Washington, D.C. 20549
600 East 96th Street
Suite 100
Indianapolis, Indiana 46240
(317) 808-6000
March 15, 2017
Dear Fellow Shareholder:
The BoardWe are focused on creating long-term value for you and all of Directorsour stakeholders. We appreciate the trust you place in us to oversee your interests in our business and officerswould like to highlight some of Duke Realty Corporation join methe actions we took in extending2019 and the beginning of this year to youhelp ensure we create value over the long term.
Corporate Responsibility
At the end of 2019, we hired a cordial invitation to attend our annual meetingVice President of shareholders. This meetingCorporate Responsibility, whose sole responsibility will be heldto lead our efforts in all facets of environmental, social, and governance (ESG) initiatives and the implementation of related strategies, policies, communications, and processes. We also committed to integrating innovative, sustainable building design features in alignment with LEED®, including constructing to LEED criteria and achieving certification in all new developments pursuant to a Sustainable Development Policy. LEED® - an acronym for Leadership in Energy and Environmental Design™ - is a registered trademark of the U.S. Green Building Council®. In addition, in November 2019, we were the first of the industrial REITs to issue a “green bond” in the United States. We are proud of our ESG efforts, but recognize that we still have opportunities to do more. We believe our new Vice President of Corporate Responsibility will help us do just that.
Board Refreshment and Diversity
We have continued our efforts to refresh and diversify our Board. Last year, we said farewell to two directors and added one new director, Mr. Warren M. Thompson, founder of Thompson Hospitality Corporation. Mr. Thompson brings business administration, corporate governance, board, financial, and entrepreneurship expertise to the Board. In January of this year, our Board also appointed Ms. Tamara D. Fischer, President and Chief Executive Officer of National Storage Affiliates Trust, as a new director. Ms. Fischer brings auditing, business administration, capital markets, investor relations, mergers and acquisitions, public company, and risk oversight expertise to the Board. Consistent with our Board Diversity and Inclusion Policy, and based on the self-identified diversity characteristics of our directors, our Board now includes four women and two people of color.
Talent Management
At the beginning of 2020, our Board’s Executive Compensation Committee changed its name to the Compensation and Human Capital Committee. In addition to reviewing executive compensation, the Compensation and Human Capital Committee now reviews associate turnover and diversity, as well as associate development and engagement programs. Making sure this is the responsibility of a Board committee reinforces how important talent management is to us.
We hope that you will be able to join us at our 2020 Annual Meeting of Shareholders on Wednesday, April 26, 2017, at 3:00 p.m. local time, at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204. To reserve your seat at the annual meeting, please call 317-808-6005 or send an e-mail to ir@dukerealty.com. As in past years, we believe that both the shareholders and management of Duke Realty Corporation can gain much through participation at this meeting. Our objective is to make it as informative and interesting as possible.
This year we again are pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish29, 2020. The accompanying proxy materials contain detailed information about the matters on which you are being asked to their shareholders over the Internet.vote. We believe that this e-proxy process will expedite shareholders’ receipt of proxy materials, while lowering the costs of delivery and reducing the environmental impact of our annual meeting. On or about March 15, 2017, we mailed to a majority of our shareholders a notice containing instructions on how to access our proxy statement and 2016 Annual Report to shareholders and how to vote online. All other shareholders will receive these materials by mail. The proxy statement contains instructions on how you can
(i) receive a paper copy of the proxy statement and 2016 Annual Report, if you only received a notice by mail, or (ii) elect to receive future proxy statements and annual reports over the Internet, if you received them by mail this year.
Whether or not you plan to attend the annual meeting, we urge you to read the materials carefully and vote promptly by mail, by telephone or onin accordance with the Internet in orderBoard’s recommendations. Your vote is very important to ensure thatus. On behalf of our associates and our Board, we recordthank you for your votes on the business matters presented at the annual meeting.support of Duke Realty.
We look forward to seeing you on April 26th.Sincerely,
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| Sincerely, |
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| /s/ JAMES B. CONNOR | |
| James B. Connor |
| PresidentDavid P. Stockert |
Chairman and Chief Executive Officer | | Lead Director |
TABLE OF CONTENTS
600 East 96th Street
Suite 100
Indianapolis, Indiana 46240
(317) 808-6000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 26, 2017
Notice is hereby given that the 2017 Annual Meeting of Shareholders, or the Annual Meeting, of Duke Realty Corporation, or the Company, will be held at the Conrad Indianapolis, 50 West Washington Street, Indianapolis, Indiana 46204, on Wednesday, April 26, 2017, at 3:00 p.m. local time. At the Annual Meeting, the shareholders will be asked to act on the following:
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| 1. To elect ten directors to serve on the Company’s Board of Directors for a one-year term ending at the 2018 Annual Meeting of Shareholders; |
| 2. To vote on an advisory basis to approve the compensation of the Company’s named executive officers for 2016; |
| 3. To vote on an advisory basis to approve the frequency of shareholder votes on the compensation of named executive officers; |
| 4. To ratify the reappointment of KPMG LLP as the Company’s independent registered public accountants for the fiscal year 2017; and |
| 5. To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
Only shareholders of record at the close of business on February 24, 2017 are entitled to notice of and to vote at the Annual Meeting or at any adjournments or postponements thereof. At least a majority of the outstanding shares of common stock of the Company entitled to vote at the Annual Meeting present in person or by proxy is required for a quorum.
YOUR VOTE IS IMPORTANT!
Submitting your proxy does not affect your right to vote in person if you attend the Annual Meeting. Instead, it benefits the Company by reducing the expenses of additional proxy solicitation. Therefore, you are urged to submit your proxy as soon as possible, regardless of whether or not you expect to attend the Annual Meeting. You may revoke your proxy at any time before its exercise by (i) delivering written notice of revocation to the Company’s Corporate Secretary, Ann C. Dee, at the above address, (ii) submitting to the Company a duly executed proxy card bearing a later date, (iii) voting via the Internet or by telephone at a later date, or (iv) appearing at the Annual Meeting and voting in person; provided, however, that no such revocation under clause (i) or (ii) shall be effective until written notice of revocation or a later dated proxy card is received by the Company’s Corporate Secretary at or before the Annual Meeting, and no such revocation under clause (iii) shall be effective unless received on or before 11:59 p.m., Indianapolis local time, on April 25, 2017.
When you submit your proxy, you authorize James B. Connor and Ann C. Dee or either one of them, each with full power of substitution, to vote your shares at the Annual Meeting in accordance with your instructions or, if no instructions are given, to vote for the election of the director nominees, for approval, on an advisory basis, of the compensation of the Company’s named executive officers, for an advisory shareholder vote on named executive officer compensation every “1 year,” for ratification of the appointment of the independent auditors for 2017, and to vote in their discretion on any other business that may properly come before the Annual Meeting and any adjournments or postponements of the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting to be Held on April 26, 2017
The Company’s proxy statement, proxy card and 2016 Annual Report are available at http://www.proxyvote.com.
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| By order of the Board of Directors,
/s/ ANN C. DEE
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Indianapolis, Indiana | Ann C. Dee |
March 15, 2017 | Executive Vice President, General Counsel and Corporate Secretary
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20172020 PROXY SUMMARY
This summary highlights information contained elsewhere in this proxy statement, or the Proxy Statement.statement. This summary does not contain all of the information that you should consider, and you should read thethis entire Proxy Statementproxy statement carefully before voting.
General
The Board of Directors of In this proxy statement, the “company,” “we,” “our” and “us” refer to Duke Realty Corporation orand its consolidated subsidiaries, unless the Company,context requires otherwise.
2019 Business Highlights
For more information regarding our 2019 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2019.
Compensation Highlights
Corporate Responsibility Highlights
Corporate Governance Highlights
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| Independence and Compliance | | Stock Guidelines |
þ | 92% of our Board of Directors (Board) is independent: All directors, other than the Chairman, are independent | þ
| No hedging or pledging of our securities
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| Lead independent director role with significant authority and responsibilities
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| Minimum stock ownership requirements |
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| Fully independent Audit, Corporate Governance, Compensation and Human Capital, and Finance Committees | | Other Governance |
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| Annual evaluations of Board and its committees | þ
| Proxy access |
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| Annual evaluations of individual directors | þ | Shareholders can amend bylaws
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þ | At least 75% attendance at Board and committee meetings
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| Shareholders can call a special meeting |
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| Directors are elected annually
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| No related-party transactions |
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| Majority vote standard in uncontested director elections
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| Corporate Responsibility Committee that reports to Board |
| Composition | þ
| No shareholder rights plan |
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| 31% of our Board is female | | |
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| Mix of director tenure, skills, and background that provides a balance of experience and institutional knowledge with fresh perspectives | | |
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| Board Diversity and Inclusion Policy | | |
2020 Proxy Information
Our Board is soliciting proxies to be voted at its 2017 Annual Meeting of Shareholders, or the Annual Meeting. The Proxy StatementOur proxy statement provides theshareholders with information shareholders need to knowneeded to vote by proxy or in person at the Annual Meeting. Shareholders do not need to attend the Annual Meeting in person in order to vote. Voting instructions are below.
Annual Meeting of Shareholders
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• Time and Date | 3:00 p.m. local time,10 a.m. CT, April 26, 201729, 2020 |
• Place | The Conrad Indianapolis, 50 West WashingtonPeninsula Hotel, 108 East Superior Street Indianapolis, Indiana 46204(at North Michigan Avenue), Chicago, Illinois 60611 |
• Record Date | February 24, 201720, 2020 |
• Voting | All shareholders of record as of the close of business on the Record Date are entitled to vote at the Annual Meeting. Each share of common stock outstanding on the Record Date is entitled to one vote on each item submitted for consideration. |
• Quorum | In order forFor any business to be conducted, the holders of a majority of the shares of common stock entitled to vote at the Annual Meeting must be present, either in person or represented by proxy. For the purpose of determining the presence of a quorum, abstentions and broker non-votes (which occur when shares held by brokers or nominees for beneficial owners are voted on some matters but not on others) generally will be counted as present. As of the Record Date, 355,560,004368,342,908 shares of common stock were issued and outstanding. |
Meeting AgendaHow to Vote
ElectionHere are the methods available to shareholders of ten directors
Advisory vote to approve named executive officer compensation
Advisory vote on frequency of shareholder votesrecord for voting on the compensation of named executive officers
Ratification of KPMG as auditors for 2017
Transaction of other business that may properly come before the meeting
Voting
Listed below are the alternatives for casting votes at the Annual Meeting.
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| | Vote, sign, and date your proxy card and mailcard. Mail it in the enclosed postage-paid envelope. |
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| | Vote in person at the Annual Meeting. For driving directions to the Annual Meeting, please call 317-808-6005.317.808.6005. |
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| | Call toll-free 1-800-690-69031.800.690.6903 and follow the instructions. You will be prompted for certain information that can be found on your proxy card. |
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| | Log on to http:https://www.proxyvote.com and follow the on-screen instructions. You will be prompted to enter certain information that can be found on your proxy card. |
Note: Please refer to the specific instructions set forthprovided on the Notice Regarding the Availability of Proxy Materials for the Annual Meeting or your printed proxy materials. If you are a beneficial holder who holds shares in “street name,” please refer to the voting instruction form provided by your bank, broker, or other nominee.
Proposal One: Election of 13 Directors
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| | Board Vote Recommendation | Page Reference (for more detail) |
| FOR EACH DIRECTOR NOMINEE
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• | We are asking shareholders to elect 13 directors to serve for a one-year term that will expire at the company’s 2021 Annual Meeting or until their successors have been elected and qualified. | | |
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| Each director nominee is elected annually by the affirmative vote of a majority of shareholders present in person or represented by proxy and entitled to vote. An abstention will result in a nominee receiving fewer affirmative votes and, therefore, will have the same effect as a vote against the nominee. Brokers are not entitled to vote uninstructed shares on director elections; therefore, broker non-votes are not considered entitled to vote and will not have an impact on the election of directors. | | |
Proposal Two: Advisory Vote to Approve the Compensation of Named Executive Officers
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| | Board Vote Recommendation | Page Reference (for more detail) |
| FOR | 34 |
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| We are asking shareholders to approve, on an advisory basis, the compensation of the named executive officers as discussed and disclosed in this proxy statement, including the Compensation Discussion and Analysis beginning on page 35 and the tables and narratives that follow under Executive Compensation beginning on page 53. | | |
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| The proposal to approve, on an advisory basis, the compensation of the company’s named executive officers will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions and broker non-votes will not be treated as votes cast and, therefore, will not have an impact on the vote to approve compensation. | | |
Proposal Three: Ratification of Reappointment of Independent Registered Public Accounting Firm
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| | Board Vote Recommendation | Page Reference (for more detail) |
| FOR | 67 |
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| We are asking shareholders to ratify the reappointment of KPMG LLP as the company’s independent registered public accountants for the 2020 fiscal year. | | |
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| To ratify the selection of KPMG, votes cast in favor of the proposal must exceed votes cast against the proposal. Abstentions will not be treated as votes cast and, therefore, will not have an impact on the ratification of KPMG as our independent registered public accountants. The ratification of the selection of KPMG as the company’s independent registered public accountants for 2020 is considered a discretionary matter, and brokers will be permitted to vote uninstructed shares as to such matter. | | |
Other
If you haveare a beneficial owner (i.e., you hold your shares held bythrough a broker or other nominee), you may instruct your broker to vote your shares by following the instructions that the broker provides to you.provides. If you sign over voting rights but do not provide specific instructions, your broker will vote on your behalf only on the proposals over which it has discretionary authority (Proposal Three). For Proposals One and Two, your instructions will be counted as broker non-votes. Most brokers offer voting by mail, telephone, and on the Internet.
If you are a shareholder of record, you may vote by:
returning a properly executed proxy card;
voting in person at the Annual Meeting; or
following the instructions on the Notice to vote online or by telephone.
When you return a properly executed proxy card, the Companywe will vote the shares that the proxy card represents in accordance with your directions. If you return the signed proxy card with no direction on a proposal, the Companywe will vote your proxy “FOR”proxy:
•“FOR” each director nominee in Proposal One, “FOR”One;
•“FOR” Proposal Two, in favor of holding a non-binding shareholder vote on the compensation of the Company’s named executive officers every “1 Year,”Two;
•“FOR” Proposal Three; and “FOR” Proposal Four, and
•in accordance with the proxy holder’s discretion, on any other matter that may properly come before the Annual Meeting, including any adjournmentadjournments or postponement thereof.
You may revoke your proxy at any time before its exercise by:
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(i) | delivering written notice of revocation to the Company’s Corporate Secretary, Ms. Ann C. Dee, at 600 East 96postponements.th Street, Suite 100, Indianapolis, Indiana 46240;
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(ii) | submitting to the Company a duly executed proxy card bearing a later date; |
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(iii) | voting via the Internet or by telephone at a later date; or |
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(iv) | appearing at the Annual Meeting and voting in person. |
provided, however, that no such revocation under clause (i) or (ii) shall be effective until written notice of revocation or a later dated proxy card is received by the Company’s Corporate Secretary at or before the Annual Meeting, and no such revocation under clause (iii) shall be effective unless received on or before 11:59 p.m., Indianapolis local time, on April 25, 2017.
Voting Matters
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| Board Vote Recommendation | Page Reference (for more detail) |
Election of Directors | FOR EACH DIRECTOR NOMINEE | 7 |
Advisory Vote to Approve Compensation of Named Executive Officers | FOR | 25 |
Advisory Vote on Frequency of Shareholder Votes On Compensation of Named Executive Officers | Every 1 Year | 26 |
Ratification of KPMG as Auditors for 2017 | FOR | 60 |
Board Nominees
We are asking shareholders to elect ten directors to serve for a one-year term that will expire at the Company’s 2018 Annual Meeting or until their successors have been elected and qualified. The Board of Directors did not nominate our current Chairman of the Board, Mr. Dennis D. Oklak, to stand for re-election to the Board of Directors. In addition, Mr. Thomas J. Baltimore informed the Board of Directors that he also will not be standing for re-election.
