In addition, you will be voting on such other business as may properly come before the annual meeting, including any adjournments or postponements thereof.
A:
| Q: | What vote is required to approve the proposals assuming that a quorum is present at the annual meeting? |
| A: | Proposal 1: | | The election of the director nominees must be approved by a majority of the votes cast. |
| | | | |
| | |
| Proposal 2: | | The ratification of the appointment of the independent registered public accounting firm requires a majority of the votes cast. |
| | | | |
| | Proposal 3: | | The approval of the amendment to our charter to provide stockholders with the ability to alter, amend or repeal our bylaws and adopt new bylaws requires an affirmative vote of a majority of the votes entitled to be cast on the matter (that is, a majority of our outstanding shares of common stock).
|
| | | | |
| | Proposal 4:
| | The approval of the Amended 2011 Plan requires an affirmative vote of a majority of the votes cast.
|
| | | | |
| | Proposal 5:
| | The advisory vote approving executive compensation requires an affirmative vote of a majority of the votes cast. |
| Q: | How are abstentions and broker non-votes treated? |
| A: | If you are the beneficial owner of shares held by a broker, bank or other nominee, you must instruct the broker, bank or other nominee how to vote your shares. A “broker non-vote” occurs when a bank, broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner. If your shares are held by a broker, bank or other nominee, your broker, bank or other nominee has discretionary voting authority under NYSE rules to vote your shares on the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm even if the institution does not receive voting instructions from you. However, your broker, bank or other nominee does not have discretionary authority to vote on the election of directors or the advisory vote approving our executive compensation, in which case a broker non-vote will occur and your shares will not be voted on these matters. | | | |
| | Pursuant to Maryland law, abstentions and broker non-votes are counted as present for purposes of determining the presence of a quorum. |
| | For purposes of the election of directors and the vote on Proposal 3, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote. |
Proposal 6:
| | The advisory vote on the frequencyFor purposes of the vote on executive compensation receivingProposal 2, abstentions will not be counted as votes cast and will have no effect on the greatest numberresult of votes (every one, twothe vote.
|
| Q: | Will there be any other items of business on the agenda? |
| A: | The board of directors does not know of any other matters that may be brought before the annual meeting nor does it foresee or three years)have reason to believe that proxy holders will have to vote for substitute or alternate nominees for election to the board of directors. If any other matter should come before the annual meeting or any nominee is not available for election, the persons named in the enclosed proxy will have discretionary authority to vote all proxies with respect to such matters in accordance with their discretion. |
| Q: | What happens if I submit my proxy without providing voting instructions on all proposals? |
| A: | Proxies properly submitted via the internet, mail or telephone will be consideredvoted at the frequency recommendedannual meeting in accordance with your directions. If the properly-submitted proxy does not provide voting instructions on a proposal, the proxy will be voted as follows: |
| ● | if you are a stockholder of record, to elect (FOR) each of the director nominees listed in “Proposal 1: Election of Directors;” if you are a beneficial owner of shares held by the stockholders.a broker, bank or other nominee, a broker non-vote will occur; |
| ● | if you are a stockholder of record or a beneficial owner of shares held by a broker, bank or other nominee, in favor of (FOR) “Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm;” and |
| ● | if you are a stockholder of record, in favor of (FOR) “Proposal 3: Advisory (Non-Binding) Vote on Executive Compensation;” if you are a beneficial owner of shares held by a broker, bank or other nominee, a broker non-vote will occur. |
Q:How are abstentions and broker non-votes treated?
| Q: | Where can I find the voting results after the annual meeting? |
A: If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item (such as the election of directors and the approval of our executive compensation) and has not received instructions from the beneficial owner.
| A: | We will announce the preliminary voting results at the annual meeting and will report the final voting results in a current report on Form 8-K, which we will file with the SEC within four business days after the meeting. |
If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under New York Stock Exchange (“NYSE”) rules to vote your shares on the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on the election of directors, the approval of the amendment to our charter, the approval of the Amended 2011 Plan, the advisory vote approving our executive compensation or the advisory vote on the frequency of the vote on our executive compensation, in which case a broker non-vote will occur and your shares will not be voted on these matters.
| Q: | Will anyone contact me regarding this vote? |
Pursuant to Maryland law, abstentions and broker non-votes are counted as present for purposes of determining the presence of a quorum.
| A: | No arrangements or contracts have been made with any solicitors as of the date of this proxy statement, although we reserve the right to engage solicitors at any time if we deem them necessary. Such solicitations may be made by mail, telephone, facsimile, e-mail or personal interviews. |
For purposes of the election of directors and the votes on Proposal 5 and Proposal 6, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote.
| Q: | Who has paid for this proxy solicitation? |
For purposes of the vote on Proposal 2, abstentions will not be counted as votes cast and will have no effect on the result of the vote.
| A: | We have paid the entire expense of preparing, printing and mailing the Notice and, to the extent requested by our stockholders, the proxy materials and any additional materials furnished to stockholders. Proxies may be solicited by our directors, officers or employees personally or by telephone without additional compensation for such activities. We also will request persons, firms and corporations holding shares in their names or in the names of their nominees, which are beneficially owned by others, to send appropriate solicitation materials to such beneficial owners. We will reimburse such holders for their reasonable expenses. |
For purposes of the vote on Proposal 3, abstentions and broker-non-votes will have the same effect as votes cast against the proposal.
For purposes of the vote on Proposal 4, abstentions will have the same effect as votes against the proposal and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote.
Important: Beneficial owners of shares held in broker accounts are advised that if they do not provide timely instructions to their broker, pursuant to NYSE Rule 452, their shares will not be voted in connection with the election of directors, the proposal on the charter amendment, the proposal on the Amended 2011 Plan or the proposals related to our executive compensation. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
Q:Will there be any other items of business on the agenda?
A: The board of directors does not know of any other matters that may be brought before the annual meeting nor does it foresee or have reason to believe that proxy holders will have to vote for substitute or alternate nominees for election to the board of directors. If any other matter should come before the annual meeting or any nominee is not available for election, the persons named in the enclosed proxy will have discretionary authority to vote all proxies with respect to such matters in accordance with their discretion.
Q:What happens if I submit my proxy without providing voting instructions on all proposals?
A: Proxies properly submitted via the internet, mail or telephone will be voted at the annual meeting in accordance with your directions. If the properly-submitted proxy does not provide voting instructions on a proposal, the proxy will be voted as follows:
· if you are a stockholder of record, to elect (FOR) each of the director nominees listed in “Proposal 1—Election of Directors;” if you are a beneficial owner whose shares are held of record by a broker, a broker non-vote will occur;
· if you are a stockholder of record or if you are a beneficial owner whose shares are held of record by a broker, in favor of (FOR) “Proposal 2—Ratification of Appointment of Independent Registered Public Accounting Firm;”
· if you are a stockholder of record, in favor of (FOR) “Proposal 3—Amendment to Charter to Provide Stockholders with the Ability to Amend Our Bylaws;” if you are a beneficial owner whose shares are held of record by a broker, a broker non-vote will occur;
· if you are a stockholder of record, in favor of (FOR) “Proposal 4—Amended and Restated STAG Industrial, Inc. 2011 Equity Incentive Plan;” if you are a beneficial owner whose shares are held of record by a broker, a broker non-vote will occur;
· if you are a stockholder of record, in favor of (FOR) “Proposal 5—Advisory (Non-Binding) Vote Approving Executive Compensation;” if you are a beneficial owner whose shares are held of record by a broker, a broker non-vote will occur; and
· if you are a stockholder of record, in favor of (FOR) an advisory vote on executive compensation every year (box “1 YEAR” on the proxy card) under “Proposal 6—Advisory (Non-Binding) Vote on Frequency of Executive Compensation Votes” if you are a beneficial owner whose shares are held of record by a broker, a broker non-vote will occur.
Q:Will anyone contact me regarding this vote?
A: No arrangements or contracts have been made with any solicitors as of the date of this proxy statement, although we reserve the right to engage solicitors at any time if we deem them necessary. Such solicitations may be made by mail, telephone, facsimile, e-mail or personal interviews.
Q:Who has paid for this proxy solicitation?
A: We have paid the entire expense of preparing, printing and mailing the Notice and, to the extent requested by our stockholders, the proxy materials and any additional materials furnished to stockholders. Proxies
may be solicited by our directors, officers or employees personally or by telephone without additional compensation for such activities. We also will request persons, firms and corporations holding shares in their names or in the names of their nominees, which are beneficially owned by others, to send appropriate solicitation materials to such beneficial owners. We will reimburse such holders for their reasonable expenses.
Q:May stockholders ask questions at the annual meeting?
A: Yes. There will be time allotted at the end of the meeting when our representatives will answer questions from the floor.
Q:How many copies should I receive if I share an address with another stockholder?
| Q: | How many copies should I receive if I share an address with another stockholder? |
The SEC has adopted rules that permit companies and intermediaries, such as a broker, bank or other agent, to implement a delivery procedure called “householding.” Under this procedure, multiple stockholders who reside at the same address may receive a single copy of our proxy materials, unless the affected stockholder has provided us with contrary instructions. This procedure provides extra convenience for stockholders and cost savings for companies.
Our company and some brokers, banks or other agents may be householding our proxy materials. A single Notice and, if applicable, a single set of our proxy materials, including this proxy statement, the accompanying proxy card, our annual report and the Notice, will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker, bank or other agent that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. If you did not respond that you did not want to participate in householding, you were deemed to have consented to the process. Stockholders may revoke their consent at any time by contacting Broadridge ICS, either by calling toll-free (800) 542-1061 or by writing to Broadridge ICS, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717.
Upon written or oral request, we will promptly deliver a separate copy of the Notice and, if applicable, a single set of our proxy materials, to any stockholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the Notice and, if applicable, our proxy materials, you may send a written request to STAG Industrial, Inc., One Federal Street, 23rd Floor, Boston, Massachusetts, 02110, Attention: Jeffrey M. Sullivan, Corporate Secretary. In addition, if you are receiving multiple copies of the Notice and, if applicable, our proxy materials, you can request householding by contacting our Corporate Secretarycorporate secretary in the same manner.
Q:What does it mean if I receive more than one Notice?
| Q: | What does it mean if I receive more than one Notice? |
A: It means that you have multiple accounts at the transfer agent or with brokers. Please submit all of your proxies over the internet, following the instructions provided in the Notice, by mail or by telephone to ensure that all of your shares are voted.
| A: | It means that you have multiple accounts at the transfer agent or with brokers, banks or other nominees. Please submit all of your proxies over the internet, following the instructions provided in the Notice, by mail or by telephone to ensure that all of your shares are voted. |
Q:Can I change my vote after I have voted?
| Q: | Can I find additional information on the company’s website? |
| A: | Yes. Our website is www.stagindustrial.com. You can view additional information on the website, such as our corporate responsibility and ESG policies, our corporate governance guidelines, our code of business conduct and ethics, our stock ownership guidelines, charters of our board committees and reports that we file with the SEC. However, the information located on, or accessible from, our website is not, and should not be deemed to be, part of this proxy statement or incorporated into any other filing that we submit to the SEC. |
| | A copy of our corporate governance guidelines, our code of business conduct and ethics, our stock ownership guidelines and each of the charters of our board committees also may be obtained free of charge by writing to STAG Industrial, Inc., One Federal Street, 23rd Floor, Boston, Massachusetts, 02110, Attention: Jeffrey M. Sullivan, Corporate Secretary. |
A: Yes. Proxies properly submitted over the internet, by mail or by telephone do not preclude a stockholder from voting in person at the meeting. A stockholder may revoke a proxy at any time prior to its exercise by filing with our corporate secretary a duly executed revocation of proxy, by properly submitting, either by internet, mail or telephone, a proxy bearing a later date or by appearing at the meeting and voting in person. Attendance at the meeting will not by itself constitute revocation of a proxy. If you have shares held by a broker, you must obtain a written proxy executed in your favor, from the broker holding your shares in order to vote your shares in person at the annual meeting.
Q:Can I find additional information on the company’s website?
A: Yes. Our website is www.stagindustrial.com. You can view additional information on the website, such as our corporate governance guidelines, our code of business conduct and ethics, our stock ownership guidelines, charters of our board committees and reports that we file with the SEC. However, the information located on, or accessible from, our website is not, and should not be deemed to be, part of this proxy statement or incorporated into any other filing that we submit to the SEC.
A copy of our corporate governance guidelines, our code of business conduct and ethics, our stock ownership guidelines and each of the charters of our board committees also may be obtained free of charge by writing to STAG Industrial, Inc., One Federal Street, 23rd Floor, Boston, Massachusetts, 02110, Attention: Jeffrey M. Sullivan, Corporate Secretary.
PROPOSAL 1:
ELECTION OF DIRECTORS
The board of directors currently consists of eightnine members with directors serving one-year terms and until their successors are duly elected and qualified. The term for each director expires at each annual meeting of stockholders. At the 20182021 annual meeting, eightnine directors will be elected to serve until the 20192022 annual meeting and until their successors are duly elected and qualified. The board of directors has nominated the following current directors (the “Nominees”) to serve as directors: Benjamin S. Butcher, Jit Kee Chin, Virgis W. Colbert, Michelle S. Dilley, Jeffrey D. Furber, Larry T. Guillemette, Francis X. Jacoby III, Christopher P. Marr and Hans S. Weger. The board of directors anticipates that each Nominee will serve, if elected, as a director. However, if anyone nominated by the board of directors is unable to accept election, the proxies will be voted for the election of such other person or persons as the board of directors may recommend.
Vote Required
The affirmative vote of a majority of the votes cast at a meeting at which a quorum is present is required for the election of the Nominees. For purposes of the election of directors, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote.
Recommendation
The board of directors recommends a vote FOR each Nominee.
Snapshot of Board Composition
The table below presents a snapshot of the expected composition of the board of directors.
Total number of directors | | 8
| 9 |
Percentage of independent directors | | 88
| %
89% |
Average age of independent directors | | 58
| 59 |
Average tenure of independent directors (years) | | 5.4
| 7.5 |
Lead independent director | | Yes | |
Percentage of directors with CEO experience | | 50
| %
50% |
Percentage of directors with CFO experience | | 50
| %
50% |
Percentage of audit committee members designated as “audit committee financial experts” | 80% |
| Percentage of women and minorities on the board (two of our directors are female, one of whom is Asian, and one of our directors is Black/African American) | 100
| %
33% |
Director Nominees for Election to Term Expiring 20192022
The following tables and biographical descriptions set forth certain information with respect to each Nominee, including the specific experience, qualifications, attributes and skills that led to the conclusion by the board that such person should continue to serve as a director.
Director Nominees | | Age | | Principal Occupation | | Director
Since | Age | Principal Occupation | Director Since |
Benjamin S. Butcher | | 64 | | Chief Executive Officer, President and Chairman | | 2010 | 67 | Chief Executive Officer, President and Chairman | 2010 |
| Jit Kee Chin | | 42 | Executive Vice President, Chief Data Officer and Chief Innovation Officer at Suffolk Construction | 2020 |
Virgis W. Colbert | | 78 | | Former Executive Vice President of Miller Brewing Company | | 2014 | 81 | Former Executive Vice President of Miller Brewing Company | 2014 |
Michelle Dilley | | 46 | | Chief Supply Chain Transformation Officer of DSC Logistics | | 2018 | |
| Michelle S. Dilley | | 49 | Chief Executive Officer of Awesome Leaders, NFP | 2018 |
Jeffrey D. Furber | | 59 | | Chief Executive Officer of AEW Capital Management | | 2011 | 62 | Global Chief Executive Officer of AEW | 2011 |
Larry T. Guillemette | | 62 | | Former Chairman, Chief Executive Officer and President of Amtrol | | 2011 | 65 | Former Chairman, Chief Executive Officer and President of Amtrol | 2011 |
Francis X. Jacoby III | | 56 | | Chief Financial Officer of Leggat McCall Properties, LLC | | 2011 | 59 | Chief Financial Officer and Executive Vice President of Leggat McCall Properties, LLC | 2011 |
Christopher P. Marr | | 53 | | Chief Executive Officer and Trustee of CubeSmart | | 2012 | 56 | Chief Executive Officer and Trustee of CubeSmart | 2012 |
Hans S. Weger | | 54 | | Former Chief Financial Officer of Focus Brands Inc. | | 2011 | 57 | Strategic Consultant | 2011 |
Director Qualifications
| Butcher | Chin | Colbert | Dilley | Furber | Guillemette | Jacoby | Marr | Weger |
| CEO/public company executive | ● | | ● | | ● | ● | | ● | ● |
| Data analytics | | ● | | | | | | | |
| Finance/accounting | | | | | | ● | ● | ● | ● |
| Industrial operations | ● | | ● | ● | | ● | | | |
| Logistics | ● | ● | | ● | | | | | |
| Real estate / construction / development / finance | ● | ● | | | ● | | ● | ● | ● |
| Real estate or property technology | | ● | | | | | | | |
| Risk management | ● | ● | ● | | ● | ● | | ● | ● |
| Strategic planning | ● | ● | ● | ● | ● | ● | ● | ● | ● |
| Supply chain management | ● | | ● | ● | | | | | |
Director Nominees
|
| Butcher
|
| Colbert
|
| Dilley
|
| Furber
|
| Guillemette
|
| Jacoby
|
| Marr
|
| Weger
|
Real estate / development / finance
| | ü
| | | | | | ü
| | | | ü
| | ü
| | ü
|
Industrial operations
| | ü
| | ü
| | ü
| | | | ü
| | | | | | |
Logistics / supply chain management
| | ü
| | ü
| | ü
| | | | | | | | | | |
CEO / senior public company executive
| | ü
| | ü
| | | | ü
| | ü
| | | | ü
| | ü
|
Strategic planning
| | ü
| | ü
| | ü
| | ü
| | ü
| | ü
| | ü
| | ü
|
Finance / accounting
| | | | | | | | | | ü
| | ü
| | ü
| | ü
|
Risk management
| | ü
| | ü
| | | | ü
| | ü
| | | | ü
| | ü
|
Director Nominees
Benjamin S. Butcher
Chief Executive Officer, President and Chairman of the Board
Committees:
·Committees:
● Investment (Chair) | | Mr. Butcher has served as our chief executive officer, president and chairman of the board of directors since 2010. Prior to the formation of our company, Mr. Butcher oversaw the growth of our predecessor business, serving as a member of the board of managers of STAG Capital Partners, LLC, STAG Capital Partners III, LLC, and their affiliates from 2003 to 2011. From 1999 to 2003, Mr. Butcher was engaged as a private equity investor in real estate and technology. From 1997 to 1998, Mr. Butcher served as a director at Credit Suisse First Boston, where he sourced and executed transactions for the principal transactions group (real estate debt and equity). Prior to that, he served as a director at Nomura Asset Capital from 1993 to 1997, where he focused on marketing and business development for its commercial mortgage-backed securities group. Mr. Butcher serves as a member of the board of trustees and a member of the nominating and corporate governance committee and compensation committee of Washington Real Estate Investment Trust (NYSE:WRE), an owner of office, multi-family and retail properties in the greater Washington, D.C. metropolitan area. Mr. Butcher holds a Bachelor of Arts degree from Bowdoin College and a Master of Business Administration degree from the Tuck School of Business at Dartmouth. In light of his extensive company-specific operational, finance and market experience, his leadership abilities, his foundership of our company, and his expertise in the acquisition, ownership and management of single-tenant industrial properties, the board of directors believes that it is in the best interests of our company and our stockholders for Mr. Butcher to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
| | |
Jit Kee Chin Independent Director Committees: ● Audit | Dr. Jit Kee Chin has served as executive vice president and chief data officer at Suffolk Construction Corporation Inc. (“Suffolk”), a national privately-held general contractor, since 2017 and additionally as chief innovation officer since 2019. In her roles, Dr. Chin is responsible for building a new capability for Suffolk, setting vision and strategy, driving business insight through analytics and operationalizing the data transformation. At Suffolk, she served on the enterprise steering committee from 2018 to 2020, which governs development and implementation of strategic initiatives. She is also part of the leadership team focused on disruptive technologies, leading Suffolk Technologies and its corporate venture program, which she set up in 2019. In that capacity, she serves as a board observer at EquipmentShare, a privately held construction solutions technology company. Before joining Suffolk, from 2008 to 2017, she served in various positions with McKinsey & Company, a global strategy consulting company, including as a senior expert in analytics from 2016 to 2017, where she specialized in the design and implementation of end-to-end analytics transformations, and as an associate principal from 2013 to 2016, where she focused on strategic, commercial and analytics consulting for transport, travel, hospitality and logistics clients. Dr. Chin holds a Doctor of Philosophy degree from the Massachusetts Institute of Technology and a Bachelor of Science degree from the California Institute of Technology. In light of her extensive data, analytics and technology infrastructure expertise, including the development and implementation of strategic initiatives, the board of directors believes that it is in the best interests of our company and our stockholders for Dr. Chin to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
Virgis W. Colbert
Independent Director
Committees:
·Committees:Compensation
·● Compensation
● Nominating and Corporate Governance | | Mr. Colbert served in a variety of key leadership positions with Miller Brewing Company from 1979 until his retirement in 2005, including executive vice president of worldwide operations from 1997 to 2005 and senior vice president of operations from 1993 to 1997. As executive vice president, Mr. Colbert was responsible for plant operations, international operations, brewing, research and quality assurance, engineering, procurement, order production/planning and logistics. Since his retirement, he continues to serve as a senior advisor to MillerCoors LLC. In addition, Mr. Colbert currently serves on the board, including the audit committee thereof, of New Senior Investment Group Inc. (NYSE: SNR), a senior housing real estate investment trust,REIT, on the board of Drive Shack Inc. (NYSE: DS), an owner and operator of golf-related leisure and entertainment businesses, and on the boards of The Nasdaq Stock Market LLC and several affiliates. Mr. Colbert also serves on the board of the Hutchins Center for African & African American Research at Harvard University (since 2013). He previously served on the boards of Lorillard, Inc. from 2008 to 2015 (including as lead director from 2013 to 2015), The Hillshire Brands Company (formerly known as Sara Lee Corporation) from 2006 to 2013, Bank of America Corp. (NYSE:BAC) from 2008 to 2013, Merrill Lynch & Co., Inc. from 2006 to 2008, Stanley Black & Decker from 2003 to 2012 and The Manitowoc Company, Inc. from 2002 to 2012. He is the former chairman and current chairman emeritus of the board for the Thurgood Marshall College Fund, and the former chairman of the board for Fisk University. Mr. Colbert received Honorary Doctor of Humane Letters degrees from Fisk University in 2005 and from Kentucky State University in 2001. He holds a Bachelor of Science degree from Central Michigan University. In light of his extensive public company board and corporate governance experience and his significant operational experience including addressing logistics, plant operations and other issues common to our tenants, the board of directors believes that it is in the best interests of our company and our stockholders for Mr. Colbert to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
Michelle S. Dilley
Independent Director
Committees:
·Committees:
● Compensation ● Nominating and Corporate Governance | | Ms. Dilley has served as the chief executive officer of Awesome Leaders, NFP since July 2020. AWESOME (Achieving Women’s Excellence in Supply Chain Operations, Management and Education) is the supply chain industry’s most active and prominent organization focused on advancing and transforming the future of supply chain leadership. Prior to joining AWESOME, Ms. Dilley served as chief supply chain transformation officer and additionally as chief operating officer at DSC Logistics, Inc. (“DSC”), a logistics and supply chain management organization, since 2017.from 2017 to 2020. In this role,these roles, she leadsled the implementation ofvision for the company’s operating platform, implemented strategic initiatives to deliver transformation and continuous improvement performance and has responsibilitywas directly responsible for engineering, safetyDSC’s network of logistics centers and security, quality, and, in collaboration with human resources, training. Previously,supply chain packaging operations throughout North America. From 2014 to 2017, she served as senior vice president, operations at LaSalle Bristol, LP, a building productsproduct distributor from 2014 to 2017,and manufacturer for factory-built housing, recreational vehicles and other markets, where she was accountable for supply chain operations and transportation throughout the United States and Canada. From 2009 to 2014, she served as vice president, supply chain at Ascension Health, a non-profit health system, where she led the supply chain business transformation and operational redesign. Ms. Dilley started her career at Whirlpool Corporation, where she served in a variety of roles, including general manager, global indirect goods & services sourcing from 2005 to 2009. Ms. Dilley holds a Bachelor of Arts degree from the University of Michigan. In light of her significant supply chain, finance and operational experience, including experience in the development and implementation of strategic initiatives, and her recent experience with diversity initiatives in the supply chain industry, the board of directors believes that it is in the best interests of our company and our stockholders for Ms. Dilley to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
| | |
Jeffrey D. Furber
Independent Director
Committees:
·Committees:
● Compensation (Chair)
·● Investment
| | Mr. Furber serves as the global chief executive officer of AEW Capital Management (“AEW”), aAEW. As one of the leading real estate investment management company,advisors, AEW currently manages $75 billion of real estate assets and the chairmansecurities on behalf of AEW Europe, where hea global client base of public and corporate pension funds, sovereign wealth funds, endowments, foundations and high net worth investors. Mr. Furber has oversight responsibility for all of AEW’s operating business units in the United States, Europe and Asia. Mr. Furber alsoHe chairs AEW’s management committee, which is responsible for the firm’sAEW’s strategic direction and for managing the firm’s resources, and is a member of the firm’s risk management committee and the investment committees in North America, Europe and investment policy group. Prior to joiningAsia. Mr. Furber joined AEW in 1997 Mr. Furberfrom Winthrop Financial Associates (“Winthrop”), a wholly-owned subsidiary of Apollo Advisors, where he served as managing director of Winthrop Financial Associates, a wholly-owned subsidiary of Apollo Advisors, and served as president of Winthrop Management. In these capacities, he was responsible for acquisitions, asset management and capital markets activity, including the sourcing of equity and mezzanine debt investments. In addition, Mr. Furber currently serves onis a member of the board of The Howard Hughes Corporation (NYSE: HHC). and Boston Children’s Hospital Trust. Mr. Furber holds a Bachelor of Arts degree from Dartmouth College and a Master of Business Administration degree from Harvard Business School. In light of his significant leadership, corporate governance and capital markets experience and his 34 years of real estate industryinvestment experience, including 21 years as chief executive officer of AEW, the board of directors believes that it is in the best interests of our company and our stockholders for Mr. Furber to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
| | |
Larry T. Guillemette
Lead Independent Director Committees:
·● Audit
·● Compensation
| | Mr. Guillemette served as chairman of the board of directors, chief executive officer and president of Amtrol Inc., a multi-national pressure vessel manufacturer (“Amtrol”), from 2006 to 2017. Mr. Guillemette also served as executive vice president and chief financial officer of Amtrol from 2000 to 2006 and as executive vice president of marketing and business development from 1998 to 2000. Prior to joining Amtrol, Mr. Guillemette served as chief executive officer and president of Balcrank Products, Inc., a manufacturer of lubrication equipment for the automotive service market and other industrial product lines from 1991 to 1998. From 1990 to 1991, he served as senior vice president and senior financial officer of The O’Connor Group, a real estate investment, management and development firm. Prior to that, from 1986 to 1990, Mr. Guillemette served as a vice president for Hampton Partners/G.M. Cypres & Co., Inc., an investment banking partnership. From 1979 to 1986, Mr. Guillemette served in various management positions with units of the Henley Group and its predecessors, including Allied-Signal, The Signal Companies and Wheelabrator-Frye. Mr. Guillemette holds a Bachelor of Arts degree from Dartmouth College and a Master of Business Administration degree from the Tuck School of Business at Dartmouth. In light of his extensive leadership experience through his senior officer and director positions and his accounting and real estate experience, the board of directors believes that it is in the best interests of our company and our stockholders for Mr. Guillemette to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
Francis X. Jacoby III
Independent Director
Committees:
·Committees:Audit
·● AuditInvestment
·● Investment
● Nominating and Corporate Governance | | Since 2016, and from 1995 to 2001, Mr. Jacoby has served as executive vice president and chief financial officer of Leggat McCall Properties, LLC, a real estate development company. From 2013 to 2016, Mr. Jacoby served as an independent consultant providing real estate finance, development and disposition related services. From 2008 to 2013, he served as president of Kensington Investment Company, Inc., the wealth management office for a family that owns travel-related businesses and passenger ships and makes investments in real estate, private equity and venture capital. In addition, in 2012, Mr. Jacoby served as the chief financial officer of Grand Circle Corporation, an affiliate of Kensington Investment Company, Inc. From 2001 to 2008, Mr. Jacoby served as the senior vice president and chief financial officer for GID Investment Advisers LLC, a family wealth management office whose primary focus is developing, acquiring and managing apartment communities, suburban office properties and flex industrial business parks throughout the United States for its own account and for joint ventures with institutional investors. From 1983 to 1995, Mr. Jacoby held a variety of senior management positions in the acquisitions, asset management and finance departments of Winthrop Financial Associates, a real estate investment company which owned and managed multiple property types. Mr. Jacoby holds a Bachelor of Arts degree from Dartmouth College and a Master of Business Administration degree from Boston University. In light of his extensive investment and capital markets experience and his significant financial and real estate investment experience, including structuring, negotiating and closing complex transactions, the board of directors believes that it is in the best interests of our company and our stockholders for Mr. Jacoby to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
| | |
Christopher P. Marr
Independent Director
Committees:
·Committees:Audit
·● Audit
● Nominating and Corporate Governance (Chair) | | Mr. Marr has served as chief executive officer and member of the board of trustees of CubeSmart (NYSE: CUBE), a real estate company that acquires, owns, operates and develops self-storage facilities in the United States, since 2014 and as president of CubeSmart since 2008. Previously, he served as chief operating officer of CubeSmart from 2012 to 2014 and as chief financial officer from June 2006 to November 2008 and as treasurer from 2006 to 2012. From 2002 to 2006, Mr. Marr served as senior vice president and chief financial officer of Brandywine Realty Trust (NYSE: BDN), an office real estate investment trust.REIT. Prior to joining Brandywine Realty Trust, Mr. Marr served as chief financial officer of Storage USA, Inc., a publicly-traded self-storage real estate investment trust,REIT, from 1998 to 2002. Mr. Marr holds a Bachelor of Arts degree from Loyola University. In light of his public company leadership, financial reporting and operations experience as thean executive officer of two publicly-traded real estate investment trusts,REITs, including chief executive officer experience, the board of directors believes that it is in the best interests of our company and our stockholders for Mr. Marr to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
Hans S. Weger
Independent Director
Committees:
·Committees:
● Audit (Chair)
·● Compensation
·● Investment
| | Mr. Weger provides consulting services to real estate and other companies. Prior to that, Mr. Weger served as chief financial officer of Focus Brands Inc., the franchisor and operator of restaurants and cafes in the United States, Puerto Rico and 63 foreign countries, from 2014 to 2016. From 2012 to 2014, Mr. Weger served as chief financial officer of Outrigger Enterprises Group, a privately-held leisure lodging and hospitality company. From 1998 to 2011, Mr. Weger served as chief financial officer, executive vice president and treasurer of LaSalle Hotel Properties (NYSE: LHO), a real estate investment trustREIT focused on the acquisition, ownership, redevelopment and leasing of primarily upscale and luxury full-service hotels. In addition, Mr. Weger served as secretary of LaSalle Hotel Properties from 1999 to 2011. Mr. Weger was responsible for all of the company’s financial, accounting, human resources and information technology activities. Prior to joining LaSalle Hotel Properties, Mr. Weger served as vice president and treasurer for La Quinta Inns, Inc. where he was responsible for all financing activities. From 1992 until 1997, Mr. Weger served in various management roles with Harrah’s Entertainment, Inc. where he was responsible for strategic planning, mergers and acquisitions and project financing. Mr. Weger holds a Bachelor of Science degree from the University of Southern Mississippi and a Master of Business Administration degree from the University of Chicago. In light of his real estate and real estate financing knowledge and his financial reporting and operations experience as the chief financial officer of a publicly-traded real estate investment trust and a privately held company, the board of directors believes that it is in the best interests of our company and our stockholders for Mr. Weger to continue to serve as a director on the board of directors, subject to stockholder approval at the annual meeting. |
Biographical Information Regarding Executive Officers Who Are Not Directors
The biographical descriptions below set forth certain information with respect to each of our executive officers other than Mr. Butcher, whose information appears above.
