensuring non-employee directors hold equity in the Company. Each non-employee director has met these guidelines as of December 31, 2017.
2020 or has additional time within which to come into compliance in accordance with the guidelines.
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20182021 Proxy Statement | 1721 |
Information for Joseph D. Margolis and Kenneth M. Woolley is contained previously under the heading “Information about the Board of Directors and its Committees—Nominees for Directors.” Information with regard to our other named executive officers is presented below. All of our executive officers are elected as officers at the annual organizational meeting of the board of directors held following each annual meeting of stockholders.
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SCOTT STUBBS
AGE: 5053
TITLE:
Executive Vice President and Chief Financial Officer | Scott Stubbs has served as our Chief Financial Officer since December, 2011. He served as the Company’s Senior Vice President Finance and Accounting since our inception, and the Corporate Controller of our predecessor beginning in December 2000. Prior to joining our predecessor, Mr. Stubbs served as Chief Financial Officer of the Lyon Company from June 2000 through December 2000. From 1995 through 2000, he served as the U.S. Controller of Critchley Inc. and from November 1992 through June 1995, he worked at Neilson, Ellgren, Durkin & Co. as a consultant. Mr. Stubbs is a licensed CPA and holds a B.S. and a Masters in Accountancy from Brigham Young University. Mr. Stubbs currently serves as a member of the board of directors of ZAGG Inc. and as the audit committee chairman. |
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JAMES L. OVERTURFZACH DICKENS
AGE: 5146 TITLE: Executive Vice President and Chief MarketingInvestment Officer | James L. OverturfZach Dickens has served as our Chief MarketingInvestment Officer (“CMO”) since May 2014. Previously,December 2020. Mr. Dickens has been with Extra Space Storage since 2002, and he held senior leadership positions withhas served in various roles in the Company in marketing and investor relations from August 2004 to May 2014 under various titlesreal estate department, including most recently as Senior Vice President of MarketingInvestments. Mr. Dickens has been instrumental in the Company's acquisitions, structuring transactions with joint venture partners and growing the company’s bridge lending program. Prior to joining Extra Space Storage, Mr. Dickens oversaw a technical support team at eBay. Mr. Dickens has a Master of International Management from Thunderbird School of Global Management, has an M.B.A from Arizona State University and a bachelors in Russian Language from the University of Utah.
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MATTHEW HERRINGTON AGE: 40 TITLE: Executive Vice President and Chief Operating Officer | Matt Herrington has served as our Chief Operating Officer since June 2020. Mr. Herrington has been a member of the Company’s senior management team for over a decade, most recently serving as the Senior Vice President of Investor Relations.Operations from 2015-2020, responsible for Company's operations in the western United States including approximately 900 locations. Mr. Overturf also served asHerrington has been with the Company since 2007 in various roles including Divisional Vice President of Marketing for our predecessor from February 1999 to August 2004. Prior to joining our predecessor, he was Director of Marketing at 3Com Megahertz Corporation from November 1997 to February 1999. From May 1994 to August 1997, he served as MarketingOperations and Senior District Manager, at Fidelity Trust Company, a subsidiary of Fidelity Investments.Operations. Mr. OverturfHerrington holds a B.S.Master's of Science in marketingManagement from Montana State University.Baker University and a Bachelor's in Business Administration from the University of Nebraska - Kearney. |
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GWYN G. MCNEAL AGE: 4952 TITLE: Executive Vice President and Chief Legal Officer | Gwyn G. McNeal has served as Chief Legal Officer since July 2013. Ms. McNeal has been with the Company since 2005. Prior to her current role she was the Vice President and Associate General Counsel of the Company, providing legal support to the Company’s operations team along with overseeing litigation, employment law matters and intellectual property. Ms. McNeal began her career practicing law with Latham & Watkins LLP, San Diego from 1992 to 2000. She then served as General Counsel for 3form, Inc. from 2000 to 2003. Prior to joining the Company, Ms. McNeal represented the Company as external counsel with Nelson Christensen & Helsten. Ms. McNeal holds a B.A. from Brigham Young University and a J.D. from the University of Southern California. |
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SAMRAT SONDHI AGE: 4346 TITLE: Executive Vice President and Chief OperationsMarketing Officer | Samrat Sondhi has beenserved as Chief Operations Officer since January 2014 and a member of the Company’s senior management team since 2008 and has been with the Company since 2003. He has served in various roles including Divisional Vice President, covering core markets across the United States, and Senior Vice President Revenue Management, playing a key role in the evolution of pricing strategy and execution for the self-storage industry. Prior to joining the Company, Mr. Sondhi served as the Vice President Revenue Management for Storage USA for two years. Prior to joining Storage USA, Mr. Sondhi worked as a consultant with Deloitte Consulting from 2001 to 2002. Mr. Sondhi holds an M.B.A. degree from Carnegie Mellon University and a B.S. in electronics from Pune University, India. |
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18NOAH SPRINGER AGE: 42 TITLE: Executive Vice President and Chief Strategy and Partnership Officer | Noah Springer has served as our Chief Strategy and Partnership Officer since December of 2020. Mr. Springer has been with the company since 2006, and has served in various roles in acquisitions, third-party management and asset management, most recently as Senior Vice President of Third-party and Asset Management. Mr. Springer helped create Management Plus, Extra Space Storage’s third-party management platform, and continues to lead that business, as well as the Company's asset management, construction and joint venture platforms. Prior to joining Extra Space, Mr. Springer worked for a number of years in banking. He has a B.A. in Finance and an MBA from the University of Utah. |
Compensation Discussion and Analysis
GENERAL PHILOSOPHY
The philosophy underlyingCompensation Committee is made up of four independent directors, who determine our executive compensation policies isin order to align management’s incentives with the long-term interests of stockholders and to be competitive with comparable employers. Accordingly, we have structured the executiveour compensation program aroundreflects the following guiding principles and objectives:key features to ensure management's incentives are appropriately aligned with our shareholders:
•Pay for performance;
Market-based•A high percentage of executive total annual target compensation in the form of equity, including 67% of long-term incentive awards include performance-based stock units which are "at risk" and subject to three-year performance periods to assess long-term performance.
•A market-based approach for evaluating and reviewing executive pay;
•Caps on annual and long-term incentives;
•No employment agreements for executive officers;
•Claw-back policy on compensation;
Stock•No excessive perquisites;
•No tax gross ups; and
•Robust stock ownership requirements for executives; and
50% of long-term incentive awards include performance based units subject to three-year performance periods to ensure long-term performance is assessed.executives.
SETTING EXECUTIVE COMPENSATION
Based on our philosophy underlying executive compensation policies, we place significant emphasis on annual and long-term performance-based incentive compensation, including, incompensation. In addition to base salaries for our executives, annual cash incentives and long-term equity based incentive awards which are all designed to reward our executives based on the achievement of predetermined company and individual goals. We also consider historical compensation levels as well as other industry conditions and the overall effectiveness of our compensation program.
In order to ensure the fulfillment of the generalour compensation philosophy as outlined above and to assist in establishing the Company’s aggregate level of compensation, the CNGCompensation Committee engages a nationally recognized compensation consulting firm, Mercer, which reports directly to the CNGCompensation Committee.
Working with Mercer for the purpose of evaluating and setting 20172020 compensation for our NEOs, the CNGCompensation Committee developed a list of 16 comparable real estate investment trusts (“REITs”)REITs that are similar to the Company in total enterprise value, relative size, number of employees numberand inclusion of properties, and total revenue.all direct competitors. The CNGCompensation Committee also took into consideration such elements as joint venture properties and unconsolidated revenues. The companies used in the comparator group, which wasis unchanged from 2016,since 2019, are:
|
| | | | | | | |
• American Campus Communities
• Apartment Investment and Management Company • AvalonBay Communities, Inc. • Camden Property TrustBoston Properties, Inc. • CubeSmart |
• DukeDigital Realty CorporationTrust | • Equity Lifestyle Properties, Inc. • Equity Residential
• Essex Property Trust, Inc. • Liberty Property Trust • Life Storage, Inc.
• National Storage Affiliates Trust
• Mid America Apartment Communities Inc. | • Public Storage • Regency Centers Corporation
• Taubman Centers, Inc.Realty Income Corporation • UDR, Inc.