The biographical information of each director nominee begins on page 8. Each director nominee is elected annually by the affirmative vote of at least a majority of the shareholders present in person or represented by proxy and entitled to vote for the election of directors. An abstention will result in a nominee receiving fewer affirmative votes and therefore will have the same effect as a vote against the nominee. Brokers are not entitled to vote uninstructed shares on director elections; therefore, broker non-votes are not considered entitled to vote and will not have an impact on the election of directors.
Advisory Vote on Named Executive Officer Compensation
We are asking shareholders to approve, on an advisory basis, our named executive officer compensation as discussed and disclosed in this Proxy Statement, including the Compensation Discussion and Analysis beginning on page 27 and the tables and narratives that follow under Executive Compensation beginning on page 45. The proposal to approve, on an advisory basis, the compensation of the Company’s named executive officers will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions and broker non-votes will not be treated as votes cast and therefore will not have an impact on the vote to approve the compensation.
We have designed our executive compensation program to attract and retain the highest quality executive officers, directly link their pay to the Company’s performance, and build value for our shareholders. Our program provides total compensation opportunities at levels that are competitive in our industry, ties a significant portion of each executive’s compensation to achieving our key business objectives, and closely aligns the interests of our executives with the interests of our shareholders. In sum, our compensation is designed to reward executives when the Company achieves strong financial and operational results, and likewise to provide reduced pay when financial and operating results are not as strong. We believe the 2016 compensation of our named executive officers is reflective of and consistent with that intent.
Advisory Vote on Frequency of Shareholder Votes on Named Executive Officer Compensation
We are asking shareholders to approve, on an advisory basis, the frequency with which they wish to have an advisory say-on-pay vote on named executive officer compensation. Shareholders may indicate whether they would like to have a say-on-pay vote every one, two or three years, or they may abstain from voting. We recommend that the shareholders vote for a one-year frequency, but we will take into account the frequency selected by shareholders, which will be the one receiving the highest number of votes. Abstentions and broker non-votes will not be treated as votes cast and therefore will not have an impact on the vote to approve the frequency of say-on-pay votes.
Auditors
We are asking shareholders to ratify the reappointment of KPMG LLP as the Company’s independent registered public accountants for the 2017 fiscal year. In order to ratify the selection of KPMG, the votes cast in favor of the proposal must exceed the votes cast against the proposal. Abstentions will not be treated as votes cast and therefore will not have an impact on the ratification of KPMG as our independent registered public accountants. The ratification of the selection of KPMG as the Company’s independent registered public accountants for 2017 will be deemed to be a discretionary matter and brokers will be permitted to vote uninstructed shares as to such matter. Set forth below is summary information with respect to KPMG’s fees for services provided in 2016 and 2015.
Audit Fees: $1,354,220 for 2016 and $1,290,960 for 2015.
Audit-Related Fees:$43,000 for 2016 and $38,500 for 2015. These fees include employee benefit plan audits and other accounting related consultation.
Tax Fees: $169,847 for 2016 and $4,209 for 2015. These fees include services for various tax consulting matters and for 2016, includes $148,338 approved by the Audit Committee for a special project.
All Other Fees: None.
Other
Your proxy gives discretionary authority to Mr. James B. Connor, our Chairman and Chief Executive Officer (CEO), and Ms. Ann C. Dee, with respect toour Executive Vice President, General Counsel and Corporate Secretary, on any other matters that might be brought before the Annual Meeting. If you are a record owner and you sign a proxy card but do not provide instructions with respect to any proposalregarding the proposals on such card, the proxy holdercard, your shares will votebe voted in accordance with the BoardBoard’s recommendations, as noted above.
You may revoke your proxy at any time before its exercise by:
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(i) | delivering written notice of revocation to Ms. Dee at 8711 River Crossing Blvd., Indianapolis, Indiana 46240; |
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(ii) | submitting to the company a duly executed proxy card with a later date; |
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(iii) | voting via the Internet or telephone at a later date; or |
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(iv) | appearing at the Annual Meeting and voting in person. |
Written revocations will not be effective until received by Ms. Dee at or before the Annual Meeting. Telephone and Internet revocations will not be effective unless, in the case of Director's recommendations for such proposal.shareholders who hold their shares through our 401(K) Plan, received on or before 11:59 p.m., Indianapolis local time, on April 23, 2020, and, in the case of all other shareholders, received on or before 11:59 p.m., Indianapolis local time, on April 27, 2020. If you are a beneficial owner, (i.e.you will need to obtain a valid proxy from your broker or other nominee that is the record holder to vote in person at the Annual Meeting.
We are offering shareholders the opportunity to confirm their votes were cast in accordance with their instructions. Vote confirmation is consistent with our commitment to sound corporate governance standards and an important means to increase transparency. Beginning March 14, 2020, and for up to two months after the Annual Meeting, you may confirm your vote beginning 24 hours after your vote is received, whether it was cast by proxy card, electronically, or telephonically. You may confirm that your instructions were received and cast per your instructions included by logging onto https://www.proxyvote.com using your control number (located on your Notice Regarding the Availability of Proxy Materials or proxy card). If you hold your shares through a broker or other nominee) and you sign voting instructions but do not provide instructions with respectnominee, the ability to any proposal,confirm your vote may be affected by the rules of the broker will vote on your behalf only on such proposals over which it has discretionary authority (Proposal Four),or other nominee and for allthe confirmation may not confirm whether the broker or other proposals (Proposals One, Two and Three), your instructions will be counted as broker non-votes.nominee allocated the correct number of shares to you.
Shareholder Proposals for 2018 Annual Meeting
5
The deadline for shareholder proposals to be included in our proxy statement for the 2018 annual meeting of shareholders is November 15, 2017. If a shareholder wishes to present a proposal at the 2018 annual meeting, whether or not the proposal is intended to be included in the 2018 proxy material, the Company’s bylaws require that the shareholder give advance written notice to the Company’s Corporate Secretary 120 days prior to the one year anniversary of the date when the proxy statement was released to shareholders in connection with the previous year’s annual meeting, which for the 2018 annual meeting would also be November 15, 2017.
Shareholder proposals should be submitted in writing to the Company (Attention: Ms. Ann C. Dee, CorporateSecretary). Any such proposals must comply with all applicable SEC rules and the requirements set forth in the Company’s bylaws.
Mailing Date/Internet Availability of Proxy Materials
This Proxy Statement,proxy statement, the enclosed proxy card, and our 20162019 Annual Report or a Notice of InternetRegarding the Availability of Proxy Materials or the Notice,(the Notice) were mailed or e-mailed to shareholders beginning on or about March 15, 2017.11, 2020. The Notice containsincludes instructions on how to access the proxy materials online. Shareholders who received the Notice by mail or e-mail will not receivebe mailed a printed copy of the proxy materials in the mail unless they request a copy in the manner described in the Notice. All shareholders will be able to access the proxy materials on the website referred to in the
Notice and this Proxy Statementproxy statement and will be able to request to receive a printed set of the proxy materials by mail or electronically, in either case, free of charge.
In additionDuke Realty is soliciting proxies to the solicitation of proxies by use of the mail, officers and regular employees of the Company may solicit proxies by telephone, facsimile, e-mail or personal interviews without additional compensation. It is also contemplated that brokerage houses will forward the proxy materials to shareholdersbe voted at the request of the Company. Receipt of more than one proxy card indicates that a shareholderAnnual Meeting, and has multiple accounts at the transfer agent or with stockbrokers. Shareholders should complete and return all proxy cards received to ensure that all of their shares are voted.
Shareholders of record that desire to receive future proxy statements and annual reports electronically should log on to http://www.proxyvote.com and follow the instructions to vote using the Internet and, when prompted, indicate that they agree to receive or access proxy materials electronically in future years. Shareholders will need to refer to the Company number and control number found on the proxy card. Shareholders may cancel this electronic enrollment if they later wish to receive proxy statements and annual reports by regular mail.
Proxy Solicitation
The solicitation is being made by the Company, and the Company will bearpaid the cost of preparing, printing, assembling, and mailing the Notice, Proxy Statement, proxy cardmaterials, and also will bear the costs of other materials that may be sent to shareholders in connection with this solicitation. The CompanyWe also may reimburse brokerage houses and other custodians, nominees, and fiduciaries for their expenses incurred in forwarding solicitation materials to the beneficial owners of shares held of record.
In addition to the solicitation of proxies by mail, Duke Realty officers and other associates may solicit proxies by telephone, facsimile, e-mail, or personal interviews without additional compensation. We also expect brokerage houses to forward proxy materials to shareholders at our request. Receipt of more than one proxy card or voting instruction form indicates that a shareholder has multiple accounts at the transfer agent or with stockbrokers. Shareholders should complete and return all proxy cards and voting instruction forms received to ensure that all of their shares are voted.
Shareholders of record who want to receive future proxy statements and annual reports electronically should log on to https://www.proxyvote.com and follow the instructions to vote using the Internet and, when prompted, indicate that they want to access proxy materials electronically in the future. Shareholders will need to refer to the company number and control number found on the proxy card. Shareholders may cancel electronic enrollment if they later decide to receive proxy statements and annual reports by such persons.regular mail.
Information about Communications with Duke Realty Corporation and Our Board of Directors
The Company provides a procedure for theShareholders may communicate with Duke Realty’s Board of Directors to accept communications from shareholders of the Companyon matters that are reasonably related to protectingprotect or promotingpromote legitimate shareholder interests. Such procedure can be foundFor instructions on how to deliver such communications, visit the Investor Relations/Corporate Governance section of the Company’sDuke Realty’s website at http://www.dukerealty.com.
YouShareholders and other interested parties also may also contact the Board of Directors, by writing to:
Board of Directors
c/o the Corporate Secretary
600 East 96th Street, Suite 100
Indianapolis, Indiana 46240.
You may contact the independent directors by writing to:
Independent Directors
c/o Corporate Secretary
600 East 96th Street, Suite 1008711 River Crossing Blvd.
Indianapolis, Indiana 46240
You may also contact the Company’se-mail Duke Realty’s Lead Director by emailing him at leaddirector@dukerealty.com.
In addition, as required by the listing standards established by the NYSE, the Company provides a method for shareholders and other interested parties tomay communicate with theDuke Realty’s independent, non-management directors of the Board of Directors and/or the entire Board, of Directors. Suchas required by the New York Stock Exchange’s (NYSE) listing standards. Written communications to non-management directors should be directed to the non-management directors by writingsent to:
Non-Management Directors
c/o Corporate Secretary
8711 River Crossing Blvd.
Indianapolis, Indiana 46240
Duke Realty’s Corporate Secretary may be contacted by sending correspondence to: 8711 River Crossing Blvd., Indianapolis, Indiana 46240, Attn: Corporate Secretary.
600 East 96th Street, Suite 100
Indianapolis, Indiana 46240
Shareholder and other interested parties may communicate with the entire Board of Directors by writing to the address set forth above.
The Company’s Corporate Secretary may be contacted by sending correspondence to: 600 East 96th Street, Suite 100, Indianapolis, Indiana 46240, Attn: Corporate Secretary.
Additional Information
The Company’sOur website is located at http://www.dukerealty.com.Although the Though information contained on the Company’sour website is not part of this Proxy Statement,proxy statement, you can view additionalfind company information on the website,there, such as the Company’sour Code of Conduct,Business Ethics, corporate governance guidelines, charters of the committees of the Board, of Directors and reports that the Company fileswe file and furnishesfurnish with the Securities and Exchange Commission or SEC. A copy(SEC) . Copies of the Company’sour Code of Conduct,Business Ethics, corporate governance guidelines, andor charters of theBoard committees of the Board of Directors also may be obtained by written request addressed to writing to:
Duke Realty Corporation 600 East 96th Street, Suite 100,
8711 River Crossing Blvd.
Indianapolis, Indiana 46240
Attention: Investor Relations.Relations
PROPOSAL ONE: ELECTION OF TEN13 DIRECTORS TO SERVE
ON THE COMPANY’S BOARD OF DIRECTORS FOR A ONE-YEAR TERM
ENDING ON THE DATE OF THE COMPANY’S 20182021 ANNUAL MEETING
The Board of Directors currently consists of twelve13 members. On January 25, 2017,29, 2020, based on the recommendation of the Corporate Governance Committee, the Board of Directors nominated each of the existing13 directors with the exception of Mr. Dennis D. Oklak, who is the current Chairman of the Board of Directors, for re-election to serve for a one-year term that will expire at the Company’s 20182021 Annual Meeting or when their successors have been elected and qualified. In addition, on February 21, 2017, Mr. Thomas J. Baltimore, Jr. informed the Company that he will not stand for re-election at the Annual Meeting. Accordingly, the Board reduced the size of the Board to be ten directors, effective as of the date of the Annual Meeting.
Each nominee has agreed to be named in this Proxy Statementproxy statement and to serve if elected. The Board of Directors believes that all of the nominees for director will be available for election. However, if a nominee is unavailable for election, the proxy holders may vote for another nominee proposed by the Board of Directors.Board. If the Board of Directors does not propose another director nominee prior to or at the Annual Meeting, the Board, of Directors, by resolution, may reduce the number of directors to be elected at the Annual Meeting.
The election of each director requires the affirmative vote of at least a majority of the shareholders present in person or represented by proxy and entitled to vote for the election of directors. An abstention will result in a nominee receiving fewer votes and, therefore, will have the same effect as a vote against the nominee. Brokers are not entitled to vote uninstructed shares in director elections; therefore, broker non-votes are not considered entitled to vote and will not have an impact on the election of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL OF THE DIRECTOR NOMINEES NAMED ON THE FOLLOWING PAGES.IN THIS PROXY STATEMENT.
BOARD EVALUATIONS AND MEMBERSHIP CRITERIA
The Corporate Governance Committee, whose responsibilities are described in “Board Committees,” evaluates the effectiveness of the Board and each of its committees annually. As part of this evaluation, each director fills out an assessment of the entire Board as well as the committees on which he or she serves. The Corporate Governance Committee then reviews a compilation of the results of the various self-assessments. In addition, each year the General Counsel also conducts a candid, in-person self-assessment interview with each Board member, designed to enhance his or her participation and role as a director, as well as to assess the competencies and skills each individual director is expected to bring to the Board.
The Corporate Governance Committee believes that though the company can benefit from experienced directors, periodic refreshment of the Board is important. The Corporate Governance Committee, therefore, regularly discusses director succession and reviews potential candidates. The Corporate Governance Committee may employ a search firm to identify director candidates. In 2019, we hired Ferguson Partners Ltd. to review potential director candidates. Key factors that the Corporate Governance Committee considers when determining whether to appoint directors include:
In nominating members for election to the Board, the Corporate Governance Committee will consider written nominations by shareholders. Our bylaws state that the Corporate Governance Committee must consider these nominees as long as the recommendation is submitted to our Corporate Secretary in a timely manner and the nomination complies with the requirements in our bylaws. Timing requirements are described in “Shareholder Proposals and Nominations for 2021 Annual Meeting.” The Corporate Governance Committee screens all potential candidates in the same manner regardless of the source of recommendation. However, the Corporate Governance Committee may, in its sole discretion, reject any recommendation for any reason. The complete set of requirements for the submission of a shareholder nomination is included in our bylaws. The Board has also adopted a proxy access bylaw, which allows certain eligible shareholders to nominate director candidates and requires us to include such candidates in our proxy materials for an annual meeting of shareholders that involves the election of directors. For more information about the eligibility and other requirements to submit director nominees pursuant to our proxy access bylaw, see “Nominees for Election of Directors-Proxy Access Policy” and “Shareholder Proposals and Nominations for 2021 Annual Meeting.”
Diversity is an important strategic initiative at Duke Realty and has relevance to our associates, suppliers, and shareholders. We also are committed to diversity at the Board level. Having a Board composed of men, women, and people of color with different perspectives facilitates more balanced, wide-ranging discussion in the boardroom. The Board also is committed to inclusion--ensuring that all directors feel welcomed, valued, and able to contribute their opinions. Accordingly, the Board has adopted a Board Diversity and Inclusion Policy, which is available on the Investor Relations/Corporate Governance section of our website at http://www.dukerealty.com. Pursuant to the Board Diversity and Inclusion Policy, our Board considers director nominees from diverse backgrounds, and the Corporate Governance Committee periodically reviews the director selection process to ensure that women and people of color are included. Pursuant to this policy, and using the self-identified diversity characteristics of our directors, our Corporate Governance Committee nominated four women and two people of color to the Board this year.