William R. Crooker
Executive Vice President, Chief Financial Officer and Treasurer
Age: 3841 | | Mr. Crooker has served as our chief financial officer, executive vice president and treasurer since 2016. Previously, Mr. Crooker served as our chief accounting officer from 2011 to 2016 and senior vice president of capital markets from 2015 to 2016. Prior to the formation of our company, Mr. Crooker served as chief accounting officer for STAG Capital Partners, LLC from 2010 to 2011, where he was responsible for the company’s accounting, tax, and financial reporting. From 2002 to 2010, Mr. Crooker worked for KPMG LLP in its real estate practice, focusing primarily on publicly-traded real estate investment trusts.REITs. He held various positions with KPMG LLP, including most recently as senior manager. Mr. Crooker is a certified public accountant and received his Bachelor of Science degree from Bentley University. |
| | |
Stephen C. Mecke
Executive Vice President and Chief Operating Officer
Age: 5558 | | Mr. Mecke has served as our chief operating officer and executive vice president since 2011. Prior to the formation of our company, Mr. Mecke served as chief investment officer for STAG Capital Partners, LLC and STAG Capital Partners III, LLC from 2004 to 2011, where he was responsible for all asset acquisition and asset management activities. Prior to joining our predecessor business, Mr. Mecke ran the acquisitions groups for M|P|A, a private real estate fund that represented a large east coast endowment fund, from 2001 to 2004. Mr. Mecke also worked at Meditrust Corporation, a publicly-traded real estate investment trust,REIT, as vice president of acquisitions and various other positions from 1992 to 2000. Mr. Mecke holds a Bachelor of Arts degree from Hobart College and a Master of Business Administration degree from Northeastern University. |
Jeffrey M. Sullivan
Executive Vice President, General Counsel and Secretary
Age: 4952 | | Mr. Sullivan has served as our executive vice president, general counsel and secretary since 2015. From 2012 to 2014, Mr. Sullivan was a partner in the corporate group of Hunton & Williams LLP, and from 2005 to 2012, Mr. Sullivan was a partner in the finance group of DLA Piper LLP (US). Before joining DLA Piper LLP (US), Mr. Sullivan was an associate and then partner in the corporate transactions and securities group of Alston & Bird LLP from 1998 to 2005. While in private practice, Mr. Sullivan focused on securities law, mergers and acquisitions, corporate governance matters and general corporate law, primarily involving real estate investment trustsREITs and other real estate companies, private equity funds and underwriters. Mr. Sullivan holds a Bachelor of Arts degree from University of North Carolina at Chapel Hill and a Juris Doctor degree from Vanderbilt University Law School. |
| | |
David G. King
Executive Vice President and Director of Real Estate Operations
Age: 5053 | | Mr. King has served as our executive vice president and director of real estate operations since 2011. Prior to the formation of our company, Mr. King served as a managing director for STAG Capital Partners, LLC and STAG Capital Partners III, LLC from 2005 to 2011, where he was responsible for portfolio management for the company. From 1997 to 2005, Mr. King worked for AMB Property Corporation, a publicly-traded real estate investment trust,REIT, as regional management officer, where he had primary responsibility for leasing, management, development, acquisition sourcing and dispositions of the firm’s industrial and office portfolios in the Mid-Atlantic region and in various other positions. Mr. King holds a Bachelor of Arts degree from the University of Vermont and a Master of Public Administration degree from Indiana University. |
| | |
Peter S. Fearey
Executive Vice President and Chief Technology Officer
Age: 49
| | Mr. Fearey has served as our executive vice president and chief technology officer since 2016. From 2015 to 2016, Mr. Fearey served as our vice president and then senior vice president of information technology. From 2014 to 2015, Mr. Fearey was an independent contractor for the company, advising on and building custom business applications. From 2010 until 2014, Mr. Fearey served as director of technology and then director of innovation for Fay School, a private school in Massachusetts. From 2003 until 2010, Mr. Fearey worked for Intuit Inc., the maker of Quicken, TurboTax and QuickBooks, as an engineering manager and then as a business leader directing a team of sales, marketing and support professionals focused on Intuit’s QuickBase product. From 1991 until 2003, Mr. Fearey worked in a variety of positions at different technology companies, including as a quality assurance manager at Apple Computer, Inc. Mr. Fearey holds a Bachelor of Science degree from Dartmouth College.
|
BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors
Our business is managed through the oversight and direction of the board of directors. A majority of the board of directors is “independent,” as determined by the board of directors, consistent with the rules of the NYSE. The one member of the board of directors who is not independent is our chief executive officer.
Board Meetings and Executive Sessions
Our directors stay informed about our business by attending meetings of the board of directors and its committees and through supplemental reports and communications. In 2017,2020, the board of directors held fiveseven meetings and each director attended at least 75% of the aggregate of the board meetings and his or her respective committee meetings. The board of directors does not have a policy with respect to directors’ attendance at annual meetings of stockholders. Nevertheless, all of our directors attended the 20172020 annual meeting of stockholders.
As required by the NYSE rules, the independent directors of ourthe board regularly meet in executive session, without the presence of management or non-independent directors. Generally, these executive sessions follow after each quarterly meeting. In 2017,2020, the independent directors of the board and the audit the compensation and the nominating and corporate governance committeescommittee met in executive session without management present at least four times at(at each quarterly meeting.meeting), the compensation committee met in executive session without management present four times (at three quarterly meetings and one special meeting), and the nominating and corporate governance committee met in executive session two times (at two quarterly meetings). Our lead independent director presides over such independent, non-management sessions of the board. Executive sessions of the audit, the compensation and the nominating and corporate governance committees are presided over by the respective chairperson of each committee.
Director Independence
Under the enhanced corporate governance standards of the NYSE, at least a majority of our directors, and all of the members of the audit committee, compensation committee and nominating and corporate governance committee, must meet the test of “independence.” The NYSE 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 us (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company). The board of directors considered a relationship between an affiliate of the company and one of the directors and determined that the relationship does not affect the director’s independence. The board of directors has affirmatively determined that each of Dr. Chin, Ms. Dilley and Messrs. Colbert, Furber, Guillemette, Jacoby, Marr and Weger satisfies the bright-line independence criteria of the NYSE and that none has a relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of the board of directors. Therefore, we believe that all of these directors, who constitute a majority of the board of directors, are independent under the NYSE rules.
We have implemented procedures for interested parties, including stockholders, to communicate directly with our independent directors. We believe that providing a method for interested parties to communicate directly with our independent directors, rather than with the full board of directors, would provide a more confidential, candid and efficient method of relaying any interested party’s concerns or comments. See “Corporate Governance Principles and Board Matters—Responsibility—Other Corporate Governance Matters—Communication with the Board of Directors, Independent Directors and the Audit Committee.”
Board Committees
The board of directors has established an investment committee, an audit committee, a compensation committee and a nominating and corporate governance committee and has adopted a written charter for each of these committees. Each of the audit committee, compensation committee and nominating and corporate governance committee is composed exclusively of independent directors, as required by and defined in the rules and listing qualifications of the NYSE and, with respect to the members of the audit committee, Rule 10A-3 promulgated
pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Moreover, the compensation committee is composed exclusively of individuals intended to be, to the extent required by Rule 16b-3 of the
Exchange Act, non-employee directors and will qualify as outside directors for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).directors. The board of directors may from time to time establish other committees to facilitate the management of our company. Matters put to a vote at any one of our four committees must be approved by a majority of the directors on the committee who are present at a meeting at which there is a quorum or by unanimous written consent of the directors on that committee.
Director | | Investment
Committee | | Audit
Committee | | Compensation
Committee | | Nominating
and Corporate
Governance
Committee |
Benjamin S. Butcher | | Chair | | | | | | |
Virgis W. Colbert | | | | | | ü | | ü |
Michelle Dilley | | | | | | | | ü |
Jeffrey D. Furber | | ü | | | | Chair | | |
Larry T. Guillemette | | | | ü | | ü | | |
Francis X. Jacoby III | | ü | | ü | | | | ü |
Christopher P. Marr | | | | ü | | | | Chair |
Hans S. Weger | | ü | | Chair | | ü | | |
Meetings Held in 2017 | | 1 | | 4 | | 6 | | 4 |
Director | Investment
Committee | Audit
Committee | Compensation
Committee | Nominating and
Corporate
Governance
Committee |
| | | | | |
| Benjamin S. Butcher | Chair | | | |
| Jit Kee Chin | | ● | | |
| Virgis W. Colbert | | | ● | ● |
| Michelle S. Dilley | | | ● | ● |
| Jeffrey D. Furber | ● | | Chair | |
| Larry T. Guillemette | | ● | ● | |
| Francis X. Jacoby III | ● | ● | | ● |
| Christopher P. Marr | | ● | | Chair |
| Hans S. Weger | ● | Chair | ● | |
| Meetings Held in 2020 | 4 | 4 | 6 | 3 |
Investment Committee
The board of directors has established an investment committee which is composed of four of our directors, at least three of whom must beare independent directors. The investment committee’s primary function is to review, evaluate and ultimately vote to approve all acquisitions and dispositions with an individual purchase or dispositions individuallysale price of more than $50 million and up to $100 million, andas well as all development and redevelopment projects with an individuala development cost of more than $10$50 million and up to $100 million. Proposed acquisitions, dispositions and development orand redevelopment projects individually in excesswith an individual purchase or sale price or development cost of more than $100 million require approval by the board of directors. The board of directors, in its discretion, may change the investment committee’s authority to approve acquisitions or dispositions from time to time, including the dollar thresholds.
The investment committee has adopted a written charter whichthat outlines certain specified responsibilities of the investment committee. A copy of the investment committee charter is available under “Corporate Governance” in the “Investor Relations” section of our website at www.stagindustrial.com.
Audit Committee
The board of directors has established an audit committee, which is composed exclusively of independent directors. Each memberFour members of the audit committee qualifiesqualify as an audit committee financial expert,experts, as that term is defined by the SEC, and isall members are financially literate and able to read and understand fundamental financial statements. The audit committee assists the board in overseeing, among other things:
·
| ● | our system of internal controls; |
| ● | our accounting and financial reporting processes; |
| ● | the integrity and audits of our consolidated financial statements; |
· our accounting and financial reporting processes;
| ● | our compliance with legal and regulatory requirements; |
| ● | our risk exposures and policies to assess and manage risks (including financial risks); |
| ● | the qualifications and independence of our independent auditors; and |
| ● | the performance of our independent auditors and any internal auditors. |
· the integrity and audits of our consolidated financial statements;
· our compliance with legal and regulatory requirements;
· the qualifications and independence of our independent auditors; and
· the performance of our independent auditors and any internal auditors.
The audit committee also is responsible for engaging independent public accountants, reviewing with the independent certified public accountants the plans and results of the audit engagement, approving professional services provided by the independent public accountants, reviewing the independence of the independent public accountants, considering the range of audit and non-audit fees and reviewing the adequacy of our internal accounting controls. The audit committee has the power to investigate any matter brought to its attention within the scope of its duties and to retain counsel for this purpose where appropriate.
The audit committee has adopted a written charter whichthat outlines certain specified responsibilities of the audit committee and complies with the rules of the SEC and the NYSE. A copy of the audit committee charter is available under “Corporate Governance” in the “Investor Relations” section of our website at www.stagindustrial.com.
Compensation Committee
The board of directors has established a compensation committee, which is composed exclusively of independent directors. The principal functions of the compensation committee are to:
| ● | evaluate the performance and compensation of our chief executive officer; |
· evaluate the performance and compensation of our chief executive officer;
| ● | review and approve the compensation and benefits of our executive officers and members of the board of directors; |
| ● | administer the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated (the “2011 Equity Incentive Plan”), as well as any other compensation, stock option, stock purchase, incentive or other benefit plans; and |
| ● | produce an annual report on executive compensation for inclusion in our proxy statement after reviewing our compensation discussion and analysis. |
· review and approve the compensation and benefits of our executive officers and members of the board of directors;
· administer our 2011 Equity Incentive Plan, as amended (the “2011 Equity Incentive Plan”), as well as any other compensation, stock option, stock purchase, incentive or other benefit plans; and
· produce an annual report on executive compensation for inclusion in our proxy statement after reviewing our compensation discussion and analysis.
OurThe compensation committee is primarily responsible for establishing and implementing our compensation program and policies. To fulfill its responsibilities, the compensation committee may engage, oversee and provide appropriate funding for advisors and consultants to advise the committee on executive compensation matters.
The compensation committee has adopted a written charter whichthat outlines certain specified responsibilities of the compensation committee and complies with the rules of the SEC and the NYSE. A copy of the compensation committee charter is available under “Corporate Governance” in the “Investor Relations” section of our website at www.stagindustrial.com.
Nominating and Corporate Governance Committee
The board of directors has established a nominating and corporate governance committee, which is composed exclusively of independent directors. The principal functions of the nominating and corporate governance committee include:
| ● | seeking, considering and recommending to the full board of directors qualified candidates for election as directors; |
· seeking, considering and recommending to the full board of directors qualified candidates for election as directors;
| ● | recommending a slate of nominees for election as directors at the annual meeting of stockholders; |
| ● | annually recommending to the board nominees for each committee of the board; |
· recommending a slate of nominees for election as directors at the annual meeting of stockholders;
| ● | annually facilitating the assessment of the board of directors’ performance as a whole and of each committee and the individual directors; |
| ● | reviewing and making recommendations on matters involving general operation of the board and our corporate governance, including our policies and practices concerning environmental sustainability, human rights and social responsibility (and related policies for tenants, communities and vendors); |
· periodically preparing and submitting to the board for adoption the committee’s selection criteria for director nominees;
| ● | reviewing our environmental sustainability risk oversight and management, corporate social responsibility and related governance reporting; and |
· reviewing and making recommendations on matters involving general operation of the board and our corporate governance;
· annually recommending to the board nominees for each committee of the board; and
· annually facilitating the assessment of the board of directors’ performance as a whole and of the individual directors and reports thereon to the board.
| ● | reviewing our performance metrics concerning environmental sustainability, human rights and social responsibility matters. |
The nominating and corporate governance committee has adopted a written charter whichthat outlines certain specified responsibilities of the nominating and corporate governance committee and complies with the rules of the SEC and the NYSE. A copy of the nominating and corporate governance committee charter is available under “Corporate Governance” in the “Investor Relations” section of our website at www.stagindustrial.com.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee is or has been employed by us. None of our executive officers currently serves, or in the past three years has served, as a member of the board of directors or compensation committee of another entity that has one or more executive officers serving on the board of directors or compensation committee. No member of the compensation committee has any other business relationship or affiliation with us other than his or her service as a director.
Board Compensation for 2017
In 2017, we paid an annual cash fee of $50,000 to each of our non-management directors for services as a director, as well as an annual grant of equity with a value of approximately $65,000 at the time of grant. We pay an additional annual cash fee of $15,000 to the lead independent director, an additional annual cash fee of $15,000 to the chair of the audit committee, an additional annual cash fee of $10,000 to the chair of the compensation committee and an additional annual cash fee of $7,500 to the chair of the nominating and corporate governance committee and any other committee of the board of directors. All members of the board of directors are reimbursed for their costs and expenses in attending our board meetings. Our directors have the option to receive fees in shares of common stock rather than in cash. The value of such shares of common stock is based on the 10-day average of the closing price of our common stock determined three days prior to the quarterly fee payment date. All of our independent directors elected to receive shares of our common stock in lieu of cash for payment of the fees payable to them in 2017. If a director is also one of our officers, we will not pay any compensation for services rendered as a director.
As mentioned above, we grant annual equity awards to our non-management directors, and in January 2017, each received an annual grant of 2,806 LTIP units. In addition, any non-management director who joins the board of directors in the future receives an initial grant of LTIP units upon the commencement of his or her service. The LTIP units granted annually vest on January 1 of the following year, subject to the recipient’s continued service as a director. LTIP units can be converted to common units of our operating partnership, STAG Industrial Operating Partnership, L.P. (our “operating partnership”), on a one-for-one basis once a material equity transaction has occurred that results in the accretion of the member’s capital account to the economic equivalent of the common unit.Committee Evaluations
The board of directors (or a duly formed committee thereof) may revise our non-management directors’ compensation in its discretion.
The following table summarizes the compensation that we paid to our non-management directors in 2017:
2017 Director Compensation Table
Name | | Fees Earned(2) | | Stock Awards(3)(4) | | Total | |
Virgis W. Colbert | | $ | 50,000 | | $ | 64,987 | | $ | 114,987 | |
Michelle Dilley(1) | | $ | — | | $ | — | | $ | — | |
Jeffrey D. Furber | | $ | 60,000 | | $ | 64,987 | | $ | 124,987 | |
Larry T. Guillemette | | $ | 65,000 | | $ | 64,987 | | $ | 129,987 | |
Francis X. Jacoby III | | $ | 50,000 | | $ | 64,987 | | $ | 114,987 | |
Christopher P. Marr | | $ | 57,500 | | $ | 64,987 | | $ | 122,487 | |
Hans S. Weger | | $ | 65,000 | | $ | 64,987 | | $ | 129,987 | |
(1) Ms. Dilley was appointed to the board of directors on March 12, 2018. As of March 12, 2018, Ms. Dilley held 3,930 unvested LTIP units.
(2) All of our independent directors elected to receive shares of our common stock in lieu of cash for payment of the fees payable to them for their service in 2017. The aggregate numbers of shares of common stock earned by the independent directors for their service in 2017 were as follows: Mr. Colbert, 1,865; Mr. Furber, 2,238; Mr. Guillemette, 2,424; Mr. Jacoby, 1,865; Mr. Marr, 2,144; and Mr. Weger, 2,424. These shares were issued based on the calculation previously disclosed in this proxy statement and are not indicative of the fair market value on the date the members received the shares.
(3) As of December 31, 2017, the aggregate number of unvested LTIP units held by each independent director was as follows: Mr. Colbert, 3,586; Mr. Furber, 3,482; Mr. Guillemette, 3,482; Mr. Jacoby, 3,482; Mr. Marr, 3,482; and Mr. Weger, 3,482. As of December 31, 2017, the aggregate number of LTIP units held by each independent director was as follows: Mr. Colbert, 13,098; Mr. Furber, 28,239; Mr. Guillemette, 28,239; Mr. Jacoby, 28,239; Mr. Marr, 20,829; and Mr. Weger, 28,239.
(4) Represents 2,806 LTIP units granted to each of Messrs. Colbert, Furber, Guillemette, Jacoby, Marrits committees perform an annual performance evaluation, with each director performing a self-evaluation of his or her board and Weger pursuant to the 2011 Equity Incentive Plan on January 6, 2017.committee experiences. The dollar value is computed in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification 718, Compensation—Stock Compensation (“ASC Topic 718”). See Note 7 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017, for a discussion of our accounting of LTIP units and the assumptions used. The grant date fair value of each award was $23.16 per LTIP unit.
Board Compensation for 2018
In 2017, the compensation committee engaged FPL Associates, L.P. (“FPL”) to evaluate the structure and competitiveness of our non-management director compensation and recommend changes, as appropriate. Based on this review, effective for 2018 and later, the compensation committee recommended and the board approved an increase in the annual grant of equity to non-management directors to a grant with a value of approximately $90,000 at the time of grant. The other components of the non-management director compensation program remained unchanged. The annual equity grant had remained at $65,000 for the prior four years (2014 to 2017).
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Snapshot of Corporate Governance Practices
The table below presents a snapshot of other corporate governance policies.
Annual election of directors
| | Yes
|
Majority voting standard for the election of directors
| | Yes
|
Regular executive sessions of independent directors
| | Yes
|
Annual board and committee self-evaluations, assisted by outside counsel
| | Yes
|
Code of business conduct and ethics for employees and directors
| | Yes
|
Stock ownership guidelines for executive officers
| | Yes
|
Stock ownership guidelines for directors
| | Yes
|
Anti-hedging and anti-pledging policies
| | Yes
|
No stockholder rights plan without stockholder approval or ratification
| | Yes
|
Corporate Governance Profile
We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance structure include the following:
· the board of directors is not staggered; instead, each of our directors is subject to re-election annually;
· we have a majority voting standard for the election of directors;
· all of the members of the board of directors, except for our chief executive officer, are independent of the company and management;
· all of the members of our audit committee qualify as an “audit committee financial expert” as defined by the SEC;
· we opted out of the control share acquisition statute and the business combination provisions in the Maryland General Corporation Law (“MGCL”) and we may not opt back in to these provisions without stockholder approval;
· we do not have a stockholder rights plan (i.e., “poison pill”) and do not intend to adopt a stockholder rights plan unless our stockholders approve in advance the adoption of a plan or, if the board of directors adopts a plan for our company, we submit the stockholder rights plan to our stockholders for a ratification vote within 12 months of adoption, without which the plan will terminate;
· the nominating and corporate governance committee evaluates annuallyoversees the effectivenessevaluation process and considers all methods of performing these evaluations. For the board as a whole, each committee and each individual director, and the committee engages2020 performance evaluation, we engaged outside counsel to conduct individualone-on-one interviews of the directorseach director to assist the committeeboard in its evaluations, which are designed, among other matters,purposes, to identify any areas in which the board would be better served by adding new members with different skills, backgrounds or experience;areas of experience. We believe using outside counsel fosters candor, facilitates participation in the evaluation process and enables individual assessments of each director. Generally, the evaluation process described below is managed by outside counsel with assistance from our corporate secretary and oversight by the chair of the nominating and corporate governance committee to ensure the process remains as thorough and transparent as possible.
| ● | Organization and membership |
| ● | Accountability and independence |
| ● | Meetings, information and resources |
·Board Refreshment and Nomination Process we have stock ownership guidelines
Board refreshment is important to our company. Before each annual meeting of stockholders, the nominating and corporate governance committee (i) assesses the composition and needs of the board as a whole, including with respect to diversity (and such matters are also the subject of full board discussions annually), (ii) rigorously evaluates all current directors, and (iii) considers the nomination of all directors whose terms expire at the next annual meeting of stockholders. The nominating and corporate governance committee also considers new candidates whenever there is a vacancy on the board or whenever a vacancy is anticipated due to a change in the size or composition of the board, a retirement of a director or for our non-management membersany other reason. In addition to considering incumbent directors, the nominating and corporate governance committee may identify director candidates based on recommendations from the directors and executive officers and may engage the services of ourthird-party search firms to assist in identifying or evaluating director candidates.
The board of directors considers director candidates based on a number of factors including:
| ● | whether the board member will be “independent,” as such term is defined by the NYSE listing standards; |
| ● | whether the candidate possesses the highest personal and professional ethics, integrity and values; |
| ● | whether the candidate has demonstrated leadership ability, with broad experience, diverse perspectives, and the ability to exercise sound business judgment; |
| ● | whether the candidate has experience in areas important to the operations of our company; |
| ● | whether the candidate has an inquisitive and objective perspective, practical wisdom and mature judgment; and |
| ● | whether the candidate provides a diversity of viewpoints, background, experience and demographics as compared to the current members of the board. |
Candidates also are evaluated based on their understanding of our business and willingness to devote adequate time to carrying out their duties. The nominating and corporate governance committee monitors the mix of skills, experience and background to assure that the board has the necessary composition to effectively perform its oversight function. While diversity characteristics of a candidate are just one of several factors considered by the committee when evaluating director candidates, we believe that diversity is a valuable component of an effective and dynamic board and will continue to make diversity an integral part of the board’s search for future directors. See “Corporate Responsibility—Corporate Governance and Ethical Business Practices—Enhancing Board Diversity” below. In general, a candidate will neither be included nor excluded from consideration solely based on his or her diversity traits. The nominating and corporate governance committee conducts regular reviews of current directors in light of the considerations described above and their past contributions to the board of directors. The board reviews the effectiveness of its director nominating policies annually.