• WeingartenVornado Realty InvestorsTrust |
The group includes threeour four direct competitors: Public Storage, Life Storage, Inc., CubeSmart and CubeSmart.National Storage Affiliates Trust. The remaining companies represent publicly traded REITs with market capitalizationstotal enterprise values comparable to Extra Spacethe Company and that generally recruit individuals to fill senior management positions who are similar in skills and background of those recruited by us.
The CNGCompensation Committee attempts to design programs that deliver total compensation for executives that approximatesuses the 50th percentilemedian (50th percentile) of the comparator group for the achievement of “at target” performance. Actual payouts may be above or below the 50th percentile depending on actual performance compared to the target and based on individual performance related goals. Mercer prepares market data based on our comparator group regarding salary, annual cash incentive award targets,as the beginning reference point and long-term incentive compensation awards.
as an indicator of competitive market trends. In addition, the Compensation Committee considers analysis prepared by Mercer also provides advice directlythat includes general real estate and industry data. The Compensation Committee does not rely on a strict formulaic framework, but instead believes in combining a quantitative and a qualitative assessment against pre-established goals in order to the CNG Committee as it makes decisions with respect to compensation for the CEO. Our CEO reviews and recommends toallow the committee the annual salary, incentive plan target and long-term stock-based compensation for each of our executive officers. The committee reviews those recommendations and makes a final determination with respectability to such compensation. The compensation that is developed for each of these officers is based on competitive market data and on the CEO’s
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20182021 Proxy Statement | 1923 |
strike the appropriate balance between short-term objectives and long term strategies while properly emphasizing objective results when assessing management's performance.
recommendations regarding the executive’s overall contributions, past performance and anticipated future contributions. The committee reviews separately and sets the compensation of the CEO based on competitive market data as well as the committee’s assessment of his performance and anticipated future contributions. The CNGCompensation Committee does not have a pre-established policy for the allocation of compensation between cash, non-cash compensation and long-term incentive compensation. None of the executive officers are present during CNGCompensation Committee deliberations or decisions regarding such executive’s compensation.
The following describes each element of our executive compensation program, along with a discussion of the decisions made by the CNGCompensation Committee with respect to that aspect of compensation for 2017.2020.
ELEMENTS OF EXECUTIVE OFFICER COMPENSATION AND BENEFITS FOR 20172020
In 2017,2020, named executive officers’ total compensation was comprised of the following elements designed to complement each other:
•base salary;
•annual incentive bonus;
•long-term incentives through restricted stock and performance basedperformance-based stock unit awards; and
•other benefits.
BASE SALARY
Base salary is a critical element of executive compensation as it provides executives with assured monthly cash compensation. In determining base salaries, the CNGCompensation Committee based its evaluation on a variety of factors, including:
•the executive’s qualifications, experience and past performance;
•the nature and responsibility forof the position; and
•the salaries paid to the position within the comparator peer group;group and other information about similarly-situated executives in the comparable company data.
No salary increases were given to any of the relative position ofNEOs for 2020. In making the decision on base salaries, among executives.
2017 Increases. Effective January 1, 2017, the CNG Committee took the following actions with respect to the base salaries for the NEOs:
Mr. Margolis became CEO on January 1, 2017 and received a salary increase from $500,000 to $750,000; and
no salary increase was given to the other NEOs for 2017.
In making each of the salary decisions described above, the CNGCompensation Committee reviewed changes in job responsibility and title, historical salary levels, performance and contributions made to the Company, the impact on total compensation, competitive conditions and the relationship of compensation to that of other of the Company’s officers and determined the compensation awarded was appropriate to reward performance, ensure retention and maintain appropriate compensation differentials among the Company’s officers. The CNG Committee increased Mr. Margolis’ compensation package for 2017 as a result of his promotion to CEO on January 1, 2017.
ANNUAL INCENTIVE BONUS
We pay annual incentives to drive the achievement of key business results and to recognize individuals based on their contributions to those results. The CNGCompensation Committee believes that this feature of compensation motivates executive officers to strive to attain our annual goals with 50% of these performance-based goals are tied to the financial operating performance of the Company and 50% are tied to the senior executive’s achievement of specific management goals, outlined below.
The financial performance goals set for 20172020 were based on the Company’s achievement of a specific target (the “FFO Target”) related to the Company’s Core FFO.funds from operations ("FFO"). The FFO Target is defined and approved annually by the board of directors. The portion of bonus based on the FFO Target could incrementally increase or decrease based on meeting, exceeding, or failing to meet the FFO Target. The FFO Target is based on the Company’s Core FFO, with additional adjustments agreed to by the board of directors in order to consistently review the performance of management as it relates to Core FFO. Core FFO provides relevant and meaningful information about our performance and is the primary measure that we use to assess our operating performance. For 2017,2020, Core FFO was defined as FFO excluding revenues and expenses not core to our operations and non-cash interest. For annual bonus determination purposes for 2017,2020, Core FFO was furtheralso adjusted to remove the impact of depreciation above or below a budgeted amount based on the Company’s projections. FFO and Core FFO are non-GAAP measures and a reconciliation of those measures to GAAP net income attributable to common stockholders is attached to this proxy statement as Appendix A.
The FFO Target established for 20172020 was $4.24$5.08 of Core FFO per share. For annual bonus determination purposes for 2017,2020, Core FFO was $4.38$5.27 per share, resulting in the payment of 128%132% of the portion of the bonus related to the achievement of the FFO Target pursuant to the annual incentive plan. The annual incentive plan which provides that the financial performance portion of executive officers’ bonuses may be reduced or increased based upon the percent of FFO Target earned, with a maximum bonus payout of 150% in the event that the FFO Target is greater than 105% and a minimum payout of 0%50% in the event that the FFO Target is less than 95% of the FFO Target.
Notwithstanding the foregoing, the CNGCompensation Committee may, in its sole discretion, exclude or adjust significant non-budgeted or non-controllable amounts, gains, or losses from actual financial results in order to properly measure the Company’s performance. In addition, the CNGCompensation Committee may adjust the Company’s overall FFO targets and gradations used to determine percentage of FFO target to appropriately implement the intent of the annual incentive plan. The CNGCompensation Committee did not make any such additional exclusions or adjustments for 20172020 bonus determination purposes.
The managementsenior executives corporate goals for 2020 included the following corporate goals along with each officer's individual goals. The corporate goals established for 20172020 for our named executive officers are summarized as follows:
maximize core property performance by increasing Core FFO, same store revenue, net operating income, tenant insurance penetration
| | | | | |
2020 Goals | 2020 Achieved |
•Core FFO of $5.08 or higher | •Core FFO of $5.27 |
•Same Store NOI growth of 0.5% or higher | •Same Store NOI growth of (0.7%) |
•Do not exceed Corporate G&A budget | •Under budget |
•Close $500 million of acquisitions (gross) and $200 million of bridge loans (gross) | •Invested $339.3 million (gross) in acquisitions, closed $220.4 million bridge loans closed (gross) and placed $453 million in other storage-related investments |
•Expand third party management platform to 730 stores | •Expanded third party management platform to 724 stores |
In addition to the corporate goals listed above, the executive officers each have additional qualitative goals relating to operational efficiencies, technology, sustainability, growth and controlling expense growth;
succession plan in place for all key professionals;
maintain an efficient and agile financial and balance sheet strategy; and
grow the portfolio through acquisitions and additional third-party management business.
The CNG Committee did not set quantifiable objectives for the foregoing management goals and assigned no specific weighting to these management goals. The CEOother company improvements. Mr. Margolis presented to the CNGCompensation Committee his assessment of the achievement of the corporate goals listed above and the specific qualitative goals of each NEO’s performance (other than his own) in achievingof our executive officers. The compensation committee reviewed the management2020 goals and recommended toachievements and weighed these against the CNGoutstanding Core FFO achieved for the year against the backdrop of the challenges of the pandemic. Upon discussion and review, the Compensation Committee thatapproved an achievement level in the CFO, CMO, COO and CLO be paid between 94-96%range of the90-100% of that portion of the bonus related to these goals. After theirthe corporate goals outlined above and the individual qualitative goals for each of the Chief Financial Officer, Chief Marketing Officer, Chief Operations Officer and Chief Legal Officer. In addition, the Compensation Committee conducted its own evaluation of Mr. Margolis’s performance relative to the above managementcorporate goals and his individual qualitative goals and the CNGCompensation Committee determined to approve an achievement levelslevel of 96%98% for Mr. Margolis for the portion of the bonus related to the achievement of the managementsuch goals.