The Board believes that it is important to have directors with strong leadership experience as well as experience in the real estate industry and operations. A balance of perspectives from other industries also is critical to well-rounded oversight. The chart below highlights the industry experience and qualifications of our nominees to the Board as more fully described in “Nominees for Election as Directors.”
The gender diversity and tenure of our director nominees is as follows:
NOMINEES FOR ELECTION AS DIRECTORS
The following paragraphs give the name and age of each director nominee, the tenure of each director nominee on the Board of Directors, the committees of the Board of Directors on which each director nominee serves, the particular experience, skills and qualifications that were instrumental in the Corporate Governance Committee’s determination that each director nominee should serve as a director of the Company, each director nominee’s business experience over the last five years or more and the public company boards of directors on which each director nominee has served over the last five years.
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| | William Cavanaugh III,John P. Case, Age 7856
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| Director Since: 1999; Lead director2018 |
| Board Committee: Corporate Governance, ChairmanCompensation and Human Capital |
| Qualifications: Mr. Cavanaugh, who served as the Chief Executive Officer of Progress Energy, Inc., a publicly-traded energy company, for eight years,Case brings auditing, business administration, capital markets, corporate finance, operations, nuclear energy industry,development, corporate governance, human capital, international business, investor relations, marketing, mergers and acquisitions, public company, and executive leadershiprisk oversight expertise to the Board of Directors.Board. |
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| Since 2019, Mr. CavanaughCase has served as Chairman & Principal of Bunker Hill Group, a private non-registered investment company with primary holdings in the Chairmanbeverage distribution business and related real estate. Mr. Case served as Chief Executive Officer and Director of the World Association of Nuclear Operators (WANO)Realty Income Corporation from 2004 until 2009.2013 to 2018. Realty Income Corporation is a Standard & Poor’s 500 Index (S&P 500) company that invests primarily in single-tenant retail properties. Mr. Case joined Realty Income Corporation in 2010 as Executive Vice President, Chief Investment Officer. He retired as Chairmanwas promoted to President in March 2013 and Chief Executive Officer of Progress Energy, Inc. in 2004, posts he had held since 1999 and 1996, respectively.September 2013. Prior to joining Realty Income Corporation, Mr. Cavanaugh currently isCase served for 19 years as a professorNew York-based real estate investment banker. He began his investment banking career at the Institute for Advanced Discovery & Innovation at the University of South Florida. |
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Alan H. Cohen, Age 70
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Director Since: 2011
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Board Committee: Executive Compensation, Chairman
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Qualifications: As an attorney and co-founder of The Finish Line, Inc., a publicly-traded athletic wear retailerMerrill Lynch, where he worked for 14 years, and was named a Managing Director in 2000. Following his tenure at Merrill Lynch, Mr. Case was co-head of Americas Real Estate Investment Banking at UBS and later the co-head of Real Estate Investment Banking for RBC Capital Markets, where he also served in various executive positions including Chief Executive Officer and President, on the firm’s Global Investment Banking Management Committee. Mr. Cohen brings consumer goods industry, corporate operations, legal and executive leadership expertise to the Board of Directors.
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Mr. Cohen is the co-founder of The Finish Line, Inc. and servedCase serves as its President from 1982 to 2003 and Chief Executive Officer from 1982 to 2008. He served as Chairmana member of the Board of DirectorsTrustees of Washington and Lee University. In addition, Mr. Case has been extensively involved in the broader real estate industry, having served on the Executive Board of the National Association of Real Estate Investment Trusts (NAREIT), as a member of The Finish Line, Inc. from 1992 to 2010Real Estate Roundtable, and as onea member of its directors from 1976 to 2010. Mr. Cohen is an attorney, and practiced law from 1973 to 1981.the International Council of Shopping Centers (ICSC). |
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| James B. Connor, Age 5861 |
| Director Since: 2015 |
| Board Committee: N/A |
| Qualifications: Mr. Connor, who joined the Companycompany in 1998, brings real estate industry, finance, operations,business administration, capital markets, corporate development, corporate governance, human capital, investor relations, marketing, public company, and executive leadershipsustainability expertise to the Board of Directors.Board. |
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| Mr. Connor was named the Company’s PresidentChairman and Chief Executive Officer of Duke Realty Corporation, commencing January 1, 2016,April 26, 2017, and joined the Company’scompany’s Board of Directors in 2015. Prior to being named PresidentChairman and Chief Executive Officer, Mr. Connor held various senior management positions with the Company,company, including President and Chief Executive Officer from January 1, 2016 to April 25, 2017, Senior Executive Vice President and Chief Operating Officer of the Company from 2013 to 2015, Senior Regional Executive Vice President of the Company from 2011 to 2013, and Executive Vice President of the Company’s Midwest region from 2003 to 2010.2011, and Senior Vice President between 1998 and 2003. Prior to joining the Companycompany in 1998, Mr. Connor held numerous executive and brokerage positions with Cushman & Wakefield, most recently serving as Senior Managing Director for the Midwest area. In 2019, Mr. Connor joined the Board of Trustees of EPR Properties, a publicly traded real estate investment trust (REIT). Mr. Connor also serves on the Board of Trustees of Roosevelt University and is a member of the Advisory Board of Directors of the Marshall Bennett Institute of Real Estate at Roosevelt University in Chicago.University. In addition, Mr. Connor is also a member of the Executive Board of Governors of the National AssociationNAREIT and a member of The Real Estate Investment Trusts and the Real Estate Round Table andRoundtable. Mr. Connor also serves as a director of the Central Indiana Corporate Partnership. |
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| | Ngaire E. Cuneo, Age 6669 |
| Director Since: 1995 |
| Board Committees:Committee: Audit and Finance |
| Qualifications: Ms. Cuneo brings finance, accounting,auditing, business administration, consulting, venture capital, corporate development, insurance industry, financial services industry, and executive managementmergers and acquisitions expertise to the Board of Directors.Board. |
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Since July 2016, | Ms. Cuneo has been serving asis an Executive Vice President of Silac, LLC, a private insurance company, and is on the Board of Directors of Sterling Life Insurance Company, also a private insurance company.position she has held since July 2016. In addition, Ms. Cuneo has been a partner of Red Associates, LLC, a venture capital firm in the financial services sector, since 2002. Ms. Cuneo also served as an Executive Vice President of Forethought Financial Group, an insurance holding company, from 2006 until 2010. From 1992 through 2001, Ms. Cuneo was an Executive Vice President of Conseco, Inc., an owner, operator, and provider of services to companies in the financial services industry. Ms. Cuneo has served as a director of Tributes, Inc. overon the last five years. The Board of Directors of Sterling Life Insurance Company, a private insurance company, since July 2016. The Board has determined that Ms. Cuneo qualifies as an “audit committee financial expert” as defined under the applicable rules established by the SEC. |
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Charles R. Eitel, Age 6770 |
| Director Since: 1999 |
| Board Committee: Corporate Governance |
| Qualifications: Mr. Eitel brings consulting, business administration, finance, operations, manufacturing industry,capital markets, consulting, corporate development, corporate governance, entrepreneurship, human capital, international business, investor relations, marketing, mergers and executive leadershipacquisitions, public company, risk oversight, and sustainability expertise to the Board of Directors.Board. |
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| Mr. Eitel is the former Chief Executive Officer and Chairman of the Board of WS Packaging Group, Inc., a privately owned producer of printed, packaged goods. Mr. Eitel also isserved in those positions between 2015 and February 2018. Between 2009 and 2014, Mr. Eitel was a co-founderpartner of Eitel & Armstrong, LLC, which is now North Inlet Partners, a consulting practice that provides hands-on operating and financial guidance to middle market companies. Prior to forming Eitel & Armstrong in 2009, Mr. Eitel served as Vice Chairman of the Board of Directors of the Simmons Bedding Company, an Atlanta-based manufacturer of mattresses, from 2008 to 2009. Mr. Eitel served as Chairman and Chief Executive Officer of the Simmons Bedding Company from 2000 until his appointment to Vice Chairman in 2008. On November 16, 2009, the Simmons Bedding Company filed for protection under Chapter 11 of the federal bankruptcy laws, from which it emerged on January 21, 2010.Since 1999, Mr. Eitel serveshas served on the Board of Directors of WS Packaging Group, Inc. and American Fidelity Assurance Corporation, a provider of supplemental health insurance benefits and financial services to education employees, auto dealerships, health care providers, and municipal workers across the United States. Since 2019, Mr. Eitel has served on the Board of Directors of Flexsteel Industries, Inc., a public company manufacturer, importer, and marketer of residential and contract upholstered and wooden furniture products in the United States. Mr. Eitel currently chairs the Corporate Governance and Nominating Committee of its Board of Directors. |
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| | Tamara D. Fischer, Age 64 |
| Director Since: 2020 |
| Board Committee: N/A |
| Qualifications: Ms. Fischer brings auditing, business administration, capital markets, investor relations, mergers and acquisitions, public company, and risk oversight expertise to the Board. |
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| Ms. Fischer has served since January 1, 2020, as a member of the Board of Trustees and the President and Chief Executive Officer of National Storage Affiliates Trust, a real estate investment trust focused on the ownership, operation, and acquisition of self-storage properties. Ms. Fischer joined the company at its inception in 2013, serving as its Executive Vice President and Chief Financial Officer until she was promoted to President and Chief Financial Officer on July 1, 2018. From 2004 to 2008, Ms. Fischer served as the Executive Vice President and Chief Financial Officer of Vintage Wine Trust, Inc., a real estate investment trust created to acquire and own vineyards, wineries, and other real estate related to the wine industry. She was involved in all aspects of the company’s capital markets, investor relations, and financial reporting activities. She continued to serve Vintage Wine Trust, Inc. as a consultant through its dissolution in 2010 and served in various other consulting positions until becoming involved with National Storage Affiliates. From 1993 to 2003, Ms. Fischer served as the Executive Vice President and Chief Financial Officer of Chateau Communities, Inc., one of the largest real estate investment trusts in the manufactured home community sector. There, she was responsible for overseeing the company’s initial public offering and several mergers and acquisitions. She was also involved in capital markets activity, investor relations, financial reporting, and administrative responsibilities. Ms. Fischer remained at Chateau Communities, Inc. through its sale to Hometown America LLC in 2003. Prior to her experience at Chateau Communities, Inc., Ms. Fischer spent nine years at Coopers & Lybrand (now PricewaterhouseCoopers), initially as an accountant in the real estate practice and later as an audit manager. |
| | Norman K. Jenkins, Age 57 |
| Director Since: 2017 |
| Board Committee: Compensation and Human Capital |
| Qualifications: Mr. Jenkins brings auditing, business administration, capital markets, entrepreneurship, human capital, mergers and acquisitions, and public company expertise to the Board. |
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| Mr. Jenkins is President and Chief Executive Officer of Capstone Development, LLC, a privately-held developer of institutional-quality lodging assets. Prior to founding Capstone Development, LLC in 2009, Mr. Jenkins served in various roles for Marriott International, Inc. between 1992 and 2008, including most recently as Senior Vice President, North American Lodging Development. Mr. Jenkins began his career with McDonald’s Corporation holding finance and operating roles between 1986 and 1992. Mr. Jenkins currently serves on the Boards of The Howard University School of Business and the Developer Roundtable of Washington, DC. |
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| | Melanie R. Sabelhaus, Age 6871 |
| Director Since: 2012 |
| Board Committee: Executive Compensation |
Qualifications: With business experience in both the private and public sectors, Ms. Sabelhaus brings public company, corporate governance, real estate industry, healthcare industry and executive leadership expertise to the Board of Directors.Human Capital, Chairperson
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Qualifications: Ms. Sabelhaus has over 30 years of small business, corporatebrings consulting, entrepreneurship, human capital, and federal government experience. Since 2005, marketing expertise to the Board. |
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| Ms. Sabelhaus has been devoting her timea consultant to supporting non-profit organizations.philanthropy for several nonprofit organizations around the country since 2005. Ms. Sabelhaus currently serveswas appointed by President Bush as a Senior Principal of Jerold Panas, Linzy & Partners, a consulting firm that provides philanthropic organizations with fundraising advice. Ms. Sabelhaus also serves as a trustee of Johns Hopkins Health System. Ms. Sabelhaus was Deputy Administrator of the U.S. Small Business Administration from 2002 to 2005, where she was responsible for policy development and program supervision. From 1998 until 2002,2018, Ms. Sabelhaus dedicated her time to community fundraising and women’s business issues. In 1986, Ms. Sabelhaus founded Exclusive Interim Properties (EIP), a real estate company that specialized in short-term, furnished housing. Ms. Sabelhaus served as Chief Executive Officer of EIP from 1986 until the company merged with four similar firms in 1997 taking the company public and renaming it Bridgestreet Accommodations World Wide.BridgeStreet Worldwide. From 1997 until 1998, Ms. Sabelhaus served as Vice President for Global Sales of Bridgestreet Accommodations World Wide.BridgeStreet Worldwide. From 1972 to 1986, Ms. Sabelhaus worked at International Business Machine (IBM), during which time she aided in the launch of IBM’s consumer retail program. Ms. Sabelhaus served for 12co-founded the United Way’s Women United, raising $1.5 billion over 15 years, asand the American Red Cross Tiffany Circle, Society of Women Leaders. Ms. Sabelhaus was the Vice Chairman of the Board of GovernorsChair of the National American Red Cross.Cross for 11 years. Ms. Sabelhaus currently serves as a trustee of Johns Hopkins Health System. |
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Peter M. Scott, III, Age 6770 |
| Director Since: 2011 |
| Board Committees: Audit and Finance |
Qualifications: Having held various management positions with Progress Energy, Inc. including Chief Financial Officer, Mr. Scott brings energy and telecommunications industry, public company finance, accounting, auditing and executive leadership expertise to the BoardFinance; Chairperson of Directors.Audit
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| Qualifications: Mr. Scott brings business administration, capital markets, consulting, corporate development, corporate governance, governmental and regulatory matters, human capital, investor relations, mergers and acquisitions, public company, and risk oversight expertise to the Board. |
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| Mr. Scott was Chief Financial Officer of Progress Energy, Inc. from 2000 to 2003 and from 2005 until his retirement in 2008. From 2004 to 2008, Mr. Scott was also President and Chief Executive Officer of Progress Energy Service Company LLC and had responsibility for all financial and administrative functions of Progress Energy, Inc. Mr. Scott also held various other management positions with Progress Energy, Inc. or its subsidiaries between 2000 and 2008, including responsibilities for its telecomtelecommunications and competitive energy subsidiaries. Before joining Progress Energy, Inc. in 2000, Mr. Scott was the President of Scott, Madden & Associates, Inc., a general management consulting firm that he founded in 1983. The firm served clients in a number of industries, including energy and telecommunications. From 1981 until 1983, Mr. Scott served as the Assistant to the Executive Vice President of Carolina Power & Light Company, Inc., a predecessor of Progress Energy, Inc. Prior to that, Mr. Scott was a principal and partner in Theodore Barry & Associates, Inc., a Los Angeles-based consulting firm, between 1977 and 1981. Mr. Scott served as Chairman of the Audit Committee and a member of the Compensation and Executive Committees of the Board of Directors of Cleco Corp., a public utility holding company until it was acquired by a private investment entity. Mr. Scott also serves as both Chairman of the Audit Committee and Vice Chairman of the Board of Governors at Research Triangle International, a not-for-profit organization that provides research and technical services. The Board of Directors has determined that Mr. Scott qualifies as an “audit committee financial expert” as defined under the applicable rules established by the SEC. |
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Jack R. Shaw, Age 74
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Director Since: 2003
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Board Committees: Audit and Finance; Chairman of the Audit Committee
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Qualifications: Mr. Shaw brings finance, accounting, auditing, and executive leadership expertise to the Board of Directors.