The nominating and corporate governance committee successfully completed our executive officers;most recent board refreshment process in 2020 with the appointment of Dr. Chin to serve as an independent director.
· we have
The nominating and corporate governance committee will consider appropriate nominees for directors whose names are submitted in writing by a lead independentstockholder of our company. Director candidates submitted by our stockholders will be evaluated by the nominating and corporate governance committee on the same basis as any other director whose authoritycandidates. We did not receive any nominations of directors by stockholders for the 2020 annual meeting. Nominations must be addressed to STAG Industrial, Inc., One Federal Street, 23rd Floor, Boston, Massachusetts, 02110, Attention: Jeffrey M. Sullivan, Corporate Secretary, indicating the nominee’s qualifications and responsibilities are describedother relevant biographical information and providing confirmation of the nominee’s consent to serve as director, if elected. To be considered for the next annual election of directors, any such written request must comply with the requirements set forth in our bylaws and below under “—Board Leadership;“Other Matters—Stockholder Proposals.” and
· our insider trading policy prohibits our directors and all of our officers and other employees from engaging in any hedging transactions with respect to our securities, and from pledging our securities as collateral for a loan or otherwise using our securities to secure debt.
Board Leadership
The board of directors recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure to provide independent oversight of management. The board understands that there is no single, generally accepted approach to providing board leadership and the right board leadership structure may vary as circumstances warrant. Consistent with this understanding, our independent directors consider the board’s leadership structure on an annual basis.
The board of directors annually will elect a chairman of the board, who may or may not be the chief executive officer of our company. Since our formation in 2010, Mr. Butcher has served as our chairman of the board and chief executive officer. Mr. Butcher is involved in both our day-to-day operations and theour strategic decision making at the board level. Based on its most recent review of our leadership structure and the needs of theour company, the board continues to believebelieves that having Mr. Butcher servingcontinuing to serve in these positions is optimal, for us because ithis service provides our company with strong, effective and consistent leadership.
If the chairman of the board and chief executive officer are the same person, our board of directors will annually elect a non-management and independent director to serve in a lead capacity, to coordinate the activities of the other non-management and independent directors and to perform any other duties and responsibilities that the board of directors may determine.determine are advisable. Although this position is elected annually, elected, it is generally expected that he or she will serve for more than one year. Mr. Guillemette has served as our lead independent director since 2015. The responsibilities of the lead independent director include (i) serving as liaison between the chairman and the independent directors, (ii) reviewing the type of information sent to the board, (iii) reviewing, in consultation with the chairman and others, agendas and board meeting schedules to determine whether sufficient time is allocated to agenda items, and (iv) wieldingholding the authority to call meetings of the independent directors.
In considering its leadership structure, the board has taken a number of factors into account. The board, which consists of a majority of independent directors (eight of the nine members), exercises a strong, independent
oversight function. This oversight function is enhanced by the audit, compensation and nominating and corporate governance committees being comprised entirely of independent directors. A number of board and committee processes and procedures, including regular executive sessions of independent directors and a regular review of our executive officers’ performance, provide substantial independent oversight of our management’s performance. Finally, under our bylaws and corporate governance guidelines, the board has the ability to change its structure, should that be deemed appropriate and in the best interest of our company and our stockholders. The board believes that these factors provide the appropriate balance between the authority of those who oversee our company and those who manage it on a day-to-day basis.
The chairman of the board presides atover all meetings of the stockholders and of the board as a whole. The chairman performs such other duties, and exercises such powers, as from time to time shall be prescribed in our bylaws or by the board of directors.
Our lead independent director presides atover all meetings of our board of directors where the chairman is not present, including executive sessions of the independent directors.
Self-Evaluation and Nomination of Directors
The nominating and corporate governance committee evaluates annually the effectiveness of the board as a whole, of each of our committees and of each individual director. We also engage outside counsel to conduct one-on-one interviews of each director to assist the committee in its evaluations, which are designed, among other
matters, to identify any areas in which the board would be better served by adding new members with different skills, backgrounds or areas of experience. We believe using outside counsel fosters candor, facilitates participation in the evaluation process and enables individual assessments of each director.
Before each annual meeting of stockholders, the nominating and corporate governance committee considers the nomination of all directors whose terms expire at the next annual meeting of stockholders and also considers new candidates whenever there is a vacancy on the board or whenever a vacancy is anticipated due to a change in the size or composition of the board, a retirement of a director or for any other reasons. In addition to considering incumbent directors, the nominating and corporate governance committee may identify director candidates based on recommendations from the directors and executive officers. In 2017, the committee engaged a search firm to help identify an eighth director and bring gender diversity to the board. The committee may in the future again engage the services of third-party search firms to assist in identifying or evaluating director candidates.
The board of directors considers director candidates based on a number of factors including:
· whether the board member will be “independent,” as such term is defined by the NYSE listing standards;
· whether the candidate possesses the highest personal and professional ethics, integrity and values;
· whether the candidate has demonstrated leadership ability, with broad experience, diverse perspectives, and the ability to exercise sound business judgment;
· whether the candidate has experience in areas important to the operations of our company;
· whether the candidate has an inquisitive and objective perspective, practical wisdom and mature judgment; and
· whether the candidate provides a diversity of viewpoints, background, experience and demographics as compared the current members of the board.
Candidates also are evaluated based on their understanding of our business and willingness to devote adequate time to carrying out their duties. The nominating and corporate governance committee monitors the mix of skills, experience and background to assure that the board has the necessary composition to effectively perform its oversight function. As noted above, diversity characteristics of a candidate are one of several factors considered by the committee when evaluating director candidates and were an important focus in the board’s recent search for an eighth director. In general, a candidate will neither be included nor excluded from consideration solely based on his or her diversity traits. The nominating and corporate governance committee conducts regular reviews of current directors in light of the considerations described above and their past contributions to the board of directors. The board reviews the effectiveness of its director candidate nominating policies annually.
The nominating and corporate governance committee will consider appropriate nominees for directors whose names are submitted in writing by a stockholder of our company. Director candidates submitted by our stockholders will be evaluated by the nominating and corporate governance committee on the same basis as any other director candidates. We did not receive any nominations of directors by stockholders for the 2018 annual meeting.
Nominations must be addressed to STAG Industrial, Inc., One Federal Street, 23rd Floor, Boston, Massachusetts, 02110, Attention: Jeffrey M. Sullivan, Corporate Secretary, indicating the nominee’s qualifications and other relevant biographical information and providing confirmation of the nominee’s consent to serve as director, if elected. To be considered for the next annual election of directors, any such written request must comply with the requirements set forth in our bylaws and below under “Other Matters—Stockholder Proposals.”
Director Resignation Policy
In February 2018, the board of directors amended and restated our bylaws to implementWe have a majority voting standard infor uncontested election of directors retaining theand a plurality standard for elections in which the number of director nominees exceeds the number of directors to be elected. Subject to the provisions of our charter related to preferred stock directors, pursuant to our bylaws, director nominees in uncontested elections of directors will be elected by the vote of a majority of the votes cast with respect to the director, which means that the number of votes cast for a director must exceed the number of votes cast against the director.
In connection with the adoption of the amended and restated bylaws, the board of directors also updated ourOur corporate governance guidelines to require incumbent director nominees who fail to receive a majority of the votes cast to submit promptly a written offer to resign from the board of directors. The nominating and corporate governance committee will make a recommendation to the board of directors on whether to accept or reject the resignation. Taking into account the recommendation of the nominating and corporate governance committee, the board of directors will determine whether to accept or reject any such resignation within 90 days after the certification of the voting results, and we will report such decision in a current report on Form 8-K furnished to the SEC. A copy of our corporate governance guidelines is available under “Corporate Governance” in the “Investor Relations” section of our website at www.stagindustrial.com.
Role of the Board in Risk Oversight
Overview
OneWhile risk management is primarily the responsibility of the key functions ofour senior management team, the board of directors is informed oversight ofplays an active role in overseeing our risk management process.processes and controls. The board of directors administers this oversight function directly, with support from the audit committee, the compensation committee and the nominating and corporate governance committee, each of which addresses risks specific to their respective areas of oversight. While the committees assume responsibilities to evaluate certain risks and oversee management’s plan regarding such risks, the full board of directors keeps itself regularly informed regarding such risks through committee and management reports.
| Board of Directors |
One of the key functions of the board of directors is informed oversight of our risk management process. The full board of directors has primary responsibility for overseeing and evaluating: ● Strategic and operational risk management ● Information security risks (see “—Information Security” below for more information) ● Management and board succession planning (see “—Management Succession Plans” below for more information) ● Risks related to the COVID-19 pandemic, including its impact on financial, real estate and investment markets and our acquisition strategies, property operations and human safety |
| Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee |
● Financial risks, including our guidelines and policies to govern the process by which risk assessment and management is undertaken ● Compliance with legal and regulatory requirements ● Internal audit function | ● Risks related to our compensation policies and programs, including whether any compensation program has the potential to encourage excessive risk taking | ● Corporate governance risks, including an evaluation of whether our corporate governance guidelines are successful in preventing illegal or improper liability-creating conduct ● ESG risks, including environmental sustainability risks, corporate social responsibility and related governance reporting |
| Senior Management Team |
| Our senior management team reviews and prioritizes significant risks, allocates resources for mitigation and provides the board of directors or the applicable committee with regular reports on potential risks facing our company, including our primary strategic, operational, information security, ESG, human resources, financial, legal, REIT and regulatory risks, and the measures we are taking to mitigate such risks. |
| Information Security Risks | Disclosure Risks | Environmental Risks |
● Our chief operating officer, to whom our data analytics and technology team (including information technology) reports, presents an information security update at each quarterly board of directors meeting. Aspects of information security are reviewed through internal audit. ● See “—Information Security” below for more information. | ● Our disclosure committee, consisting of certain executives and senior employees, reports to our chief financial officer. Our disclosure committee meets at least quarterly and periodically as needed to ensure the accuracy, completeness and timeliness of our disclosure statements, and to evaluate the effectiveness of the design and operation of our disclosure controls and procedures. | ● Our corporate responsibility committee, consisting of our general counsel, senior vice president–construction management and senior vice president–investor relations, administers our environmental stewardship efforts. In addition, our senior vice president–construction management, under the supervision of our director of real estate operations, is responsible for identifying, implementing and monitoring sustainability initiatives across our portfolio. |
In particular,addition to the auditboard of directors’ review of risks applicable to our company generally, as discussed under the “—Board and Committee Evaluations” section above, the board of directors conducts an annual self-evaluation in order to evaluate its performance for the purpose of improving board and committee processes and effectiveness.
Information Security
As discussed above, the board of directors has the primary responsibility for overseeing our information security risk management. Our chief operating officer, to considerwhom our data analytics and discusstechnology team (including information technology) reports, presents an information security update at each quarterly board of directors meeting. Aspects of information security are reviewed through internal audit.
We use third-party experts to review and test our major financial risk exposuresinformation security systems, including regular penetration tests of our network. We also use third-party systems to monitor our information security continually. We maintain a cybersecurity insurance policy, and we conduct mandatory information security training for all employees several times a year and regularly test our employees for information security awareness and adherence to our information security recommendations.
To our knowledge, we have not experienced an information security breach in the last three years or otherwise.
Management Succession Plans
The board of directors oversees the recruitment, development, and retention of executive talent and reviews or discusses our management succession plans at least annually. Management succession is generally discussed throughout the year with the chief executive officer at board meetings and in executive sessions. Management succession discussions generally focus on the chief executive officer and other senior executive roles, but also include broader discussions about our employee workforce. The board of directors has regular and direct exposure to senior leadership and high-potential employees through board meetings held throughout each year. Our board of directors has framed and continues to evolve plans with an adaptable timeframe for orderly management succession.
In addition, in order to minimize the potential disruption to our company upon the unexpected resignation, termination, death, disability or other form of absence of our chief executive officer, the board of directors reviewed and approved a chief executive officer emergency succession policy (the “CEO Emergency Succession Policy”). The CEO Emergency Succession Policy is general in nature and is intended to provide the board and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. The compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. The nominating and corporate governance committee monitorswith contingency procedures upon a sudden succession of the effectivenesschief executive officer.
Board Compensation for 2020
In 2020, we paid an annual cash fee of $50,000 to each of our non-management directors for services as a director, as well as an annual grant of equity with a value of approximately $100,000 at the time of grant. In 2020, we paid an additional annual cash fee of $25,000 to the lead independent director, an additional annual cash fee of $20,000 to the chair of the audit committee, an additional annual cash fee of $15,000 to the chair of the compensation committee and an additional annual cash fee of $12,500 to the chair of the nominating and corporate governance committee and any other committee of the board of directors. All members of the board of directors are reimbursed for their costs and expenses in attending our board meetings. Our directors have the option to receive fees in shares of common stock rather than in cash. The value of such shares of common stock is based on the 10-day average of the closing price of our common stock determined three days prior to the quarterly fee payment date. All of our independent directors elected to receive shares of our common stock in lieu of cash for payment of the fees payable to them in 2020. If a director is also one of our officers, we will not pay any compensation for services rendered as a director.
As mentioned above, we grant annual equity awards to our non-management directors. In addition, any non-management director who joins the board of directors in the future receives an initial grant of LTIP units upon the commencement of his or her service. The LTIP units granted annually vest on January 1 of the following year, subject to the recipient’s continued service as a director. LTIP units can be converted to common units of our operating partnership, STAG Industrial Operating Partnership, L.P. (our “operating partnership”), on a one-for-one basis once a material equity transaction has occurred that results in the accretion of the member’s capital account to the economic equivalent of the common unit.
The board of directors (or a duly formed committee thereof) may revise our non-management directors’ compensation in its discretion.
The following table summarizes the compensation that we paid to our non-management directors in 2020:
2020 Director Compensation Table
| | Name | | Fees Earned(1) | | Stock Awards(2)(3) | | Total |
| | | | | | | | |
| | Jit Kee Chin | | $50,000 | | $99,992 | | $149,992 |
| | Virgis W. Colbert | | $50,000 | | $99,992 | | $149,992 |
| | Michelle S. Dilley | | $50,000 | | $99,992 | | $149,992 |
| | Jeffrey D. Furber | | $65,000 | | $99,992 | | $164,992 |
| | Larry T. Guillemette | | $75,000 | | $99,992 | | $174,992 |
| | Francis X. Jacoby III | | $50,000 | | $99,992 | | $149,992 |
| | Christopher P. Marr | | $62,500 | | $99,992 | | $162,492 |
| | Hans S. Weger | | $70,000 | | $99,992 | | $169,992 |
| (1) | All of our independent directors elected to receive shares of our common stock in lieu of cash for payment of the fees payable to them for their service in 2020. The aggregate numbers of shares of common stock earned by the independent directors for their service in 2020 were as follows: Dr. Chin, 1,764; Mr. Colbert, 1,764; Ms. Dilley, 1,764; Mr. Furber, 2,294; Mr. Guillemette, 2,647; Mr. Jacoby, 1,764; Mr. Marr, 2,205; and Mr. Weger, 2,471. These shares were issued based on the calculation previously disclosed in this proxy statement and are not indicative of the fair market value on the date the members received the shares. |
| (2) | As of December 31, 2020, the aggregate number of unvested LTIP units held by each independent director was as follows: Dr. Chin, 3,393; Mr. Colbert, 3,393; Ms. Dilley, 3,393; Mr. Furber, 3,393; Mr. Guillemette, 3,393; Mr. Jacoby, 3,393; Mr. Marr, 3,393; and Mr. Weger, 3,393. As of December 31, 2020, the aggregate number of LTIP units held by each independent director was as follows: Dr. Chin, 3,393; Mr. Colbert, 23,911; Ms. Dilley, 11,151; Mr. Furber, 39,052; Mr. Guillemette, 39,052; Mr. Jacoby, 39,052; Mr. Marr, 31,642; and Mr. Weger, 39,052. |
| (3) | Represents 3,393 LTIP units granted to each of Dr. Chin, Ms. Dilley and Messrs. Colbert, Furber, Guillemette, Jacoby, Marr and Weger on January 8, 2020. The dollar value is computed in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification 718, Compensation—Stock Compensation (“ASC Topic 718”). See Note 7 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2020, for a discussion of our accounting of LTIP units and the assumptions used. The grant date fair value of each award granted on January 8, 2020 was $29.47. |
CORPORATE RESPONSIBILITY
We are committed to having a robust corporate responsibility program that incorporates ESG strategies into our business to increase the sustainability and value of our portfolio. During 2020, we enhanced and refined our corporate responsibility program and related initiatives discussed below.
To provide a board-guided leadership structure to oversee and drive our ESG initiatives, in April 2020, we amended the charter of the nominating and corporate governance committee to add ESG oversight responsibilities, including (i) reviewing and making recommendations on our policies and practices concerning environmental sustainability, human rights and social responsibility (and related policies for tenants, communities and vendors), (ii) reviewing our environmental sustainability risk oversight and management, corporate and social responsibility and related governance reporting, and (iii) reviewing our performance metrics concerning environmental sustainability, human rights and social responsibility matters. For more information, see “Board of Directors and Its Committees—Board Committees—Nominating and Corporate Governance Committee” and “—Role of the Board in Risk Oversight” above.
During 2020, we added a “Corporate Responsibility” tab to the front page of our website at www.stagindustrial.com and an ESG section to our investor presentation (the most recent version of which is available on our website). In addition, in April 2020, the board of directors adopted new ESG policies and practices, including an Environmental Sustainability Policy, a Human Rights Policy and a Vendor Code of Conduct, each of which is discussed in more detail below and copies of which are available under the “Corporate Responsibility” section of our website at www.stagindustrial.com.
Environmental Sustainability
2020 Environmental Sustainability Overview
As the long-term owner of industrial buildings, we have a vested interest in making investments and working with our tenants to create a portfolio of industrial buildings with modern sustainable features that will continue to meet tenant demand and help our tenants run their operations as efficiently as possible.
We have made progress on environmental issues in four primary areas – (i) investments to garner energy savings, including modernization of lighting and HVAC equipment, (ii) installation of alternative energy generating systems, (iii) working with our tenants on utility consumption transparency, and (iv) conversion of our portfolio from non-reflective to reflective roofing. With respect to energy savings, we are working with our tenants to accelerate the replacement of inefficient equipment and, in doing so, generate significant electrical and natural gas cost savings, decrease resource consumption and increase the value of and return on our properties. These cost savings initially accrue to the tenants under our triple-net leases but will make our buildings more competitive and attractive to potential tenants when exposed to market conditions in future lease negotiations. In addition, when one of our buildings becomes vacant, we advance these cost-saving modernization efforts on our own initiative. With respect to alternative energy, the most promising technology for local power generation at our industrial sites is solar (photovoltaic). We have been aggressively pursuing solar panel installations in the states that are most receptive to these installations and, as of December 31, 2020, our properties hosted or were undergoing construction for solar projects with more than 25 megawatts capacity in aggregate. Through the terms in our standard lease agreement, we are also working to develop more transparency in the energy consumption at our buildings. In 2020, we have been recognized by the Institute for Market Transformation as a Green Lease Leader at the Gold level. We achieved this recognition by modifying our standard form of lease to require sharing of tenant utility usage so that we can identify those of our buildings that are outliers with respect to energy consumption. Our capital decisions are then prioritized based on where deployment would yield maximum utility savings. For reflective roofing, we continue to use white membranes in our re-roof projects exclusively. These white, or cool, roofs reflect sunlight and reduce heat load on our buildings, which allows our tenants to keep the buildings at comfortable temperatures while minimizing utility usage.
During 2020, we enhanced our environmental programs and related initiatives and achieved the following milestones and accomplishments:
| 2020 Environmental SUSTAINABILITY Highlights |
| 3 |
| Improved GRESB Rating | | Green Lease Leader – Gold Level |
In 2020, we achieved an improved score of ‘B’ from GRESB as a result of our 2020 public disclosure assessment. As of December 2020, we were ranked second out of the nine industrial companies rated by GRESB.  | | In 2020, in recognition of our form lease, which includes environmentally friendly provisions with an emphasis on energy efficiency to promote sustainability, we were recognized by the Institute for Market Transformation as a Green Lease Leader at the Gold level.  |
| | |
| Reflective Roofing | | Lighting Conversions |
| Since 2015, we have installed more than 16 million square feet of reflective roofing in our portfolio. This amounts to approximately 16% of the entire portfolio. As of December 31, 2020, more than 46% of our buildings benefit from reflective roofing. | | As of December 31, 2020, we had fluorescent or LED lighting systems in more than 90% of our portfolio. Since 2016, we have replaced less efficient lights with LED systems in more than 14 million square feet of our portfolio. We actively pursue additional opportunities for upgrade across our properties. |
| | |
| Solar Panel Installations |
We pursue solar energy opportunities in our portfolio nationwide and have executed contracts for solar development/leasing in multiple states. As of December 31, 2020, our properties hosted or were undergoing construction for solar projects with more than 25 megawatts capacity in aggregate and we had identified 15 additional projects expected to commence in 2021. ● In June 2020, we announced the groundbreaking of solar installations on four properties in Massachusetts and one in New Jersey. The projects will deliver energy to the local electrical grid, ultimately powering homes and businesses. These systems will have an aggregate capacity of 8.5 megawatts, which will generate more than 10 million kilowatt hours of electricity annually — the equivalent of powering nearly 1,000 homes with solar. ● In November 2020, we announced the groundbreaking of solar installations on a property in Illinois and a property in Massachusetts. These projects are part of community solar programs and will provide low-cost renewable energy to local homes and businesses. These systems have an aggregate capacity of 3.5 megawatts and will generate more than 4.4 million kilowatt hours of electricity annually — the equivalent of powering approximately 360 homes with solar. ● In November 2020, we announced the groundbreaking of three solar installations on properties in Maryland. These three projects are part of Maryland’s community solar program and will provide low-cost renewable energy to local homes and businesses. The systems have an aggregate capacity of 11.6 megawatts and will generate more than 15 million kilowatt hours of electricity annually — the equivalent of powering nearly 1,500 homes. The installations include a 9.2 megawatt system on our Hampstead facility, which will be the country’s largest rooftop community solar project. |
Environmental Sustainability Policy
In April 2020, the board of directors adopted an Environmental Sustainability Policy, which outlines our practices regarding understanding environmental risks and opportunities in our business and promoting greater tenant engagement and awareness and responsibility among our employees. A copy of our Environmental Sustainability Policy is available under the “Corporate Responsibility” section of our website at www.stagindustrial.com.
Tenant Engagement on Environmental Policies
With respect to the properties in our existing portfolio, we are committed to appropriate environmental stewardship, monitoring the performance of our responsible investments and measuring our progress toward improving the environmental footprint of our properties through the implementation of targeted environmental efficiency projects and equipment upgrades, such as solar panel systems and LED lighting. Each year, we conduct a tenant survey to provide an opportunity for tenants to provide feedback on their properties that they did not communicate during our physical visits each year. We also use the survey as an opportunity to remind tenants that we are willing to finance capital improvements that lead to energy savings and to promote our capital investment program, where we invest additional capital in the building and, to pay for the project, receive monthly payments from the tenant that are less than or equal to the monthly savings realized through execution of the project. This program allows for a more efficient building at similar or reduced monthly operational cost.
Environmental Considerations in Investment Decisions
We are a growth-oriented company, and much of our growth comes from acquisitions. Accordingly, we believe our environmental strategies are most effective if they influence how we price and purchase a building, rather than being restricted to incremental improvement of already-owned real estate. We employ responsible investing practices as part of our acquisition due diligence process. Where feasible, in considering potential acquisitions, we evaluate and underwrite building systems, equipment and technologies that improve efficiency and conserve natural resources.
Social Responsibility and Human Rights
We are committed to good corporate citizenship. This commitment to social responsibility and human rights extends to all, including employees, tenants, communities, investors, suppliers and visitors. Our mission is to extend our financial resources, time and core values and principles to improve our communities and to provide a work environment that attracts, develops and retains high-performing individuals and that treats employees with dignity and respect.
Human Rights Policy
To evidence our commitment to maintaining a work environment where every employee is treated with dignity and respect, is free from discrimination and harassment, and is allowed to devote their full attention and best efforts to performing their job to the best of their respective abilities, in April 2020, the board of directors adopted a Human Rights Policy. This new policy solidifies our core principles regarding equal opportunity, competitive compensation, ethical behavior, workplace safety, open and risk-free communication and legal compliance. These commitments align seamlessly with our pledge to provide a work environment that attracts, develops and retains top talent by affording our employees an engaging work experience that allows for career development and opportunities for meaningful civic involvement. A copy of our Human Rights Policy is available under the “Corporate Responsibility” section of our website at www.stagindustrial.com.
Employee Engagement
We continually assess and strive to enhance employee satisfaction and engagement. We regularly conduct internal and external surveys of our employees, many of whom have a relatively long tenure with our company, to measure our culture and our employees’ engagement. We chose to conduct these surveys to collect our employee’s feedback based on the recognition that they, more than any other stakeholder, best understand our culture. On an annual basis since 2016 and through 2019, we have participated in an employee engagement survey administered by a third party that provides employees an opportunity to share their perspectives on what is and is not working within our organization. In 2019, we participated in a second third-party survey of our employees designed to identify opportunities for improving employee engagement and business success. The results of the survey included benchmarking scores against comparably-sized businesses. In addition, in 2018, we conducted an internally-developed survey of our employees centered on culture (as opposed to engagement). We created the survey based on professional frameworks to assess and explore how our employees view our culture by archetype and to gain insight on what makes certain employees successful in our culture. Our employee survey results helped us better understand morale, satisfaction and engagement and have informed our strategies for improving company culture and communicating with our employees.
Diversity and Inclusion
We offer equal employment opportunities to all of our employees and seek to foster a diverse and vibrant workplace with employees who possess a broad range of experiences, backgrounds and skills. We are committed to promoting diversity and inclusion within our company culture and throughout our operations. We believe diversity in the workplace contributes to a more positive and inclusive environment. We are further committed to creating a respectful environment in which our employees can flourish. As part of that commitment, we endeavor to maintain a workplace free from discrimination or harassment on the basis of race, color, religion, creed, gender, gender identity or expression, sexual orientation, genetic information, national origin, ancestry, age, disability, military or veteran status, and political affiliate or activities, among others. We conduct training to prevent discrimination and harassment and monitor and address employee conduct.
Employee Compensation and Benefit Programs
We are committed to compensating our employees well and at competitive industry rates while, at the same time, monitoring our compensation programs to ensure that we are continuously attracting and retaining top talent. We also provide our employees with highly competitive health and wellness benefits, including medical, dental, vision, life and short-term disability insurance, with the premiums therefor entirely paid by us. We also offer flexible spending accounts for medical care, a program to pay commuting and office parking costs with pre-tax income and a competitive vacation policy, including paid holidays, personal time off and a variety of leave benefits.
Employee Training and Development
We believe that our employees’ training and development is critical to our long-term success. Our employees are offered regular opportunities to participate in personal growth and professional development programs and social or team building events. We believe that developing our employees through skill building, mentorship and educational opportunities fosters a more collaborative and sustainable work environment. We also recognize the importance of preparing employees for upward mobility and ensuring employees are capable of assuming other roles and responsibilities within the organization. We seek to identify and develop future leaders within our company and periodically review with our chief executive officer and board of directors the identity, skills and characteristics of those persons who could succeed to senior and executive positions. For additional information on our management succession plans, see “Board of Directors and Its Committees—Role of the Board in Risk Oversight—Management Succession Plans” above.