The annual bonuses paid to the named executive officers for 20172020 are reflected in the “Summary Executive Compensation Table” below.
LONG-TERM INCENTIVES FOR 20172020
The Long-Term Incentive Program allows for grants of restricted stock and performance-based stock awards. Prior to 2017, stock options were also a part of the Long-Term Incentive Program.units ("PSU(s)"). The goals of the Company’s equity awards are to: (1) align the interests of each executive officer with those of our stockholders by providing each individual with a significant incentive to manage the Company from the perspective of a stockholder with an equity stake in the business, and (2) encourage long-term retention of key employees by virtue of vesting conditions imposed on typical equity awards. Employees must remain employed by the Company for a fixed period of time in order for the equity awards to vest fully. VestingUnless otherwise determined by the Compensation Committee, vesting ceases upon termination of employment and unvested grants of restricted stock and performance-based unitsPSUs are cancelledcanceled upon termination of employment. During the vesting period, restricted stock awards and performance-based unitsPSUs may not be sold, transferred or pledged.
Commencing in 2017,LONG-TERM INCENTIVES GRANTED IN 2020
For 2020, the NEOs of the Company receive 50%received 33% of their long-term incentive awards in the form of restricted stock grants. Typically, grantsGrants of restricted stock vest over a four-year period at the rate of 25% per year. The restricted stock grants may be voted and receive the payment of nonforfeitablenon-forfeitable dividends.
Commencing in 2017, the NEOsThe remaining 67% of the Company receive the remaining 50% of their long-term incentive awards to the NEOs come in the form of performance-based unitsPSUs that vest after a three-year performance period. For the awards granted in 2017, this2020, the three-year performance period will end on December 31, 2019.2022. These awards have two financial performance components, each weighted 50%, that are measured at the end of a three-year performance period. At the end of the performance period and to the extent performance goals are achieved, the performance-based unitsPSUs will then be converted into common shares and paid out after the end of the performance period. In addition, the award recipient will receive a cash payment equivalent to the dividends that would have been paid on such stock during the performance period on the vesting date.
The first financialperformance component of the performance-based unitsPSUs measures our total stockholder return (measured by reference to the change in our share price plus dividends) as compared to the total stockholder return of a peer group consisting of all REITs tracked within the MSCI US REIT Index. If the Company achieves a total stockholder return at the 50th percentile of its peer group, then the performance-based unitsPSUs will be paid out at 100% of the target units related to the total stockholder return metric. The second financialperformance component of the performance-based unitsPSUs measures the Company’s average annual growth in Core FFO, per share. The CNGCompensation Committee has set a three-year Core FFO target which, if achieved, will result in a payout of 100% of the target units related to the FFO metric. With respect to both measurements, the NEOs have the ability to be paid out at a range of 0% to 200% of the target units depending on the Company’s performance with respect to both metrics. Performance above and below targeted levels will be determined by linear interpolation. Subject to the accelerated vesting described below, the NEOs must generally remain employed through the last day of the performance period in order to be eligible to vest in the performance-based stock units.
Grants of restricted shares and performance-based unitsPSUs are discussed and reviewed at regularly scheduled meetings of the CNGCompensation Committee. By taking such actions at regularly scheduled meetings, the CNGCompensation Committee seeks to avoid any possible appearance that the grant timing was manipulated to affect the value of the awards. We do not have any program, plan or practice to coordinate any equity awards with the release by us of material non-public information or any other investor relations activities.
The CNGCompensation Committee awarded both restricted stock grants and performance-based unitsPSUs to all of the named executive officers in 2017,2020, which awards are shown in the “Grants of Plan-Based Awards” table below. The values of the restricted stock grants and performance basedperformance-based units were determined by the CNGCompensation Committee based on the recommendation of the CEO taking into consideration the total executive compensation at the comparator group of companies.
The equity awards granted to the named executive officers are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Tables—Severance and Change in Control Arrangements with Named Executive Officers.”
FINAL RESULTS OF THE 2018 PERFORMANCE BASED UNITS
In February 2018, the Company issued PSUs to our NEOs, which allowed each NEO to earn from 0% to 200% of the target number of awards based on two performance components, each weighted at 50%, measured at the end of the three-year performance period that ended December 31, 2020. The first performance component of the 2018 PSUs was our total stockholder return (measured by reference to the change in our share price plus dividends) as compared to the total stockholder return of a peer group consisting of all REITs tracked within the MSCI US REIT Index. If we achieved a total stockholder return at the 50th percentile of our peer group, then the PSUs would pay out at 100% of the target units related to the total stockholder return metric. The second performance component of the 2018 performance based units measured the Company’s Core FFO per share. The Compensation Committee set a Core FFO target of $5.09 per share, which, if achieved for the year ended December 31, 2020, would have resulted in a payout of 100% of the target units related to the Core FFO metric.
In February 2021, the Compensation Committee determined our performance relative to the performance metrics for the 2018 PSUs and approved the vesting of such awards at 169% of target. The following tables show the performance metrics and ultimate 169% achievement for the 2018 PSUs at the completion of the three-year performance period from January 1, 2018 through December 31, 2020 and the resulting stock awards.
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| 2018 Performance Level | |
Performance Metric (1) | Weighting | Threshold (0%) | Target (100%) | Maximum (200%) | Performance Result | % of Achievement | Weighted % of Achievement |
TSR Ranking Relative to MSCI US REIT Index for Performance Period | 50% | Below 25th percentile | 50th Percentile | At or above 75th percentile | 86th percentile | 200% | 100% |
Core FFO for 2020 | 50% | At or below $4.58 | $5.09 | At or above $5.60 | $5.28 | 137% | 69% |
TOTAL % of TARGET ACHIEVED: | 169% |
(1) Achievement between levels is determined by linear interpolation.
The following table sets forth the number of 2018 PSUs that vested for each NEO resulting from the 169% achievement level as shown above.
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| Target Number of Performance Based Stock Units | Resulting Number of Performance Based Stock Units (1) |
Joseph D. Margolis | 14,560 | 24,534 |
Scott Stubbs | 5,124 | 8,634 |
Matthew Herrington (2) | — | — |
Gwyn G. McNeal | 2,890 | 4,870 |
James Overturf | 3,082 | 5,194 |
Samrat Sondhi | 3,082 | 5,194 |
(1) In addition, each NEO received a cash payment equivalent to the dividends that would have been paid on such resulting number of 2018 performance-based units during the performance period on the settlement date of such awards in February 2021 as follows: Mr. Margolis, $258,077; Mr. Stubbs, $90,809; Mr. Herrington $0; Ms. McNeal, $51,211; Mr. Overturf, $54,630; and Mr. Sondhi, $54,630.
(2) Mr. Herrington was promoted to Chief Operating Officer on June 1, 2020 and did not receive an award of 2018 PSUs.
OTHER COMPENSATION ELEMENTS
We provide benefits and perquisites to our named executive officers and other employees, such as medical and life insurance, 401(k) plan, and severance pursuant to the terms of the Company’s change in control plan.
•Medical Insurance. The Company makes available to each NEO and their spouses and children such health, dental and vision insurance coverage on the same basis as the Company may from time to time make available to its other corporate employees. A portion of the insurance coverage is paid by the Company.
•Life Insurance. The Company provides each named executive officer such life insurance on the same basis as the Company may from time to time make available to its other corporate employees.
•Retirement Benefits. Our executive officers are eligible to participate in our 401(k) defined contribution plan on the same basis as other eligible employees. The Company currently matches 100% of the first three percent of an employee’s cash compensation contributed by each employee, and 50% of the next two percent of an employee’s cash compensation contributed.
A description of the severance arrangements we maintain with our named executive officers can be found under “Severance and Change in Control Arrangements with Named Executive Officers.” below. We also limit the perquisites that we make available to our executive officers, particularly in light of the potential for abuse associated with such perquisites. Accordingly, our executives are entitled to few benefits that are not otherwise available to all of our employees.