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Since 2002, Mr. Shaw has been affiliated with The Regenstrief Foundation, currently serving as a Board member. Mr. Shaw spent 35 years with Ernst & Young and also served as Partner, Partner-in-Charge, and Managing Partner of Ernst & Young’s Indianapolis office at various times throughout his career. Mr. Shaw has served on the Board of Directors of many community organizations including the Indiana Repertory Theatre, the Indianapolis Chamber of Commerce, the Indianapolis Convention and Visitors Association, the Children’s Museum of Indianapolis, United Way of Central Indiana, and the Central Indiana Corporate Partnership. In addition, Mr. Shaw served on the Dean’s Advisory Council of the Indiana University Kelley School of Business. The Board of Directors has determined that Mr. Shaw, who serves as Chairman of the Company’s Audit Committee, qualifies as an “audit committee financial expert” as defined under the applicable rules established by the SEC. |
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| | David P. Stockert, Age 57 |
| Director Since: 2017 (Lead Director since 2019) |
| Board Committee: Corporate Governance, Chairperson |
| Qualifications: Mr. Stockert brings business administration, capital markets, investor relations, mergers and acquisitions, and public company expertise to the Board. |
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| In 2019, Mr. Stockert became one of three general partners of Sweetwater Opportunity Fund, L.P., a real estate opportunity fund headquartered in Atlanta, Georgia. The fund was formed to invest in commercial property in the Southeast and Texas, targeting primarily sub-institutional, opportunistic, situational, and relationship-based investments. From 2002 to 2016, Mr. Stockert served as Chief Executive Officer and President of Post Properties, Inc. and as President and Chief Operating Officer from 2001 to 2002. Prior to joining Post Properties, Inc., Mr. Stockert served as Executive Vice President of Duke Realty Corporation from 1999 to 2000, and as Senior Vice President and Chief Financial Officer of Weeks Corporation from 1995 to 1999. Prior to joining Weeks Corporation, Mr. Stockert was an investment banker and a certified public accountant. Since 2016, Mr. Stockert has served on the Board of Directors of Mid-America Apartment Communities, Inc., a publicly traded REIT that invests in apartments. Mr. Stockert also serves on multiple civic and charitable boards in the Atlanta area. |
| | Chris T. Sultemeier, Age 57 |
| Director Since: 2018 |
| Board Committee: Finance |
| Qualifications: Mr. Sultemeier brings business administration, human capital, international business, public company, and sustainability expertise to the Board. |
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| Mr. Sultemeier served as Executive Vice President Logistics of Walmart Stores, Inc. and President/Chief Executive Officer of Wal-mart Transportation LLC between 2012 and 2017. Prior to that, Mr. Sultemeier held various roles in logistics and merchandising for Walmart Stores, Inc., which he joined in 1989. Mr. Sultemeier served as a U.S. Army Captain between 1984 and 1989. Mr. Sultemeier currently serves on the U.S. Congressional Medal of Honor Foundation Board of Directors and teaches at M.I.T. in its Supply Chain/Transportation Master’s Program. |
| | Michael E. Szymanczyk, Age 6871 |
| Director Since: 2014 |
| Board Committees: Audit and Finance; Chairperson of Finance |
| Qualifications: AsMr. Szymanczyk brings auditing, business administration, capital markets, corporate development, corporate governance, governmental and regulatory matters, human capital, investor relations, marketing, mergers and acquisitions, public company, and risk oversight expertise to the formerBoard. |
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| Mr. Szymanczyk currently serves as Chief Executive Officer of Endurance Capital LLC, a Fortune 500 company, Mr. Szymanczyk brings leadership, management and analytic skills as well as expertise in addressing governmental and regulatory matters to the Board of Directors. |
family-owned real estate investment venture, a position he has held since 2006. Mr. Szymanczyk was the Chairman of the Board and Chief Executive Officer of Altria Group, Inc. from 2008 until 2012. From 2002 through 2008, Mr. Szymanczyk served as Chairman, President and Chief Executive Officer of Philip Morris USA Inc. Prior to that, he served in various sales and marketing roles at Proctor & Gamble, Inc. and Kraft, Inc. Mr. Szymanczyk currently serves as Chief Executive Officer of Endurance Capital LLC, a family-owned real estate investment venture. Mr. Szymanczyk also serves on the Finance and Risk Oversight Committee and the AuditCompensation, Governance, and Nominating Committee of the Board of Directors of Dominion Resources, Inc., a publicly-traded provider of electricity, natural gas and related services to customers primarily in the eastern and western regions of the U.S. Mr. Szymanczyk has served as a director of Dominion Resources, Inc. since 2012. The Board of Directors has determined that Mr. Szymanczyk qualifies as an “audit committee financial expert” as defined under the applicable rules established by the SEC. |
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| | Warren M. Thompson, Age 60 |
| Director Since: 2019 |
| Board Committee: Finance |
| Qualifications: Mr. Thompson brings business administration and entrepreneurship expertise to the Board. |
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| Mr. Thompson is Chairman of the Board and President of Thompson Hospitality, a private retail food and facilities management firm. Mr. Thompson founded Thompson Hospitality in 1992. Mr. Thompson began his career with the Marriott Corporation in 1983, where he started with the Restaurant Fast Track Management Development Program and served in 15 positions in nine years, ending as Vice President Operations for the Host Division. Mr. Thompson has served on the Board of Directors of Compass Group North American, a public food service and support services company since 1997. |
| | Lynn C. Thurber, Age 7073 |
| Director Since: 2008 |
| Board Committee: Executive CompensationCorporate Governance |
| Qualifications: Ms. Thurber brings auditing, capital markets, corporate governance, human capital, international business, asset management, investment management, finance, accounting, real estate industry, financial services industry,investor relations, mergers and executive managementacquisitions, public company, risk oversight, and sustainability expertise to the Board of Directors.Board. |
Since 2006, | | |
| Ms. Thurber has served as the non-executive Chairman of LaSalle Investment Management, a subsidiary of Jones Lang LaSalle Inc. and a global real estate money management firm that invests in private real estate as well as publicly-tradedpublicly traded real estate companies on behalf of institutional and individual investors.investors, from 2006 until 2017. Prior to becoming Chairman, Ms. Thurber was the Chief Executive Officer of LaSalle Investment Management from 2000 to 2006. Since 2011, Ms. Thurber ishas served as the Chairman of the Board of Directors of Jones Lang LaSalle Income Property Trust, Inc., a non-listed REIT that owns and manages a diversified portfolio of office, retail, industrial, and apartment properties, and isproperties. In addition, since 2016, Ms. Thurber has served as a trustee of Acadia Realty Trust, a real estate investment trustpublic REIT that primarily invests in retail properties. Ms. Thurber is a trusteeGoverning Trustee and former Chairman of Global Board of the Urban Land Institute, a non-profit organization that provides leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Ms. Thurber also previously served as a director of Jones Lang LaSalle Inc., a leading publicly-traded financial and professional services firm specializing in real estate. |
The Structure of the Board of Directors and the Lead Director
The Board of Directors views the selection of the Chairman and Chief Executive Officer or CEO,(CEO) as one of its most important responsibilities. As a result, theThe Board of Directors believes that it should remain free to determine whether these positions should be combined or separated based on circumstances of the Company and the composition of the Board of Directors at any given time. The Board of Directors has determined that effective as of the Annual Meeting, a combined Chairman and CEO is in the best interests of the Companycompany at this time and has chosen Mr. James B. Connor, who is our Chief Executive Officer,CEO, to serve also as the Chairman of the Board. Prior to the Annual Meeting, our former CEO, Mr. Dennis D. Oklak, is serving as our Chairman of the Board, which the Board of Directors believes is appropriate given Mr. Oklak's long tenure as a director and deep knowledge of our history and culture.
Because Mr. Oklak will not be standing for re-election to theThe Board of Directors at the Annual Meeting, the Board of Directors believes that having the same person serve as Board Chairman and CEO following the Annual Meeting is in the best interests of our shareholders because itboth positions demonstrates for our employees,associates, vendors, tenants, and other stakeholders that the Companycompany is under strong leadership, with a singleone person setting the tone and having primary responsibility for managing our operations. In order toTo ensure that thean appropriate balance of power exists between our unaffiliated directors and the CEO, the Board of Directors established the Lead Director position and theposition. The independent members of the Board of Directors have chosen Mr. William Cavanaugh III, the ChairmanDavid P. Stockert, Chairperson of our Corporate Governance Committee, to serve
as Lead Director. As set forthoutlined in our corporate governance guidelines, the Lead Director chairs the executive sessions of the independent directors, which are held at least quarterly. The Lead Director also serves as a liaison between the CEO and the independent directors, approves information sent to the Board, of Directors and approves meeting agendas and schedules to assureensure that there is sufficient time for discussion of all agenda items.
We firmly believe that our board structure allows for appropriate oversight by the Board of Directors in fulfilling its duties to our Companycompany and to our shareholders.
Board Oversight of Risk Management
The Board of Directors is primarily responsible for overseeing the Company’scompany’s risk management processes. A portion of this responsibility has been delegated by the Board of Directors to each of the committees of the Board of Directors with respect to the assessment of the Company’scompany’s risks and risk management in its respective areas of oversight. The focus of each of the committees with respect to risk management is as follows:
These committees and the full Board of Directors focus on the most significant risks facing the Companycompany and the Company’scompany’s general risk management strategy and also ensure that risks undertaken by the Companycompany are consistent with the Board of Directors’Board’s appetite for risk. While the Board of Directors oversees the Company’scompany’s risk management, Companycompany management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing the Companycompany and that the leadership structure of the Board of Directors supports this approach.
Management works with the Board to assess the company’s risks as follows:
Cyber Security
Cyber security is a growing risk for companies. While the Audit Committee is tasked with overseeing cyber security, it is of particular concern to the full Board, as well. Management reports at least annually to the full Board, as well as quarterly to the Audit Committee, regarding the steps the company is taking to protect the company from cyber attacks or intrusions. Management has created a Cyber Security Committee that meets regularly to discuss the cyber risks facing the company. The Cyber Security Committee focuses on the following strategy areas: legal and compliance; operations and technology; business continuity and crisis management; leadership and governance; human factors; and information risk management.
Independent Directors
Under the Company’scompany’s articles of incorporation, at least three-fourths of the directors must be persons who are “unaffiliated directors,” which means only those persons who are not officers or employeesassociates of the Companycompany or any of its affiliates. Because none ofSince Mr. William Cavanaugh III, Mr. Alan H. Cohen,John P. Case; Ms. Ngaire E. Cuneo,Cuneo; Mr. Charles R. Eitel,Eitel; Ms. Tamara D. Fischer; Mr. Norman K. Jenkins; Ms. Melanie R. Sabelhaus,Sabelhaus; Mr. Peter M. Scott, III,III; Mr. Jack R. Shaw,David P. Stockert; Mr. Chris T. Sultemeier; Mr. Michael E. Szymanczyk, orSzymanczyk; Mr. Warren M. Thompson; and Ms. Lynn C. Thurber isare not currently an officerofficers or employeeassociates of the Companycompany or any of its affiliates, 90%92% of the director nominees are unaffiliated directors.
In addition, under the enhanced corporate governance listing standards of the New York Stock Exchange, or NYSE, at least a majority of the Company’scompany’s directors, and all of the members of the Company’scompany’s Audit, Committee, Executive Compensation Committeeand Human Capital, and Corporate Governance Committee,Committees, must meet the test of “independence” as defined under the listing standards of the NYSE. The NYSE listing standards provide that to qualify as an “independent” director, in addition to satisfying certain bright-line criteria, the Board of Directors must affirmatively determine that a director has no material relationship with the Companycompany (either directly or as a partner, shareholder, or officer of an organization that has a relationship with the Company)company) that would compromise suchthe director’s independence.In January 2017,2020, the Board of Directors undertook a review of director independence. During this review, the Board of Directors considered, among other things, relationships and transactions during the past three years between each director or any member of his or her immediate family, on the one hand, and the Companycompany and its subsidiaries and affiliates, on the other hand. The purpose of the review was to determine whether any such relationships or transactions
were inconsistent with a determination that the director is independentdirector’s independence as defined under the NYSE listing standards. Based on the review, the Board of Directors has determined that all of the unaffiliated director nominees and Mr. Thomas J. Baltimore are independent under the listing standards of the NYSE.
Further to the independence standard discussed above,In addition, members of the Audit Committee also must satisfy additional independence requirements established by the SEC and the NYSE. Specifically, members of the Audit Committee may not accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Companycompany or any of its subsidiaries other than their directors’ compensation, and they may not be affiliated with the Companycompany or anyits subsidiaries. All members of its subsidiaries.
the Audit Committee satisfy these enhanced independence requirements.
Finally, in affirmatively determining the independence of any director who will serve on the Executive Compensation and Human Capital Committee, the Board of Directors must consider all factors specifically relevant to determining whetherregarding a director has adirector’s relationship to the Companycompany that is material tocould affect that director’s ability to be independent from management in connection with thehis or her duties, of a member of the Executive Compensation Committee, including (1) the source of such director’s compensation, of the director, including any consulting, advisory, or other compensatory fee paid by the Companycompany to suchthe director; and (2) whether the director is affiliated with the Company,company, its subsidiaries, or its affiliates.
BOARD COMMITTEES
The Board of Directors has four standing committees, with each committee described below. The All members of each committee are also listed below. The committees consist solely of independent directors.
Auditthe Compensation and Human Capital Committee
The Board of Directors has established the Audit Committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The Audit Committee provides assistance to the Board of Directors in fulfilling its responsibility to the shareholders relating to corporate accounting, reporting practices, the quality and integrity of the financial reports and other operating controls of the Company. The Audit Committee also is responsible for the selection of the independent auditors and engagement partner and oversees the auditors’ activities. The selection of the independent auditor is made in the best interests of the Company and its shareholders. In addition, the committee has responsibility for directly overseeing the Company’s enterprise and risk management and for supervising and assessing the performance of the Company’s internal audit department.
Each member of the Audit Committee satisfies the satisfy these enhanced independence requirements for audit committee members as defined in the listing standards of the NYSE and the rules of the SEC. The Audit Committee operates under a written charter which is available on the Investor Relations/Corporate Governance section of the Company’s website at http://www.dukerealty.com. In addition, the Investor Relations/Corporate Governance section of the Company’s website contains information regarding procedures established by the Audit Committee for the submission of complaints or concerns about the Company’s accounting, internal accounting controls or auditing matters.requirements.
The Board of Directors requires that at least one member of the Board of Directors meet the criteria for an “audit committee financial expert” as defined under the rules of the SEC. The Board of Directors has determined that each of Ms. Cuneo, Mr. Scott, Mr. Shaw, and Mr. Szymanczyk is an “audit committee financial expert” as defined under the applicable rules of the SEC.
Corporate Governance Committee
The purpose of the Corporate Governance Committee is to make recommendations to the Board of Directors regarding corporate governance policies and practices, oversee succession planning for senior management and the Board of Directors, recommend criteria for membership on the Board of Directors, nominate members for election to the Board of Directors and make recommendations to the Board of Directors concerning the members, size and responsibilities of each of the committees.
In determining appropriate candidates to nominate for election to the Board of Directors and in considering shareholder nominees, the Corporate Governance Committee generally considers the age, expertise, business experience, character, and other board memberships of the candidate. The Corporate Governance Committee considers director candidates with a view to bringing to the Board of Directors a variety of experience and backgrounds, including geography, ethnicity and gender diversity. Directors should have familiarity with the Company’s business and industry, a high level of managerial experience in a relatively complex organization and/or be accustomed to addressing complex issues. The committee seeks candidates of the highest character and integrity, and who have experience at or demonstrated understanding of strategy/policy setting and a reputation for working collegially. In addition, candidates should have
sufficient time available to devote to the Company in order to carry out their duties as directors. Diversity is an important strategic initiative at the Company and has relevance with respect to our employees, our suppliers, and our shareholders. Accordingly, the Corporate Governance Committee also recognizes the importance of diversity in identifying its director nominees. The Corporate Governance Committee does not currently have a policy in place regarding diversity in director nominations, but recognizes that “diversity” has several dimensions and is important for the Board of Directors. The Corporate Governance Committee may employ a search firm to identify director candidates.