COVID-19 Business Continuity
We are committed to the health and safety of our employees and reducing their risk of exposure to COVID-19. Our response to the COVID-19 pandemic is a direct reflection of our commitment to our employee’s health, safety and well-being, as well our commitment to training and preparedness. In response to the outbreak of COVID-19 in the United States, we acted swiftly to protect the health and safety of our employees while also ensuring the continuity of operations. By mid-March 2020, we transitioned substantially all employees to working remotely with no disruption to our financial, operational, communications and other systems. Throughout the year, we communicated frequently with employees through manager, department and company-wide video and audio meetings, email correspondence and other forms of electronic communication to enhance transparency and encourage open dialogue between leadership and employees. In addition, we developed and distributed safety guides for voluntary office visits in addition to equipping offices with personal protective equipment and enhanced cleaning regimens.
Corporate Donations and Volunteering
We strive to collaborate with local non-profit organizations that provide opportunities to inspire and empower children and young adults. Our employees demonstrate their personal commitment by volunteering time and resources into these organizations that we believe will help children and young adults realize their potential and make an impact to future generations.
Charitable Action Committee
Early in our life as a public company, we established the CAC to promote quality interaction with our local community in Boston. The CAC is funded by our company and is managed by our volunteer employees with differing seniorities and responsibilities. We currently support several local and national charities through a combination of financial support (both direct and employee matching) and numerous employee volunteer activities (such as food and clothing distribution, habitat improvement, etc.) with a focus on supporting children, young adults, equality and social justice.
Charitable Action Fund
In November 2020, we announced the establishment of the Charitable Action Fund in cooperation with the Boston Foundation. The Charitable Action Fund will support our social responsibility endeavors, including promoting equality and inspiring children and young adults, particularly those at risk, to realize their potential and benefit future generations. The Charitable Action Fund was formed to be the predominant channel for our monetary charitable giving and will augment our ongoing company-wide volunteer programs. The Charitable Action Fund is a donor advised fund sponsored by the Boston Foundation, which is a non-profit organization qualified under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). Our executive officers will oversee the Charitable Action Fund, in conjunction with the CAC.
More information about our corporate donations and volunteer activities is available under “Social Responsibility” in the “Corporate Responsibility” section of our website at www.stagindustrial.com.
Corporate Governance and Ethical Business Practices
Corporate Governance Overview
We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance structure include the following:
| Annual election of directors | ✓ |
| Majority voting standard for the election of directors (with a director resignation policy) | ✓ |
| Regular executive sessions of independent directors | ✓ |
| Independent board; eight of our nine directors are “independent” under NYSE rules | ✓ |
| Designation of lead independent director | ✓ |
| All members of the audit committee, compensation committee and nominating and corporate governance committee are “independent” under NYSE rules | ✓ |
| Four of the five members of the audit committee qualify as “audit committee financial experts” as defined by the SEC | ✓ |
| Diverse board of directors; two of our directors are female, one of whom is Asian, and one of our directors is Black/African American | ✓ |
| Annual board, committee and director self-evaluations, assisted by outside counsel | ✓ |
| Regular board review or discussion of management succession plans | ✓ |
| Stockholder ability to amend bylaws | ✓ |
| No stockholder rights plan (i.e., “poison pill”) without stockholder approval or ratification | ✓ |
| Opted out of Maryland control share acquisition and business combination statutes and may not opt back in without stockholder approval | ✓ |
| Robust stock ownership guidelines for directors and executive officers | ✓ |
| Anti-hedging and anti-pledging policies | ✓ |
| Code of business conduct and ethics for employees and directors | ✓ |
For more information about the board of directors and its committees, including whether they are successful in preventing illegal or improper liability-creating conduct.board elections, board leadership, director independence and board policies related to annual self-evaluations and oversight of risk management, see “Board of Directors and Its Committees” above.
Vendor Code of Conduct
We encourage all our vendors to join our commitment to moral and ethical standards in conducting their businesses, and to refrain from engaging in or tolerating any unethical, improper or immoral business practices, including, but not limited to, bribery, corruption, extortion, fraud or misrepresentation. To promote that effort, in April 2020, the board of directors adopted a Vendor Code of Conduct, which sets uncompromising vendor standards for fair and ethical business practices, safe labor conditions, respect for human rights and environmental stewardship. A copy of our Vendor Code of Conduct is available under the “Corporate Responsibility” tab of our website at www.stagindustrial.com.
Stockholder Engagement
Our management team participates in an active stockholder engagement process each year:
We provide institutional investors with many opportunities and events to provide feedback directly to our management team throughout the year, including formal events, one-on-one sessions and group meetings throughout the year. During 2020, our management team attended (in-person and virtually) seven investor conferences and numerous other individual investor meetings, where they met with approximately 112 institutional investors, representing approximately 22% of our outstanding common stock. These meetings covered a range of topics, including our financial condition and results of operations, our business investment, finance and operation strategies, our stock price performance, economic, industry and market trends, ESG policies, corporate governance and executive compensation and other matters. In addition to, and apart from, our regular investor meetings, we speak exclusively about executive compensation and corporate governance with a number of our investors each year.
We engage with stockholders throughout the year in order to:
| ● | provide visibility and transparency into our business, performance and corporate practices; |
| ● | hear from our stockholders about issues that are important to them and their expectations for our company; and |
| ● | assess emerging issues that may affect our business, inform our decision making, enhance our public disclosures and help shape our practices. |
Our management team recognizes the benefits that come from this dialogue with our stockholders. Stockholder feedback is thoughtfully considered and has led to modifications in our ESG practices, executive compensation program and public disclosures.
Enhancing Board Diversity
We are committed to diversity and recognize the benefits of having a diverse board of directors. We view increasing diversity at the board level as essential to maintaining our competitive advantage and supporting the attainment of our strategic objectives. Not only does diversity promote the inclusion of different perspectives and ideas, and ensure that we have the opportunity to benefit from all available talent, but the promotion of a diverse board also makes prudent business sense and makes for better corporate governance. We believe that a truly diverse board will include and make good use of differences in the skills, regional and industry experience, background, race, gender, cultural and other distinctions between directors. These differences are considered in determining the optimum composition of our board. All board appointments are based on merit, in the context of the skills, experience, independence and knowledge which the board as a whole requires to be effective. As part of the annual performance evaluation of the effectiveness of the board of directors, board committees and individual directors (described above under “Board of Directors and Its Committees—Board and Committee Evaluations”), the nominating and corporate governance committee considers the balance of skills, experience, independence and knowledge of our company and the diversity representation of the board, including gender, ethnicity and race, how the board works together as a unit, and other factors relevant to its effectiveness.
Stock Ownership Guidelines
We have adopted stock ownership guidelines that apply to all our executive officers. The stock ownership guidelines require that the chief executive officer and president own qualified securities equal to six times his or her annual base salary and the chief financial officer, chief operating officer and other executive officers own qualified securities equal to three times his or her annual base salary. Qualified securities include the company’s common stock, preferred stock, common units and LTIP units, whether owned directly or indirectly. Newly appointed executive officers will have up to five years to comply with the stock ownership guidelines. All of our executive officers are in compliance with the stock ownership guidelines.
In addition, we have adopted stock ownership guidelines that apply to all non-management members of the board of directors. The stock ownership guidelines require that the non-management members own qualified securities equal to five times their annual cash retainer. Qualified securities include the company’s common stock, preferred stock, common units and LTIP units, whether owned directly or indirectly. Newly appointed non-management members of the board of directors have up to five years to comply with the stock ownership guidelines. All of our non-management members of the board of directors are in compliance with our stock ownership guidelines.
Prohibition Against Hedging and Pledging
Our insider trading policy prohibits our officers, directors, and employees and their respective family members from, among other prohibited activities, directly or indirectly engaging in short-term or speculative
transactions in our securities or in other transactions in our securities that may lead to inadvertent violations of insider trading laws.
The insider trading policy prohibits our officers, directors, and employees and their respective family members from, among other prohibited activities, (i) directly or indirectly engaging in strategies using puts, calls, equity swaps or other derivative securities on an exchange or in any other market in order to hedge or offset any decreases in the market value of any directly or indirectly owned securities of the company;company, (ii) engaging in short sale transactions or forward sale transactions or any short-term or speculative transactions in our securities or in other transactions in our securities that may lead to inadvertent violations of insider trading laws;laws, and (iii) pledging our securities as collateral for a loan or otherwise using our securities to secure a debt, including through the use of traditional margin accounts with a broker.
Other Corporate Governance Matters
Code of Business Conduct and Ethics and Corporate Governance Guidelines
We have adopted a code of business conduct and ethics and corporate governance guidelines that apply to all of our executive officers and employees and each member of the board of directors. The corporate governance guidelines provide the framework for the governance of our company and represent the board’s current views with respect to selected corporate governance issues considered to be of significance to our stockholders. The corporate governance guidelines direct the board of director’s actions with respect to, among other things, board composition and director qualifications, selection of our chief executive officer, chairman of the board and lead independent director, composition of the board’s standing committees, director resignation policy, executive sessions, stockholder communications with the board, management succession planning and the board’s annual performance evaluation.
Within the time period required by the SEC, we will disclose on our website any amendment to the code of business conduct and ethics and any waiver applicable to any director, executive officer or senior financial officer of any provision of the code of business conduct and ethics that would otherwise be required to be disclosed under the rules of the SEC or NYSE.
Copies of the code of business conduct and ethics and corporate governance guidelines are available under “Corporate Governance” in the “Investor Relations” section of our website at www.stagindustrial.com. Copies of such documents are also available in print to any stockholder who requests them. Requests should be sent STAG Industrial, Inc., One Federal Street, 23rd Floor, Boston, Massachusetts, 02110, Attention: Jeffrey M. Sullivan, Corporate Secretary.
Related Party Transactions
The board of directors has adopted a policy for the review and approval of related person transactions requiring disclosure under Rule 404(a) of Regulation S-K. The policy provides that the nominating and corporate governance committee is responsible for reviewing and approving or disapproving all related party transactions, including any transaction, arrangement or relationship in which (i) the amount involved may be expected to exceed $120,000 in any fiscal year, (ii) we will be a participant and (iii) a related person has a direct or indirect material interest. A related person is defined as an executive officer, director or nominee for election as director, or a greater than 5% beneficial owner of our common stock, or an immediate family member of the foregoing. See “Certain Relationships and Related Party Transactions.”
Conflicts of Interests
Our code of business conduct and ethics expressly prohibits the continuation of any conflict of interest by an employee, officer or director except under guidelines approved by the board of directors. Our policies provide that any transaction involving us in which any of our directors or officers has a material interest must be approved by a vote of a majority of our disinterested directors. Our code of business conduct and ethics requires any employee, officer or director to report any actual conflict of interest to our compliance officer, who will then seek guidance from the board of directors. In addition, our corporate governance guidelines require that each member of
the board of directors consult the chairman of the board in advance of accepting an invitation to serve on another company’s board should there be a possible conflict and notify the nominating and corporate governance committee in writing of the outcome. Because the facts and circumstances regarding potential conflicts are difficult to predict, the board of directors has not adopted a written policy for evaluating conflicts of interests. If a conflict of interest arises, the board will review, among other things, the facts and circumstances of the conflict, our applicable corporate governance policies, the effects of any potential waivers of those policies, applicable state law, and the NYSE continued listing rules and regulations, and will consider the advice of counsel before making any decisions regarding the conflict.
Communication with the Board of Directors, Independent Directors and the Audit Committee
The board of directors may be contacted by any party via mail or e-mail at the addresses listed below:
Board of Directors
STAG Industrial, Inc.
One Federal Street, 23rd Floor
Boston, Massachusetts 02110
boardofdirectors@stagindustrial.com
We believe that providing a method for interested parties to communicate directly with our independent directors, rather than to the full board, would provide a more confidential, candid and efficient method of relaying any interested party’s concerns or comments. The presiding director of independent executive sessions of directors is the lead independent director, and the lead independent director may be contacted by any party via mail or e-mail at the addresses listed below:
Lead Independent Director
STAG Industrial, Inc.
One Federal Street, 23rd Floor
Boston, Massachusetts 02110
leadindependentdirector@stagindustrial.com
The audit committee has adopted a process for anyone to send communications to the audit committee with concerns or complaints concerning our company’s regulatory compliance, accounting, audit or internal controls issues.controls. The audit committee may be contacted by any party via mail or e-mail at the addresses listed below:
Chairman
Audit Committee
STAG Industrial, Inc.
One Federal Street, 23rd Floor
Boston, Massachusetts 02110
auditcommittee@stagindustrial.com
Alternatively, anyone may call our toll-free whistleblower hotline toll-free at (877) 472-2110. A copy of our whistleblower policy is available under “Corporate Governance” in the “Investor Relations” section of our website at www.stagindustrial.com.
Relevant communications are distributed to the board, or to any individual director or directors, as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the board of directors has requested that certain items that are unrelated to the duties and responsibilities of the board should be excluded or redirected, as appropriate, such as: business solicitations or advertisements; junk mail and mass mailings; resumes and other forms of job inquiries; spam; and surveys. In addition, material that is unduly hostile, threatening, potentially illegal or similarly unsuitable will be excluded; however, any communication that is excluded will be made available to any outside director upon request.
EXECUTIVE OFFICER COMPENSATION DISCUSSION AND ANALYSIS
Introduction
TheThis section discusses the principles underlying the material components of our executive compensation program for our executive officers who are named in the “Summary Compensation Table” for 2017 are Benjamin S. Butcher, our chief executive officer, presidentbelow and chairman of the board of directors; William R. Crooker, our executive vice president, chief financial officer and treasurer; Stephen C. Mecke, our executive vice president and chief operating officer; Jeffrey M. Sullivan, our executive vice president, general counsel and secretary; and David G. King, our executive vice president and director of real estate operations (collectively, the “named executive officers”). The compensation committee is responsible for establishing our executive officer compensation program. The program sets the structure and levels of executive officer compensation and establishes the performance-based metrics and individual goals against which the officers’ performances are evaluated by the compensation committee. In establishing its executive compensation program, the compensation committee considered, among other things, analyses prepared by and the advice of FPL, an independent compensation consultant engaged by the compensation committee.
The principles underlying the key elements of our executive compensation program and factors relevant to an analysis of the compensatory policies and decisions. Our “named executive officers” during 2020 were:
| ● | Benjamin S. Butcher, Chief Executive officer, President and Chairman of the Board of Directors |
| ● | William R. Crooker, Executive Vice President, Chief Financial Officer and Treasurer |
| ● | Stephen C. Mecke, Executive Vice President and Chief Operating Officer |
| ● | Jeffrey M. Sullivan, Executive Vice President, General Counsel and Secretary |
| ● | David G. King, Executive Vice President and Director of Real Estate Operations |
Executive Summary
2020 Say-On-Pay Vote
At the 2020 annual meeting of stockholders, approximately 97.4% of the votes cast in the advisory vote on the 2019 compensation of our named executive officers were in favor. The compensation committee considered these voting results as supportive of the committee’s general executive compensation practices.
2020 Business Highlights
During 2020, we continued to deliver strong operating and financial results, while creating significant long-term value for our stockholders. Key highlights include the following:
| ● | Our balance sheet enables capital access and liquidity and facilitates our strategic growth. As of December 31, 2020, our ratio of net debt to total real estate cost basis was approximately 32.4% and our ratio of total long-term indebtedness to total enterprise value was approximately 25.0%. In addition, during 2020, we (i) raised equity capital of approximately $439.3 million through follow-on common stock offerings (including net proceeds received upon physical settlement of certain forward sales agreements), (ii) maintained two investment grade ratings from nationally recognized statistical rating agencies, and (iii) paid a monthly dividend on shares of our common stock at an annualized rate of $1.44 per share, which represents a dividend yield of approximately 4.6% based on the year-end closing stock price of $31.32. |
| ● | Our acquisition platform and process create significant external growth. Since our initial public offering in 2011, as of December 31, 2020, we have deployed almost $5.5 billion of capital, representing the acquisition of 487 buildings totaling approximately 101.1 million rentable square feet. During 2020, we acquired 48 buildings totaling approximately 9.9 million rentable square feet for a total purchase price of approximately $775.8 million. |
| ● | Despite facing challenges related to the COVID-19 pandemic, we continue to execute on our operational goals and maintained strong occupancy and rent collections during the year. We (i) achieved an occupancy rate of 96.9% on the total portfolio and 97.2% on the operating portfolio as of December 31, 2020, and (ii) collected 99.6% of base rental billings for the year ended December 31, 2020 (as of February 10, 2021), representing one of the highest collection rates in our industry. |
| ● | Our investment strategy and execution generate significant cash flow growth and earnings growth. For the year ended December 31, 2020: |
| ° | Net income was approximately $206.8 million as compared to net income of approximately $50.7 million in 2019, a decrease of approximately 307.9%. These amounts included approximately $135.7 million and $7.4 million, respectively, of gain from sales of properties in 2020 and 2019. Excluding gain from sales of properties, our net income increased approximately 64.2% from 2019 to 2020. |
| ° | FFO was approximately $291.1 million as compared to FFO of approximately $238.2 million in 2019, an increase of approximately 22.2%. |
| ° | NOI was approximately $394.1 million as compared to NOI of approximately $330.8 million in 2019, an increase of approximately 19.3%. |
| ● | Our operating and financial performance has translated into significant stockholder returns. We believe that the value creation produced from an investment in real estate should be assessed over a long-term period, and our strategy has focused on long-term value creation. As of December 31, 2020, our TSR performance has been +33.4% over three years, +122.3% over five years and +126.9% over seven years. We have outperformed the MSCI US REIT index over the three-year, five-year and seven-year periods. We also outperformed the S&P 500 Index over the five-year period (the S&P 500 Index returned 48.9% and 134.0% over the three- and seven-year periods, respectively). |
| ● | Our short-term (2020) stockholder return performance has been in line with the performance of our peer groups. Our TSR for 2020 was 4.2%, which placed us at approximately the 39th percentile, the 62nd percentile and the 74th percentile in our 2020 industry peer group, our 2020 size-based peer group and the group of companies constituting the MSCI US REIT index, respectively. |
Please refer to Appendix A attached hereto for certain definitions and reconciliations of FFO and NOI to the nearest measure under GAAP.
Executive Compensation Program Highlights
Our executive compensation program is designed to provide a total compensation package intended to attract and retain high-caliber executive officers and employees, and also to incentivize employee contributions that are discussed below. consistent with our corporate objectives and stockholder interests. It is our policy to provide a competitive total compensation package and share our success with our named executive officers, as well as our other employees, when our objectives are met.
The key elementscomponents of compensation are designed to be flexible and complementary and to serve,support, collectively, the goals and objectives of our executive compensation program.
Below are certain features of our current executive compensation program, which reflect our commitment to a pay-for-performance compensation structure:
· A substantial majority of executive officer pay is tied to our performance and not guaranteed. The compensation committee sets clear goals for company performance and differentiates certain elements of compensation based on individual achievement.
| ● | A substantial majority of executive officer compensation is tied to our performance and is not guaranteed. The compensation committee sets clear goals for company performance and differentiates certain elements of compensation based on individual achievement. |
· Two of the primary components of our executive compensation program are annual cash incentive bonuses and long-term equity awards, which consist of up to one half of grant date value in LTIP units subject to multi-year vesting and one half or more of grant date value in performance units.
| ● | Two of the primary components of our executive compensation program are annual cash incentive bonuses and long-term equity awards, which consist of up to 40% of grant date value in LTIP units subject to multi-year vesting and 60% or more of grant date value in performance units. |
·Annual cash incentive bonuses — The annual cash incentive bonuses vary according to performance and are not guaranteed.
| ° | Annual cash incentive bonuses – The annual cash incentive bonuses vary according to performance and are not guaranteed. |
·LTIP units — In the absence of stock price appreciation, LTIP units will not have value beyond distributions actually paid. Unlike common stock, LTIP units lack an immediate liquidation value upon grant.
| o | LTIP units – In the absence of stock price appreciation, LTIP units will not have value beyond distributions actually paid. Unlike common stock, LTIP units lack an immediate liquidation value upon grant and present the risk of never achieving a liquidation, or sale, value. |
·Performance units — The ultimate value of the performance units depends on our TSR (as defined below) over a three-year period compared to both relative return (TSR vs. three benchmarks) and, as a condition for higher levels of value, an absolute return. The performance units are intended as an additional long-term incentive designed to align the executive officers’ interests more closely with those of the stockholders.
| o | Performance units – The ultimate value of the performance units depends on our TSR over a three-year period compared to both relative returns (TSR vs. three benchmarks) and an absolute return (as a condition for higher levels of value). The performance units are intended as an additional long-term incentive designed to align the executive officers’ interests more closely with those of the stockholders. |
· Our heavy reliance on corporate performance as a performance metric reflects the committee’s belief that the company should require a uniform commitment to corporate success from all of its senior officers, irrespective of their office. A relatively small portion of pay is not dependent on company performance. Annual base salaries for our executive officers are intended to be 25% or less of total compensation.
| ● | Our heavy reliance on company financial and operational performance as performance metrics reflects the committee’s belief that the company should require a uniform commitment to corporate success from all of its senior officers, irrespective of their office. A relatively small portion of pay is not dependent on company performance. Annual base salaries for our executive officers are intended to be less than 25% of total compensation. |
· The ability to measure the company’s performance against sensible standards is essential, and the committee considers the comparison of the company’s total stockholder return, defined as common stock price appreciation plus dividends, assuming reinvestment of dividends into additional shares of common stock (“TSR”), to the TSR of our peers to be the best indicator of performance.
· We measure performance against multiple indices to avoid the risk of poor correlation of performance and reward that is inherent in reliance on a single peer index.
| ● | We measure performance against multiple metrics and multiple indices to avoid the risk of poor correlation of performance and reward that is inherent in reliance on a single performance metric or peer index. |
Below are additional features of our current executive compensation practices —– both the practices we believe drive performance and the practices we have not implemented because we do not believe they would serve the stockholders’ long-term interests:
What We Do | | What We Don’t Do |
| |
|
✓ We tie pay to performance by linking a meaningful portion of total compensation to the achievement of short- and long-term financial goals (primarily through relative TSR).
✓ü We mitigate undue risk, including utilizing retention provisions, multiple performance targets, and robust board and management processes to identify risk.
✓ü We tie pay to performance by linking a majority of equity compensation and total compensation to the achievement of financial and operational goals.
ü We require strong, positive TSR (25% or greater) as a condition to higher pay outs under performance units; relative TSR performance below the 30th percentile would result in no payout under the performance units. ü The 2011 Equity Incentive Plan generally requires a minimum one-year vesting period for stock options and stock appreciation rights. ✓ü We have reasonable post-employment and change of control provisions. Our employment agreements with the named executive officers generally provide for cash payments after a change of control only if an employee is also terminated within one year of the change of control (a double-trigger).
✓ü We provide only modest perquisites that have a sound benefit to our business.
✓ü The compensation committee benefits from its utilization of an independent compensation consulting firm. The reports prepared by the compensation consulting firm are used by the compensation committee to set executive compensation at levels that are competitive with our peers.
✓ü We adoptedhave stock ownership guidelines for executive officers and directors.
| | ✘û We do not guarantee annual base salary increases. We do not guarantee bonuses of a minimum specific dollar amount. We do not provide uncapped bonuses.
✘ We do not believe the executive compensation program creates risks that are reasonably likely to pose a material adverse impact to our company.
✘û We do not guarantee annual base salary increases or bonuses of a minimum amount (bonuses can be zero). We do not provide uncapped bonuses.
û The 2011 Equity Incentive Plan prohibits recyclingliberal share recycling. We may not reuse shares withheld or delivered to satisfy tax withholdings or an option’s exercise price. We also may not use “net share counting” in the exercise of stock appreciation rights. û We do not reprice stock options or stock appreciation rights without stockholder approval. The exercise price of stock options and the base price of stock appreciation rights.rights may not be less than the grant date fair market value of our common stock. ✘û We do not reprice underwater stock options.
✘ Our employment agreements with the executive officers do not include tax gross-up provisions with respect to payments contingent upon a change of control.
✘ The named executive officers do not receive dividends on unearned performance awards.
✘ We do not have pension plans.
✘û We do not distribute dividends on unearned performance unit awards.
û The independent compensation consulting firm did not provide any other services to us.us not related to compensation or succession planning and executive assessments. ✘û Our insider trading policy prohibits hedging and pledging of our common stock by executive officers and directors.
|
2020 Changes to Our Equity Incentive Compensation Program
Historically we have issued performance units to our executive officers that may settle in shares of common stock (or other securities) depending on our relative TSR performance over a three-year measuring period compared to three benchmarks: (i) the TSR of companies in an industry peer group, (ii) the TSR of companies in a size-based peer group, and (iii) the TSR of companies in a major real estate company stock index. The performance units also have a significant absolute TSR as a condition to higher settlement, or payout, levels.
In connection with the adoption of our redesigned executive compensation program in 2019, the compensation committee determined that, effective for the performance units to be issued after year-end 2019, the threshold for a target payout would be increased from the 50th percentile to the 55th percentile. The compensation committee further determined that other terms of the performance units would be substantially similar to the terms of our historical performance units.
Below are the key terms of the new performance unit awards:
ü Performance units will have zero value (no payout) for performance below the 30th percentile
ü Must outperform to earn target award; threshold for target payout is the 55th percentile
ü Must achieve a cumulative 25% absolute TSR to receive a payout above target on 50% of the award
The compensation committee specifically considered whether the performance units should pay out above target or otherwise in instances where we have had strong relative TSR performance but a negative absolute TSR (i.e., outperformance among the three peer groups when they have had overall negative performance). The compensation committee continues to believe that competitive pay practices require that executive officers be compensated at a reasonable level for outperforming peers in difficult economic environments, even if absolute TSR is negative. In this regard, the compensation committee took note of the following:
| ● | by the terms of the award agreements, half of the performance units cannot pay above target without a 25% or greater positive absolute TSR (i.e., a positive absolute TSR below 25% would result in no more than target for half of the performance units); |
| ● | stockholders with whom we met with during a previous compensation and governance-focused outreach effort, with one exception, either expressly supported or did not object to the degree to which payouts under the performance units depended on relative TSR; |
| ● | in our regular, year-long engagement with stockholders, none expressed concern about performance unit pay outs in the case of substantial relative TSR outperformance (75th percentile or greater) but negative absolute TSR; and |
| ● | in the case of negative absolute TSR over the measuring period, the value of any settlement of the performance units would necessarily be less than the same settlement at the grant date stock price and the executive would experience an appropriate value decrement as a stockholder. |
Executive Compensation Program GoalsObjectives and Philosophy
Objectives of Our Executive Compensation Program
The compensation committee’s overarching goal is to attract and maintain an excellent executive management team that enhances stockholder value over the long term. The executive compensation program is, therefore, designed to provide substantial incentives to focus executive management’s efforts accordingly. The compensation program also is designed to encourage and reward executives who contribute to company performance goals and TSR performance by successfully executing the company’s business strategy, providing
thoughtful and creative stewardship and exhibiting outstanding performance. SpecificThe specific objectives of the compensation program are to:
| ● | align the interests of executive officers with the interests of stockholders; |
· align the interests of executive officers with the interests of stockholders;
| ● | encourage and maintain a performance-driven company culture; |
| ● | provide the compensation committee with the flexibility and discretion to adjust executive compensation to appropriately reflect both individual circumstances and variable business conditions; and |
| ● | attract and retain talented and experienced executive officers. |
·Pay-for-Performance Philosophy encourage and maintain a performance-driven company culture;
· provide the compensation committee with the flexibility and discretion to reflect appropriately both individual circumstances and variable business conditions; and
· attract and retain talented and experienced officers.
Consistent with these objectives, executive compensation isfor 2020 was heavily weighted toward (i) TSR-basedcompany financial and operational performance metrics for bonuses and (ii) long termTSR for long-term equity incentives. We believe that the executive compensation program supports these objectives by providing the named executive officers with a multi-faceted compensation package, comprising a base salary, the opportunity to earn an annual cash incentive bonus and equity awards under the 2011 Equity Incentive Plan.
The graph below illustrates our long-term pay-for-performance alignment by comparing our chief executive officer’s total direct compensation to our TSR (indexed to a base date of December 31, 2012)2015) for the past five years.