POLICY REGARDING TAX DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to the company’s named executive officers. The CNGCompensation Committee’s general policy is to maintain flexibility in compensating named executive officers in a manner designed to promote varying corporate goals. In addition, we believe that we qualify as a REIT under the Code and generally are not subject to federal income taxes, provided that we distribute to our stockholders at least 90% of our taxable income each year. As a result, we do not expect that the payment of compensation that does not satisfy the requirements of Section 162(m) of the Code will have a material adverse federal income tax consequence to us. Accordingly, the CNGCompensation Committee has not adopted a policy that all compensation must be deductible.
STOCK OWNERSHIP GUIDELINES FOR EXECUTIVE AND SENIOR OFFICERS
We have stock ownership guidelines which require each of our executive and senior officers, within five years after appointment as an officer, to hold shares of our common stock, restricted stock or stock options (whether or not vested). These stock ownership guidelines align our officers’ interests with those of our stockholders, ensuring executive and senior officers hold a significant amount of equity in the Company. Each executive and senior officer has met the following guidelines as of December 31, 2017:
2020, or has additional time within which to come into compliance in accordance with the guidelines.
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Position | Base Salary Multiple | Time to Attain |
CEO | 5x | 5 years |
Executive Vice President | 3x | 5 years |
Senior Vice President | 1x | 5 years |
IMPACT OF ADVISORY VOTE APPROVING EXECUTIVE COMPENSATION
At the Company’s 20172020 Annual Meeting of Stockholders, an advisory vote was held to approve executive compensation, thereby affording stockholders the opportunity to cast a vote on the compensation programs for our named executive officers. Of the 125,912,293129,493,308 total shares outstanding, 93% voted on this matter, excluding abstentions and broker non-votes. The result of these votes indicated 96%95% approval of the compensation paid to our named executive officers. The CNGCompensation Committee believes that the results of this vote affirm stockholder support of the Company’s approach to executive compensation, and the CNGCompensation Committee did not change its general approach to executive compensation after receiving these voting results. The CNGCompensation Committee will continue to consider the outcome of advisory stockholder votes regarding executive compensation when making future compensation decisions for our named executive officers.
Compensation Nominating and Governance Committee Report
The CNGCompensation Committee has reviewed and discussed the Compensation Discussion and Analysis with the Company’s management and, based on our review and discussions, the committee recommended to the board of directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K and in this proxy statement.
Submitted by the CNGCompensation Committee
Roger B. Porter, Chairman
Joseph J. Bonner
Dennis J. Letham
Diane Olmstead
K. Fred Skousen
Executive Compensation Tables
SUMMARY EXECUTIVE COMPENSATION TABLE
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Name and principal position | Year | Salary | | Non-equity incentive plan compensation (1) | Stock awards (2) | Option awards (2) | All other compensation (4) | Total |
Joseph D. Margolis | 2020 | $ | 850,000 | | | $ | 1,319,625 | | $ | 4,216,825 | | $ | — | | $ | 395,762 | | $ | 6,782,212 | |
Chief Executive Officer | 2019 | 850,000 | | | 1,057,188 | | 3,965,507 | | — | | 412,280 | | 6,284,975 | |
| 2018 | 750,000 | | | 895,313 | | 2,581,747 | | — | | 203,266 | | 4,430,326 | |
| | | | | | | |
|
Scott Stubbs | 2020 | $ | 475,000 | | | $ | 527,250 | | $ | 1,178,223 | | $ | — | | $ | 150,903 | | $ | 2,331,376 | |
Chief Financial Officer | 2019 | 475,000 | | | 482,125 | | 1,108,076 | | — | | 142,997 | | 2,208,198 | |
| 2018 | 475,000 | | | 453,625 | | 908,461 | | — | | 72,390 | | 1,909,476 | |
| | | | | | | |
|
Matthew Herrington | 2020 | $ | 299,700 | | | $ | 227,255 | | $ | 198,084 | | $ | — | | $ | 170,878 | | $ | 895,917 | |
Chief Operations Officer (3) | | | | | | | | |
| | | | | | | | |
Gwyn G. McNeal | 2020 | $ | 400,000 | | | $ | 417,600 | | $ | 771,806 | | $ | — | | $ | 96,773 | | $ | 1,686,179 | |
Chief Legal Officer | 2019 | 400,000 | | | 360,000 | | 725,638 | | — | | 83,366 | | 1,569,004 | |
| 2018 | 375,000 | | | 330,750 | | 512,306 | | — | | 48,311 | | 1,266,367 | |
| | | | | | | | |
James Overturf | 2020 | $ | 236,539 | | | $ | 216,173 | | $ | 2,169,681 | | $ | — | | $ | 86,195 | | $ | 2,708,588 | |
Former Chief Marketing Officer (3) | 2019 | 410,000 | | | 367,155 | | 850,041 | | — | | 73,085 | | 1,700,281 | |
| 2018 | 400,000 | | | 352,800 | | 546,531 | | — | | 32,402 | | 1,331,733 | |
| | | | | | | | |
Samrat Sondhi | 2020 | $ | 410,000 | | | $ | 447,925 | | $ | 903,967 | | $ | — | | $ | 102,239 | | $ | 1,864,131 | |
Chief Marketing Officer (3) | 2019 | 410,000 | | | 359,775 | | 850,041 | | — | | 86,483 | | 1,706,299 | |
| 2018 | 400,000 | | | 352,800 | | 546,531 | | — | | 48,187 | | 1,347,518 | |
| | | | | | | | |
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Name and principal position | Year | Salary | Bonus (1) | Non-equity incentive plan compensation (2) | Stock awards (3) | Option awards (3) | All other compensation (4) | Total |
Joseph D. Margolis (5) | 2017 | $ | 750,000 |
| $ | — |
| $ | 1,050,000 |
| $ | 2,407,523 |
| $ | — |
| $ | 213,373 |
| $ | 4,420,896 |
|
Chief Executive Officer | 2016 | 500,000 |
| — |
| 555,000 |
| 680,181 |
| 121,822 |
| 210,201 |
| 2,067,204 |
|
| 2015 | 290,000 |
| — |
| 461,250 |
| 4,896,222 |
| 879,395 |
| 121,457 |
| 6,648,324 |
|
Scott Stubbs | 2017 | 475,000 |
| — |
| 478,800 |
| 762,482 |
| — |
| 75,154 |
| 1,791,436 |
|
Chief Financial Officer | 2016 | 475,000 |
| — |
| 468,113 |
| 605,800 |
| 108,523 |
| 82,895 |
| 1,740,331 |
|
| 2015 | 437,750 |
| 100,000 |
| 486,559 |
| 558,289 |
| 98,803 |
| 78,376 |
| 1,759,777 |
|
James L. Overturf | 2017 | 385,000 |
| — |
| 321,956 |
| 412,008 |
| — |
| 33,021 |
| 1,151,985 |
|
Chief Marketing Officer | 2016 | 385,000 |
| — |
| 316,181 |
| 327,622 |
| 58,678 |
| 42,542 |
| 1,130,023 |
|
| 2015 | 334,750 |
| 25,000 |
| 307,552 |
| 284,708 |
| 50,364 |
| 38,598 |
| 1,040,972 |
|
Gwyn G. McNeal | 2017 | 350,000 |
| — |
| 292,688 |
| 374,552 |
| — |
| 46,328 |
| 1,063,568 |
|
Chief Legal Officer | | | | | | | |
|
|
Samrat Sondhi | 2017 | 350,000 |
| — |
| 291,375 |
| 374,552 |
| — |
| 46,676 |
| 1,062,603 |
|
Chief Operations Officer | | | | | | | |
|
|
(1) Represents amounts earned related to the Company’s annual incentive bonus program. | |
(1) | Bonus relates to the successful completion of the acquisition of SmartStop Self Storage, Inc. on October 1, 2015. |
| |
(2) | Represents amounts earned related to the Company’s annual incentive bonus program. |
| |
(3) | Dollar amounts represent the grant date fair value of the stock, PSU and option awards granted during the year computed in accordance with ASC 718, using the assumptions to value such awards reported in the notes to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC. For Mr. Margolis, it includes the grant date fair value of the stock award granted to him during 2015 for his service as a non-employee director prior to joining the Company as an employee in July 2015. |
(2) Dollar amounts represent the grant date fair value of the stock and performance-based stock units ("PSU(s)") granted during the year computed in accordance with ASC 718, using the assumptions to value such awards reported in the notes to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC.