In nominating members for election to the Board of Directors, the Corporate Governance Committee will consider nominees recommended by shareholders if such recommendations are made in writing to the committee. The Company’s bylaws state that the committee must consider such nominees so long as the recommendation is submitted to the Company’s Corporate Secretary at least 120 calendar days before the first anniversary of the date that the Company’s proxy statement was released to shareholders in connection with the previous year’s annual meeting of shareholders. However, if no annual meeting of shareholders was held in the previous year or if the date of the annual meeting of shareholders changed by more than 30 calendar days from the date contemplated at the time of the previous year’s proxy statement, the notice must be received by the Company’s Corporate Secretary not fewer than the later of (i) 150 calendar days prior to the date of the contemplated annual meeting or (ii) the date which is 10 calendar days after the date of the first public announcement or other notification to the shareholders of the date of the contemplated annual meeting. The Corporate Governance Committee screens all potential candidates in the same manner regardless of the source of recommendation. However, the Corporate Governance Committee may, in its sole discretion, reject any such recommendation for any reason. Shareholder nominations should contain a brief biographical sketch of the candidate, a document indicating the candidate’s willingness to be named in the proxy statement as a nominee and to serve if elected, and evidence of the nominating person’s share ownership. The complete set of requirements for any such nomination is included in the Company’s bylaws.
The Corporate Governance Committee operates under a written charter, which is available on the Investor Relations/Corporate Governance section of the Company’s website athttp://www.dukerealty.com.
Executive Compensation Committee
The Executive Compensation Committee reviews and approves the compensation of the Board of Directors, CEO and other executive officers of the Company and its affiliates (as designated by the Board of Directors from time to time). In addition, it oversees the Company’s compensation strategies, programs, plans and policies to assure that the Board of Directors, CEO, other executive officers and key management employees of the Company and its affiliates are compensated effectively and in a manner consistent with the stated compensation strategy of the Company. It also oversees the administration of all Company benefit plans. In addition, the committee reviews and approves the individual elements of compensation for the executive officers and directors of the Company. The Executive Compensation Committee may delegate authority to sub-committees as appropriate.
Each member of the Executive Compensation Committee satisfies the enhanced independence standards for compensation committee members as defined in the listing standards of the NYSE and the rules of the SEC. The Executive Compensation Committee operates under a written charter, which is available on the Investor Relations/Corporate Governance section of the Company’s website athttp://www.dukerealty.com.
The Executive Compensation Committee regularly uses independent compensation advisers to provide advice regarding our executive compensation program. For additional information regarding the role of the Executive Compensation Committee and its advisers, see “Compensation Discussion and Analysis—Executive Compensation Practices” and “—How We Make Compensation Decisions” later in this proxy statement.
Finance Committee
The Finance Committee reviews and evaluates the financial policies, plans and structure of the Company, its subsidiaries and affiliates. In this role, the Finance Committee reviews the capital structure, investment decisions, financial commitments, and relationships with external sources of financing and rating agencies. The committee also reviews and authorizes asset acquisitions, asset dispositions and development transactions exceeding certain threshold amounts established by the Board of Directors. The Finance Committee operates under a written charter, which is available on the Investor Relations/Corporate Governance section of the Company’s website athttp://www.dukerealty.com.
2016 BOARD COMMITTEE MEMBERSHIP AND MEETINGS
The table below provides membership and meeting information for each of the committees of the Board of Directors during 2016.
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| | | | | | | | | | | | | | | | | | | | |
| | | | | Executive | | | | Corporate |
| Board | | Audit | | Compensation | | Finance | | Governance |
|
| |
| |
| |
| |
|
Thomas J. Baltimore, Jr. | | Member | | | | | | | | | | | | | | | | Member | |
William Cavanaugh III | | Lead Director | | | | | | | | | | | | | | | | Chairman | |
Alan H. Cohen | | Member | | | | | | | | Chairman | | | | | | | | | |
James B. Connor | | Member | | | | | | | | | | | | | | | | | |
Ngaire E. Cuneo | | Member | | | | Member | | | | | | | | Member | | | | | |
Charles R. Eitel | | Member | | | | | | | | | | | | | | | | Member | |
Martin C. Jischke, Ph.D. (1) | | Member | | | | | | | | Member | | | | | | | | | |
Dennis D. Oklak | | Chairman | | | | | | | | | | | | | | | | | |
Melanie R. Sabelhaus | | Member | | | | | | | | Member | | | | | | | | | |
Peter M. Scott, III | | Member | | | | Member | | | | | | | | Member | | | | | |
Jack R. Shaw | | Member | | | | Chairman | | | | | | | | Member | | | | | |
Michael E. Szymanczyk (2) | | Member | | | | Member | | | | | | | | Chairman | | | | | |
Lynn C. Thurber | | Member | | | | | | | | Member | | | | | | | | | |
Robert J. Woodward Jr. (1) | | Member | | | | Member | | | | | | | | Member | | | | | |
Number of 2016 Meetings | | 4 | | | | 7 | | | | 5 | | | | 6 | | | | 4 | |
__________
(1) Messrs. Jischke and Woodward served as directors until the annual meeting of shareholders held on April 27, 2016 when they did not stand for re-election to the Board of Directors.
(2) Because Mr. Woodward, who was previously Chairman of the Finance Committee, did not stand for re-election, the Board of Directors appointed Mr.Szymanczyk to be Chairman of the Finance Committee, effective May 1, 2016.
The independent directors met separately in executive sessions four times in 2016, in addition to the committee meetings noted above. As Lead Director, Mr. Cavanaugh presided over each of these executive sessions.
Majority Voting Policy for Director Elections
The Company’scompany’s articles of incorporation provide that the election of directors at an annual meeting shall be by the affirmative vote of at least a majority of the shareholders present in person or by proxy and entitled to vote at such meeting. In addition, the Company’scompany’s corporate governance guidelines provide for a majority voting policy for the election of directors. Pursuant to this policy, in any non-contested election of directors, any nominee for director who does not receive the affirmative vote of at least a majority of the votes entitled to vote thereon present in person or by proxy or a “Majority(an Against Vote,”Vote) shall promptly tender his or her resignation following certification of the shareholder vote. The Corporate Governance Committee shall consider the resignation offer and recommend to the Board of Directors the action to be taken with respect to such offer of resignation. Within 90 days following certification of the shareholder vote, the Board of Directors will act on the recommendation of the Corporate Governance Committee.
Any director who tenders his or her resignation pursuant tounder this provision shall not participate in the Corporate Governance Committee recommendation or Board of Directors action regarding whether to accept the resignation offer.
If each member of the Corporate Governance Committee receives a Majorityan Against Vote in the same election, then the independent directors who did not receive a Majorityan Against Vote shall appoint a committee amongst themselves to consider the resignation offers and recommend to the Board of Directors whether to accept them.
If the only three or fewer directors who do not receive a Majorityan Against Vote in the same election, constitute three or fewer directors, all directors may participate in the action regardingdecision of whether or not to accept the resignation offers.
Proxy Access Policy
On October 25, 2017, the Board approved the amendment and restatement of the company’s bylaws to implement proxy access. These bylaws state that whenever the Board solicits proxies for the election of directors at an annual meeting of shareholders, subject to certain requirements, a shareholder, or a group of up to 20 shareholders, owning three percent or more of the company’s outstanding common stock continuously for at least three years can require the company to include in its proxy materials for such annual meeting director nominations for up to the greater of:
•20% of the number of directors up for election, rounding down to nearest whole number; or
•two directors.
Shareholder requests to include shareholder nominees in the company’s proxy materials for the 2021 annual meeting of shareholders must be received by the Corporate Secretary no earlier than October 12, 2020, and no later than November 11, 2020, and must satisfy the requirements specified in the company’s bylaws.
BOARD COMMITTEES
The Board has four standing committees: the Audit Committee, Corporate Governance Committee, Compensation and Human Capital Committee, and Finance Committee. All committee members are independent. In addition, each member of the Audit Committee satisfies the enhanced independence requirements for audit committee members as defined in the NYSE listing standards and SEC rules. Similarly, each member of the Compensation and Human Capital Committee satisfies the enhanced independence standards for compensation committee members as defined in the NYSE listing standards and SEC rules. The Board has adopted written charters for each of these committees. The charters are available on the Investor Relations/Corporate Governance section of our website at www.dukerealty.com. In addition, the Investor Relations/Corporate Governance section of our website contains procedures established by the Audit Committee for submitting complaints or concerns about our accounting, internal accounting controls, or auditing matters. The following table summarizes the primary responsibilities of the committees.
|
| |
Committee | Primary Responsibilities |
Audit | • provides assistance to the Board in fulfilling its responsibility to shareholders related to corporate accounting, reporting practices, the quality and integrity of financial reports, cyber security, and other operating controls of the company |
| • selects the company’s independent auditors and engagement partner in the best interests of the company and its shareholders |
| • oversees the independent auditors’ activities |
| • supervises and assesses the performance of the company’s internal audit department |
Corporate Governance | • makes recommendations to the Board regarding corporate governance policies and practices and oversees compliance with such policies and practices |
| • oversees succession planning for senior management and the Board |
| • recommends criteria for membership on the Board |
| • nominates members for election to the Board |
| • makes recommendations to the Board concerning the members, size, and responsibilities of each of the committees |
| • periodically reviews our corporate responsibility practices
|
Compensation and Human Capital | • reviews and approves the compensation of the Board, CEO, and other executive officers of the company and its affiliates |
| • oversees the company’s compensation strategies, programs, plans, and policies to ensure that the Board, CEO, other executive officers, and key management associates of the company and its affiliates are compensated effectively and in a manner consistent with the stated compensation strategy of the company |
| • oversees the administration of all company benefit plans |
| • reviews and approves the individual elements of compensation for the executive officers and directors of the company |
| • reviews associate turnover and diversity, as well as associate development and engagement programs |
Finance | • reviews and evaluates the financial policies, plans, and structure of the company, its subsidiaries and affiliates |
| • reviews the capital structure, investment decisions, financial commitments, and relationships with external sources of financing and rating agencies |
| • reviews and authorizes asset acquisitions, asset dispositions, and development transactions exceeding threshold amounts established by the Board |
2019 BOARD COMMITTEE MEMBERSHIP AND MEETINGS
The following table provides membership and meeting information for each of the committees of the Board during 2019.(1)
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| Board | Audit | Compensation and Human Capital | Finance | | Corporate Governance |
John P. Case | | Member | | | | | | Member | | | | | | | | | |
William Cavanaugh III(2) | | Former Member | | | | | | | | | | | | | | Former Chairperson | |
Alan H. Cohen(2) | | Former Member | | | | | | | | | | Former Member | | | | | |
James B. Connor | | Chairman | | | | | | | | | | | | | | | |
Ngaire E. Cuneo | | Member | | | Member | | | | | | | | | | | | |
Charles R. Eitel | | Member | | | | | | | | | | | | | | Member | |
Norman K. Jenkins | | Member | | | | | | Member | | | | | | | | | |
Melanie R. Sabelhaus | | Member | | | | | | Chairperson | | | | | | | | | |
Peter M. Scott, III | | Member | | | Chairperson | | | | | | Member | | | | | |
David P. Stockert | | Lead Director | | | | | | | | | | | | | | Chairperson | |
Chris T. Sultemeier | | Member | | | | | | | | | | Member | | | | | |
Michael E. Szymanczyk | | Member | | | Member | | | | | | | Chairperson | | | | |
Warren M. Thompson | | Member | | | | | | | | | | Member | | | | | |
Lynn C. Thurber | | Member | | | | | | | | | | | | | | Member | |
Number of 2019 Meetings | | 6 | | | 4 | | | 5 | | | | 9 | | | | 4 | |
|
| |
(1) | All directors, with the exception of Messrs. William Cavanaugh III and Alan H. Cohen, have served on the respective committee(s) listed above since May 1, 2019. |
(2) | Messrs. Cavanaugh and Cohen served as directors until the annual meeting of shareholders held on April 24, 2019, when they did not stand for re-election. |
Independent directors met separately in executive sessions four times in 2019, in addition to the committee meetings noted above. As Lead Director, Mr. Cavanaugh presided over the first of these executive sessions, and Mr. David P. Stockert presided over the last three.
Attendance at Board Meetings and the Annual Meeting
All of our directors attended at least 75% of the meetings of the Board of Directors in 20162019 during the term of their tenure, including meetings of the committees of which they were members. The Companycompany encourages all of its directors to attend the annual meeting and, in 2016,2019, all directors, attended such meeting with the exception of Mr. Baltimore.Warren M. Thompson, attended the meeting.
DIRECTOR COMPENSATION
The Companycompany does not pay additional compensation to directors who are also employees of the Company. The non-employeecompany. Non-employee directors received the following compensation in 2016:2019:
an annual retainer of $90,000,$100,000, payable in cash unless otherwise elected to be paid in shares of our common stock.stock
an annual supplemental retainer for the directors serving in the roles indicated in the following table:
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| | | |
Service Description | Annual Amount |
|
Lead Director/Corporate Governance Committee ChairmanChairperson(1) |
| $25,00030,000 |
|
Audit Committee ChairmanChairperson |
| $20,000 |
|
Executive Compensation and Human Capital Committee ChairmanChairperson |
| $12,50017,500 |
|
Finance Committee ChairmanChairperson |
| $12,50017,500 |
|
Director on more than one committee |
| $5,000 |
|
| |
(1) | The positions of Lead Director and Corporate Governance Committee ChairmanChairperson are currently held by the sameone individual, who receivedand in 2019, there was only one supplemental annual retainer infor the amount of $25,000 for 2016.two positions. |
an annual grant of restricted stock units or RSUs,(RSUs), pursuant to the Duke Realty Corporation 2015 Non-Employee Directors’ Compensation Plan or the 2015(2015 Directors’ Plan.Plan). These RSUs were granted on February 10, 20162019, and with the exception of Messrs. Cavanaugh and Cohen, all such RSUs vested in full on the first anniversary of the grant date. The RSUs granted to Messrs. Cavanaugh and Cohen on February 10, 2019, vested upon their retirement from the Board. The number of RSUs awarded was determined by dividing the grant value of $90,000$125,000 by the closing stock price on the grant date.
Newly appointed non-employee directors are entitled to a one-time grant of RSUs valued at $50,000. These awards vest in full on the second anniversary of the grant date of grant.assuming the recipient remains a director at such time. All retainers are paid on a quarterly basis in arrears, for the previous quarter’s service.
On an annual basis, the Compensation and Human Capital Committee of the Board conducts a competitive review of our non-employee director compensation program using the same peer group of similarly-sized REITs that are used for executive compensation comparisons. Based on these reviews, the Compensation and Human Capital Committee may make changes to the non-employee director compensation program for the upcoming year. The last review was conducted in September 2019 and indicated that our non-employee director compensation levels generally approximate the peer group median, with the exception of the annual grant of RSUs for non-employee directors and the retainer for the Chairpersons of the Audit Committee and the Corporate Governance Committee, which were below the median. Effective January 1, 2017, the annual retainer was increased to $100,000, and the value of2020, the annual grant of RSUs was increased to $125,000.$135,000, the supplemental retainer for the Chairperson of the Audit Committee was increased to $25,000, and a supplemental retainer of $15,000 for the Chairperson of the Corporate Governance Committee was added. The new supplemental retainers will be paid as follows:retainer for the Chairperson of the Corporate Governance Committee is in addition to the $30,000 supplemental retainer for the Lead Director.
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| | | |
Service Description | Annual Amount |
Lead Director/Corporate Governance Committee Chairman |
| $30,000 |
|
Audit Committee Chairman |
| $20,000 |
|
Executive Compensation Committee Chairman |
| $15,000 |
|
Finance Committee Chairman |
| $15,000 |
|
Director on more than one committee |
| $5,000 |
|
TheNon-employee directors also are also reimbursed for reasonable travel expenses incurred in connection with attendance at meetings of the Board, of Directors and its committees or other Companycompany functions in which non-employee directors participate at whichthe request of the Chairman of the Board of Directors and CEO requests the non-employee directors to participate.CEO. In addition, the Company matches dollar for dollar,we match dollar-for-dollar donations made by eligible associates and board members,directors, up to $1,000 per associate/board memberdirector per calendar year, to the eligible nonprofit organization of their choice. The Company doesWe do not provide any perquisites, or other personal benefits, or property to directors for which the aggregate value would exceed $10,000.$10,000 per director.