The compensation reported in this graph differs from compensation reported in the summary compensation table. The graph above aligns the value of equity incentive awards with the performance year for which they were earned, rather than the year in which they were granted. For example, compensation earned in any given year includes the
fair value, as of the vesting date, of LTIP units that vested during the year, rather than the fair value, as of the grant date, of LTIP units granted in the year. As another example, compensation in 20142019 includes the fair value of the LTIP units issued in satisfaction of the outperformance plan interests granted in 2011.2016.
Final Results of 2018 Performance Units – Alignment of Pay and Performance
In January 2018, we issued performance units under the 2011 Equity Incentive Plan, which provided each executive officer the opportunity to earn a target number of awards as determined by our relative and absolute TSR performance over a three-year performance period compared to pre-established quantitative performance metrics. The following table shows the performance metrics and ultimate 140.7% achievement for the performance units at the completion of the three-year performance period from January 1, 2018 through December 31, 2020.
| Benchmark | Performance Metrics | Performance Result(1) | Metric Payout Percentage | Weighting | Calculated
Payout
Percentage(2) | |
30th Percentile | 50th Percentile | 75th Percentile | 95th Percentile | |
| Size-Based Peer Group | 50% earned | 100% earned | 200% earned | N/A | 52nd percentile | 109.3% | 25% | 27.3% | |
| Industry Peer Group | 50% earned | 100% earned | 200% earned | N/A | 32nd percentile | 54.6% | 25% | 13.7% | |
| MSCI US REIT Index(3) | 50% earned | 100% earned | 200% earned | 300% earned | 75th percentile | 199.4% | 50% | 99.7% | |
| | | | | | | | | |
| | Total Calculated Payout Percentage: | 140.7% |
| | | | | | | | | | | | |
(1) Rounded to the nearest whole percentile.
(2) Excludes deemed dividend shares.
(3) Awards above 100% for this benchmark require us to achieve a minimum absolute TSR of 25%. Our absolute TSR for the performance period from January 1, 2018 through December 31, 2020 was 29.2%.
A comparison of this result to prior years illustrates the true variability of our long-term equity incentive compensation program. The total percentage of target achieved for the 2016-2018 and 2017-2019 performance units was 263% and 166%, respectively.
How We Determine Executive Compensation
The compensation committee determines compensation for the named executive officers and currently has fourfive independent directors, Ms. Dilley and Messrs. Colbert, Furber, Guillemette and Weger. The compensation committee exercises independent discretion with respect to executive compensation matters and administers our equity incentive programs, including reviewing and approving equity grants to the named executive officers pursuant to the 2011 Equity Incentive Plan. The compensation committee operates under a written charter adopted by the board of directors, a copy of which is available onunder “Corporate Governance” in the “Investor Relations” section of our website at www.stagindustrial.comwww.stagindustrial.com.. The information located on, or accessible from, our website is not, and should not be deemed to be, part of this proxy statement or incorporated into any other filing that we submit to the SEC.
The initial compensation arrangements with the named executive officers were determined in negotiations with each individual executive officer and were formalized in the executive officers’ employment agreements, as described below in “Potential Payments Upon Termination or Change in Control—Employment Agreements.” In making compensation decisions for 2017,2020, the compensation committee evaluated the performance of our chief executive officer and, together with our chief executive officer, assessed the individual performance of the other named executive officers. The compensation committee also reviewed market-based compensation data provided by its independent compensation consultant, FPL Associates, L.P. (“FPL”), and from data publicly available from other sources such as the National Association of Real Estate Investment Trusts.Trusts (“Nareit”).
Compensation Committee Consideration of the 2017 Vote on Executive Compensation
In determining our executive compensation program for the remainder of 2017 and 2018, the compensation committee generally considered the results of the 2017 advisory vote of our stockholders on executive compensation presented in our 2017 proxy statement. The compensation committee noted that approximately 94% of the votes cast approved the compensation of the named executive officers in our 2017 proxy statement. The compensation committee considered these voting results as supportive of the committee’s general executive compensation practices.
Engagement of Compensation Consultant
The compensation committee is authorized to retain the services of one or more executive compensation consultants, in its discretion, to assist with the establishment and review of our compensation programs and related policies. The compensation committee has sole authority to hire, terminate and set the terms of any future engagement of FPL or any other compensation consultant.
For compensation advice in 2017,2020, the compensation committee engaged FPL, an independent compensation consulting firm, to provide market-based compensation data to assist the committee in the implementation of our comprehensive executive compensation program. In connection with these efforts, FPL prepared for the compensation committee reports that included compensation analyses for each executive position, an analysis of a recommended peer group for the company and a description of the methodology used to provide the compensation analyses. FPL researched competitive market practices, reviewed the proxy statements of its recommended peer group and checked its own proprietary information data bases. The compensation committee reviewed the peer group compensation analyses and methodology provided to the company and it approved the 20172020 executive compensation program.
Peer Groups
Our focus on single tenant industrial properties that represent relative value is uncommon, making the identification of directly comparable companies difficult. For 2017,the 2020 performance units, FPL recommended 1512 publicly-traded real estate investment trustsREITs with diverse investment focuses and with implied equity market capitalizations roughly
comparable (approximately 50% to 200%) to our equity market capitalization (the “size-based peer group”). The companies in the size-based peer group are listed below:
CoreSite Realty Corporation | Pebblebrook Hotel Trust | Pennsylvania Real Estate Investment Trust
Rexford Industrial Realty, Inc. |
DCT Industrial Trust,EastGroup Properties, Inc.
| | Physicians Realty Trust | STORE Capital Corporation |
EastGroup Properties, Inc.
| | PS Business Parks, Inc.
|
Education Realty Trust, Inc.
| | QTS Realty Trust, Inc.
|
First Industrial Realty Trust, Inc. | PS Business Parks, Inc. | Ramco-Gershenson Properties Trust
Terreno Realty Corporation |
Gramercy PropertyLexington Realty Trust
| QTS Realty Trust, Inc. | STORE Capital Corporation
|
Hersha Hospitality Trust
| | Xenia Hotels & Resorts, Inc. |
Lexington Realty Trust
| | |
For 2017 annual cash bonuses,the 2020 performance units, the compensation committee also used a group of 11eight companies that primarily own industrial and/or single-tenant real estate (the “industry peer group”). The companies in the industry peer group are listed below:
DCT Industrial Trust, Inc.
| | Liberty Property Trust
|
Duke Realty Corporation | | Monmouth Real Estate Investment Corporation |
EastGroup Properties, Inc. | | PS Business Parks, Inc. |
First Industrial Realty Trust, Inc. | | STORE Capital Corporation
Rexford Industrial Realty, Inc. |
Gramercy PropertyLexington Realty Trust
| | Terreno Realty Corporation |
Lexington Realty Trust
| | |
Company AccomplishmentsFor more information regarding how the compensation committee used both the size-based peer group and the industry peer group to determine the 2020 performance units, see “—Equity Incentive Compensation Program—Performance Units.”
Below are certain of our achievements for 2017:
· achieved TSR of 20.7% for the year ended December 31, 2017, which significantly exceeded the 5.1% return of the MSCI US REIT index;
· acquired 53 buildings with approximately 11.1 million square feet for approximately $613 million, representing approximately 23.1% growth of our total assets on a real estate cost basis from year-end 2016;
· achieved an occupancy rate of approximately 95.3% at year-end 2017;
· achieved a retention rate of approximately 59.1% for leases expiring in 2017;
· achieved, as of December 31, 2017, a ratio of net debt to total real estate cost basis of approximately 37.4% and a ratio of total long-term indebtedness to total enterprise value of approximately 28.9%;
· raised gross equity capital of approximately $427.5 million through our at-the-market common stock offering programs;
· maintained an investment grade rating from a nationally recognized statistical rating agency;
· paid a monthly dividend at an annualized rate of $1.405002 per share, which represents a dividend yield of approximately 5.1% based on the year-end closing stock price of $27.33; and
· for 2017 compared to 2016, increased our funds from operations attributable to common stockholders and unit holders by approximately 48.4% and our net operating income by approximately 21.0%.
For purposes of the above, we define:
· “net debt” as our total long-term indebtedness outstanding less cash and cash equivalents on hand;
· “long-term indebtedness” as the principal outstanding on our unsecured credit facility, unsecured term loans, unsecured notes and mortgage notes;
· “real estate cost basis” as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization; and
· “enterprise value” as the market value of our common stock and operating partnership units (including LTIP units) outstanding (based on the period-end closing price on the NYSE) plus the liquidation value of our preferred stock and amounts outstanding on our long-term indebtedness.
Funds from operations and net operating income meet the definition of “non-GAAP financial measures” as set forth in Item 10(e) of Regulation S-K promulgated by the SEC. Please refer to Appendix A attached hereto for an explanation of why our management considers these measures, the historical amounts of these two measures and a reconciliation of the measures to the nearest measure under generally accepted accounting principles.
Key Elements of Executive Compensation
The following table summarizes the key elements of our executive compensation program for the named executive officers and each element’s program objectives, including annual cash compensation and equity awards. A more detailed discussion of each element of our executive compensation program follows this table.We established our bonus performance metrics early in 2020, before the COVID-19 crisis, and we did not adjust those performance metrics or otherwise make changes to our executive compensation program in response to the unprecedented pandemic.
Element | | Description | | Objectives |
| | | | |
Annual Cash Compensation | | | | |
Annual Base Salary | | Fixed cash compensation. Reviewed and adjusted periodically. Salaries should generally constitute no more than 25% of total annual compensation. Salaries plus cash incentive bonuses are targeted at the 50th percentile of the cash compensation for similar officer positions in the compensation peer group, before adjustment of the bonus for company under- or over-performance based on TSR. | | ·● Attract and retain executives
·
● Provide steady source of income sufficient to permit executives to focus effectively on their professional responsibilities ·
● Help ensure that total cash compensation is competitive but not in excess of market |
Annual Cash Incentive CompensationBonus Program | | “At risk” variable cash compensation based on the company’s TSR. company performance goals and individual performance goals. | | ·● Encourage executives to achieve annual company and individual performance goals
·
● Align executives’ interests with the stockholders’ interests |
Equity Incentive Compensation Program | | |
LTIP Units | | Awards vest in equal installments over multi-year periods, subject to continued service. Value of the award is “at risk” assince (i), the award may never have any liquidation value in the absence of sufficient stock price appreciation, the award may never have any liquidation value, and (ii) the value fluctuates with the company’s common stock price. LTIP unit awards should generally constitute approximately one half40% or less of total annual equity incentive compensation. | | ·● Promote long-term equity ownership by executives
·
● Encourage the retention of our executives ·
● Align executives’ interests with the stockholders’ interests |
Performance Units | | “At risk” variable equity compensation based on company performance over three-year performance period. Awards are paid in common stock.stock or LTIP units. Performance units should generally constitute approximately one half60% or more of total annual equity incentive compensation. | | ·● Encourage executives to achieve long-term company performance goals
·
● Align executives’ interests with the stockholders’ interests ·
● Attract and retain executives |
Annual Base Salary
Annual base salary provides a minimum level of compensation commensurate with an experienced and motivated individual of the appropriate caliber and background to perform an executive officer’s job. It should be benchmarked to current market rates to ensure that we are able to attract new executive officers, if necessary. Base salary levels are intended to provide a steady source of income sufficient to permit these officers to focus effectively on their professional responsibilities. Base salaries of the named executive officers are reviewed and may be adjusted periodically by the compensation committee. No formulaic base salary increases are provided to the named executive officers. The compensation committee has determined that executive officers’ salaries should generally constitute no moreless than 25% of total annual compensation.The compensation committee did not increase base salaries from 2016 to 2017. For 2018, the committee increased the base salaries for Messrs. Butcher, Crooker and Mecke, respectively, to $650,000; $360,000; and $375,000. After the increase, the 2018 base salaries for these three individuals range from approximately 10% below to approximately 5% above the 2017 median base salaries for officers in the same positions at our peers, according to information compiled by FPL. No changes were made to the base salaries of the other named executive officers.
Annual Cash Incentive CompensationBonus Program
The annual cash incentive compensationbonus program is intended to compensate the named executive officers for achieving annual financialcompany performance goals and individual performance goals. The compensation committee believes that incentive cash compensation is central to the attainment of the executive compensation program’s objectives. Annual cash incentive bonuses encourage the named executive officers to achieve company performance goals, which fosters a performance-driven company culture that aligns the executives’ interests with the stockholders’ interests.
The annual cash incentive bonus program allows our executive officers to earn from 0% to either 150% or 187.5% (depending on the executive officer) of base salary based on various pre-defined and pre-weighted annual company and individual performance goals established by the compensation committee (at least 80% of which are objective, calculable company performance measurements). Individual performance goals are assessed subjectively and are focused, depending on position, on matters such as process efficiencies, capital transactions, investor relations activities, rollover rent and retention results, achievement of department initiatives and others.
The table below provides a summary of our annual cash incentive bonus program, including the 2020 performance goals and their relative weighting:
| Annual Cash Incentive Bonus Program |
| | | |
| Performance Metrics | | 80% Corporate Performance Goals 50% Core FFO per Share 10% Acquisition Volume 10% Net Debt to Run Rate Adjusted EBITDAre 10% Same Store Cash NOI Growth 20% Individual Performance Goals |
| | | |
| Performance Bandwidths | | Defined performance bandwidths based on percentage of base salary: |
| CEO: Threshold - 62.5% Target - 125% Maximum -187.5% | Other NEOs: Threshold - 50% Target - 100% Maximum - 150% |
Each performance goal was assigned a weighting relative to the other annual performance goals. Results between threshold and target or between target and maximum will be based on linear interpolation. Performance below threshold earns 0%, and performance above the maximum is capped at the maximum level (no additional amounts are paid for exceeding the maximum performance goal). The total annual cash incentive bonus earned by an executive officer is the sum of the weighted annual incentive amounts earned with respect to each goal. As describeddiscussed in more detail below under “—Company Performance Goals—Acquisition Volume,” the compensation committee did not adjust the 2020 performance goals in response to the unprecedented COVID-19 pandemic.
Company Performance Goals
For 2020, 80% of the annual cash incentive bonuses was based on the following company performance goals:
Core FFO per Share
FFO is a widely recognized measure of the performance of REITs. We calculate FFO in accordance with the standards established by Nareit. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating buildings, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures. “Core FFO” excludes transaction costs, amortization of above and below market leases, net, loss on extinguishment of debt, gain (loss) on involuntary conversion, gain (loss) on swap ineffectiveness, and non-recurring other expenses. We believe that Core FFO, which excludes items that by their nature are not comparable from period to period and tend to obscure actual operating results, is useful to compare our operating performance over a given time period to that of other companies and other time periods in a consistent manner.
With the 50% weighting of the Core FFO per Share component, our chief executive officer can earn between 31.3 percentage points (at the threshold level) and 93.8 percentage points (at the maximum level) and our other named executive officers can earn between 25.0 (at the threshold level) and 75.0 (at maximum level) under this performance goal component. As shown in the chart below, for 2020, our Core FFO per Share, assuming bonuses were paid at target levels, was $1.90, or 0.5% greater than the target Core FFO per Share goal. As a result, our chief executive officer earned 72.9 percentage points and the other named executive officers earned 58.3 percentage points under the Core FFO per Share performance goal component. See the table below under “—2020 Company Performance Results” for more detail on the calculation.
Acquisition Volume
We are a growth-oriented company, and much of our growth is external, from acquisitions. Moreover, a significant portion of our employees and resources are directed toward acquisitions. Accordingly, our annual Acquisition Volume measures one of our core operations.
With the 10% weighting of the Acquisition Volume component, our chief executive officer can earn between 6.3 percentage points (at the threshold level) and 18.8 percentage points (at the maximum level) and our other named executive officers can earn between 5.0 (at the threshold level) and 15.0 (at maximum level) under this performance goal component. As shown in the chart below, for 2020, our Acquisition Volume was approximately $775.8 million, which was below the threshold Acquisition Volume goal. Due to the COVID-19 pandemic, related government shutdowns and other actions, the reactions of various market participants and the uncertainty of the
pandemic’s effects on pricing and leasing, for a full quarter of the year we were limited in our ability to source, underwrite and complete acquisitions. Despite this, we made significant efforts once acquisition market activity resumed that resulted in a near achievement of our Acquisition Volume goal. The compensation committee deliberated as to whether to adjust the Acquisition Volume goal in light of the challenges created by the COVID-19 pandemic, including whether to evaluate the metric on an annualized basis, which would have resulted in a payout under this performance component. Ultimately, the compensation committee concluded that maintaining the Acquisition Volume goal, as originally established, was appropriate. As a result, our named executive officers did not earn any percentage points under the Acquisition Volume performance goal component. See the table below under “—2020 Company Performance Results” for more detail on the calculation.
Net Debt to Run Rate Adjusted EBITDAre
We define “Net Debt” as our total long-term indebtedness less cash and cash equivalents on hand. We define “EBITDAre” in accordance with the standards established by Nareit. EBITDAre represents net income (loss) (computed in accordance with GAAP) before interest income and expense, tax, depreciation and amortization, gains or losses on the sale of rental property, and loss on impairments. “Adjusted EBITDAre” further excludes transaction costs, termination income, solar income, revenue associated with one-time tenant reimbursements of capital expenditures, straight-line rent adjustments, non-cash compensation expense, amortization of above and below market leases, net, gain (loss) on involuntary conversion, loss on extinguishment of debt, and other non-recurring items. “Run Rate Adjusted EBITDAre” is Adjusted EBITDAre plus incremental Adjusted EBITDAre adjusted for a full period of acquisitions and dispositions. Run Rate Adjusted EBITDAre does not reflect our historical results and does not predict future results, which may be substantially different. We believe that EBITDAre, Adjusted EBITDAre and Run Rate Adjusted EBITDAre are helpful to investors as supplemental measures of the operating performance of a real estate company because they are direct measures of the actual operating results of our properties. We also use these measures in ratios to compare our performance to that of our industry peers, such as Net Debt to Run Rate Adjusted EBITDAre, which we view as an important measurement of the strength of our balance sheet, the strength or riskiness of our earnings and our ability to withstand negative economic trends such as a decrease in our stock price.
With the 10% weighting of the Net Debt to Run Rate Adjusted EBITDAre component, our chief executive officer can earn between 6.3 percentage points (at the threshold level) and 18.8 percentage points (at the maximum level) and our other named executive officers can earn between 5.0 (at the threshold level) and 15.0 (at maximum level) under this performance goal component. As shown in the chart below, for 2020, our Net Debt to Run Rate Adjusted EBITDAre was 4.6x, or 3.2% better than the maximum Net Debt to Run Rate Adjusted EBITDAre goal. As a result, our chief executive officer earned 18.8 percentage points and the other named executive officers earned 15.0 percentage points under the Net Debt to Run Rate Adjusted EBITDAre performance goal component. See the table below under “—2020 Company Performance Results” for more detail on the calculation.
Same Store Cash NOI Growth
Same Store Cash NOI Growth is a measurement of our internal growth and a primary financial measure for evaluating the core operating performance of our properties. We define “NOI” as rental income, including reimbursements, less property expenses, which excludes depreciation, amortization, loss on impairments, general and administrative expenses, interest expense, interest income, transaction costs, gain (loss) on involuntary conversion, loss on extinguishment of debt, gain on sales of rental property, and other expenses. We define “Cash NOI” as NOI less straight-line rent adjustments and less intangible amortization of above and below market leases, net. We believe that NOI and Cash NOI are appropriate supplemental performance measures because they help investors and management understand the core operations of our buildings. Comparing Cash NOI on a “same store” basis (i.e., looking at the exact same set of stabilized properties over the periods being compared) allows for an apples-to-apples comparison. We also exclude lease termination fees, solar income and revenue associated with one-time tenant reimbursements of capital expenditures when calculating Cash NOI on a “same store” basis.
With the 10% weighting of the Same Store Cash NOI Growth component, our chief executive officer can earn between 6.3 percentage points (at the threshold level) and 18.8 percentage points (at the maximum level) and our other named executive officers can earn between 5.0 (at the threshold level) and 15.0 (at maximum level) under this performance goal component. As shown in the chart below, for 2020, our Same Store Cash NOI Growth was 1.7%, or 13.3% greater than the target Same Store Cash NOI Growth goal. As a result, our chief executive officer earned 15.0 percentage points and the other named executive officers earned 12.0 percentage points under the Same Store Cash NOI Growth performance goal component. See the table below under “—2020 Company Performance Results” for more detail on the calculation.
2020 Company Performance Results
In January 2021, the compensation committee evaluated our performance against the company performance goals, which are set forth in the table below.
Performance Metrics (Weighting) | Percentage Points Available | Performance Goals | Percentage Points
Earned (CEO / Other NEOs) |
Threshold
(CEO / Other
NEOs) | | Maximum
(CEO / Other
NEOs) | Threshold | Target | Maximum |
Core FFO per Share (50%) | 31.3 / 25.0 | 62.5 / 50.0 | 93.8 / 75.0 | $1.86 | $1.89 | $1.92 | 72.9 / 58.3 (33rd percentile between target and maximum) |
| | Actual $1.90 | |
Acquisition Volume (10%) | 6.3 / 5.0 | 12.5 / 10.0 | 18.8 / 15.0 | $800 million | $900 million | $1 billion | 0.0 / 0.0 (below threshold) |
Actual $775.8 million | | |
Net Debt to Run Rate Adjusted EBITDAre (10%) | 6.3 / 5.0 | 12.5 / 10.0 | 18.8 / 15.0 | 6.00x | 5.38x | 4.75x | 18.8 / 15.0 (above maximum) |
| | | | Actual 4.60x |
Same Store Cash NOI Growth (10%) | 6.3 / 5.0 | 12.5 / 10.0 | 18.8 / 15.0 | 1.0% | 1.5% | 2.0% | 15.0 / 12.0 (40th percentile between target and maximum) |
| | Actual 1.70% | |
| | | | | | |
| | | | | Total Percentage Points Earned (CEO / Other NEOs): | 106.7 / 85.3 |
| | | | | | | | | | | | | | | | |
Individual Performance Goals
For 2020, 20% of the annual cash incentive bonuses was based on the compensation committee’s (and the chief executive officer’s with respect to the other named executive officers) determinationassessment of the 2017 annual cash incentive compensation program was guided byfollowing individual goals, as well as performance in the company’s TSR.context of the COVID-19 pandemic:
| ● | with respect to Mr. Butcher, the overall success of the company and succession planning; |
| ● | with respect to Mr. Crooker, acquisition activity, process efficiencies (accounting, corporate finance and modeling), our balance sheet (equity and debt transactions, costs of transactions, maturity schedule, etc.) and fixed charge coverage ratio, our ratings process, investor relations matters, accounting accuracy and compliance with the requirements of the Sarbanes-Oxley Act of 2002, and achievement of department initiatives; |
| ● | with respect to Mr. Mecke, process efficiencies, achievement of certain other officers’ individual goals, information security and achievement of department initiatives; |
| ● | with respect to Mr. Sullivan, process efficiencies (legal and credit), responsiveness to asset management and acquisitions, scalability of the legal and credit departments, corporate governance developments and the achievement of department initiatives; and |
| ● | with respect to Mr. King, process efficiencies (asset management and markets), rollover rental rates and retention results, disposition success (particularly opportunistic sales), sustainability initiatives and achievement of department initiatives. |
The compensation committee set
With the target total cash compensation (annual base salary and annual cash incentive bonus) for each20% weighting of the individual performance component, our chief executive officer atcan earn between 12.5 percentage points (at the 50th percentile forthreshold level) and 37.5 percentage points (at the cash compensation for the same or equivalent position for the companies inmaximum level) and our size-based peer group. The compensation committee then determined the annual cash incentive bonuses would be based entirely on company performance (as described in more detail below). The compensation committee believes its focus on company performance metrics helps to closely identify theother named executive officers’ interests with our stockholders’ interests. The 50th percentile targetofficers can earn between 10.0 (at the threshold level) and the specified performance metrics were not a guarantee of a minimum bonus or a threshold for granting bonuses. The compensation committee, at its discretion and after taking into consideration changing business conditions, the performance of individual executive officers and other factors, can award higher or lower amounts.30.0 (at maximum level) under
Company Performance—Total Stockholder Return
In developing the annual cash incentive compensation program, the compensation committee focusedthis component. Based on TSR, which the compensation committee believes is the best measurement to align management’s interests with our stockholders as it is more reflective of our company’s and, by extension, the executive officers’ performance.
The compensation committee determined that our TSR performance should be measured in relation to the size-based peer group, the MSCI US REIT index and the industry peer group, which comparisons would provide discrete, rational and measurable benchmarks for comparison of our performance. Our initial TSR percentile is calculated by comparing our TSR for the year to the TSR for each of the size-based peer group, the MSCI US REIT index and the industry peer group for the year and then averaging those percentile rankings.
For example, if our TSR ranks in the 50th percentile of the size-based peer group, the 60th percentile of the MSCI US REIT index and the 70th percentile of the industry peer group, then our initial TSR percentile for purposes of the cash bonus awards would be the 60th percentile. That initial TSR percentile is then adjusted according to a “muting” methodology. For performance above or below the 50th percentile, the initial TSR percentile is adjusted at half the variation from the 50th percentile to determine the final compensation percentile. For example, if company performance results in an initial TSR percentile set at the 60th percentile, the final compensation percentile for the purpose of calculating the cash bonus award would be set at the 55th percentile (the +10% performance would result in a +5% award) of the size-based peer group.
For 2017, we generated a TSR of 20.7% resulting in a percentile rank in the size-based peer group of 76%, the MSCI US REIT index of 86% (using as comparison only those companies that were in the MSCI US REIT index at both the beginning and end of 2017), and the industry peer group of 76%, resulting in an initial TSR percentile rank of 79%. The ranks were calculated based on a normal, or “z,” distribution. After applying the muting methodology described above, the final compensation percentile for 2017 was 65%. Therefore,this assessment, the compensation committee determined that each named executive officer should receive annual cash incentive bonus award atMessrs. Butcher, Crooker, Mecke, Sullivan and King earned 33.7, 28.0, 28.0, 27.0 and 27.0 percentage points, respectively, under the 65th percentile of the size-based peers.individual performance goal component.
For fiscal 2018 bonuses, the compensation committee anticipates continuing the muting methodology but to a lesser degree. The committee anticipates that the initial TSR percentile will be muted by averaging to the nearest 25th percentile (that is, the 25th percentile, the 50th percentile or the 75th percentile, as applicable) instead of only to the 50th percentile. For example, performance at the 95th percentile will be muted down by half the variation from the 75th percentile to determine the final compensation percentile. As another example, performance at the 5th percentile will be muted up by half the variation from the 25th percentile.