The grant date fair value of the restricted stock awards granted in 20172020 to the named executive officers was as follows: Mr. Margolis, $1,125,015;$1,273,689; Mr. Stubbs, $356,301;$355,884; Mr. Herrington, $198,084; Ms. McNeal, $233,068; Mr. Overturf, $192,528; Ms. McNeal, $175,025;$273,110; and Mr. Sondhi, $175,025.$273,110.
With respect to the performance-based unitsPSUs granted during 2017,2020, the performance objectives applicable to those awards relate to two financial performance components, each weighted 50%, that are measured at the end of a three-year performance period ending December 31, 2019. At 2022. With respect to both measurements,the endNEOs have the ability to be paid out at a range of 0% to 200% of the target units depending on the Company’s performance period andwith respect to the extent performance goals are achieved, the performance-based units awards will then be converted into common shares and paid out after the end of the performance period.both metrics. In addition, the award recipient will receive a cash payment equivalent to the dividends that would have been paid on such stock during the performance period on the vesting date. The first financial componentdate of the performance-based units measures our total stockholder return (measured by reference to the change in our share price plus dividends) as compared to the total stockholder return of a peer group consisting of all REITs tracked within the MSCI US REIT Index. If the Company achieves a total stockholder return at the 50th percentile of its peer group, then the performance-based units will be paid out at
100% of the target units related to the total stockholder return metric. The second financial component of the performance-based units measures the Company’s average annual growth in Core FFO, per share. The CNG Committee has set a three-year Core FFO target which, if achieved, will result in a payout of 100% of the target units related to the FFO metric. With respect to both measurements, the NEOs have the ability to be paid out at a range of 0% to 200% of the target units depending on the Company’s performance with respect to both metrics.PSUs.
The grant date fair value of the portion of these performance-based units that are tied to our total stockholder return (which is a market-based condition) was calculated, in accordance with ASC 718, using a Monte Carlo simulation which considered the likelihood of achieving the vesting conditions. Our model estimates the fair value of the awards based on our data and that of the MSCI US REIT Index. Based on the performance objectives and these capital markets assumptions, these performance-based unitsPSUs were valued using the Monte Carlo model at $93.54$146.60 per share, which value was applied to the target units eligible to be earned with respect to this objective for the 20172020 grants. The grant date fair value under ASC 718 of the portion of the performance-based unitsthese PSUs granted in 2017 that are tied to our total stockholder return, as reflected in this column, was as follows: Mr. Margolis, $715,488;$1,667,428; Mr. Stubbs, $226,601;$465,895; Ms. McNeal, $305,221; Mr. Overturf, $122,444; Ms. McNeal, $111,312;$357,411; and Mr. Sondhi, $111,312.$357,411.
The grant date fair value of the portion of these performance-based stock units that are tied to Core FFO objectives was calculated, in accordance with ASC 718, based on the closing stock price on the grant date and the probable outcome of the Core FFO performance objectives as of the grant date (which was determined to be at “target” levels). As a result, the grant date fair value of these performance-based units was $74.13$112.16 per share, which value was applied to the “target” number of units eligible to be earned with respect to this objective for the 20172020 grants. The grant date fair value under ASC 718 of the portion of the performance-based unitsPSUs granted in 20172020 that are tied to Core FFO performance, as reflected in this column, was as follows: Mr. Margolis, $567,020;$1,275,708; Mr. Stubbs, $179,580;$356,444; Ms. McNeal, $233,517; Mr. Overturf, $97,036; Ms. McNeal, $88,215;$273,446; and Mr. Sondhi, $88,215.$273,446 . The maximum potentialgrant date fair value under ASC 718 of the performance-based units granted in 2017 that are tied to Core FFO performance,these PSUs assuming the highest level of performance achievement, is as follows: Mr. Margolis, $1,134,040;$2,551,416; Mr. Stubbs, $359,160;$712,888; Ms. McNeal, $467,034; Mr. Overturf, $194,072; Ms. McNeal, $176,430;$546,892; and Mr. Sondhi, $176,430.$546,892.
Mr. Overturf retired effective June 30, 2020 (See note 3 below). His stock awards were modified at the time of his retirement to allow for continued vesting of his stock awards subsequent to his retirement date. The Company recognized an additional $1,265,686 of expense related to this modification, which is included above.
| | | | | |
(4)2021 Proxy Statement | All other compensation includes:29 |
(3) On March 13, 2020, the Company announced the retirement of Mr. Overturf effective June 30, 2020. The Company also announced that Mr. Sondhi was promoted to Chief Marketing Officer, effective June 1, 2020, with no salary change. Mr. Matthew Herrington, current Senior Vice President Operations was promoted to Chief Operations Officer effective June 1, 2020.
(4) All other compensation includes:
| | | | | | | | | | | | | | | | | |
Name | Year | Other benefits (a) | Relocation Costs (b) | Dividends on restricted stock and dividend equivalent payouts on vested PSUs (c) | Total other compensation |
Joseph D. Margolis | 2020 | $ | 21,668 | $ | — | $ | 374,094 | $ | 395,762 |
Scott Stubbs | 2020 | 25,268 | — | 125,635 | 150,903 |
Matthew Herrington | 2020 | 24,591 | 129,376 | 16,911 | 170,878 |
Gwyn G. McNeal | 2020 | 24,307 | — | 72,466 | 96,773 |
James Overturf | 2020 | 7,362 | — | 78,833 | 86,195 |
Samrat Sondhi | 2020 | 23,618 | — | 78,621 | 102,239 |
a) Includes defined contribution plans, group life insurance premiums and other medical insurance which are generally available to all salaried employees and do not discriminate in scope, terms, or operation in favor of executive officers.
b) Represents relocation costs paid to Mr. Herrington, including tax gross ups in the amount of $37,907 to cover applicable taxes.
c) Includes dividends on restricted stock paid in 2020 and dividend equivalent payouts paid in cash on 2018 PSUs that vested based on performance for the performance period ended December 31, 2020, which cash dividend equivalent payouts occurred in February 2021, as follows : Mr. Margolis, $116,017 and $258,077, respectively; Mr. Stubbs, $34,826 and $90,809, respectively; Mr. Herrington, $16,911 and $0, respectively; Ms. McNeal, $21,254 and $51,211, respectively; Mr. Overturf, $24,203 and $54,630, respectively; and Mr. Sondhi, $23,990 and $54,630, respectively.