Non-employee directors may elect to defer receipt of all or a portion of their director compensation payable in cash, stock, or RSUs pursuant to the Directors’ Deferred Compensation Plan. The deferredDeferred compensation and earnings thereon are towill be paid to the directors after they cease to be members of the Board of Directors.Board. Deferred compensation that otherwise is otherwise payable in shares
of common stock is invested in a “deferred stock account” under the Directors’ Deferred Compensation Plan. Deferred compensation that is payable in cash may be invested in either a deferred stock account or an “interest account” under suchthis plan. Each of these types ofThese deferral accounts isare described below.
Deferred Stock Account. This account allows the director, in effect, to invest his or her deferred compensation in shares of the Company’scompany’s common stock. Funds in this account are credited as hypothetical shares of the Company’scompany’s common stock based on the market price at the time the compensation would otherwise have been paid. Dividends on these hypothetical shares are deemed to be reinvested in additional hypothetical shares based upon the market price of the Company’scompany’s common stock on the date dividends are paid. Actual shares are issued only when a director ends his or her service on the Board of Directors.Board.
Interest Account. Through December 31, 2016,2019, amounts in this account earned interest at a rate equal to 120% of the long-term applicable federal rate, as published by the Internal Revenue Service.
Stock Ownership Policies
Pursuant to the Company’sour Director and Executive Stock Ownership Guidelines or the Stock(Stock Ownership Guidelines,Guidelines), a stock ownership goal for each director is determined on an individual basis, first in dollars equal to five times the director’s annual retainer, and then by converting that amount to a fixed number of shares. Each director has five years to attain the target number of shares. A copy of these Stock Ownership Guidelines can be found on the Investor Relations/Corporate Governance section of the Company’sour website at http://www.dukerealty.com.
Stock Retention Requirements.
Until directors reach their targeted share ownership, they are required to retain any shares that they owned on the date they became subject to the Stock Ownership Guidelines and at least 75% of “net shares” delivered through the Company’sour director compensation programs. For this purpose, “net shares” means the number of shares obtained by exercising stock options or through the vesting of awards, less the number of shares the director sells or trades to pay for any exercise costs. If the director transfers an award to a family member who resides in the same household, the transferee will be subject to the same retention requirements and the shares will still be counted toward satisfaction of the ownership requirements.
The following table sets forth compensation information for all of the Company’s non-employee directors for the fiscal year ended December 31, 2016.
The following table sets forth compensation information for all of our non-employee directors for the fiscal year ended December 31, 2019.
Director Compensation Table for 20162019
| | Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) (3) | All Other Compensation ($) (4) | Total ($) | | Fees Earned or Paid in Cash (1) | Stock Awards (2)(3) | All Other Compensation (4) | Total |
Thomas J. Baltimore, Jr. | 87,500 | 90,000 | – | 177,500 | |
John P. Case | | | $100,000 | $125,000 | – | $225,000 |
William Cavanaugh III(5) | 112,500 | 90,000 | – | 202,500 | | $97,500 | $125,000 | – | $222,500 |
Alan H. Cohen | 100,000 | 90,000 | – | 190,000 | | $75,000 | $125,000 | – | $200,000 |
Ngaire E. Cuneo | 92,500 | 90,000 | – | 182,500 | | $100,000 | $125,000 | – | $225,000 |
Charles R. Eitel | 87,500 | 90,000 | 1,000 | 178,500 | | $100,000 | $125,000 | $1,000 | $226,000 |
Martin C. Jischke, Ph.D. | 65,000 | 90,000 | – | 155,000 | |
Norman K. Jenkins | | | $100,000 | $125,000 | – | $225,000 |
Melanie R. Sabelhaus | 87,500 | 90,000 | 1,000 | 178,500 | | $116,875 | $125,000 | $1,000 | $242,875 |
Peter M. Scott, III | 92,500 | 90,000 | – | 182,500 | | $125,000 | $125,000 | – | $250,000 |
Jack R. Shaw | 112,500 | 90,000 | – | 202,500 | |
David P. Stockert(5) | | | $115,000 | $125,000 | $1,000 | $241,000 |
Chris T. Sultemeier | | | $100,000 | $125,000 | – | $225,000 |
Michael E. Szymanczyk | 98,750 | 90,000 | – | 188,750 | | $121,875 | $125,000 | – | $246,875 |
Warren M. Thompson(5) | | | $75,000 | $175,000 | - | $250,000 |
Lynn C. Thurber | 87,500 | 90,000 | 1,000 | 178,500 | | $100,000 | $125,000 | $1,000 | $226,000 |
Robert J. Woodward Jr. | 78,125 | 90,000 | – | 168,125 | |
| |
(1) | Because we pay director fees in arrears on a quarterly basis, a portion of the cash fees paid to directors in 20162019 was based on the prior year’s annual and supplemental retainer amount.amounts. Messrs. Baltimore, Cavanaugh, Jenkins, Stockert, and Cohen,Szymanczyk and Mses. Cuneo and Thurber each elected to receive payment of their annual cash retainer in shares of common stock as indicated in the following table. Furthermore, Mr.Messrs. Cavanaugh, Jenkins, and Szymanczyk and Ms. Cuneo elected to defer receipt of their shares for their annual retainer and any supplemental retainer pursuant to the Directors’ Deferred Compensation Plan of Duke Realty Corporation.Plan. The number of shares was determined by dividing the amount of the applicable retainer by the closing stock price on the date the retainer was earned. |
|
| | |
Name | | Total Number of Shares Received in 20162019 for Annual Cash Retainer |
Thomas J. Baltimore, Jr | 3,634 |
William Cavanaugh III | 4,677 |
Alan H. Cohen | 3,6343,333 |
Ngaire E. Cuneo | 3,842 | 3,306 |
Norman K. Jenkins | | 3,306 |
David P. Stockert | | 3,765 |
Michael E. Szymanczyk | | 4,026 |
Lynn C. Thurber | 3,634 | 3,306 |
| |
(2) | Represents the aggregate grant date fair value of stock awards we granted by the Company as computed under FASB (Financial Accounting Standards Board) ASC (Accounting Standards Codification) Topic 718.718, Compensation- Stock Compensation, (ASC 718). The fair value of the stock awards was equal to the stock price on the date of grant. Compensation in the form of stock awards includes RSUs granted in 2016.2019. |
| |
(3) | No options were granted to directors in 2016,2019, and there were no outstanding options held by the Company’sour non-employee directors as of December 31, 2016.2019. The following table sets forth the aggregate number of outstanding stock awards held by the Company’sour non-employee directors as of December 31, 2016:2019: |
|
| | |
Name | | Number of RSUs |
Thomas J. Baltimore, Jr.John P. Case | 4,803 | 6,289 |
William Cavanaugh III | 4,803 | –
|
Alan H. Cohen | 4,803 | –
|
Ngaire E. Cuneo | 4,803 | 4,285 |
Charles R. Eitel | 4,803 | 4,285 |
Norman K. Jenkins | | 4,285 |
Melanie R. Sabelhaus | 4,803 | 4,285 |
Peter M. Scott, III | 4,803 | 4,285 |
Jack R. ShawDavid P. Stockert | 4,803 | 4,285 |
Chris T. Sultemeier | | 6,289 |
Michael E. Szymanczyk | 4,803 | 4,285 |
Warren M. Thompson | | 6,003 |
Lynn C. Thurber | 4,803 | 4,285 |
| |
(4) | Represents the amount of matching charitable contributions provided under the Duke Realty Matching Gifts program. |
| |
(5) | Reflects changes in committee assignments or Chairperson position during 2019. |
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors, or theBoard’s Audit Committee is composed of fourthree directors, each of whom is independent under Securities and Exchange Commission, or SEC Rule 10A-3 and the listing standards of the New York Stock Exchange.NYSE. The duties and responsibilities of the Audit Committee are set forth in a written Audit Committee Charter which is available on the Investor Relations/Corporate Governance section of the Company’scompany’s website at http://www.dukerealty.com.The Board of Directors has determined that each of Ms. Cuneo, Mr. Scott, Mr. Shaw and Mr. Szymanczyk is an “audit committee financial expert” as defined by the rules of the SEC.
Management is responsible for the Company’scompany’s internal controls and financial reporting process andas well as compliance with laws and regulations and ethical business standards. KPMG LLP, or KPMG, the Company’scompany’s independent registered public accounting firm, is responsible for auditing the consolidated financial statements and expressing an opinion on the financial statements and the effectiveness of internal controls over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States)., or the PCAOB. The Audit Committee’s responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee meets separately at most regular committee meetings with management, the Internal Audit Department, and KPMG. The Audit Committee met with management and KPMG to review and discuss the Company’s 2016company’s 2019 consolidated financial statements. The Audit Committee also discussed with KPMG the matters required by the applicable requirements of the PCAOB Auditing Standard No. 16 (Communication with Audit Committees). Managementand the SEC, and KPMG also made presentations to the Audit Committee throughout the year on specific topics of interest, including: (i) current developments and best practices for audit committees; (ii) updates on the substantive requirements of the Sarbanes-Oxley Act of 2002, including management’s responsibility for assessing the effectiveness of internal control over financial reporting; (iii) the Company’scompany’s critical accounting policies; (iv) the applicability of several new and proposed accounting releases; and (v) numerous SEC initiatives. The Audit Committee has received the written disclosures and the letter from KPMG in accordance with applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with KPMG that firm’s independence. The Audit Committee pre-approved all audit, audit-related, and permitted non-audit services provided by KPMG to the Companycompany and the related fees for such services, and has concluded that such services are compatible with KPMG’s independence.
Based upon the Audit Committee’s discussions with management and KPMG, and the Audit Committee’s review of the representations of management and KPMG, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company’scompany’s Annual Report on Form 10-K for the year ended December 31, 20162019, to be filed with the SEC.
Audit Committee
Jack R. Shaw, ChairmanPeter M. Scott, III, Chairperson
Ngaire E. Cuneo
Peter M. Scott, III
Michael E. Szymanczyk
The information contained in the Audit Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference in such filing.
FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The Company
We incurred the following fees for services rendered by KPMG, the Company’sour independent registered public accountants, during 20162019 and 2015:2018:
Audit Fees: $1,354,220$1,721,000 for 20162019 and $1,290,960$1,402,000 for 2015.2018, which included fees for services associated with comfort letters and auditor consents totaling $425,000 and $330,000 respectively.
Audit-Related Fees: $43,00055,000 for 20162019 and $38,500$53,000 for 2015.2018. These fees include employeeprimarily relate to associate benefit plan audits and other accounting related consultation.audits.
Tax Fees: $169,8477,673 for 20162019 and $4,209$25,162 for 2015.2018. These fees includeare for services foron various tax consulting matters and for 2016, includes $148,338include an additional $15,000 in 2018 approved by the Audit Committee for a special project.Committee.
All Other Fees: None.
Audit Committee Pre-Approval Policies
The Audit Committee has adopted a policy that requires the pre-approval of all fees paid to KPMG for audit and non-audit services. Under thatthis policy, the committee pre-approved the following services, including the amount of fees payable for such services:
Taxtax consulting services;
Auditaudit services associated with SEC filings;
Consultationsconsultations regarding the appropriate accounting or disclosure treatment of specific transactions or events;
Audits of the Company’s employee benefit plans; and
Accounting and compensation consulting services.audits of our associate benefit plans.
Any fees in excess of the pre-approved amounts, or any services not described above, require the pre-approval of the Audit Committee chairman,chairperson, with a review by the Audit Committee at its next scheduled meeting. All non-audit services provided by KPMG in 20152018 and 20162019 were approved in accordance with this pre-approval policy.
Audit Committee Review
The Company’s Audit Committee has reviewed the services rendered and the fees billed by KPMG for the fiscal year ended December 31, 2016.2019. The Audit Committee has determined that the services rendered and the fees billed last year that were not related directly to the audit of the Company’sour financial statements were compatible with the maintenance of independence of KPMG as the Company’sour independent registered public accountants.
REPORT OF THE EXECUTIVE COMPENSATION AND HUMAN CAPITAL COMMITTEE
Each member of our Executive Compensation and Human Capital Committee is independent, as determined by the Board of Directors and based on the NYSE listing standards. As membersMembers of the Executive Compensation and Human Capital Committee we have primary responsibility for setting the compensation of the Company’scompany’s senior executive officers in a manner that is effective and consistent with the compensation strategy for the Company.company. As part of that responsibility, we have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based upon such reviews and discussions, we recommended that the Board of Directors include the Compensation Discussion and Analysis in this Proxy Statement.proxy statement.
Executive Compensation and Human Capital Committee
Alan H. Cohen, Chairman
Melanie R. Sabelhaus, Chairperson
Lynn C. ThurberJohn P. Case
Norman K. Jenkins
The information contained in the Report of the Executive Compensation and Human Capital Committee shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, except to the extent that we specifically incorporate it by reference in such filing.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Executive Compensation and Human Capital Committee consists of three independent directors: Mr. Cohen, Ms. Sabelhaus, Mr. Case, and Ms. Thurber. Mr. Jischke also served on the Executive Compensation Committee through April 27, 2016.Jenkins. No member of the Executive Compensation and Human Capital Committee is or was formerly an officer or an employeeassociate of the Company.company. No executive officer of the Companycompany serves as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving as a member of the Company’s Board, of Directors, nor has such interlocking relationship existed in the past.
Corporate Responsibility
As part of our vision to continually set the standard for maximizing stakeholder value, we have a long standing commitment to sustainable practices in environmental, social, and corporate governance, or ESG, initiatives. Below, we note some of our accomplishments in each ESG category. At the end of 2019, we decided to strengthen our commitment by hiring a Vice President of Corporate Responsibility, whose sole responsibility will be to lead our efforts on all facets of ESG strategic initiatives and implementation of related strategies, policies, communications, and processes. We are proud of our ESG efforts, but recognize that we still have opportunities to do more. We believe our new Vice President of Corporate Responsibility will help us do just that.
Environmental
We have implemented sustainable and customer-oriented practices in development and operations to try to mitigate the impact to the environment and reduce overall corporate risk.
On December 17, 2019, we adopted a Sustainable Development Policy intended to increase the operational efficiency of our buildings and promote sustainable design principles. We are committed to integrating innovative, sustainable building design features in alignment with LEED®, including constructing to LEED criteria and achieving certification in all new developments where feasible. LEED®- an acronym for Leadership in Energy and Environmental Design™ - is a registered trademark of the U.S. Green Building Council®.
We also follow sustainable building standards for maintenance, renovations, and tenant improvement projects with an objective of providing operating cost savings for tenants as well as supporting tenant and landlord sustainability objectives.
For existing buildings, we look for ways to reduce energy, water, and waste consumption, including, for example, retrofitting older high energy consuming light fixtures to newer, more efficient LED lighting. While we do not control most of the utility usage at our properties, we partner with Goby, Inc. in order to help us monitor and manage the utility usage that we do control. Our partnership with Goby, Inc. is also instrumental in benchmarking buildings with EnergyStar when required by municipalities or other governmental regulation. In order to make this partnership more useful, we have updated our standard lease form to include language requiring tenants to provide us with their utility usage. With the help of the utility management platform and more data from tenants, we expect to establish realistic utility usage benchmarks and then find ways to work with tenants to help make energy, water, and waste efficiency decisions.
In 2019, we completed the GRESB Real Estate Assessment for the second time. GRESB is an industry leader in providing ESG benchmarks for real estate assets. By responding, we are able to assess and improve our ESG performance over time. In 2019, we increased our GRESB survey score from the previous year and we expect to continue participating in the survey.
We were the first of the industrial REITs to issue a “green bond” in the United States in November 2019. We plan to use the net proceeds from this green bond to finance future or refinance recently completed “Eligible Green Projects.” This may include green buildings, energy efficiency projects, sustainable water and wastewater management systems, renewable energy projects, clean transportation solutions and pollution prevention and control.