Calculation of the Bonus AwardsBonuses
Based on our actual performance in 2017 with respect to the specified performance metrics,2020, the compensation committee approved annual cash incentive bonuses for the named executive officers for 20172020 in the following amounts:
| | 2017 | | | | | | | | | | Target Total | | | | |
| | Year- | | 2017 Total Cash Compensation of | | | | Cash | | | | |
| | End | | Size-Based Peer Group | | | | Compensation | | 2017 Cash | | |
| | Base | | 25th | | 50th | | 75th | | Muted | | at Total Muted | | Bonus | | |
Executive | | 2020 Base
Salary | 2020 Annual Cash Incentive Bonus Opportunity | Percentage Points Earned | 2020 Bonus |
| Salary | | Percentile | | Percentile | | Percentile | | Percentile | | Percentile | | Award | | Below Threshold | Threshold | Target | Maximum | Company Performance | Individual Performance | Total |
Benjamin S. Butcher | | $ | 525,000 | | $ | 1,210,000 | | $ | 1,690,000 | | $ | 1,924,000 | | 65 | | $ | 1,826,032 | | $ | 1,301,032 | | $650,000 | $0 | $406,250 | $812,500 | $1,218,750 | 106.7 | 33.7 | 140.4 | $912,708 |
William R. Crooker | | $ | 300,000 | | $ | 744,000 | | $ | 863,000 | | $ | 952,000 | | 65 | | $ | 914,739 | | $ | 614,739 | | $400,000 | $0 | $200,000 | $400,000 | $600,000 | 85.3 | 28.0 | 113.3 | $453,333 |
Stephen C. Mecke | | $ | 309,000 | | $ | 700,000 | | $ | 710,000 | | $ | 823,000 | | 65 | | $ | 775,691 | | $ | 466,691 | | $450,000 | $0 | $225,000 | $450,000 | $675,000 | 85.3 | 28.0 | 113.3 | $510,000 |
Jeffrey M. Sullivan | | $ | 300,000 | | $ | 679,000 | | $ | 748,000 | | $ | 765,000 | | 65 | | $ | 757,883 | | $ | 457,883 | | $300,000 | $0 | $150,000 | $300,000 | $450,000 | 85.3 | 27.0 | 112.3 | $337,000 |
David G. King | | $ | 300,000 | | $ | 529,000 | | $ | 645,000 | | $ | 742,500 | | 65 | | $ | 701,680 | | $ | 401,680 | | $300,000 | $0 | $150,000 | $300,000 | $450,000 | 85.3 | 27.0 | 112.3 | $337,000 |
Equity Incentive Compensation Program
The goals of our long-term, equity-based awards are to incentivize and reward increases in long-term stockholder value and to align the interests of the named executive officers with the interests of our stockholders. Because vesting is based on continued employment or the achievement of performance goals, our equity-based incentives also encourage the retention of the named executive officers through the awardmulti-year vesting period.or performance periods in the awards. The compensation committee considers this alignment of vital importance and, as a result, long-term, equity-based awards will generally constitute roughly 50%a majority of total annual compensation, subject to adjustment in the discretion of the compensation committee.
The compensation committee sets the total value of LTIP units and target performance units to be granted to each named executive officer based on a percentage such executive’s base salary (250% to 400% depending on the executive officer) and the full grant date fair value per unit determined in accordance with ASC Topic 718. For 2017,2020, the compensation committee determined that annual equity awards should consist of approximately one half of grant date value35% to 40% in LTIP units (subject to multi-year vesting) and one half60% to 65% in performance units (with a multi-year measuring period).
The committee expects that equity awards for years after 2017 will be allocated more heavily toward performance units, andchart below shows the breakout of our equity incentive grants made in January 2018compensation for fiscal year 2018 were allocated approximately 60% to 65% to performance units.Messrs. Butcher, Crooker, and Mecke.
LTIP Units
The compensation committee has made and may make certain awards to the named executive officers in the form of LTIP units. LTIP units are a separate series of units of limited partnership interests in our operating partnership. LTIP units, granted either as free-standing awards or in tandem with other awards under the 2011 Equity Incentive Plan, will be valued by reference to the value of shares of our common stock, and will be subject to such conditions and restrictions as the compensation committee may determine, including continued employment or service, computation of financial metrics and/or achievement of pre-established performance goals and objectives. If applicable conditions and/or restrictions are not attained, participants will forfeit their LTIP units. Unless
otherwise provided, LTIP unit awards, whether vested or unvested, will entitle the participant to receive current distributions from our operating partnership equivalent to the dividends that would be payable with respect to the number of shares of our common stock underlying the LTIP unit award.
While the compensation committee has the ability to grant various equity formulations to the executive officers under the 2011 Equity Incentive Plan, to date the compensation committee has deemed LTIP unit awards to be an effective means to ensure alignment of the executives’ interests with those of the stockholders. LTIP units are structured as “profits interests” for U.S. federal income tax purposes, and we do not expect the grant, vesting or conversion of LTIP units to produce a tax deduction for us based on current U.S. federal income tax law. The key feature of LTIP units is that, at the time of award, LTIP units, as profits interests, initially will not have full parity on a per unit basis, with our operating partnership’s common units with respect to liquidating distributions. Upon the occurrence of specified events, LTIP units can over time achieve full parity with common units and therefore accrete to an economic value for the participant equivalent to common units. If such parity is achieved, LTIP units may be converted, subject to the satisfaction of applicable vesting conditions, on a one-for-one basis into common units, which in turn are redeemable by the holder for shares of common stock on a one-for-one basis or for the cash value of such shares, at the company’sour election. However, there are circumstances under which LTIP units will not achieve parity with common units, and until such parity is reached, the value that a participant could realize for a given number of LTIP units will be less than the value of an equal number of shares of common stock and may be zero. The compensation committee believes that this characteristic of the LTIP units, that they achieve real value only if our
share value appreciates, links the executives’executive compensation to our performance. Under the 2011 Equity Incentive Plan, each LTIP unit awarded will be equivalent to an award of one share of common stock reserved under the 2011 Equity Incentive Plan, thereby reducing the number of shares of common stock available for other equity awards on a one-for-one basis.
The compensation committee believes that using LTIP units for equity-based awards (i) links the executives’executive compensation to the performance of the company, (ii) serves our objectives by increasing the after-tax value of a given equity grant and, therefore, enhances our equity-based compensation package for executives as a whole, (iii) advances the separate goal of promoting long-term equity ownership by executives, (iv) has no worse effect on dilution as compared to using restricted stock, (v) does not increase our recorded expense on account of equity-based compensation awards, (vi) further aligns the interests of executives with the interests of stockholders and (vii) because LTIP units are offered by many of our peers, it enables us to remain competitive with our peers in recruiting and retaining talented executives.
In January 2017,2020, the compensation committee approved equity awards for fiscal year 20172020 in dollar values, with the number of shares/units granted calculated by dividing the dollar value of the approved awards by the closing market price on the NYSE of a share of our common stock on the effective date of grant, after adjustment of the closing price by a discount or premium determined by a third-party valuation of the LTIP units. In determining the size of the long-term equity incentives awarded to the named executive officers for 20172020 service, the compensation committee considered, among other things, the role and responsibilities of the individual, competitive factors and individual performance history. These awards were intended to enable our executive officers to establish a meaningful equity stake in our company that would vest over a period of years based on continued service. We believe that these awards enable us to deliver competitive compensation value to the executive officers at levels sufficient to attract and retain top talent within our executive officer ranks.
The following table sets forth the number and value of the LTIP unit awardsunits granted to the named executive officers granted in January 20172020 for 20172020 compensation. The LTIP unit awardsunits vest over four years in equal installments on a quarterly basis beginning on March 31, 2020, subject to continued service. The LTIP units were issued on January 6, 2017,8, 2020, based on the full grant date fair value determined in accordance with ASC Topic 718. See Note 7 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017,2020, for a discussion of our accounting of LTIP units.
Executive | | Date of Grant | | Number of LTIP
Units Issued | | Value of LTIP
Unit Award | |
Benjamin S. Butcher | | January 6, 2017 | | 39,669 | | $ | 918,734 | |
William R. Crooker | | January 6, 2017 | | 12,953 | | $ | 299,991 | |
Stephen C. Mecke | | January 6, 2017 | | 13,341 | | $ | 308,978 | |
Jeffrey M. Sullivan | | January 6, 2017 | | 12,953 | | $ | 299,991 | |
David G. King | | January 6, 2017 | | 12,953 | | $ | 299,991 | |
The 2017 LTIP unit awards vest over four years in equal installments on a quarterly basis beginning on March 31, 2017, subject to continued service as an employee and, as applicable, director.
Executive | Date of Grant | Number of LTIP
Units Issued | Value of LTIP
Unit Award |
| Benjamin S. Butcher | January 8, 2020 | 30,879 | $910,004 |
| William R. Crooker | January 8, 2020 | 13,064 | $384,996 |
| Stephen C. Mecke | January 8, 2020 | 14,252 | $420,006 |
| Jeffrey M. Sullivan | January 8, 2020 | 10,180 | $300,005 |
| David G. King | January 8, 2020 | 10,180 | $300,005 |
In January 2018,2021, the compensation committee approved the grant of an aggregate of 92,44982,297 LTIP units to the named executive officers for 20182021 compensation. The grants were made on January 5, 2018.7, 2021. These LTIP unit awards vest over four years in equal installments on a quarterly basis beginning on March 31, 2018,2021, subject to continued service as an employee and, as applicable, director.service. The 20182021 grants of LTIP units will be reflected in the “Summary Compensation Table” and “2018“2021 Grants of Plan BasedPlan-Based Awards” table in our proxy statement for the 20192022 annual meeting of stockholders.
Performance Units
The compensation committee grants performance units to the named executive officers as an additional long-term incentive award designed to align the executive officers’ interests more closely with those of the stockholders. The ultimate value of the performance units depends on our TSR over a three-year period commencing January 1, 2017.2020. The award measures both relative return (TSR vs. three benchmarks) and, as a condition for higher levels of value, an absolute return.
At the end of the three-year measuring period, the performance units convert into shares of common stock (or other securities) at a rate depending on our TSR over the measuring period as compared to three different benchmarks and on the absolute amount of our TSR. A recipient of performance units may receive as few as zero shares or as many as 250% of the number of target units, plus deemed dividends on earned shares. That is, at the end of the measuring period, a recipient of 10,000 performance units may receive no value (no shares of common stock or other securities and no dividends) or receive as much as 25,000 shares of common stock (or other securities) plus dividends on earned shares (as if the dividends were paid and reinvested into additional shares of common stock during the measuring period).
The target amount of the performance units is nominally allocated:
· 25% to our TSR compared to the TSR of an industry peer group;
| ● | 25% to our TSR compared to the TSR of the size-based peer group; |
· 25% to our TSR compared to the TSR of a size-based peer group; and
| ● | 25% to our TSR compared to the TSR of the industry peer group; and |
· 50% to our TSR compared to the TSR of the companies in the MSCI US REIT index.
| ● | 50% to our TSR compared to the TSR of the companies in the MSCI US REIT index. |
The potential of the portion of the award allocated to each of the industrysize-based and compensationindustry peer group comparison ranges from 0% to 200% of the allocated target amount. The potential of the portion of the award allocated to the MSCI US REIT index group comparison ranges from 0% to 300% of the allocated target amount, except that the portion of the award attributable to performance against the MSCI US REIT index group may not exceed 100%target (100% of the allocated targetamount) unless we achieve a minimum absolute TSR of 25% over the measuring period.
The table below indicates the potential levels of awards within the industry peer group, the compensationsize-based peer group and the MSCI US REIT index group benchmarks. Awards for performance between the indicated percentile rankings (e.g., between the 30th percentile and the 5055th percentile) are determined by interpolating between the earned amounts (e.g., between 50% earned and 100% earned).
Percentile Ranking within Applicable Benchmark (Based on TSR) |
Benchmark | Below 30th Percentile | 30th Percentile | | | |
Benchmark
| | Below 30th
Percentile
| | 30th
Percentile
| | 50th Percentile
| | 75th
Percentile
| | 95th Percentile
|
IndustrySize-Based Peer Group (Allocated
(Allocated 25% of the Target Amount) | | 0% earned | | 50% earned | | 100% earned | | 200% earned | | [No increase for performance beyond 75%.] |
| | | | | | | | | | |
CompensationIndustry Peer Group (Allocated
(Allocated 25% of the Target Amount) | | 0% earned | | 50% earned | | 100% earned | | 200% earned | | [No increase for performance beyond 75%.] |
| | | | | | | | | | |
MSCI US REIT Index Group (Allocated(1) (Allocated 50% of the Target Amount) | | 0% earned | | 50% earned | | 100% earned
[Awards above 100% for this benchmark require us to achieve a minimum absolute TSR of 25%.] | | 200% earned | | 300% earned |
(1) Awards above 100% for this benchmark require us to achieve a minimum absolute TSR of 25%.
No dividends are paid to the recipient during the measuring period. At the end of the measuring period, if our TSR is such that the recipient earns shares of common stock or other securities (“Award Shares”), the recipient
will receive additional common stock (or other securities) relating to dividends deemed to have been paid on the Award Shares. The additional shares are equal to the number of shares that the recipient would have acquired if the recipient held the Award Shares at the beginning of the measuring period and re-invested all dividends paid on the Award Shares over the measuring period into common stock on the dividend payment dates. In the discretion of the compensation committee, we may pay the cash value of the deemed dividends instead of issuing additional shares.
The number of Award Shares is determined at the end of the measuring period. One half ofFor performance units granted in 2020, the Award Shares will be immediately and fully vested and transferable. The other half of the Award Shares will be restricted (subject to forfeiture) and vest one yeartransferable upon settlement after the end of the measuring period. Any dividend shares will also be immediately and fully vested and transferable.
For purposes of the performance units awarded in 2017, the industry peer group consisted of: (i) DCT Industrial Trust Inc., (ii) Duke Realty Corporation, (iii) EastGroup Properties, Inc., (iv) First Industrial Realty Trust, Inc., (v) Gramercy Property Trust, (vi) Lexington Realty Trust, (vii) Liberty Property Trust, (viii) Monmouth Real Estate Investment Corp., (ix) PS Business Parks, Inc., (x) STORE Capital Corporation and (xi) Terreno Realty Corporation.
Excluding companies that were merged into or acquired by other companies in 2017, the compensation peer group consisted of (i) CoreSite Realty Corporation, (ii) DCT Industrial Trust Inc., (iii) EastGroup Properties, Inc., (iv) Education Realty Trust, Inc., (v) First Industrial Realty Trust, Inc., (vi) Hersha Hospitality Trust, (vii) Lexington Realty Trust, (viii) Pennsylvania Real Estate Investment Trust, (ix) Physicians Realty Trust, (x) PS Business Parks, Inc., (xi) QTS Realty Trust, Inc., (xii) Ramco-Gershenson Properties Trust, and (xiii) Ryman Hospitality Properties, Inc.
The following table sets forth the target number and value of the performance unit awardsunits granted to the named executive officers granted in January 20172020 for 20172020 compensation. The performance unit awardsunits were issued on January 6, 2017,8, 2020, based on the full grant date fair value determined in accordance with ASC Topic 718. See Note 8 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017,2020, for a discussion of our accounting of performance units.
Executive | | Date of Grant | | Target Number of
Performance
Units Issued | | Value of
Performance
Unit Award (at
target amounts) | | Date of Grant | Target Number of Performance
Units Issued | Value of Performance
Unit Award (at target amounts) |
Benjamin S. Butcher | | January 6, 2017 | | 29,442 | | $ | 854,955 | | January 8, 2020 | 46,711 | $1,690,004 |
William R. Crooker | | January 6, 2017 | | 9,963 | | $ | 289,312 | | January 8, 2020 | 19,762 | $714,989 |
Stephen C. Mecke | | January 6, 2017 | | 9,887 | | $ | 287,105 | | January 8, 2020 | 21,559 | $780,005 |
Jeffrey M. Sullivan | | January 6, 2017 | | 9,624 | | $ | 279,468 | | January 8, 2020 | 12,438 | $450,007 |
David G. King | | January 6, 2017 | | 9,665 | | $ | 280,658 | | January 8, 2020 | 12,438 | $450,007 |
In January 2018,2021, the compensation committee approved the grant of an aggregate target of 141,599123,079 performance units to the named executive officers for 20182021 compensation. The 20182021 grants of performance units will be reflected in the “Summary Compensation Table” and “2018“2021 Grants of Plan BasedPlan-Based Awards” table in our proxy statement for the 20192022 annual meeting of stockholders. The peer groups for the performance units awarded in 2018, while having substantial overlap with the peer groups for the 2017 awards, were different.
Employee Benefits
Our full-time employees, including the named executive officers, are eligible to participate in health and welfare benefit plans, which provide medical, dental, prescription, life insurance, disability insurance and related benefits.
Additional Compensation Components
In the future, as we further formulate and implement our compensation program, we may provide different and/or additional compensation components, benefits and/or perquisites to the named executive officers, to ensure that we provide a balanced and comprehensive compensation structure. We believe that it is important to maintain flexibility to adapt our compensation structure at this timewhen needed to properly attract, motivate and retain the top executive talent for which we compete.
Employment Agreements
We have entered into an employment agreement with each of the named executive officers. See “Potential Payments Upon Termination or Change in Control—Employment Agreements” below for more information.
Conclusion
The diagram below depicts the cash and equity compensation of our chief executive officer for 2017.2020. The diagram demonstrates that a substantial majority of our chief executive officer’s compensation (85%(approximately 84%) was strongly aligned with the interests of the stockholders because either it was determined by or depends on TSRperformance or its value fluctuates as the company’sprice of our common stock price increases or decreases. Less than 20%Approximately 16% of our chief executive officer’s compensation is fixed base salary that is not dependent on our stock price performance. All other compensation is variable.
| (1) | 2020 compensation consists of base salary, annual cash incentive bonus and the grant date fair value of LTIP units and performance units granted in January 2020. “At Risk” means the applicable compensation is either determined by or depends on company and individual performance goals (including TSR) or its value fluctuates with the price of our common stock (as in the case of LTIP units subject to forfeiture). |
(1) Compensation consists of 2017 base salary, 2017 annual incentive bonus and the grant date fair value of LTIP units and performance units granted in January 2017. “At Risk” means the applicable compensation is either determined by or depends on TSR or its value fluctuates with our common stock price (as in the case of LTIP units subject to forfeiture).
EXECUTIVE OFFICER COMPENSATION TABLES
Summary Compensation Table
The following table sets forth the information required by Item 402 of Regulation S-K promulgated by the SEC. The table sets forth the base salary and other compensation that was paid to or earned by the named executive officers in 2017.2020. With respect to equity incentive awards, the dollar amounts indicated in the table under “Stock Awards” are the aggregate grant date fair value of awards computed in accordance with ASC Topic 718.
Name and Principal Position | | Year | | Salary | | Bonus | | Stock
Awards(2) | | Non-Equity
Incentive Plan
Compensation | | All Other
Compensation(3) | | Total | |
Benjamin S. Butcher | | 2017 | | $ | 525,000 | | $ | — | | $ | 1,773,689 | | $ | 1,301,032 | | $ | 24,367 | | $ | 3,624,088 | |
Chief Executive Officer, President and Chairman | | 2016 | | $ | 525,000 | | $ | — | | $ | 1,647,014 | | $ | 1,119,877 | | $ | 16,863 | | $ | 3,308,754 | |
| | 2015 | | $ | 521,635 | | $ | 860,464 | | $ | 4,724,946 | | $ | — | | $ | 20,733 | | $ | 6,127,778 | |
| | | | | | | | | | | | | | | |
William R. Crooker(1) | | 2017 | | $ | 300,000 | | $ | — | | $ | 589,303 | | $ | 614,739 | | $ | 35,870 | | $ | 1,539,912 | |
Chief Financial Officer, Executive Vice President and Treasurer | | 2016 | | $ | 296,876 | | $ | — | | $ | 552,587 | | $ | 524,425 | | $ | 34,729 | | $ | 1,408,617 | |
| | | | | | | | | | | | | | | |
Stephen C. Mecke | | 2017 | | $ | 309,000 | | $ | — | | $ | 596,083 | | $ | 466,691 | | $ | 35,870 | | $ | 1,407,644 | |
Chief Operating Officer and Executive Vice President | | 2016 | | $ | 309,000 | | $ | — | | $ | 553,324 | | $ | 539,325 | | $ | 34,659 | | $ | 1,436,308 | |
2015 | | $ | 309,000 | | $ | 377,034 | | $ | 891,330 | | $ | — | | $ | 35,058 | | $ | 1,612,422 | |
| | | | | | | | | | | | | | | |
Jeffrey M. Sullivan | | 2017 | | $ | 300,000 | | $ | — | | $ | 579,459 | | $ | 457,883 | | $ | 33,804 | | $ | 1,371,146 | |
Executive Vice President, General Counsel and Secretary | | 2016 | | $ | 298,588 | | $ | — | | $ | 538,230 | | $ | 354,953 | | $ | 32,435 | | $ | 1,224,206 | |
2015 | | $ | 290,000 | | $ | 296,555 | | $ | 671,146 | | $ | — | | $ | 70,681 | | $ | 1,328,382 | |
| | | | | | | | | | | | | | | |
David G. King | | 2017 | | $ | 300,000 | | $ | — | | $ | 580,649 | | $ | 401,680 | | $ | 35,870 | | $ | 1,318,199 | |
Executive Vice President and Director of Real Estate Operations | | 2016 | | $ | 296,165 | | $ | — | | $ | 539,973 | | $ | 305,848 | | $ | 34,659 | | $ | 1,176,645 | |
2015 | | $ | 272,950 | | $ | 313,605 | | $ | 807,604 | | $ | — | | $ | 35,045 | | $ | 1,429,204 | |
(1) Mr. Crooker was appointed as our chief financial officer, executive vice president and treasurer on January 26, 2016.
Name and Principal Position | Year | Salary | Bonus | Stock Awards(1) | Non-Equity Incentive Plan Compensation | All Other
Compensation(2) | Total |
Benjamin S. Butcher Chief Executive Officer, President and Chairman | 2020 | $650,000 | $— | $2,600,008 | $912,708 | $25,534 | $4,188,250 |
| 2019 | $650,000 | $— | $2,599,969 | $1,027,813 | $24,731 | $4,302,513 |
| 2018 | $650,000 | $— | $2,599,975 | $1,076,520 | $23,715 | $4,350,210 |
William R. Crooker Chief Financial Officer, Executive Vice President and Treasurer | 2020 | $400,000 | $— | $1,099,985 | $453,333 | $38,761 | $1,992,079 |
| 2019 | $400,000 | $— | $1,099,983 | $518,000 | $36,938 | $2,054,921 |
| 2018 | $360,000 | $77,110 | $989,983 | $562,890 | $36,190 | $2,026,173 |
Stephen C. Mecke Chief Operating Officer and Executive Vice President | 2020 | $450,000 | $— | $1,200,011 | $510,000 | $38,761 | $2,198,772 |
| 2019 | $450,000 | $— | $1,199,972 | $569,250 | $36,938 | $2,256,160 |
| 2018 | $375,000 | $— | $1,312,469 | $725,000 | $36,190 | $2,448,659 |
Jeffrey M. Sullivan Executive Vice President, General Counsel and Secretary | 2020 | $300,000 | $— | $750,012 | $337,000 | $37,248 | $1,424,260 |
| 2019 | $300,000 | $— | $749,985 | $379,500 | $34,900 | $1,464,385 |
| 2018 | $300,000 | $— | $749,984 | $398,920 | $34,154 | $1,483,058 |
David G. King Executive Vice President and Director of Real Estate Operations | 2020 | $300,000 | $— | $750,012 | $337,000 | $38,761 | $1,425,773 |
| 2019 | $300,000 | $— | $749,985 | $385,500 | $36,938 | $1,472,423 |
| 2018 | $300,000 | $— | $749,984 | $356,745 | $36,190 | $1,442,919 |
(2) For 2017, represents the total grant date fair value of LTIP units granted on January 6, 2017, and performance units granted on January 6, 2017, under the 2011 Equity Incentive Plan, determined in accordance with ASC Topic 718. See Notes 7 and 8 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017, for a discussion of our accounting of LTIP units and performance units and the assumptions used.
| (1) | For 2020, represents the total grant date fair value of LTIP units and performance units granted on January 8, 2020 under the 2011 Equity Incentive Plan, determined in accordance with ASC Topic 718. See Notes 7 and 8 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2020, for a discussion of our accounting of LTIP units and performance units and the assumptions used. |
The grant date fair values for the following named executive officers relating to 20172020 LTIP unit awards granted on January 6, 2017,8, 2020, are as follows: Benjamin S. Butcher—$918,734;910,004; William R. Crooker—$299,991;384,996; Stephen C. Mecke—$308,978;420,006; Jeffrey M. Sullivan—$299,991;300,005; and David G. King—$299,991.300,005. The LTIP unit awards granted in 20172020 vest over four years from the date of grant in equal installments on a quarterly basis, subject to continued service as an employee or director.service.
The grant date fair values for the named executive officers relating to 20172020 performance unit awards granted on January 6, 2017,8, 2020, are as follows: Benjamin S. Butcher—$854,955;1,690,004; William R. Crooker—$289,312;714,989; Stephen C. Mecke—$287,105;780,005; Jeffrey M. Sullivan—$279,468;450,007 and David G. King—$280,658.450,007. The maximum value of the 20172020 performance unit awards assuming that the highest level of performance is achieved are as follows: Benjamin S. Butcher—$2,137,388;4,224,992; William R. Crooker—$723,294;1,787,473; Stephen C. Mecke—$717,777;1,949,993; Jeffrey M. Sullivan—$698,669;1,125,017; and David G. King—$701,660.1,125,017.
| (2) | All other compensation for 2020 represents amounts paid for insurance premiums, 401(k) matching contributions and commuting/parking allowances, as follows: |
Name | Insurance
Premiums | 401(K) Matching
Contributions | Commuting/
Parking
Allowances | Total |
| Benjamin S. Butcher | $16,504 | $8,550 | $480 | $25,534 |
| William R. Crooker | $24,211 | $8,550 | $6,000 | $38,761 |
| Stephen C. Mecke | $24,211 | $8,550 | $6,000 | $38,761 |
| Jeffrey M. Sullivan | $24,211 | $8,550 | $4,487 | $37,248 |
| David G. King | $24,211 | $8,550 | $6,000 | $38,761 |
(3) All other compensation for 2017 does not include any distributions on unvested LTIP units. It represents amounts paid for health insurance premiums, 401(k) matching contributions and automobile/parking allowances, as follows:
Name | | Insurance
Premiums | | 401(K) Matching
Contributions | | Automobile/
Parking Allowances | | Total | |
Benjamin S. Butcher | | $ | 15,154 | | $ | 8,100 | | $ | 1,113 | | $ | 24,367 | |
William R. Crooker | | $ | 21,890 | | $ | 8,100 | | $ | 5,880 | | $ | 35,870 | |
Stephen C. Mecke | | $ | 21,890 | | $ | 8,100 | | $ | 5,880 | | $ | 35,870 | |
Jeffrey M. Sullivan | | $ | 21,890 | | $ | 8,100 | | $ | 3,814 | | $ | 33,804 | |
David G. King | | $ | 21,890 | | $ | 8,100 | | $ | 5,880 | | $ | 35,870 | |
20172020 Grants of Plan-Based Awards
The following table sets forth information with respect to plan-based awards granted in 20172020 to the named executive officers.
| | | | | | | | | | | | | | | | All Other | | | | |
| | | | | | | | Stock | | | | |
| | | | Estimated Possible Payouts | | Estimated Future Payouts | | Awards: | | | | |
| | | | Under Non-Equity Incentive | | Under Equity Incentive | | Number of | | | | |
| | | | Plan Awards(1) | | Plan Awards(2) | | Shares of | | Grant Date | | |
| | | | Threshold | | Target | | Maximum | | Threshold | | Target | | Maximum | | Stock or | | Fair | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other
Stock
Awards: | |
Name | | Date of Grant | | ($) | | ($) | | ($) | | (#) | | (#) | | (#) | | Units(3) | | Value(4) | | Date of Grant | Threshold
($) | Target
($) | Maximum
($) | Threshold
(#) | Target
(#) | Maximum
(#) | Number of
Shares or
Units (#)(3) | Grant Date
Fair
Value(4) |
Benjamin S. Butcher | | | | | | | | | | | | | | | | | | | | | |
Annual cash incentive bonus | | | | $ | 685,000 | | $ | 1,165,000 | | $ | 1,399,000 | | | | | | | | | | | | | $406,250 | $812,500 | $1,218,750 | |
LTIP units | | January 6, 2017 | | | | | | | | | | | | | | 39,669 | | $ | 918,734 | | January 8, 2020 | | 30,879 | $910,004 |
Performance units | | January 6, 2017 | | | | | | | | 0 | | 29,442 | | 73,605 | | | | $ | 854,955 | | January 8, 2020 | | 23,356 | 46,711 | 116,777 | | $1,690,004 |
William R. Crooker | | | | | | | | | | | | | | | | | | | | | | |
Annual cash incentive bonus | | | | $ | 444,000 | | $ | 563,000 | | $ | 652,000 | | | | | | | | | | | | | $200,000 | $400,000 | $600,000 | | |
LTIP units | | January 6, 2017 | | | | | | | | | | | | | | 12,953 | | $ | 299,991 | | January 8, 2020 | | 13,064 | $384,996 |
Performance units | | January 6, 2017 | | | | | | | | 0 | | 9,963 | | 24,908 | | | | $ | 289,312 | | January 8, 2020 | | 9,881 | 19,762 | 49,405 | | $714,989 |
Stephen C. Mecke | | | | | | | | | | | | | | | | | | | | | | |
Annual cash incentive bonus | | | | $ | 391,000 | | $ | 401,000 | | $ | 514,000 | | | | | | | | | | | | | $225,000 | $450,000 | $675,000 | | |
LTIP units | | January 6, 2017 | | | | | | | | | | | | | | 13,341 | | $ | 308,978 | | January 8, 2020 | | 14,252 | $420,006 |
Performance units | | January 6, 2017 | | | | | | | | 0 | | 9,887 | | 24,718 | | | | $ | 287,105 | | January 8, 2020 | | 10,780 | 21,559 | 53,897 | | $780,005 |
Jeffrey M. Sullivan | | | | | | | | | | | | | | | | | | | | | | |
Annual cash incentive bonus | | | | $ | 379,000 | | $ | 448,000 | | $ | 465,000 | | | | | | | | | | | | | $150,000 | $300,000 | $450,000 | | |
LTIP units | | January 6, 2017 | | | | | | | | | | | | | | 12,953 | | $ | 299,991 | | January 8, 2020 | | 10,180 | $300,005 |
Performance units | | January 6, 2017 | | | | | | | | 0 | | 9,624 | | 24,060 | | | | $ | 279,468 | | January 8, 2020 | | 6,219 | 12,438 | 31,095 | | $450,007 |
David G. King | | | | | | | | | | | | | | | | | | | | | | |
Annual cash incentive bonus | | | | $ | 229,000 | | $ | 345,000 | | $ | 442,500 | | | | | | | | | | | | | $150,000 | $300,000 | $450,000 | | |
LTIP units | | January 6, 2017 | | | | | | | | | | | | | | 12,953 | | $ | 299,991 | | January 8, 2020 | | 10,180 | $300,005 |
Performance units | | January 6, 2017 | | | | | | | | 0 | | 9,665 | | 24,163 | | | | $ | 280,658 | | January 8, 2020 | | 6,219 | 12,438 | 31,095 | | $450,007 |
| (1) | For the year ended December 31, 2020, the compensation committee approved annual cash incentive bonuses for Messrs. Butcher, Crooker, Mecke, Sullivan and King of $912,708, $453,333, $510,000, $337,000 and $337,000, respectively. For more information regarding the company and individual performance goals for these annual cash incentive bonuses, see “Executive Officer Compensation Discussion and Analysis—Annual Cash Incentive Bonus Program.” |
| (2) | Equity incentive plan awards were made in the form of performance units. At the end of the three-year measuring period, the performance units convert into shares of common stock (or other securities) at a rate depending on our TSR over the measuring period as compared to three different benchmarks and on the absolute amount of our TSR. A |
(1)For the year ended December 31, 2017, the compensation committee approved annual cash incentive bonuses for Messrs. Butcher, Crooker, Mecke, Sullivan and King of $1,301,032, $614,739, $466,691, $457,883 and $401,680, respectively. For more information regarding the performance criteria for these annual cash incentive bonus awards, see “Executive Officer Compensation Discussion and Analysis—Key Elements of Executive Compensation—Annual Cash Incentive Compensation Program.”