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| | | | | | | | | | | | | | | | |
Name | Year | Defined contribution plans | Group term life insurance premiums | Other medical insurance | Dividends on restricted stock | Total other compensation |
Joseph D. Margolis | 2017 | $ | 7,200 |
| $ | 468 |
| $ | 11,859 |
| $ | 193,846 |
| $ | 213,373 |
|
Scott Stubbs | 2017 | 10,286 |
| 468 |
| 11,931 |
| 52,469 |
| 75,154 |
|
James L. Overturf | 2017 | 5,100 |
| 468 |
| — |
| 27,453 |
| 33,021 |
|
Gwyn G. McNeal | 2017 | 9,824 |
| 468 |
| 12,180 |
| 23,856 |
| 46,328 |
|
Samrat Sondhi | 2017 | 9,000 |
| 468 |
| 11,931 |
| 25,277 |
| 46,676 |
|
| | | | | |
(5) | Mr. Margolis was appointed as CIO effective July 7, 2015 and as CEO effective January 1, 2017. Mr. Margolis served as a director of the Company from February 2005 to July 2015. The amount reflected in the “Salary” column for 2015 includes $40,000 paid to Mr. Margolis for his service as a non-employee director prior to joining the Company as an employee in July 2015. |
GRANTS OF PLAN-BASED AWARDS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 (3) | Grant date fair value of stock awards (4) |
Name | Grant date | Threshold | Target (1) | Maximum (1) | | Threshold | Target (2) | Maximum (2) |
Joseph D. Margolis | | | | | | | | | | |
Annual Incentive | — | | $ | — | | $ | 1,147,500 | | $ | 1,434,375 | | | | | | — | $ | — | |
Stock awards | 2/12/2020 | | | | | | | | 11,356 | 1,273,689 | |
PSU awards | 2/12/2020 | | | | | — | | 22,748 | 45,496 | — | 2,943,136 | |
Scott Stubbs | | | | | | | | | | |
Annual Incentive | — | | $ | — | | $ | 475,000 | | $ | 593,750 | | | | | | — | $ | — | |
Stock awards | 2/12/2020 | | | | | | | | 3,173 | 355,884 | |
PSU awards | 2/12/2020 | | | | | — | | 6,356 | 12,712 | — | 822,339 | |
Matthew Herrington | | | | | | | | | | |
Annual Incentive | — | | $ | — | | $ | 197,979 | | $ | 247,475 | | | | | | — | $ | — | |
Stock awards | 2/12/2020 | | | | | | | | 2,074 | 198,084 | |
PSU awards (5) | 2/12/2020 | | | | | — | | — | — | — | — | |
Gwyn G. McNeal | | | | | | | | | | |
Annual Incentive | — | | $ | — | | $ | 360,000 | | $ | 450,000 | | | | | | — | $ | — | |
Stock awards | 2/12/2020 | | | | | | | | 2,078 | 233,068 | |
PSU awards | 2/12/2020 | | | | | — | | 4,164 | 8,328 | — | 538,738 | |
James Overturf | | | | | | | | | | |
Annual Incentive | — | | $ | — | | $ | 194,750 | | $ | 243,438 | | | | | | — | $ | — | |
Stock awards | 2/12/2020 | | | | | | | | 2,435 | 273,110 | |
PSU awards | 2/12/2020 | | | | | — | | 4,876 | 9,752 | — | 630,857 | |
Samrat Sondhi | | | | | | | | | | |
Annual Incentive | — | | $ | — | | $ | 389,500 | | $ | 486,875 | | | | | | — | $ | — | |
Stock awards | 2/12/2020 | | | | | | | | 2,435 | 273,110 | |
PSU awards | 2/12/2020 | | | | | — | | 4,876 | 9,752 | — | 630,857 | |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | 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 (3) | Grant date fair value of stock awards (4) |
Name | Grant date | Threshold | Target (1) | Maximum (1) | | Threshold | Target (2) | Maximum (2) |
Joseph D. Margolis | | | | | | | | | | |
Annual Incentive | | $ | — |
| $ | 937,500 |
| $ | 1,171,875 |
| | | | | | |
Stock awards | 2/15/2017 | | | | | | | | 15,298 |
| $ | 1,125,015 |
|
PSU awards | 3/14/2017 | | | | | — |
| 15,298 |
| 30,596 |
| — |
| 1,282,508 |
|
Scott Stubbs | | | | | | | | | | |
Annual Incentive | | — |
| 427,500 |
| 534,375 |
| | | | | | |
Stock awards | 2/15/2017 | | | | | | | | 4,845 |
| 356,301 |
|
PSU awards | 3/14/2017 | | | | | — |
| 4,845 |
| 9,690 |
| — |
| 406,181 |
|
James Overturf | | | | | | | | | | |
Annual Incentive | | — |
| 288,750 |
| 360,938 |
| | | | | | |
Stock awards | 2/15/2017 | | | | | | | | 2,618 |
| 192,528 |
|
PSU awards | 3/14/2017 | | | | | — |
| 2,618 |
| 5,236 |
| — |
| 219,480 |
|
Gwyn G. McNeal | | | | | | | | | | |
Annual Incentive | | — |
| 262,500 |
| 328,125 |
| | | | | | |
Stock awards | 2/15/2017 | | | | | | | | 2,380 |
| 175,025 |
|
PSU awards | 3/14/2017 | | | | | — |
| 2,380 |
| 4,760 |
| — |
| 199,527 |
|
Samrat Sondhi | | | | | | | | | | |
Annual Incentive | | — |
| 262,500 |
| 328,125 |
| | | | | | |
Stock awards | 2/15/2017 | | | | | | | | 2,380 |
| 175,025 |
|
PSU awards | 3/14/2017 | | | | | — |
| 2,380 |
| 4,760 |
| — |
| 199,527 |
|
| |
(1) | (1) Amounts relate to the annual incentive bonus as described in the “Annual Incentive Bonus” section above. |
| |
(2) | Represents performance-based units granted during 2017 related to the 2017 total compensation package for the named executive officers. The performance objectives applicable to these awards relate to two financial performance components, each weighted 50%, that are measured at the end of a three-year performance period ending December 31, 2019. At the end of the performance period and to the extent performance goals are achieved, the performance-based units awards will then be converted into common shares and paid out after the end of the performance period. In addition, the award recipient will receive a cash payment equivalent to the dividends that would have been paid on such stock during the performance period on the vesting date. The first financial component of the performance-based units measures our total stockholder return (measured by reference to the change in our share price plus dividends) as compared to the total stockholder return of a peer group consisting of all REITs tracked within the MSCI US REIT Index. If the Company achieves a total stockholder return at the 50th percentile of its peer group, then the performance-based units will be paid out at 100% of the target units related to the total stockholder return metric. The second financial component of the performance-based units measures the Company’s average annual growth in Core FFO, per share. The CNG Committee has set a three-year Core FFO target which, if achieved, will result in a payout of 100% of the target units related to the FFO metric. With respect to both measurements, the NEOs have the ability to be paid out at a range of 0% to 200% of the target units depending on the Company’s performance with respect to both metrics. The awards are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Severance and Change in Control Arrangements with Executive Officers.”
|
| |
(3) | Grants of restricted stock awards under the 2015 Incentive Award Plan related to the 2017 total compensation package for the named executive officers. The shares have dividend and voting rights and vest ratably over four years following the grant date. The awards are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Severance and Change in Control Arrangements with Executive Officers.” |
| |
(4) | Dollar amounts represent the grant date fair value of the stock awards granted during the year computed in accordance with ASC 718, using the assumptions to value such awards reported in the notes to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC. |
The grant date fair value of the portion of these performance-based units that are tied to our total stockholder return (which is a market-based condition) was calculated using a Monte Carlo simulation which considered the likelihood of achieving the vesting conditions. Our model estimates the fair value of the awards based on our data and that of the MSCI US REIT Index. Based on the performance objectives and these capital markets assumptions, these performance-based units were valued using the Monte Carlo model at $93.54 per share, which value was applied to the target units eligible to be earned with respect to this objective for the 2017 grants. The grant date fair value of the portion of the performance-based units granted in 2017 that are tied to our total stockholder return wasannual incentive bonus as follows: Mr. Margolis, $715,488; Mr. Stubbs, $226,601; Mr. Overturf, $122,444; Ms. McNeal, $111,312; and Mr. Sondhi, $111,312.
The grant date fair value of the portion of these performance-based units that are tied to Core FFO objectives was calculated, in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date and the probable outcome of the Core FFO performance objectives as of the grant date (which was determined to be at target levels). As a result, the grant date fair value of these performance-based units was $74.13 per share, which value was applied to the target number of units eligible to be earned with respect to this objective for the 2017 grants and is discloseddescribed in the table“Annual Incentive Bonus” section above. The maximum potential value of the performance-based units
(2) Represents PSUs granted in 2017 that are tied to Core FFO performance, assuming the highest level of performance achievement, is as follows: Mr. Margolis, $1,134,040; Mr. Stubbs, $359,160; Mr. Overturf, $194,072; Ms. McNeal, $176,430; and Mr. Sondhi, $176,430.