Social
We have numerous initiatives that demonstrate our care and concern for everyone with whom we interact, including the communities in which we do business.
| |
• | We are dedicated to fair compensation, fostering a dynamic and balanced work environment, and providing associates with developmental opportunities to perform well and derive satisfaction from their work. A testament to our culture is our average associate tenure of 12.5 years. We also routinely conduct associate engagement surveys and have received numerous awards for being a great place to work. Recently, the Best Companies Group in partnership with local business journals awarded us 1st place for the Best Places to |
Work in Chicago, Illinois (medium company category); 2nd place for the Best Places to Work in Philadelphia, Pennsylvania (large company category); and 4th place for the Best Places to Work in Orange County, California (large company category).
Since 2001, we have had a diversity and inclusion program, pursuant to which we strive to attract and retain diverse talent, hire diverse vendors, and partner with our tenants on diversity initiatives. In 2019, NAREIT, the REIT industry trade group, recognized us as the Corporate Gold winner and Mr. Connor as the individual winner of its inaugural Dividends Through Diversity and Inclusion Recognition Awards program.
In 2019, we continued our support of the Duke Realty Women’s Network initiative, the goal of which is to create a network that supports the investment in, development, and growth of women at our company. The Duke Realty Women’s Network holds semi-annual panel discussions for all associates and organizes various networking events in the local offices.
| |
• | In addition, we promote all aspects of wellness for our associates-including physical, emotional, and financial health-through our wellness program, which includes group activities, online resources, and generous incentives. We have also won awards for our wellness program, including Finalist-4th Place in the Healthiest Employer of Indiana awards and the American Heart Association’s Workplace Health Achievement Gold Level Recognition. |
We encourage our associates to participate in volunteer and community activities and support those who do by providing each associate with two paid community days per year. We hold an annual company-wide Day of Service in which all associates are encouraged to volunteer in their local communities. We also have charitable contribution programs, such as our dollars for doers program (matching dollars for volunteer hours spent) and our matching gifts program (matching dollars for associate donations to charities).
We have partnered with the American Red Cross since 2017 to help prevent and alleviate human suffering in the face of emergencies. Each year, Duke Realty associates participate in various engagement opportunities from volunteering in the organization’s “Sound the Alarm” campaign, during which our associates helped local fire departments install smoke alarms, replace batteries in existing smoke alarms, and provide fire prevention and safety education, to assisting in the Missing Maps project, during which associates have helped put people from high risk countries on the map, organized blood drives in their communities, and built military kits to ship overseas. Currently, Duke Realty is an American Red Cross Disaster Responder member and recognized as one of the largest supporters nationwide.
Corporate Governance
Our reputation is one of our most important assets. Since our inception, we have insisted that our associates, officers, and directors conduct business in accordance with the highest ethical standards. We also strive to implement robust corporate governance practices, as they are critical to keeping us accountable and transparent.
We are devoted to ensuring that the Board has a strong oversight function, with a majority of independent directors and a Lead Director. We also conduct annual evaluations of our Board and its committees.
31% of our Board and our nominees to the Board are female. Our Compensation and Human Capital Committee is chaired by a woman. We also have a Board Diversity and Inclusion Policy.
The Board oversees our risk management processes, with our Internal Audit Department reporting directly to the Audit Committee. Please see “Board Oversight of Risk Management” for more information regarding the Board’s role in risk management.
We conduct annual Code of Business Ethics training sessions, and associates and directors must sign off on our Code of Business Ethics every year.
We have a Corporate Responsibility Committee that reports to the Board.
We have adopted proxy access, shareholders can call special meetings and amend our bylaws, and we do not have a shareholder rights plan.
Through all of our ESG efforts, we demonstrate that operating and developing commercial real estate can be conducted with a conscious regard for the environment and the community, while also benefiting our shareholders, associates, tenants, and communities in which we operate.
PROPOSAL TWO: ADVISORY VOTE TO APPROVE THE COMPENSATION OF NAMED EXECUTIVE OFFICERS
In accordance with the requirements of Section 14A of the Exchange Act and the related SEC rules, we are asking our shareholders to vote to approve, on an advisory (nonbinding) basis, the compensation of our named executive officers, as disclosed in this Proxy Statement.proxy statement.
As discussed in the Compensation Discussion and Analysis beginning on page 27,35, we have designed our executive compensation program to attract and retain the highest quality executive officers, directly link pay to our performance, and build value for our shareholders. Our program provides total compensation opportunities at levels that are competitive in our industry, ties a significant portion of each executive’s compensation to achieving our key business objectives, and closely aligns the interests of our executives with the interests of our shareholders. In sum, our compensation is designed to reward executives when the Company achieves strong financial and operational results, and likewise to provide reduced pay when financial and operating results are not as strong. We believe the 2016 compensation of our named executive officers is reflective of and consistent with that intent.
This proposal, commonly known as a “say-on-pay” proposal, gives our shareholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers described in this Proxy Statement.proxy statement.
At the annual meeting of shareholders on April 27, 2016, over 95%24, 2019, more than 91% of the shares voted were voted in support of the 2015 compensation of our named executive officers, which wasas discussed and disclosed in the 20162019 proxy statement. The Executive Compensation and Human Capital Committee appreciates and values the views of our shareholders. In considering the results of last year’s advisory vote to approve executive compensation, the Executive Compensation and Human Capital Committee concluded that the compensation paid to our named executive officers and the Company’sour overall pay practices enjoy strong shareholder support. No significant changes were made to our executive compensation program for 20162019 as a result of the advisory vote.
The Board of Directors invites you to review carefully the Compensation Discussion and Analysis beginning on page 2735 and the tabulartables and other disclosures on compensation under Executive Compensation beginning on page 45,53, and encourages you to cast a vote to approve the Company’scompany’s executive compensation programs through the following resolution:
“Resolved, that shareholders approve the compensation of the Company’scompany’s named executive officers as discussed and disclosed in the Compensation Discussion and Analysis, the executive compensation tables, and any narrative executive compensation disclosure contained in this Proxy Statement.proxy statement.”
The say-on-pay vote is advisory and, therefore, not binding on the Company,company, the Executive Compensation and Human Capital Committee, or the Board of Directors.Board. The shareholders’ advisory vote will not overrule any decision made by the Board of Directors or the Executive Compensation and Human Capital Committee or create or imply any additional fiduciary duty by our directors. However, if there is a significant vote against the named executive officer compensation as disclosed in this Proxy Statement,proxy statement, we will consider our shareholders’ concerns and the Executive Compensation and Human Capital Committee will evaluate whether any actions are necessaryneeded to address those concerns. Currently say-on-paySay-on-pay votes currently are held by the Companycompany annually, and we expect the next say-on-pay vote after this Annual Meeting to occur at the 20182021 annual meeting of shareholders, although such timing may change depending on the outcome of the vote on Proposal Three.shareholders.
The proposal to approve, on an advisory basis, the compensation of the Company’sour named executive officers will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. Abstentions and broker non-votes will not be treated as votes cast and therefore will not affect the outcome.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL TWO.
PROPOSAL THREE: ADVISORY VOTE ON FREQUENCY OF SHAREHOLDER VOTES
ON COMPENSATION OF NAMED EXECUTIVE OFFICERS
As required by Section 14A of the Exchange Act, we are including a proposal for our shareholders to vote to approve, on an advisory (nonbinding) basis, the frequency with which they wish to have a nonbinding, advisory vote to approve the compensation of our named executive officers through a proposal similar to this year’s Proposal Two. By voting on this Proposal Three, shareholders may indicate whether they would prefer an advisory say-on-pay vote on named executive officer compensation once every one, two, or three years.
After careful consideration, the Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for our Company, and therefore the Board of Directors recommends that you vote for a one-year frequency for the advisory say-on-pay vote on executive compensation.
In formulating its recommendation, the Board of Directors considered that an annual advisory vote on the compensation of named executive officers will allow our shareholders to provide us with their direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. We believe that say-on-pay votes are an effective communication vehicle, and communication can be most useful when it is received frequently. We understand that our shareholders may have different views on this matter, and we look forward to hearing from our shareholders on this proposal.
Please mark on the Proxy Card your preference as to the frequency of holding shareholder advisory votes on the compensation of named executive officers as either every year, every two years, or every three years, or you may abstain from voting.
The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency that has been selected by shareholders. Abstentions and broker non-votes will not be treated as votes cast and therefore will not affect the outcome. The Board of Directors will take the results of the vote into account when deciding when to call for the next advisory vote on the compensation of named executive officers. However, because this vote is advisory and not binding on the Board of Directors in any way, the Board of Directors may decide that it is in the best interests of our shareholders and the Company to hold an advisory vote on the compensation of named executive officers more or less frequently than the option approved by the Company’s shareholders.
A vote similar to this Proposal Three will occur at least once every six years.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EVERY “1 YEAR” ON PROPOSAL THREE.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In the paragraphs that follow, we provide an overview and analysis of our compensation program and policies, the material compensation decisions we havethe Compensation and Human Capital Committee has made under those programs and policies with respect to our top executive officers, and the material factors that wethe Compensation and Human Capital Committee has considered in making those decisions. Following thisthe Compensation Discussion and Analysis or CD&A,(CD&A), under the heading “Executive Compensation,” is a series of tables containing specific data about the compensation earned in 20162019 by the following individuals, whom we refer to as our named executive officers:
our former Executive Chairman Mr. Dennis D. Oklak, who stepped down from that position on January 6, 2017, and is currently serving as the non-executive Chairman of the Board of Directors;
our President and Chief Executive Officer, Mr. James B. Connor;
our Executive Vice President and Chief Financial Officer, Mr. Mark A. Denien;
our Executive Vice President and Chief Operating Officer, Mr. Steven W. Schnur.
our Executive Vice President, Chief Investment Officer, Mr. Nicholas C. Anthony; and
our Executive Vice President, General Counsel and Corporate Secretary, Ms. Ann C. Dee;
our Executive Vice President, Construction, Mr. Peter D. Harrington, since July 1, 2016; and
our former Executive Vice President, Construction, Mr. Steven R. Kennedy, who left the Company on June 30, 2016.
As a matter of convenience, throughout this CD&A we refer to the Board of Directors of the Company as the “Board” and to the Executive Compensation Committee as the “Committee.”Dee.
Our 2016 Business Objectives2019 Performance Highlights
2019 was another excellent year for Duke Realty Corporation is a U.S.Realty. We improved in nearly every key operating metric, including same-property net operating income growth, rent growth, and development starts compared to what was an already very impressive 2018, and further strengthened our already sound balance sheet.
At December 31, 2019, we owned or jointly controlled 519 primarily industrial properties, REIT providing supply chain real estate solutions with an incremental focus on medical office real estate. As of December 31, 2016, our diversified portfolio of industrial and medical office properties included 540 rental and development properties, including jointly controlled properties, encompassing 137.5which encompassed 155.3 million rentable square feet (including 38 unconsolidated joint venture in-service properties with 11.0 million square feet, 21 consolidated properties under development with 8.7 million square feet and isone unconsolidated joint venture property under development with 133,000 square feet). Our properties are leased by a diverse base of approximately 1,400more than 800 tenants whose businesses include e-commerce, manufacturing, retailing, wholesale trade, distribution, healthcare and professional services. As a fully integrated commercial real estate firm, we provide in-house leasing, management, development and construction services.distribution. We also own, directly andowned, including through ownership interests in unconsolidated joint ventures approximately 2,200(with acreage not adjusted for our percentage ownership interest), 1,380 acres of land and controlcontrolled an additional 1,6001,000 acres through purchase options.
Our 2016 business plan focused on improving operating results, continued portfolio repositioningIn 2019, we refined the geography of our assets to substantially reduceincrease our exposure to suburban office propertiescoastal Tier 1 markets through value-creating development projects and strengtheningthe acquisition of quality, strategically-located industrial assets with high potential for growth in cash flow.
In addition to portfolio repositioning, we continued to execute on our overall financial position.operational and capital strategies in 2019. Highlights include:
In 2019, earnings per diluted share increased by 10% from 2018, primarily due to higher gains on sales of properties. Earnings per diluted share from continuing operations increased by 11% from 2018. In 2019, we achieved an increase of over 10% in Adjusted Funds from Operations (AFFO) and over 8% in Core Funds from Operations (Core FFO). AFFO and Core FFO are not generally accepted accounting principles (GAAP) metrics. See Appendix A for a discussion and reconciliation to the most directly comparable GAAP measures.
Our operational focusaverage total in-service occupancy for 2016the year was 96.0%. Even with the high occupancy level in our stabilized portfolio, we have ample opportunity to grow adjusted funds from operations, or AFFO, through (1) increasing property occupancyearnings and lease additional space in our unstabilized portfolio.
We recorded a 28.6% increase in GAAP rental rates for 2019, which contributed to achieve strong growth in same propertysame-property net operating income; (2) managing capital expenditures on second generation leases; and (3) providing a full line of real estate services to our tenants and to third parties.
Our capital strategy was to improve our balance sheet and overall financial position by actively managing the components of our capital structure. This included utilizing proceeds from property dispositions to repay debt, opportunistically raising capital in the debt and equity markets when rates and pricing were favorable, maintaining investment grade ratings from our credit rating agencies and improving the key metrics that drive such credit ratings.income growth.
Fiscal 2016 PayWe maintained our strong balance sheet and Performance Alignmentoverall financial position by utilizing proceeds from property dispositions to repay debt and opportunistically raise capital in the debt markets when rates and pricing were favorable, all while maintaining high investment-grade credit ratings and improving the key metrics that drive such ratings.
We were the first of the industrial REITs to issue a “green bond” in the United States in November 2019. Please see “Corporate Responsibility—Environmental” for more information on this “green bond” issuance. |
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Fiscal Year 2016 Performance Measures and Results
|
| Fiscal Year 2016 Award Payouts/Vesting |
Annual Incentive Awards | | | |
Corporate Goals | |
Annual cash incentive awards for all executives had the following corporate goals: AFFO/share, average in-service lease up occupancy, and same-property net operating income (industrial and MOB only). Awards for Messrs. Connor and Denien also included a corporate goal relating to Fixed Charge Coverage Ratio (Trailing 12 months). | The table below summarizes the overall bonus payouts which were based on the corporate, division (as applicable) and individual goals and weightings for each executive.
|
| | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual |
|
AFFO/Share
| |
| $1.02 |
|
| $1.05 |
|
| $1.08 |
|
| $1.10 |
|
| $1.06 |
| NEO | % of Target Earned | Annual Incentive Payout |
Average In-Service Lease Up Occupancy | 94.7 | % | 95.9 | % | 96.7 | % | 97.0 | % | 96.5 | % | Oklak | 144.4 | % |
| $649,800 |
|
Same-Property Net Operating Income | 2.0 | % | 3.5 | % | 4.7 | % | 5.5 | % | 6.0 | % | Connor | 152.3 | % |
| $1,138,070 |
|
Fixed Charge Coverage Ratio | 2.9x |
| 3.2x |
| 3.4x |
| 3.6x |
| 3.6x |
| Denien | 152.3 | % |
| $770,390 |
|
Division Goals | Dee | 141.2 | % |
| $523,150 |
|
Awards for Messrs. Harrington and Kennedy included the following financial and operational goals related to our Construction Division, plus various other metrics relating to project execution, overhead expenses, and diversity and inclusion.
| Harrington | 131.6 | % |
| $335,580 |
|
| | |
(Dollar figures are in millions.) | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual |
| Due to Mr. Kennedy's departure in June 2016, he was not eligible to receive an annual bonus for 2016. |
Construction Volume | |
| $481.7 |
|
| $688.1 |
|
| $757.0 |
|
| $825.8 |
|
| $553.8 |
|
Construction Starts | |
| $437.5 |
|
| $625 |
|
| $687.5 |
|
| $750 |
|
| $807.9 |
| | | |
Third-Party Fee Variance | | (10 | )% | 0% |
| 25 | % | 50 | % | 80.4 | % | | | |
Development Cost Variance | | 4 | % | 2 | % | 1.5 | % | 1 | % | 1.67 | % | | | |
Individual Goals | | | |
Awards for all executives included subjective, non-formulaic individual performance goals. | |
| | | | | | | | | |
2016-2018 Performance Share Plan Awards (“PSP Awards”) | | | |
PSP awards vest after three years, if and to the extent performance goals are met, and have three performance components: average annual growth in AFFO/Share, leverage metric (split between fixed charge coverage ratio and debt plus preferred to EBITDA ratio, each based on trailing 12 months of 2018), and relative total shareholder return, based on a peer group of selected REITs. Named executive officers have the opportunity to elect to receive LTIP Units with the same vesting schedule in lieu of PSP awards. | The performance goals and resulting payout for the PSP Awards relating to fiscal years 2014-2016 are described on pages 40 and 41.
|
| | Threshold (50%) |
| Target (100%) |
| Superior (200%) |
| | |
Average Annual Growth in AFFO/Share | 0% |
| 3% |
| 5 | % | | |
Leverage Metric: | | | | | |
Fixed Charge Coverage Ratio | 2.7x |
| 3.2x |
| 3.5x |
| | |
Debt Plus Preferred to EBITDA Ratio | 7.0 |
| 6.5 |
| 6.0 |
| | |
| | Threshold (50%) | Target (100%) | Stretch (150%) | Superior (200%) | |
Relative TSR (percentile) | | ≥30 and <40 |
| ≥40 and <60 |
| ≥60 and <80 |
| ≥80 | |
Restricted Stock Units (RSUs)
RSUs granted in 2016 vest in equal amounts on the first three anniversaries of the grant date, provided that the named executive officer remains employed on each such vesting date. Named executive officers have the opportunity to elect to receive LTIP Units with the same vesting schedule in lieu of RSUs. |
Our operational and strategic success has translated into strong returns to our shareholders. Our total shareholder return was 46.4% and 107.7% over the past three and five fiscal years, respectively. This is particularly favorable when compared to total shareholder returns of 26.2% and 40.5% for the MSCI US REIT Index over the same time periods. We increased our quarterly dividend from $0.215 per share for the first three quarters of 2019 to $0.235 per share for the fourth quarter of 2019, representing a 9.3% increase. We expect to continue to distribute an amount at least equal to our taxable earnings, to meet the requirements to maintain our REIT status, and additional amounts as determined by our Board. Distributions are declared at the discretion of our Board and are subject to actual cash available for distribution, our financial condition, capital requirements, and such other factors as our Board deems relevant.