(2)Equity incentive plan awards were made in the form of performance units. At the end of the three-year measuring period, the performance units convert into shares of common stock at a rate depending on our TSR over the measuring period as compared to three different benchmarks and on the absolute amount of our TSR. A recipient of performance units may receive as few as zero shares or as many as 250% of the number of target units, plus deemed dividends on earned shares. For more information regarding the performance criteria for these performance unit awards, see “Executive Officer Compensation Discussion and Analysis—Key Elements of Executive Compensation—Equity Incentive Compensation Program—Performance Units.”
| (3) | Stock awards were made in the form of LTIP units. The LTIP units will vest over four years in equal installments on a quarterly basis beginning on March 31, 2020, subject to continued service. For more information regarding the LTIP unit awards, see “Executive Officer Compensation Discussion and Analysis—Equity Incentive Compensation Program—LTIP Units.” |
(3)Stock awards were made in the form of LTIP units. The LTIP units will vest over four years in equal installments on a quarterly basis beginning on March 31, 2017, subject to continued service as an employee or, as applicable, director. For more information regarding the LTIP unit awards, see “Executive Officer Compensation Discussion and Analysis—Key Elements of Executive Compensation—Equity Incentive Compensation Program—LTIP Units.”
| (4) | The amounts included in this column represent the full grant date fair value of the LTIP units and performance units, determined in accordance with ASC Topic 718. See Notes 7 and 8 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2020, for a discussion of our accounting of LTIP units and performance units and the assumptions used. |
(4)The amounts included in this column represent the full grant date fair value of the LTIP units and performance units, determined in accordance with ASC Topic 718. See Notes 7 and 8 to our consolidated financial statements included in
our annual report on Form 10-K for the year ended December 31, 2017, for a discussion of our accounting of LTIP units and performance units and the assumptions used.
Outstanding Equity Awards at Fiscal Year-End 20172020
The following table sets forth information with respect to outstanding equity awards held by the named executive officers as of December 31, 2017.2020. No option awards were outstanding for the named executive officers as of December 31, 2017. 2020. The aggregate dollar values indicated in the table below for equity incentive plan awards are the market or payout values and not the grant date fair values determined in accordance with ASC Topic 718 or the compensation expense recognized in our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017.2020. In addition, the number of unearned performance units in the equity incentive plan awards are the actual amounts earned under the 2018 performance unit awards and target amounts that may be earned pursuant tounder the 2019 and 2020 performance unit awards. For more information regarding the threshold, target and maximum amounts with respect to equity incentive plan awards granted in 2017,2020, see “— 20172020 Grants of Plan-Based Awards.”
| | Stock Awards | | |
| | | | | | Equity Incentive | | Equity Incentive | | |
| | | | | | Plan Awards: | | Plan Awards: | | |
| | | | | | Number of | | Market or Payout | | |
| | Number of Shares | | Market Value of | | Unearned Shares, | | Value of Unearned | | |
| | of Stock or Units | | Shares or Units | | Units or Other | | Shares, Units or | | |
| | That Have Not | | That Have Not | | Rights That Have | | Other Rights That | | Stock Awards |
Name | | Vested(1) | | Vested(2) | | Not Vested(3) | | Have Not Vested(3)(4) | | Number of Shares
of Stock or Units
That Have Not
Vested(1) | Market Value of
Shares or Units
That Have Not
Vested(2) | Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested(3) | Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested(3)(4) |
Benjamin S. Butcher | | 173,599 | | $ | 4,744,461 | | 135,452 | | $ | 3,701,903 | | 68,261 | $2,137,935 | 202,644 | $6,346,810 |
William R. Crooker | | 27,906 | | $ | 762,671 | | 33,507 | | $ | 915,746 | | 21,444 | $671,626 | 81,672 | $2,557,967 |
Stephen C. Mecke | | 24,873 | | $ | 679,779 | | 46,116 | | $ | 1,260,350 | | 24,205 | $758,101 | 97,680 | $3,059,338 |
Jeffrey M. Sullivan | | 19,694 | | $ | 538,237 | | 43,852 | | $ | 1,198,475 | | 17,009 | $532,722 | 53,958 | $1,689,965 |
David G. King | | 23,700 | | $ | 647,721 | | 42,740 | | $ | 1,168,084 | | 17,009 | $532,722 | 53,958 | $1,689,965 |
| (1) | The following table summarizes the awards (time-based LTIP units and restricted stock) for which a portion of the awards remain unvested as of December 31, 2020. The table also provides information about the applicable vesting periods. |
Grant Date | Grant Date
Fair Value | Number of Units | Vesting Periods |
Butcher | Crooker | Mecke | Sullivan | King |
| May 4, 2015 | $20.38 | 100,000 | — | — | — | — | Over six years: one-half vests in one installment on the third anniversary of the grant date and the remaining amount vests in equal installments over the next three years |
| January 5, 2018 | $25.05 | 36,327 | 13,832 | 18,338 | 11,976 | 11,976 | Over four years in equal installments on a quarterly basis |
| January 7, 2019 | $23.51 | 38,706 | 16,376 | 17,864 | 12,760 | 12,760 | Over four years in equal installments on a quarterly basis |
| January 8, 2020 | $29.47 | 30,879 | 13,064 | 14,252 | 10,180 | 10,180 | Over four years in equal installments on a quarterly basis |
| (2) | Based on our common stock closing price of $31.32 on December 31, 2020. |
| (3) | The following table summarizes the performance unit awards (at target amounts) for which a portion of the awards remain unearned and unvested as of December 31, 2020, assuming the performance unit awards are earned at the conclusion of the applicable measurement period. The table also provides information about the applicable vesting periods. |
Grant Date | Grant Date
Fair Value | Number of Performance Units | Vesting Periods |
Butcher | Crooker | Mecke | Sullivan | King |
| January 5, 2018 | $28.86 | 58,558 | 22,297 | 29,560 | 15,592 | 15,592 | One half of earned shares vest immediately and one half vest on the first anniversary of the measurement period |
| January 7, 2019 | $28.19 | 59,950 | 25,363 | 27,669 | 15,963 | 15,963 | All earned shares vest immediately in full |
| January 8, 2020 | $36.18 | 46,711 | 19,762 | 21,559 | 12,438 | 12,438 | All earned shares vest immediately in full |
| (4) | For performance units, value is based on our closing price of $31.32 on December 31, 2020. For the 2018 performance unit awards, the number and value set forth in the table is based on the amount that the named executive officers earned for the three-year performance period ended December 31, 2020. The compensation committee determined the number of shares of common stock and LTIP units earned under the 2018 performance unit awards on January 7, 2021. For the 2019 and 2020 performance unit awards, the number and value set forth in the table assumes that the named executive officers earn the target amounts of performance units. See footnote 3 above. |
(1) The following table summarizes the awards (time-based LTIP units and restricted stock) for which a portion of the awards remain unvested as of December 31, 2017. The table also provides information about the applicable vesting periods.
| | Grant Date | | Number of Units | | | |
Grant Date | | Fair Value | | Butcher | | Crooker | | Mecke | | Sullivan | | King | | Vesting Periods | |
January 3, 2013 | | $ | 18.11 | | — | | 13,252 | | — | | — | | — | | Over five years in equal installments on an annual basis | |
| | | | | | | | | | | | | | | |
January 2, 2014 | | $ | 19.29 | | 88,452 | | — | | 30,326 | | — | | 26,788 | | Over five years in equal installments on a quarterly basis | |
| | | | | | | | | | | | | | | |
January 2, 2014 | | $ | 20.13 | | — | | 12,254 | | — | | — | | — | | Over five years in equal installments on an annual basis | |
| | | | | | | | | | | | | | | |
October 27, 2014 | | $ | 22.56 | | — | | — | | — | | 4,006 | | — | | Over five years in equal installments on a quarterly basis | |
| | | | | | | | | | | | | | | |
May 4, 2015 | | $ | 20.38 | | 100,000 | | — | | — | | — | | — | | Over six years: one-half vests in one installment on the third anniversary of the grant date and the remaining amount vests in equal installments over the next three years | |
| | | | | | | | | | | | | | | |
January 8, 2016 | | $ | 16.63 | | 52,310 | | — | | 17,593 | | 16,511 | | 15,540 | | Over four years in equal installments on a quarterly basis | |
| | Grant Date | | Number of Units | | | |
Grant Date | | Fair Value | | Butcher | | Crooker | | Mecke | | Sullivan | | King | | Vesting Periods | |
January 8, 2016 | | $ | 17.98 | | — | | 7,899 | | — | | — | | — | | Over four years in equal installments on an annual basis | |
| | | | | | | | | | | | | | | |
February 22, 2016 | | $ | 15.07 | | — | | 9,424 | | — | | 628 | | 1,699 | | Over four years in equal installments on a quarterly basis | |
| | | | | | | | | �� | | | | | | |
January 6, 2017 | | $ | 23.16 | | 39,669 | | 12,953 | | 13,341 | | 12,953 | | 12,953 | | Over four years in equal installments on a quarterly basis | |
(2) Based on our common stock closing price of $27.33 on December 29, 2017.
(3) On January 12, 2015, the named executive officers received awards under the 2015 Outperformance Program (the “2015 OPP”). The number and market or payout value of 2015 OPP awards set forth in the table is based on the amount that the named executive officers would have earned under the 2015 OPP if our performance for the three-year performance period under the program continued at the same annualized rate as we experienced from January 1, 2015, the first day of the performance period, through December 31, 2017. On January 5, 2018, the compensation committee determined that the performance hurdles outlined in the 2015 OPP had been met as of the measurement date, January 1, 2018. Based on this assessment and pursuant to the 2011 Equity Incentive Plan, LTIP units were issued pursuant to the 2015 OPP as follows: Mr. Butcher, 76,617 units to settle his program interest of $1,987,158; Mr. Crooker, 12,683 units to settle his program interest of $328,955; Mr. Mecke, 26,401 units to settle his program interest of $684,764; Mr. Sullivan, 24,589 units to settle his program interest of $637,770; and Mr. King, 23,295 units to settle his program interest of $604,203. Such LTIP units were fully vested as of the grant date, January 5, 2018.
The following table summarizes the performance unit awards (at target amounts) for which a portion of the awards remain unearned and unvested as of December 31, 2017, assuming the performance unit awards are earned at the conclusion of the applicable measurement period. The table also provides information about the applicable vesting periods.
| | Grant Date | | Number of Performance Units | | | |
Grant Date | | Fair Value | | Butcher | | Crooker | | Mecke | | Sullivan | | King | | Vesting Periods | |
March 8, 2016 | | $ | 23.34 | | 33,301 | | 11,508 | | 11,174 | | 10,893 | | 10,968 | | One half of earned shares vest immediately and one half vest on the first anniversary of the measurement period | |
January 6, 2017 | | $ | 29.04 | | 29,442 | | 9,963 | | 9,887 | | 9,624 | | 9,665 | | One half of earned shares vest immediately and one half vest on the first anniversary of the measurement period | |
(4) For performance units, value is based on our closing price of $27.33 on December 29, 2017, and assumes that the named executive officers earn the target amounts of performance units. See footnote 3 above.
20172020 Option Exercises and Stock Vested
The following table sets forth the aggregate number of LTIP units and restricted shares of common stock that vested in 2017. The table excludes LTIP units issued pursuant to the 2015 OPP, which settled after December 31, 2017.2020. The value realized on vesting is the product of (1)(i) the fair market value of a share of common stock on the vesting date, multiplied by (2)(ii) the number of LTIP units or shares vesting. The value realized is before payment of any applicable withholding tax and brokerage commissions. No options were exercised by the named executive officers during 2017.2020.
Name | | Vesting Date | Closing Market Price | Number of Shares
Acquired on
Vesting (1)(2) | Value Realized
on Vesting |
| Benjamin S. Butcher | | January 8, 2020 | $31.49 | 39,328 | $1,238,439 |
| | | | | | Number of Shares | | | | March 31, 2020 | $22.52 | 9,099 | $204,909 |
| | | | Closing Market | | Acquired on | | Value Realized | | May 4, 2020 | $24.83 | 16,667 | $413,842 |
Name | | Vesting Date | | Price | | Vesting(1) | | on Vesting | | |
Benjamin S. Butcher | | March 31, 2017 | | $ | 25.02 | | 20,103 | | $ | 502,977 | | |
| | June 30, 2017 | | $ | 27.60 | | 20,105 | | $ | 554,898 | | June 30, 2020 | $29.32 | 9,099 | $266,783 |
| | September 30, 2017 | | $ | 27.47 | | 20,105 | | $ | 552,284 | | September 30, 2020 | $30.49 | 9,100 | $277,459 |
| | December 31, 2017 | | $ | 27.33 | | 20,105 | | $ | 549,470 | | December 31, 2020 | $31.32 | 30,883 | $967,256 |
William R. Crooker | | January 2, 2017 | | $ | 23.71 | | 4,426 | | $ | 104,940 | | January 1, 2020 | $31.57 | 1,975 | $62,351 |
| | January 3, 2017 | | $ | 23.71 | | 4,569 | | $ | 108,331 | | January 8, 2020 | $31.49 | 12,454 | $392,176 |
| | March 31, 2017 | | $ | 25.02 | | 2,319 | | $ | 58,021 | | March 31, 2020 | $22.52 | 3,516 | $79,180 |
| | June 30, 2017 | | $ | 27.60 | | 2,319 | | $ | 64,004 | | June 30, 2020 | $29.32 | 3,513 | $103,001 |
| | September 30, 2017 | | $ | 27.47 | | 2,319 | | $ | 63,703 | | September 30, 2020 | $30.49 | 3,516 | $107,203 |
| | December 31, 2017 | | $ | 27.33 | | 2,318 | | $ | 63,351 | | December 31, 2020 | $31.32 | 10,885 | $340,918 |
Stephen C. Mecke | | March 31, 2017 | | $ | 25.02 | | 7,588 | | $ | 189,852 | | January 8, 2020 | $31.49 | 12,360 | $389,216 |
| | June 30, 2017 | | $ | 27.60 | | 7,587 | | $ | 209,401 | | March 31, 2020 | $22.52 | 3,988 | $89,810 |
| | September 30, 2017 | | $ | 27.47 | | 7,589 | | $ | 208,470 | | June 30, 2020 | $29.32 | 3,987 | $116,899 |
| | December 31, 2017 | | $ | 27.33 | | 7,591 | | $ | 207,462 | | September 30, 2020 | $30.49 | 3,987 | $121,564 |
| | | December 31, 2020 | $31.32 | 11,303 | $354,010 |
Jeffrey M. Sullivan | | March 31, 2017 | | $ | 25.02 | | 3,860 | | $ | 96,577 | | January 8, 2020 | $31.49 | 12,856 | $404,835 |
| | | March 31, 2020 | $22.52 | 2,993 | $67,402 |
| | June 30, 2017 | | $ | 27.60 | | 3,860 | | $ | 106,536 | | June 30, 2020 | $29.32 | 2,992 | $87,725 |
| | September 30, 2017 | | $ | 27.47 | | 3,860 | | $ | 106,034 | | September 30, 2020 | $30.49 | 2,993 | $91,257 |
| | December 31, 2017 | | $ | 27.33 | | 30,456 | | $ | 832,362 | | December 31, 2020 | $31.32 | 10,112 | $316,708 |
David G. King | | March 31, 2017 | | $ | 25.02 | | 6,972 | | $ | 174,439 | | January 8, 2020 | $31.49 | 12,910 | $406,536 |
| | June 30, 2017 | | $ | 27.60 | | 6,972 | | $ | 192,427 | | March 31, 2020 | $22.52 | 2,993 | $67,402 |
| | September 30, 2017 | | $ | 27.47 | | 6,971 | | $ | 191,493 | | June 30, 2020 | $29.32 | 2,992 | $87,725 |
| | December 31, 2017 | | $ | 27.33 | | 6,971 | | $ | 190,517 | | September 30, 2020 | $30.49 | 2,993 | $91,257 |
| | | December 31, 2020 | $31.32 | 10,143 | $317,679 |
| (1) | Represents restricted shares of common stock and LTIP units that vested in 2020 and unrestricted shares of common stock and LTIP units issued in 2020. Restricted shares of common stock vest in equal installments on an annual basis. Time-based LTIP units vest over four years in equal installments on a quarterly basis on March 31, June 30, September 30, and December 31 of each year. Vested LTIP units can be converted to common units in our operating partnership on a one-for-one basis once a material equity transaction has occurred that results in the accretion of the member’s capital account to the economic equivalent of the common unit. During 2020, there was a material equity transaction in our operating partnership which resulted in an accretion of the member’s capital account to the economic value equivalent of the common units. The LTIP units may be converted to common units. |
| (2) | Pursuant to the 2011 Equity Incentive Plan, on January 8, 2020, the compensation committee determined the number of shares of common stock and LTIP units to be issued pursuant to the January 2017 performance unit awards as follows: |
| | Mr. Butcher, 39,328 LTIP units that vested on the grant date and 21,784 LTIP units that vested on December 31, 2020; Mr. Crooker, 12,454 shares of common stock that vested on the grant date and 7,372 LTIP units that vested on December 31, 2020; Mr. Mecke, 12,360 shares of common stock that vested on the grant date and 7,315 LTIP units that vested on December 31, 2020; Mr. Sullivan, 12,856 LTIP units that vested on the grant date and 7,121 LTIP units that vested on December 31, 2020; and Mr. King, 12,910 LTIP units that vested on the grant date and 7,152 LTIP units that vested on December 31, 2020. |
(1) Represents restricted shares of common stock and LTIP units that vested in 2017. Restricted shares of common stock vest in equal installments on an annual basis. LTIP units vest in equal installments on a quarterly basis on March 31, June 30, September 30, and December 31 of each year. Vested LTIP units can be converted to common units in our operating partnership on a one-for-one basis once a material equity transaction has occurred that results in the accretion of the member’s capital account to the economic equivalent of the common unit. During 2017, there was a material equity transaction in our operating partnership which resulted in an accretion of the member’s capital account to the economic value equivalent of the common units. The LTIP units may be converted to common units.
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2017,2020, relating to our equity compensation plans pursuant to which we grant options, restricted stock, LTIP units or other rights to acquire shares from time to time.
| | Number of securities | | | | Number of securities | |
| | to be issued | | Weighted-average | | remaining available for | |
| | upon exercise | | exercise price of | | future issuance | |
| | of outstanding options, | | outstanding options, | | under equity | |
Plan Category | | warrants and rights(1) | | warrants and rights | | compensation plans | |
Equity compensation plans approved by security holders(2) | | 1,457,070 | | — | | 983,735 | |
Equity compensation plans not approved by security holders | | — | | — | | — | |
Total | | 1,457,070 | | — | | 983,735 | |
(1) Consists entirely of LTIP units that, upon the satisfaction of certain conditions, are convertible into common units, which may then be redeemed for cash, or at our option, an equal number of shares of common stock, subject to certain restrictions. There is no exercise price associated with LTIP units.
Plan Category | Number of securities
to be issued
upon exercise
of outstanding options,
warrants and rights(1) | Weighted-average
exercise price of
outstanding options,
warrants and rights | Number of securities
remaining available for
future issuance
under equity
compensation plans |
| Equity compensation plans approved by security holders(2) | 1,692,423 | — | 2,325,389 |
| Equity compensation plans not approved by security holders | — | — | — |
| Total | 1,692,423 | — | 2,325,389 |
(2) 2011 Equity Incentive Plan. Please see “Proposal 4: Amended and Restated STAG Industrial, Inc. 2011 Equity Incentive Plan” for a description of the Amended 2011 Plan that is subject to stockholder approval at the annual meeting.
| (1) | Consists entirely of LTIP units that, upon the satisfaction of certain conditions, are convertible into common units, which may then be redeemed for cash, or at our option, an equal number of shares of common stock, subject to certain restrictions. There is no exercise price associated with LTIP units. |
| (2) | 2011 Equity Incentive Plan. |
Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K promulgated by the SEC, we are providing the following information about the ratio of the median employee’s total annual compensation to the total annual compensation of our chief executive officer for the year ended December 31, 2017:2020:
· Median employee total annual compensation (excluding our chief executive officer)—$189,830
| ● | Median employee total annual compensation (excluding our chief executive officer)—$222,316 |
· Chief executive officer total annual compensation (as reported in the “Summary Compensation Table” presented above)—$3,624,088
| ● | Chief executive officer total annual compensation (as reported in the “Summary Compensation Table” presented above)—$4,188,250 |
· Ratio of chief executive officer to median employee total annual compensation—19:1
| ● | Ratio of chief executive officer to median employee total annual compensation—19:1 |
In determining the median employee, we prepared a list of all employees as of December 31, 20172020 and reviewed the amount of salary, wages and equity awards of all such employees reported to the Internal Revenue Service on Form W-2 for 2017.2020. We also reviewed pre-tax wages that were contributed by employees to a pre-tax parking program, a flexible spending account program and supplemental insurance policy premiums. More specifically, for each employee, we aggregated the amounts indicated on the face of his or her Form W-2 for Medicare wages, pre-tax wages allocated to dependent care and pre-tax wages allocated to commuting costs. The resulting sum matched our payroll records, with minor variations for amounts associated withcosts, flexible spending accounts and supplemental insurance policy premiums. premiums. We had 72 78 employees as of December 31, 2017.2020. Salaries, wages and bonuses were annualized for those employees that were not employed for the full year of 2017. 2020. In addition, bonuses for employees who were not employed for the full year of 20162019 were annualized because the Form W-2 amounts reflect bonuses paid in 20172020 for 2016 employment.2019 employment. We identified the median employee using this compensation measure, which was consistently applied to all
employees included in the calculation. Because all employees are located in the United States, we did not make any cost-of-living adjustments in identifying the median employee.
Once the median employee was identified, we combined all of the elements of such employee’s compensation for 20172020 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K promulgated by the SEC, resulting in median employee total annual compensation of $189,830.$222,316. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Employment AgreementsPotential Payments Upon Termination or Change in Control
Employment Agreements
We enterhave entered into employment agreements with each of the named executive officers. We believe that the employment agreements benefit us by helping to retain the executives and by requiring the executive officers to devote the necessary business attention and time to our affairs. The current terms of the employment agreements with Messrs. Butcher, Crooker, Mecke, Sullivan and King respectively, expire on May 4, 2018;2022, February 25, 2018;2022, April 20, 2018;2022, December 31, 2017;2021 and April 20, 2018; except that2022, respectively; and the term of each agreement renews automatically for successive one-year periods unless, not fewer than 60 days before the termination of the then existing term, either party provides notice of non-renewal to the other party.
Pursuant to the employment agreements, the named executive officers also are eligible to receive additional awards of LTIP units and other equity awards, subject to the terms of the 2011 Equity Incentive Plan (or other then effective incentive plan) and the applicable award agreement and the discretion of the compensation committee. The employment agreements generally provide for immediate vesting of all outstanding equity-based awards held by the executive officers upon a change of control of us and their subsequent non-renewal within 12 months, or termination of the executive officer’s employment by us without “cause” or by the executive officer for “good reason.” In addition, each of Messrs. Butcher, Crooker, Mecke, Sullivan and King will be subject to a non-competition provision for the 12-month period following any termination of employment other than a termination by us without “cause” or by the executive officer for “good reason.” The employment agreements also provide for participation in any other employee benefit plans, insurance policies or contracts maintained by us relating to retirement, health, disability, vacation and other related benefits.