See footnote (2) to the “Summary Compensation Table” above for more details regarding the grant date fair values of the 2017 equity awards.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END |
| | | | | | | | | | | | | | | |
| Option awards | | Stock awards |
Name | Number of shares underlying unexercised options exercisable | Number of shares underlying unexercised options unexercisable (1) | Option exercise price | Option expiration date | | Number of unearned shares, units or other rights that have not vested (2) | Market value of unearned shares, units or other rights 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) |
Joseph D. Margolis | 25,000 | 25,000 | $ | 73.52 |
| 8/1/2025 | | 53,950 | $ | 4,717,928 |
| 15,298 | $ | 1,337,810 |
|
| 1,500 | 4,500 | 85.99 |
| 2/22/2026 | | | | | |
Scott Stubbs | 27,750 | — | $ | 6.22 |
| 2/17/2019 | | 16,817 | $ | 1,470,647 |
| 4,845 | $ | 423,695 |
|
| 15,600 | — | 11.59 |
| 2/16/2020 | | | | | |
| 8,000 | — | 19.60 |
| 2/8/2021 | | | | | |
| 9,200 | — | 26.87 |
| 2/16/2022 | | | | | |
| 8,085 | — | 38.40 |
| 2/20/2023 | | | | | |
| 5,325 | 1,775 | 47.50 |
| 2/19/2024 | | | | | |
| 3,080 | 3,080 | 65.45 |
| 2/18/2025 | | | | | |
| 1,337 | 4,008 | 85.99 |
| 2/22/2026 | | | | | |
James L. Overturf | 800 | — | $ | 19.60 |
| 2/8/2021 | | 8,799 | $ | 769,473 |
| 2,618 | $ | 228,944 |
|
| 3,225 | — | 26.87 |
| 2/16/2022 | | | | | |
| 3,375 | — | 38.40 |
| 2/20/2023 | | | | | |
| 2,513 | 837 | 47.50 |
| 2/19/2024 | | | | | |
| 1,570 | 1,570 | 65.45 |
| 2/18/2025 | | | | | |
| 723 | 2,167 | 85.99 |
| 2/22/2026 | | | | | |
Gwyn G. McNeal | 1,275 | 425 | $ | 47.50 |
| 2/19/2024 | | 7,569 | $ | 661,909 |
| 2,380 | $ | 208,131 |
|
| 1,450 | 1,450 | 65.45 |
| 2/18/2025 | | | | | |
| 657 | 1,968 | 85.99 |
| 2/22/2026 | | | | | |
Samrat Sondhi | 12,480 | — | $ | 11.59 |
| 2/16/2020 | | 7,907 | $ | 691,467 |
| 2,380 | $ | 208,131 |
|
| 6,400 | — | 19.60 |
| 2/8/2021 | | | | | |
| 3,744 | — | 28.79 |
| 4/1/2022 | | | | | |
| 2,025 | 675 | 47.50 |
| 2/19/2024 | | | | | |
| 1,450 | 1,450 | 65.45 |
| 2/18/2025 | | | | | |
| 657 | 1,968 | 85.99 |
| 2/22/2026 | | | | | |
| |
(1) | Stock options vest ratably over four years from the date of grant, which is 10 years prior to the expiration date. The awards are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Severance and Change in Control Arrangements with Executive Officers.” |
| |
(2) | Represents restricted stock awards granted to the named executive officers. The awards are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Severance and Change in Control Arrangements with Executive Officers.” |
Mr. Margolis' 53,950 shares vest as follows: 32,270 shares that vest ratably over the remaining two years on August 1, 2018 and 2019; 5,932 shares vest ratably over the remaining three years on February 22, 2018, 2019 and 2020; and 15,298 shares vest ratably over the remaining four years on the anniversary of the date of grant of February 15, 2017.
Mr. Stubbs' 16,817 shares vest as follows: 2,425 shares vest on February 19, 2018; 4,264 shares vest ratably over the remaining two years on February 18, 2018 and 2019; 5,283 shares vest ratably over the remaining three years on February 22, 2018, 2019 and 2020; and 4,845 shares vest ratably over four years on the anniversary date of grant of February 15, 2017.
Mr. Overturf's 8,799 shares vest as follows: 1,150 shares vest on February 19, 2018; 2,174 shares vest ratably over the remaining two years on February 18, 2018 and 2019; 2,857 shares that vest ratably over the remaining three years on February 22, 2018, 2019 and 2020; and 2,618 shares that vest ratably over four years on the anniversary of the date of grant of February 15, 2017.
Ms. McNeal's 7,569 shares vest as follows: 587 shares vest February 19, 2018; 2,007 shares vest ratably over the remaining two years on February 18, 2018 and 2019; 2,595 shares vest ratably over the remaining three years on February 22, 2018, 2019 and 2020; and 2,380 shares vest ratably over four years on the anniversary date of grant of February 15, 2017.
Mr. Sondhi's 7,907 shares vest as follows: 925 shares vest on February 19, 2018; 2,007 shares vest ratably over the remaining two years on February 18, 2018 and 2019; 2,595 shares vest ratably over the remaining three years on February 22, 2018, 2019 and 2020; and 2,380 shares vest ratably over four years on the anniversary date of grant of February 15, 2017.
| |
(3) | Market value at year-end is based on the closing trading price of our stock on December 29, 2017, which was $87.45. |
| |
(4) | Represents the performance-based units granted to the NEOs in 2017 that vest after a three-year performance period ending December 31, 2019. The performance-based units are included in the table above at target levels. These awards have two financial performance components, each weighted 50%, that are measured at the end of a three-year period. At the end of the performance period and to the extent performance goals are achieved, the performance-based units awards will then be converted into common shares and paid out after the end of the performance period. In addition, the award recipient will receive a cash payment equivalent to the dividends that would have been paid on such stock during the performance period on the vesting date. |
The first financial component of the performance-based units measures our total stockholder return (measured by reference to the change in our share price plus dividends) as compared to the total stockholder return of a peer group consisting of all REITs tracked within the MSCI US REIT Index. If the Company achieves a total stockholder return at the 50th percentile of its peer group, then the performance-based units will be paid out at 100% of the target unitsduring 2020 related to the 2020 total stockholder return metric. The second financial componentcompensation package for the named executive officers found in the "Summary Executive Compensation Table" above. For a description of the performance-based units measures the Company’s average annual growth in Core FFO, per share. The CNG Committee has set a three-year Core FFO target which, if achieved, will result in a payout of 100% of the target units relatedvesting terms applicable to the FFO metric. With respect to both measurements, the NEOs have the ability to be paid out at a range of 0% to 200% of the target units depending on the Company’s performance with respect to both metrics.
such awards, please see "Executive Compensation - Compensation Discussion and Analysis - Long Term Incentives for 2020" above. The awards are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Severance and Change in Control Arrangements with Named Executive Officers.”
(3) Grants of restricted stock awards under the 2015 Incentive Award Plan related to the 2020 total compensation package for the named executive officers. The shares have dividend and voting rights and vest ratably over four years following the grant date. The awards are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Severance and Change in Control Arrangements with Named Executive Officers.”
(4) Dollar amounts represent the grant date fair value of the stock awards granted during the year computed in accordance with ASC 718, using the assumptions to value such awards reported in the notes to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC.
See footnote (2) to the “Summary Executive Compensation Table” above for more details regarding the grant date fair values of the 2020 equity awards.
(5) Mr. Herrington was promoted to Chief Operating Officer on June 1, 2020 and did not receive a 2020 PSU award.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option awards | | Stock awards |
Name | Number of shares underlying unexercised options exercisable | Number of shares underlying unexercised options unexercisable | Option exercise price | Option expiration date | | Number of unearned shares, units or other rights that have not vested (1) | Market value of unearned shares, units or other rights that have not vested (2) | Equity incentive plan awards; Number of unearned shares, units or other rights that have not vested (3) | Equity incentive plan awards; Market or payout value of unearned shares, units or other rights that have not vested (2) |
| | | | | | | | | |
Joseph D. Margolis | 50,000 | — | $ | 73.52 | | 8/1/2025 | | 32,227 | $ | 3,733,820 | | 48,836 | $ | 5,658,139 | |
| 6,000 | — | 85.99 | | 2/22/2026 | | | | | |
| | | | | | | | | |
Scott Stubbs | — | — | — | | — | | | 9,674 | 1,120,830 | | 13,646 | 1,581,026 | |
| | | | | | | | | |
Matt Herrington | — | — | — | | — | | | 4,133 | 478,849 | | — | — | |
| | | | | | | | | |
Gwyn G. McNeal | — | — | — | | — | | | 5,904 | 684,037 | | 8,938 | 1,035,557 | |
| | | | | | | | | |
James Overturf | 722 | — | 85.99 | | 2/22/2026 | | 6,723 | 778,927 | | 10,468 | 1,212,822 | |
| | | | | | | | | |
Samrat Sondhi | 2,700 | — | 47.50 | | 2/19/2024 | | 6,664 | 772,091 | | 10,468 | 1,212,822 | |
| 2,900 | — | 65.45 | | 2/18/2025 | | | | | |
| 2,625 | — | 85.99 | | 2/22/2026 | | | | | |
| | | | | | | | | |
(1) Represents restricted stock awards granted to the named executive officers. The awards are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Severance and Change in Control Arrangements with Named Executive Officers.”