Fiscal 2019 Pay and Performance Alignment |
| | | | | | | | | | | | | | | | | |
Fiscal Year 2019 Performance Measures and Results |
| Fiscal Year 2019 Award Payouts/Vesting |
Annual Incentive Awards | | | |
Corporate Goals (all named executive officers) | |
Annual cash incentive awards for all executives had the following corporate goals: AFFO/share, Core FFO/share, and average total in-service lease up occupancy. | The table below summarizes the overall bonus payouts which were based on the corporate, division (as applicable) and individual goals and weightings for each named executive officer. |
| | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual |
AFFO/Share |
| $1.23 |
|
| $1.27 |
|
| $1.29 |
|
| $1.32 |
| $1.30 | NEO | % of Target Earned | Annual Incentive Payout |
Core FFO/Share | $1.34 |
| $1.40 |
| $1.43 |
| $1.47 |
| $1.44 | Connor | 153.80% | $2,164,800 |
Average Total In-Service Lease Up Occupancy | 94.00% |
| 95.50% |
| 96.20% |
| 97.00% |
| 96.00% | Denien | 153.80% | $1,076,250 |
| Schnur | 153.70% | $969,360 |
Division Goals (Mr. Anthony) | Anthony | 155.40% | $922,810 |
The award for Mr. Anthony also included the following goals related to our Capital Transactions and Joint Venture Division. | Dee | 153.70% | $804,480 |
(Dollar figures are in millions) | Threshold (50%) |
| Target (100%) |
| Stretch (150%) |
| Superior (200%) |
| Actual | | | |
Acquisitions Volume(1) | $133.3 |
| $200.0 |
| $233.3 |
| $300.0 |
| $215.7 | | | |
Acquisitions Yield(2) | 4.00% |
| 4.25% |
| 4.40% |
| 4.60% |
| 4.66% | | | |
Dispositions Volume(1) | $326.2 |
| $434.9 |
| $489.3 |
| $598.0 |
| $498.5 | | | |
Dispositions Yield(3) | 6.25% |
| 6.00% |
| 5.60% |
| 5.40% |
| 5.64% | | | |
(1) Based on ownership share. | | | |
(2) Stabilized capitalization rate | | | |
(3) In-place capitalization rate | | | |
| | | |
Individual Goals (all named executive officers) | | | |
Awards for all executives included subjective, non-formulaic individual performance goals. | |
2019-2021 Performance Share Plan Awards (PSP awards) | | | |
PSP awards vest after three years, if and to the extent performance goals are met, and have two performance components: average annual growth in AFFO/Share and relative total shareholder return, based on a peer group of selected REITs and certain indices. Named executive officers have the opportunity to elect to receive Long-Term Incentive Plan, or LTIP, units with the same vesting schedule in lieu of PSP awards. | The performance goals and resulting payout for the PSP awards relating to fiscal years 2017-2019 are described on pages 49-50.
|
| Threshold (50%) |
| Target (100%) |
| Superior (200%) |
| | |
Average Annual Growth in AFFO/Share | 0.00% |
| 3.00% |
| 5.00% or above | |
| Threshold (50%) |
| Target (100%) |
| Superior (200%) |
| Outperformance (250%) |
Annualized Relative TSR (Total Shareholder Return) Percentile Rank | 25 |
| 50 |
| 75 |
| ≥75 & ≥15.00% Absolute TSR |
Restricted Stock Units (RSUs) RSUs granted in 2019 vest in equal amounts on the first three anniversaries of the grant date, provided that the named executive officer remains employed on each such vesting date. Named executive officers have the opportunity to elect to receive LTIP Units with the same vesting schedule in lieu of RSUs. |
Our Executive Compensation Practices
The Compensation and Human Capital Committee is mindful of evolving practices in executive compensation and corporate governance. The following table highlights our current executive compensation practices – both the practices we believe drive performance and mitigate risk and the practices we have not implemented or eliminated because we do not believe they would serve our shareholders’ long-term interests.
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Executive Compensation Practices We Have Implemented: |
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•þProvide balanced pay opportunities consisting of (1) cash and equity, (2) annual and longer-termlong-term incentives, and
(3) fixed and variable pay |
•þAlign pay and performance
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•þUse diverse performance measures
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•þHave appropriate caps on performance-based bonus payouts
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•þProvide perquisites that are limited perquisites withand have sound business rationale
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•þInclude “double-trigger” change in control provisions in equity awards
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•þApply share ownership and retention guidelines for senior executive officers and directors
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•þUtilize an independent compensation adviser
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•þMitigate undue risk in compensation programs
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•þMaintain a clawback policy
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•þMaintain an anti-hedging/pledging policy
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Executive Compensation Practices We Have Not Implemented: |
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•ýNo “liberal” change in control definition that would be activated on shareholder approval of a transaction
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•ýNo tax gross-ups on perquisites (except for certain relocation costs that are available to all associates)
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•ýNo tax gross-up protection for change in control excise taxes
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•ý No repricing of options or SARs (directly or indirectly) without prior shareholder approval
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•ýGenerally do not utilize No employment contracts, though we do haveexcept for severance agreements with certain officers
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Consideration of Most Recent Say on PaySay-on-Pay Vote
The Compensation and Human Capital Committee recognizes that executive pay practices and views of sound governance principles continue to evolve. Consequently, the Compensation and Human Capital Committee intends to continue paying close attention to the advice and counsel of its independent compensation adviser and invites our shareholders to communicate any concerns or opinions on executive pay directly to the Compensation and Human Capital Committee or the Board. Please refer to “Information about Communications with Duke Realty Corporation and Our Board of Directors”Board” on pages 5 andpage 6 for information about communicating with the Board.
At the annual meeting of shareholders on April 27, 2016, over 95%24, 2019, more than 91% of the shares voted were voted in support of the 2015 compensation of our named executive officers, as discussed and disclosed in the 20162019 proxy statement. In consideringBased on the results of this most recent advisory vote to approve the compensation of our named executive officers, the Compensation and Human Capital Committee concluded that the compensation paid to our named executive officers and the Company’scompany’s overall pay practices enjoy strong shareholder support. No significant changes were made to our executive compensation program for 20162019 as a result of the advisory vote.
At the annual meeting of shareholders on April 26, 2017, our shareholders expressed a preference that advisory votes on executive compensation occur every year. Consistent with this preference, the Board has implemented an advisory vote to approve executive compensation every year until the next required vote on the frequency of shareholder votes on the compensation of executives, which is expected to occur at the 2023 annual meeting.
Overview of Executive Compensation Philosophy and Objectives
We have designed our executive compensation program, under the direction of the Compensation and Human Capital Committee, to attract and retain the highest quality executive officers, directly link pay to our performance, and build value for our shareholders. In order to do this effectively, our program is designed to:
provide total compensation opportunities with a combination of compensation elements that are competitive,competitive;
tie a significant portion of each executive’s compensation to achieving our key business objectives,objectives; and
align shareholder interests and executive rewards by tying a significant portion of each executive’s compensation opportunity to pay for performance standards designed to increase long-term shareholder value.
Determining Individual Compensation Levels and Pay Mix
When setting compensation, the Compensation and Human Capital Committee seeks to achieve optimal balance between:
fixed and variable pay;
short-term and long-term pay;incentives; and
cash and equity.
We believe that a significant percentage of our executives’ compensation should be at risk and subject to performance. In addition, we attempt to balance the shortshort- and long-term focus of our executives and to align their interests with our shareholders by providing a meaningful portion of their compensation in the form of equity-based awards.
Our executive compensation program includes the following elements:
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Compensation Element | | Overview/Objectives |
Base Salary | • | Fixed portion of an executive’s annual compensation that is intended to recognize fundamental market value for the individual’s skills and experience of the individual relative tobased on the responsibilities of his or her position. |
Annual Cash Incentive | • | Annual cash incentives vary based on performance against pre-defined goals and are intended to reward short termshort-term performance, including company, individual, and in some cases, division performance. |
Long-term Incentive Awards (restricted stock units and performance sharePSP awards) | • | Stock-based incentives vary based on stock price and, in the case of performance sharePSP awards, on the achievement of predefined goals. They are intended to reward performance over a multi-year period, link executive’sexecutives’ interests to those of shareholders, and encourage retention through a multi-year vesting schedule. |
The following charts below show the allocations of the fiscal year 20162019 target total direct compensation for our CEO and the fiscal year 20162019 average target total direct compensation for our other named executive officers, respectively. Base salary is the only fixed element of compensation, with the remainder being at risk. Base salarysalaries and annual bonusbonuses are paid in cash, while 100% of the long-term incentive opportunityopportunities (RSUs and performance shares) isPSP awards) are paid in stock.stock, or partnership units, at the executive’s election.
Fiscal 20162019 Targeted Total Direct Compensation (1)
(1) Messrs. Kennedy and Harrington are not included in the “Other NEOs” chart since neither was an executive officer for the entire year.
How We Make Compensation Decisions
The Compensation and Human Capital Committee has primary responsibility for determining the Company’sour compensation strategy and setting the compensation of the Company’sour senior executive officers. Information about the CommitteeCompensation and its composition and responsibilitiesHuman Capital Committee can be found on page 1421 of thethis proxy statement, under the caption “Board Committees—Executive Compensation Committee.Committees.” To assist in evaluating the compensation practices at the Company,company, the Compensation and Human Capital Committee engaged Frederic W. Cook & Co., Inc. (FW Cook), or FW Cook, as its independent executive compensation consultantadviser in 2016.2019. FW Cook reports directly to the Compensation and Human Capital Committee and provides no other services to the Company.company. The following table outlines the roles and responsibilities of the various parties in determining executive compensation.
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| | |
| | Roles and Responsibilities |
The Compensation and Human Capital Committee | • | Determines the Company'sour compensation strategy. |
| • | Oversees design, implementation, and administration of Companyour equity programs. |
| • | Approves incentive programs and sets performance goals for executive officers. |
| • | Reviews the performance of the CEO. |
| • | Determines appropriate levels of compensation for our executive officers, including the CEO, by assessing their individual performance in addition toas well as the financial and operational results of the Companycompany against annual objectives. |
| | |
FW Cook | • | Provides advice, research, and analytical services on a variety of subjects, including compensation philosophy, trends, and best practices, peer group selection, target competitive positioning, pay mix, and incentive program design.
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CEO | • | Develops an assessment of individual performance for each of his direct reports. |
| • | Provides recommendations to the Compensation and Human Capital Committee regarding individual compensation levels for such executives. |
| • | Provides recommendations to the Compensation and Human Capital Committee regarding metrics and goal levels for incentive plans for Company,company, division, and individual performance for himself and each of his direct reports. |
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Other Members of Management | • | Our ChiefVice President, Human Resources Officer provides data and information relating to our compensation programs to the Compensation and Human Capital Committee and FW Cook to help facilitate the Compensation and Human Capital Committee’s review of competitive compensation practices. |
| • | Our Chief Financial Officer provides the Compensation and Human Capital Committee with reports on financial performance as it relates to key business drivers and performance measures included in incentive program designs.
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Assessing the Competitive Marketplace
As part of its process of evaluating our compensation program, theThe Compensation and Human Capital Committee reviews peer compensation data to ensure that our executive officer compensation is competitive in the marketplace. In 2015,2018, management engaged FPL Associates or FPL,(FPL), to provide market data from our peer groups.group. The peer group, developed in consultation with FW Cook, consisted of 1415 public REITs that were similar in size to the Companycompany in terms of total capitalization (market value of common stock, preferred stock, operating partnership units, and balance sheet long-term debt) at that time.. Total capitalization of companies in this peer group ranged from approximately $9.5 billion to $20.3 billion, with a median of $14.1 billion (as of June 30, 2018). Our total capitalization of approximately $13.0 billion (also as of June 30, 2018) was 92% of the median of the peer group. This peer group was used to assess competitive levels of compensation for our executive officers to help inform the Committee'sCompensation and Human Capital Committee’s decisions on 20162019 target total direct compensation opportunities. The total capitalization of companies in this peer group ranged from approximately $7.5 billion to $21.1 billion, with a median of $11.6 billion (as of June 30, 2015). The Company’s total capitalization of approximately $12.1 billion (also as of June 30, 2015) was consistent with the median of the peer group. The companies included in the REIT compensation peer group were as follows:were:
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•Alexandria Real Estate Equities, Inc. | •Federal Realty Investment Trust | •Liberty Property Trust |
•Apartment Investment and Management Company | CBL & Associates Properties, Inc.
| Federal Realty Investment Trust
• Healthpeak Properties, Inc.
| Taubman Centers, Inc.•The Macerich Company |
BioMed Realty•Camden Property Trust Inc.
| DDR Corporation
•Host Hotels & Resorts, Inc.
| •Mid-America Apartment Communities, Inc. |
•Douglas Emmett, Inc. | •Kilroy Realty Corporation | •Regency Centers Corporation |
•Extra Storage Space, Inc. | •Kimco Realty Corporation
| UDR, Inc. |
Brixmor Property Group, Inc.
| Digital Realty Trust,•UDR, Inc.
|
Liberty Property Trust
| | Camden Property Trust
| Douglas Emmett, Inc. | The Macerich Company
| |
Mr. Denien’s base salary increased by $30,000 to $460,000, Ms. Dee's base salary increased by $15,000 to $390,000, Mr. Kennedy's base salary increased by $10,000 to $368,000, and Mr. Harrington's base salary increased by $15,000 to $285,000. Mr. Harrington's base salarySchnur was increased again by $15,000 to $300,000later promoted on June 1, 2016 to reflect his promotionSeptember 2, 2019 to Executive Vice President, Construction.Chief Operating Officer with a new base salary of $485,000.
Each named executive officer has a target annual bonus potential, expressed as a percentage of base salary, that is based on his or her role and responsibilities, internal equity considerations, and external competitive compensation data as reviewed from time to time.data. Annual bonuses are paid in cash in February for the prior year’s performance, and are