Mr. Margolis' 32,227 shares vest as follows: 3,824 shares that vest on February 15, 2021; 7,279 shares vest ratably over the remaining two years on February 14, 2021 and 2022; 9,768 shares vest ratably over the remaining three years on March 5, 2021, 2022 and 2023; and 11,356 shares vest ratably over the remaining four years on the anniversary of the date of grant of February 12, 2020.
Mr. Stubbs' 9,674 shares vest as follows: 1,211 shares vest on February 15, 2021; 2,561 shares vest ratably over the remaining two years on February 14, 2021 and 2022; 2,729 shares vest ratably over the remaining three years on March 5, 2021, 2022 and 2023; and 3,173 shares vest ratably over four years on the anniversary date of grant of February 12, 2020.
Mr. Herrington's 4,133 shares vest as follows 395 shares vest on April 1, 2021, 701 shares vest ratably over the remaining two years on April 1, 2021 and 2022, 963 shares vest ratably over the remaining three years on April 1, 2021, 2022, and 2023, 1,425 shares vest ratably over four years on the anniversary date of grant of April 1, 2020, and 649 shares vest ratably over four years on the anniversary date of grant of June 1, 2020.
Ms. McNeal's 5,904 shares vest as follows: 595 shares vest February 15, 2021; 1,444 shares vest ratably over the remaining two years on February 14, 2021 and 2022; 1,787 shares vest ratably over the remaining three years on March 5, 2021, 2022 and 2023; and 2,078 shares vest ratably over four years on the anniversary date of grant of February 12, 2020.
Mr. Overturf's 6,723 shares vest as follows: 654 shares vest on February 15, 2021; 1,540 shares vest ratably over the remaining two years on February 14, 2021 and 2022; 2,094 shares that vest ratably over the remaining three years on March 5, 2021, 2022 and 2023; and 2,435 shares that vest ratably over four years on the anniversary of the date of grant of February 12, 2020.
Mr. Sondhi's 6,664 shares vest as follows: 595 shares vest on February 15, 2021; 1,540 shares vest ratably over the remaining two years on February 14, 2021 and 2022; 2,094 shares vest ratably over the remaining three years on March 5, 2021, 2022 and 2023; and 2,435 shares vest ratably over four years on the anniversary date of grant of February 12, 2020.
(2) Market value at year-end is based on the closing trading price of our stock on December 31, 2020, which was $115.86.
(3) Represents the PSUs granted to the NEOs on February 12, 2020 and March 5, 2019 that vest after a three-year performance period ending December 31, 2022 and December 31, 2021 respectively, as follows: Mr. Margolis, 22,748 units granted in 2020 and 26,088 units granted in 2019; Mr. Stubbs, 6,356 units granted in 2020 and 7,290 units granted in 2019; Ms. McNeal, 4,164 units granted in 2020 and 4,774 units granted in 2019; Mr Overturf, 4,876 units granted in 2020 and 5,592 units granted in 2019; and Mr. Sondhi, 4,876 units granted in 2020 and 5,592 units granted in 2019. Mr. Herrington was promoted June 1, 2020 and was not granted any PSUs in 2020 or 2019. The maximum payout of the PSUs would be double the units awarded at grant date. The PSUs are included in the table above at target levels. The NEOs have the ability to be paid out at a range of 0% to 200% of the target units depending on the Company’s performance with respect to the performance metrics applicable to these awards. In addition, the award recipient will receive a cash payment equivalent to the dividends that would have been paid on such stock during the performance period on the vesting date of the PSUs.
For a description of the vesting terms applicable to such awards, please see “Executive Compensation — Compensation Discussion and Analysis -- Long-Term Incentives for 2020” above. The awards are eligible for accelerated vesting under certain circumstances as described below under “Executive Compensation Tables -- Severance and Change in Control Arrangements with Named Executive Officers.”
OPTIONS EXERCISED, AND STOCK VESTED AND 2018 PSUs
| | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards |
Name | Number of shares acquired on exercise | Value realized on exercise | | Number of shares acquired on vesting (1) | Value realized on vesting |
Joseph D. Margolis | — | $ | — | | 37,231 | $ | 4,312,581 |
Scott Stubbs | 26,690 | 1,382,499 | | 13,797 | 1,592,381 |
Matthew Herrington | — | — | | 2,332 | 234,448 |
Gwyn G. McNeal | 5,525 | 162,313 | | 7,648 | 883,088 |
James L. Overturf | — | — | | 8,269 | 954,302 |
Samrat Sondhi | — | — | | 8,123 | 937,991 |
|
| | | | | | | | | |
| Option Awards | | Stock Awards |
Name | Number of shares acquired on exercise | Value realized on exercise | | Number of shares acquired on vesting | Value realized on vesting |
Joseph D. Margolis | — | $ | — |
| | 18,338 | $ | 1,451,310 |
|
Scott Stubbs | — | — |
| | 9,227 | 713,966 |
|
James L. Overturf | — | — |
| | 4,561 | 352,976 |
|
Gwyn G. McNeal | — | — |
| | 2,765 | 213,292 |
|
Samrat Sondhi | — | — |
| | 3,573 | 274,366 |
|
(1) Includes the 2018 performance-based stock units granted on February 14, 2018 that were settled in February 2021 based on performance during the three-year performance period that ended December 31, 2020, and corresponding dividend equivalent payouts paid in cash on such 2018-2020 PSUs, which cash dividend equivalent payouts occurred in February 2021, as follows: Mr. Margolis, 24,534 shares and $258,077, respectively; Mr. Stubbs, 8,634 shares and $90,809, respectively; Mr. Herrington, 0 shares and $0, respectively; Ms. McNeal, 4,870 shares and $51,211, respectively; Mr. Overturf, 5,194 shares and $54,630, respectively; and Mr. Sondhi, 5,194 shares and $54,630, respectively.SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
The named executive officers do not have employment agreements with the Company; however, they would receive severance payments upon termination of employment by reason of termination without cause or resignation for good reason within 12 months following a change in control of the Company as defined in the Company’s Executive Change in Control Plan as follows:
• two years of annual base salary plus two times the greater of the prior year’s bonus or average of the three previous annual bonuses, payable in a lump sum;
• annual salary and other benefits earned and accrued prior to the termination of employment;
• lump sum payment equal to the cost of continuing health benefits for two years;
• outplacement services for six months; and
• full vesting of equity incentive compensation and any non-qualified pension or deferred compensation benefits.
In addition, the performance-based units granted in 2017PSUs will vest on an accelerated basis under certain circumstances. Specifically, in the event of a change in control of the Company prior to the end of the three-year performance period, such number of performance-based unitsPSUs will vest on the date of the change in control as is equal to the greater of (1) the target number of units or (2) such number of units as would vest based on actual performance relative to the performance goals for the portion of the performance period ending on the date of the change in control, provided, that in determining performance relative to the Core FFO performance objective for the performance period, the Company’s Core FFO for the shortened performance period will be measured against prorated Core FFO objectives. In the event of a named executive officer’s termination due to death or disability prior to the end of the three-year performance period, a prorated portion of the target number of units will vest on the date of termination based on the portion of the three-year performance period that has elapsed prior to the date of termination.
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20182021 Proxy Statement | 2733 |
The table below presents the amounts that would have been received by or paid on behalf of our named executive officers for the following events as of December 31, 2017:2020:
We believe executive pay must be internally consistent and equitable to motivate our employees to create stockholder value. We are committed to internal pay equity, and the CNGCompensation Committee monitors the relationship between the pay of our executive officers and the pay of our non-managerial employees. The Compensation Committee reviewed a comparison of CEO pay (base salary and incentive pay) to the pay of all our employees in 2017.2020. Our CEO to median employee pay ratio set forth below is a reasonable estimate calculated as required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and in accordance with Item 402(u) of Regulation S-K.
We did not make any assumptions, adjustments, or estimates with respect to total cash compensation, and we did not annualize the compensation for any full-time employees thatwho were not employed by us for all of 2017.2020. We believe the use of total cash compensation for all employees is a consistently applied compensation measure because we do not widely distribute annual equity awards to employees. Approximately 8% of our employees receive annual equity awards.