The employment agreement with Mr. Butcher provides that upon the termination of his employment either by us without “cause” or by the executive officer for “good reason,” or in the event that following a change of control we or our successor gives him a notice of non-renewal within 12 months following the change of control, Mr. Butcher will be entitled to the following severance payments and benefits, subject to his execution of a general release in our favor:
· a lump-sum cash payment equal to three times the sum of (1) Mr. Butcher’s then-current annual base salary; and (2) the bonus paid to Mr. Butcher for the most recently completed fiscal year for which the amount of his bonus was determined;
| ● | a lump-sum cash payment equal to three times the sum of (i) Mr. Butcher’s then-current annual base salary; and (ii) the bonus paid to Mr. Butcher for the most recently completed fiscal year for which the amount of his bonus was determined; |
· our direct-to-insurer payment of any group health or other insurance premiums that Mr. Butcher would otherwise have been required to pay to obtain coverage under our group health and other insurance plans for a period of 18 months; and
| ● | our direct-to-insurer payment of any group health or other insurance premiums that Mr. Butcher would otherwise have been required to pay to obtain coverage under our group health and other insurance plans for a period of 18 months; and |
· immediate vesting of all outstanding equity-based awards held by Mr. Butcher.
| ● | immediate vesting of all outstanding equity-based awards held by Mr. Butcher. |
The employment agreements with Messrs. Crooker, Mecke, Sullivan and King provide that upon the termination of an executive officer’s employment either by us without “cause” or by the executive officer for “good reason,” or in the event that following a change of control we or our successor gives the executive officer a notice of non-renewal within 12 months following the change of control, the executive officer will be entitled under his employment agreement to the following severance payments and benefits, subject to the executive officer’s execution of a general release in our favor:
· a lump-sum cash payment equal to two times the sum of (1) the executive officer’s then-current annual base salary; and (2) the bonus paid to the executive officer for the most recently completed fiscal year for which the amount of his bonus was determined;
| ● | a lump-sum cash payment equal to two times the sum of (i) the executive officer’s then-current annual base salary; and (ii) the bonus paid to the executive officer for the most recently completed fiscal year for which the amount of his bonus was determined; |
| ● | our direct-to-insurer payment of any group health premiums or other insurance that the executive officer would otherwise have been required to pay to obtain coverage under our group health and other insurance plans for a period of 18 months; and |
· our direct-to-insurer payment of any group health premiums or other insurance that the executive officer would otherwise have been required to pay to obtain coverage under our group health and other insurance plans for a period of 18 months; and
· immediate vesting of all outstanding equity-based awards held by the executive officer.
| ● | immediate vesting of all outstanding equity-based awards held by the executive officer. |
In addition, the employment agreements with Messrs. Butcher, Crooker, Mecke, Sullivan and King provide that, upon termination of the officer’s employment by reason of the executive officer’s death or disability, the executive officer will be entitled to receive his accrued and unpaid then-current annual base salary as of the date of his death or disability and the bonus pro-rated through the date of his death or disability. Messrs. Butcher, Crooker and Sullivan will also be entitled to receive our direct-to-insurer payment of any group health or other insurance premiums they would have otherwise been required to pay to obtain coverage under our group health and other insurance plans for 18 months.
Pursuant to the employment agreements, Messrs. Butcher, Crooker, Mecke, Sullivan and King are eligible to receive a monthly commuting and parking allowance of up to $500.
None of the employment agreements contains a Code Section 280Gan excise tax gross-up provision.provision under Section 280G of the Code.
In some instances, the terms of the performance units modify the provisions of the employment agreements that otherwise provide for full vesting of all equity awards upon certain terminations. For example, in most terminations of employment, the performance units vest on a pro rata basis, rather than in full.
Accelerated Vesting of Equity Awards
LTIP Unit Agreements
Under the LTIP unit agreements, the vesting of unvested LTIP units is accelerated upon a change in control (as defined in the applicable agreements) or termination of employment by reason of death or disability.
Performance Unit Agreements
Under the performance awardunit agreements, the awarding of unearned and unvested performance units is accelerated upon a change in control (as defined in the performance awardunit agreements). Upon a change in control of our company, the measuring period for the performance units ends, and performance is measured and the award calculated and made, without pro ration, based on TSR through the date of the change in control. Upon a termination of a recipient’s employment by reason of death or disability, by the company without cause“cause” (as defined in the performance awardunit agreement) or by the recipient for good reason“good reason” (as defined in the performance award agreement), the measuring period for such recipient’s performance units ends, and performance is measured and the award calculated and made, after pro ration, based on the portion of the full measuring period elapsed based onand our TSR through the date of termination. Upon a termination of the recipient’s employment during the measuring period by the company for cause“cause” or by the recipient without good“good reason,” the performance units terminate without any award of shares.
Employee Retirement Vesting Program
On January 7, 2021, the compensation committee adopted the STAG Industrial, Inc. Employee Retirement Vesting Program (the “Retirement Vesting Program”) to provide supplemental retirement benefits for eligible employees. The Retirement Vesting Program will be administered by the compensation committee.
Under the Retirement Vesting Program, upon an eligible employee’s Qualifying Retirement (as defined below), the employee would be entitled to: (i) the immediate vesting of all outstanding time-based equity awards (i.e., awards that are subject to forfeiture solely pursuant to a time-based vesting schedule); and (ii) subject to the compensation committee’s future certification that the performance goals for the applicable period have been achieved, a prorated portion of any outstanding performance-based equity awards (i.e., awards for which the performance period has not expired and which remain subject to vesting based on the specified performance
measures). The prorated portion of such performance-based equity awards will be determined at the end of the applicable performance period based on our actual performance and will be calculated by multiplying the full amount of any such award so payable by a fraction, the numerator of which shall equal the number of days such employee was employed during the performance period and the denominator of which shall equal the number of days in the performance period.
To be eligible to participate in the Retirement Vesting Program upon a Qualifying Retirement, an employee must satisfy certain terms and conditions, including the employee must (i) provide us with at least six months’ advance written notice of his or her retirement, and (ii) sign and not revoke a general release and non-competition agreement, with ongoing non-competition and employee non-solicitation provisions that remain in effect for at least 12 months following termination of employment (which non-competition and employee non-solicitation provisions, in the discretion of the compensation committee, may be those already established in an employment agreement with us).
For purposes of the Retirement Vesting Program, “Qualifying Retirement” means an employee’s voluntarily termination of employment (other than where grounds for “cause” exist) at or after having satisfied the “Rule of 70.” “Rule of 70” means when an employee’s years of service with us or our affiliates or predecessors (must be at least 10 years, based on 120 months of continuous employment, not calendar years) plus his or her age (must be at least 55 years old) on the date of termination of service equals or exceeds 70. An employee’s “service” for purposes of the Retirement Vesting Program will continue until he or she is no longer serving in the role as employee, director or consultant of our company or any affiliate.
Termination Payment Table
The following table indicates the cash amounts and accelerated vesting that Messrs. Butcher, Crooker, Mecke, Sullivan and King would be entitled to receive under various termination or change of control circumstances pursuant to the terms of their employment agreements and the applicable award agreements under the 2011 Equity Incentive Plan. This table assumes that the termination or change of control, as applicable, occurred on December 31, 2017.2020.
Name and Termination or Change of Control Scenario | | Cash
Payment | | Acceleration of
Vesting of Equity
Awards(1)(2) | | Total | | Cash
Payment | Acceleration of
Vesting of Equity Awards (1)(2) | Total |
Benjamin S. Butcher | | | | | | | | | | |
Voluntary termination, retirement or involuntary termination for cause | | $ | — | | $ | — | | $ | — | | $— | $— |
| Qualifying retirement(3) | | $— | $— |
Termination by company without cause or by employee for good reason | | $ | 5,500,827 | | $ | 8,833,350 | | $ | 14,334,177 | | $4,712,880 | $7,578,219 | $12,291,099 |
Accelerated vesting upon change of control(2) | | $ | — | | $ | 10,517,316 | | $ | 10,517,316 | | |
| Accelerated vesting upon change of control(2) | | $— | $9,572,018 | $9,572,018 |
Notice of non-renewal within 12 months following change of control | | $ | 5,500,827 | | $ | 10,517,316 | | $ | 16,018,143 | | $4,712,880 | $9,572,018 | $14,284,898 |
Death or disability(3) | | $ | 1,323,763 | | $ | 8,833,350 | | $ | 10,157,113 | | |
| Death or disability(4) | | $937,464 | $7,578,219 | $8,515,683 |
William R. Crooker | | | | | | | | | | |
Voluntary termination, retirement or involuntary termination for cause | | $ | — | | $ | — | | $ | — | | $— | $— |
| Qualifying retirement | | $— | $— |
Termination by company without cause or by employee for good reason | | $ | 1,862,313 | | $ | 1,814,887 | | $ | 3,677,200 | | $1,742,983 | $2,846,048 | $4,589,031 |
Accelerated vesting upon change of control(2) | | $ | — | | $ | 2,390,785 | | $ | 2,390,785 | | |
| Accelerated vesting upon change of control(2) | | $— | $3,689,590 | $3,689,590 |
Notice of non-renewal within 12 months following change of control | | $ | 1,862,313 | | $ | 2,390,785 | | $ | 4,253,098 | | $1,742,983 | $3,689,590 | $5,432,573 |
Death or disability(3) | | $ | 647,574 | | $ | 1,814,887 | | $ | 2,462,461 | | |
| Death or disability(4) | | $489,650 | $2,846,048 | $3,335,698 |
Stephen C. Mecke | | | | | | | | | | |
Voluntary termination, retirement or involuntary termination for cause | | $ | — | | $ | — | | $ | — | | $— | $— |
| Qualifying retirement(3) | | $— | $— |
Termination by company without cause or by employee for good reason | | $ | 1,584,217 | | $ | 2,069,848 | | $ | 3,654,065 | | $1,956,317 | $3,399,003 | $5,355,320 |
Accelerated vesting upon change of control(2) | | $ | — | | $ | 2,635,142 | | $ | 2,635,142 | | |
| Accelerated vesting upon change of control(2) | | $— | $4,319,247 | $4,319,247 |
Notice of non-renewal within 12 months following change of control | | $ | 1,584,217 | | $ | 2,635,142 | | $ | 4,219,359 | | $1,956,317 | $4,319,247 | $6,275,564 |
Death or disability(3) | | $ | 466,691 | | $ | 2,069,848 | | $ | 2,536,539 | | |
| Death or disability(4) | | $510,000 | $3,399,003 | $3,909,003 |
Jeffrey M. Sullivan | | | | | | | | | | |
Voluntary termination, retirement or involuntary termination for cause | | $ | — | | $ | — | | $ | — | | $— | $— |
| Qualifying retirement | | $— | $— |
Termination by company without cause or by employee for good reason | | $ | 1,548,601 | | $ | 1,863,411 | | $ | 3,412,012 | | $1,310,317 | $1,981,303 | $3,291,620 |
Accelerated vesting upon change of control(2) | | $ | — | | $ | 2,414,056 | | $ | 2,414,056 | | |
| Accelerated vesting upon change of control(2) | | $— | $2,512,209 | $2,512,209 |
Notice of non-renewal within 12 months following change of control | | $ | 1,548,601 | | $ | 2,414,056 | | $ | 3,962,657 | | $1,310,317 | $2,512,209 | $3,822,526 |
Death or disability(3) | | $ | 490,718 | | $ | 1,863,411 | | $ | 2,354,129 | | |
| Death or disability(4) | | $373,317 | $1,981,303 | $2,354,620 |
David G. King | | | | | | | | | | |
Voluntary termination, retirement or involuntary termination for cause | | $ | — | | $ | — | | $ | — | | $— | $— | $— |
| Qualifying retirement | | $— | $— | $— |
Termination by company without cause or by employee for good reason | | $ | 1,436,195 | | $ | 1,943,674 | | $ | 3,379,869 | | $1,310,317 | $1,981,303 | $3,291,620 |
Accelerated vesting upon change of control(2) | | $ | — | | $ | 2,497,379 | | $ | 2,497,379 | | |
| Accelerated vesting upon change of control(2) | | $— | $2,512,209 | $2,512,209 |
Notice of non-renewal within 12 months following change of control | | $ | 1,436,195 | | $ | 2,497,379 | | $ | 3,933,574 | | $1,310,317 | $2,512,209 | $3,822,526 |
Death or disability(3) | | $ | 401,680 | | $ | 1,943,674 | | $ | 2,345,354 | | |
| Death or disability(4) | | $337,000 | $1,981,303 | $2,318,303 |
| (1) | Amounts in this column reflect accelerated vesting of unvested LTIP units, performance units and restricted stock granted pursuant to the 2011 Equity Incentive Plan. For purposes of this table, each LTIP unit, performance unit and restricted share of common stock was valued at $31.32, the closing price of our common stock on the NYSE on December 31, 2020. |
| (2) | For a discussion of the vesting of equity awards upon the occurrence of certain triggering events, including a change in control, termination without cause and Qualifying Retirement, see “—Accelerated Vesting of Equity Awards” above. |
| (3) | The Retirement Vesting Program was adopted on January 7, 2021 and, therefore, was not in effective as of December 31, 2020. Upon adoption of the Retirement Vesting Program, each of Messrs. Butcher and Mecke satisfied the “Rule of 70” requirements and were eligible to participate in the program. |
| (4) | Upon death of the named executive officer, the executive officer will receive a prorated bonus for services performed during the year. The prorated bonus will be derived from the bonus paid in the previous fiscal year. Under the equity award agreements, the vesting of unvested LTIP units and restricted stock and unearned and unvested performance units is accelerated at death or disability. See “—Accelerated Vesting of Equity Awards” above. |
(1)COMPENSATION COMMITTEE REPORT Amounts in this column reflect accelerated vesting of unvested LTIP units, performance units and restricted stock granted pursuant to the 2011 Equity Incentive Plan. For purposes of this table, each LTIP unit, performance unit and restricted share of common stock was valued at $27.33, the closing price of our common stock on the NYSE on December 29, 2017. This column also includes amounts payable under the 2015 OPP, which was settled on January 5, 2018.
(2) For a discussion of the vesting of equity awards upon the occurrence of a change in control and certain termination triggering events, see “—Accelerated Vesting of Equity Awards” above.
(3) Upon death of the named executive officer, the executive officer will receive a prorated bonus for services performed during the year. The prorated bonus will be derived from the bonus paid in the previous fiscal year. Under the equity award agreements, the vesting of unvested LTIP units and restricted stock and unearned and unvested performance units is accelerated at death or disability. See “—Accelerated Vesting of Equity Awards” above.
COMPENSATION COMMITTEE REPORT
The following is a report by the compensation committee submitted in connection with its review of the Compensation Discussion and Analysis section of this proxy statement prepared in connection with the annual meeting.
The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated by the SEC. Based on such review and discussion, the compensation committee recommended to the board of directors (and the board has approved) that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by the Compensation Committee of the Board of Directors
Jeffrey D. Furber (Chair)
Virgis W. Colbert
Michelle S. Dilley
Larry T. Guillemette
Hans S. Weger
AUDIT COMMITTEE REPORT
The following is a report by the audit committee submitted in connection with its review of our financial reports for the fiscal year ended December 31, 2017.2020. Notwithstanding anything to the contrary set forth in any of our previous or future filings under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this proxy statement in future filings with the SEC, in whole or in part, the following report shall not be deemed incorporated by reference into any such filing.
The audit committee oversees our financial reporting process on behalf of the board of directors, in accordance with the audit committee charter. Management is responsible for our financial statements and the financial reporting process, including implementing and maintaining effective internal control over financial reporting and for the assessment of, and reporting on, the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the audit committee reviewed and discussed with management and PricewaterhouseCoopers LLP the audited financial statements for STAG Industrial, Inc. for the fiscal year ended December 31, 2017.2020.
In addition, the audit committee has (i) discussed with the representatives of PricewaterhouseCoopers LLP the matters that are required to be discussed by the Statement on Auditing Standard No. 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board, (ii) discussed and received the written disclosures and the letter from PricewaterhouseCoopers LLP that are required by applicable requirements of the Public Company Accounting Oversight Board regarding PricewaterhouseCoopers LLP’s communications with the audit committee concerning independence, and (iii) discussed with PricewaterhouseCoopers LLP the auditors’ independence from the company and management.
Based on the reviews and discussions referred to above, the audit committee recommended to the board of directors (and the board has approved) that the audited financial statements be included in our annual report on Form 10-K for the year ended December 31, 20172020 for filing with the SEC. The annual report on Form 10-K was filed with the SEC on February 15, 2018.10, 2021.
The members of the audit committee have oversight responsibilities only and are not acting as experts in accounting and auditing. Members of the audit committee rely, without independent verification, on the information provided to them and on the representations made by management and the independent registered public accountants. Accordingly, the audit committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the audit committee’s considerations and discussions referred to above do not assure that the audit of our financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principlesGAAP or that PricewaterhouseCoopers LLP is in fact “independent.”
Submitted by the Audit Committee of the Board of Directors (members of the Audit Committee as of the filing of the annual report on Form 10-K listed below)
Hans S. Weger (Chair)
Jit Kee Chin
Larry T. Guillemette
Francis X. Jacoby III
Christopher P. Marr
PROPOSAL 2:
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Proposal
The audit committee of the board of directors has selected the accounting firm of PricewaterhouseCoopers LLP to serve as our independent registered public accountantsaccounting firm for the year ending December 31, 2017,2021, and the board of directors is asking stockholders to ratify this appointment. Although current law, rules and regulations, as well as the audit committee charter, require the company’s independent auditor to be engaged, retained and supervised by the audit committee, the board of directors considers the selection of the independent auditor to be an important matter of stockholder concern and is submitting the selection of PricewaterhouseCoopers LLP for ratification by stockholders as a matter of good corporate practice. PricewaterhouseCoopers LLP has served as our independent registered public accountantsaccounting firm since our formation in July 2010 and is considered by our management to be well qualified.
A representative of PricewaterhouseCoopers LLP will be present at the annual meeting, will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.
Fee Disclosure
The following is a summary of the fees incurred or billed by PricewaterhouseCoopers LLP for professional services rendered for our company for the years ended December 31, 20172020 and December 31, 2016:2019:
| | Year Ended
December 31, 2017 | | Year Ended
December 31, 2016 | | Year Ended
December 31, 2020 | | Year Ended
December 31, 2019 |
Audit Fees | | $ | 949,091 | | $ | 891,617 | | $997,553 | | $1,107,602 |
Tax Fees | | 467,600 | | 468,160 | | — | | — |
Audit-Related Fees | | — | | — | | — | | — |
All Other Fees | | 2,700 | | 1,800 | | 2,700 | | 2,700 |
Total | | $ | 1,419,391 | | $ | 1,361,577 | | $1,000,253 | | $1,110,302 |
Audit Fees
“Audit Fees” consist of fees and related expenses incurred for professional services rendered for the audit of the financial statements and services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements. For example, audit fees include fees for professional services rendered in connection with quarterly and annual reports, and the issuance of consents by PricewaterhouseCoopers LLP to be named in our registration statements and to the use of their audit report in the registration statements.
Tax Fees
“Tax Fees” consist of fees and related expenses incurred or billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance and tax planning and structuring.
Audit-Related Fees and All Other Fees
“Audit-Related Fees” and “All Other Fees” consist of fees and related expenses for products and services other than services described under “Audit Fees” and “Tax Fees.”
Pre-Approval Policy
All audit, tax and other services provided to us were reviewed and pre-approved by the audit committee or a member of the audit committee designated by the full committee to pre-approve such services. The audit committee or designated member concluded that the provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
Vote Required
The affirmative vote of a majority of the votes cast at a meeting at which a quorum is present is required to ratify the appointment of our independent registered public accounting firm, which is considered a routine matter. For purposes of the vote on the ratification of the appointment of our independent registered public accounting firm, abstentions will not be counted as votes cast and will have no effect on the result of the vote.
Recommendation
The board of directors recommends a vote FOR the ratification of the appointment of the independent registered public accounting firm.
PROPOSAL 3:
AMENDMENT TO CHARTER TO PROVIDE
STOCKHOLDERS WITH THE ABILITY TO AMEND OUR BYLAWS
Proposal
Our board of directors has adopted and declared advisable, and recommends for your approval, an amendment to the Articles of Amendment and Restatement of STAG Industrial, Inc. (our “Charter”) to revise the last sentence of Article V, Section 5.5 in order to allow both directors and stockholders to amend our bylaws in accordance with the provisions of the bylaws (the “Proposed Charter Amendment”). Set forth below is the entire text of Article V, Section 5.5 of our Charter, with the additions and deletions proposed by Proposal 3 indicated by underline and strike out, respectively:
“Section 5.5Charter and Bylaws. The rights of all stockholders and the terms of all stock are subject to the provisions of the Charter and the Bylaws. The Board of Directors shall have the non-exclusiveexclusive power to adopt, alter or repeal any provision of the Bylaws and to make new Bylaws.”
Additional Information
The general description of the Proposed Charter Amendment set forth above is qualified in its entirety by reference to the text of the Proposed Charter Amendment, which is attached as Appendix B to this proxy statement and is incorporated by reference herein.
Currently, our bylaws provide that, with the exception of provisions in our bylaws relating to the control share and business combination provisions of the MGCL, which provisions may not be amended without stockholder approval, the board of directors has the exclusive power to adopt, alter or repeal any provision of the bylaws and to make new bylaws. Subject to stockholder approval of the Proposed Charter Amendment, the board of directors has approved an amendment and restatement of our existing bylaws (the “Third Amended and Restated Bylaws”), which will allow for the bylaws to be adopted, altered or repealed by the board of directors or by the stockholders, by the affirmative vote of a majority of the outstanding shares entitled to vote on the matter. Approval of the Third Amended and Restated Bylaws does not require stockholder action. The adoption of the Third Amended and Restated Bylaws is conditioned upon the approval of the Proposed Charter Amendment at the annual meeting and upon effectiveness of the Proposed Charter Amendment.
If this proposal is approved by stockholders, we will cause the Articles of Amendment to be promptly filed with the State Department of Assessments and Taxation in Maryland (the “SDAT”) and the Third Amended and Restated Bylaws will be concurrently adopted. If the Proposed Charter Amendment is not approved by stockholders, then the Articles of Amendment will not be filed with the SDAT, the Third Amended and Restated Bylaws will not be adopted and the board of directors will continue to have the exclusive power to adopt, alter or repeal any provision of the bylaws pursuant to our Charter.
Vote Required
The affirmative vote of a majority of the votes entitled to be cast on the matter (that is, a majority of our outstanding shares of common stock) is required to approve the Proposed Charter Amendment. For purposes of the vote on Proposal 3, abstentions and broker-non-votes will have the same effect as votes cast against the proposal.
Recommendation
The board of directors recommends a vote FOR the approval of the Proposed Charter Amendment.
PROPOSAL 4:
AMENDED AND RESTATED
STAG INDUSTRIAL, INC. 2011 EQUITY INCENTIVE PLAN
Proposal
We currently have in effect the 2011 Equity Incentive Plan. The 2011 Equity Incentive Plan was approved by stockholders prior to our initial public offering and provides for the issuance of equity-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock awards and other awards based on shares of our common stock, such as LTIP units in our operating partnership, that may be made by us directly to our executive officers, directors, employees and other individuals providing bona fide services to or for us.
The board of directors believes that the ability to grant equity-based awards under the 2011 Equity Incentive Plan helps us remain competitive in attracting and retaining high caliber employees and other service providers upon whom our future growth and success depends. In addition, equity-based awards under the 2011 Equity Incentive Plan align the interests of our employees, officers and directors to the long-term interests of our stockholders. In order to continue to provide the incentive compensation opportunities available under the 2011 Equity Incentive Plan, we are asking our stockholders to approve the Amended 2011 Plan.
The board of directors approved the Amended 2011 Plan, subject to shareholder approval at the annual meeting. The effective and adoption date of the Amended 2011 Plan will be the date of stockholder approval. Any awards previously granted under the 2011 Equity Incentive Plan will remain in effect pursuant to their terms.
If our stockholders do not approve the Amended 2011 Plan, the 2011 Equity Incentive Plan will continue in effect under the terms currently in place. Once the existing 2011 Equity Incentive Plan expires, or once the shares of common stock remaining available for issuance under the 2011 Equity Incentive Plan are used, the compensation committee will be unable to make equity awards. Compensation for our employees (including the named executive officers) and directors would then be solely in cash. Paying compensation completely in cash would significantly reduce the alignment of management’s interests with those of our stockholders, which is primarily achieved through the issuance of long-term equity incentive awards that are available only through a current equity incentive plan. Moreover, compensating our employees and directors only in cash would reduce our available cash at a time when we may be conserving cash or allocating cash to other business purposes. Finally, without the Amended 2011 Plan and the incentive awards it makes possible, we would likely not retain our key personnel and not be able to hire the best available people.
Features of the Amended 2011 Plan include:
·Number of Shares. The Amended 2011 Plan will increase the maximum number of shares of common stock reserved and available for issuance by 3,000,000 shares, to an aggregate of 6,642,461 shares.
·Term. The term of the Amended 2011 Plan will expire on April 30, 2028.
·Awards. The Amended 2011 Plan authorizes the grant of equity-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock awards and other awards based on shares of our common stock, such as LTIP units in our operating partnership.
·Individual Limit. Subject to adjustment, (i) the maximum number of shares of common stock that may be granted in the form of stock options or stock appreciation rights to any individual during any fiscal year is 500,000 shares, and (ii) the maximum number of performance awards that may be granted to any individual during any fiscal year for attaining “target” performance is 500,000 shares. The maximum cash payment that may be made to a participant in a fiscal year with respect to performance awards is $5,000,000.
·Non-Management Director Compensation. Discretionary awards under the Amended 2011 Plan to our non-management directors will be administered by the board of directors. Subject to adjustment, the maximum number of shares of common stock that may be granted any one non-management director shall be that number of shares that have a fair market value on the date of the grant equal to $150,000; provided, however, this limitation shall not apply to stock grants in lieu of cash compensation otherwise payable to the non-management director.
·Stock Options and Stock Appreciation Rights. Stock options and stock appreciation rights may not be repriced without stockholder approval. The exercise price of stock options and the base price of stock appreciation rights may not be less than 100% of the grant date fair market value of a shares of common stock.
·Minimum Vesting. The Amended 2011 Plan generally requires a minimum one-year vesting period for stock options and stock appreciation rights.
·No Liberal Share Recycling. The Amended 2011 Plan prohibits the reuse of shares withheld or delivered to satisfy the exercise price of an option or to satisfy tax withholding requirements. The Amended 2011 Plan also prohibits “net share counting” upon the exercise of stock appreciation rights.
·No Dividends on Unearned Performance Units. Ourcurrent form of performance unit agreement provides that such awards are subject to a three-year performance period; and provides that dividends are not paid on unearned performance units, but are only paid on earned performance units when, and to the extent that, the goals are achieved.
·Stockholder Approval. The Amended 2011 Plan will require stockholder approval of any amendment to the plan to the extent such approval is required by applicable law, regulation or exchange listing standard.
As of March 12, 2018, subject to increases resulting from the forfeiture of currently outstanding awards and assuming that all outstanding performance units are settled for the target number of units and that all dividends on earned performance units are paid in cash, 184,020 shares of common stock were reserved and available for future issuances under the 2011 Equity Incentive Plan. The actual number of shares needed to settle performance units is not known or calculable with certainty and may range from zero shares to a number of shares equal to 250% of the target number of outstanding performance units, plus additional shares that may be issued to settle dividends on earned performance units.
As of March 12, 2018, 97,229,588 shares of common stock were outstanding and 4,275,817 shares of common stock were issuable upon exchange or conversion of outstanding common units and LTIP units of our operating partnership. The closing price of our shares of common stock on the NYSE on March 12, 2018 was $24.13.
The material features of the Amended 2011 Plan are summarized below. The following summary does not purport to be complete and is subject to, and qualified in its entirety by, reference to the complete text of the Amended 2011 Plan, which is attached to this proxy statement as Appendix C.
Description of the Amended 2011 Plan
The Amended 2011 Plan provides for the issuance of equity-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other awards based on shares of our common stock, such as LTIP units in our operating partnership, that may be made by us directly to our executive officers, directors, employees and other individuals providing bona fide services to or for us.
The Amended 2011 Plan will be administered by the board of directors, which may delegate its authority to the compensation committee. The plan administrator has the authority to make awards to the eligible participants referenced above, and to determine the eligible individuals who will receive awards, what form the awards will take, and the terms and conditions of the awards. Except as provided below with respect to equitable adjustments, the
plan administrator may not reduce the exercise price of any stock option or stock appreciation right granted under the Amended 2011 Plan or take any other action that is treated as a repricing under generally accepted accounting principles without first obtaining the consent of our stockholders.
Upon stockholder approval of the Amended 2011 Plan, subject to adjustments as provided below, the shares of common stock that are reserved for issuance under the Amended 2011 Plan, in the aggregate, shall be 6,642,461 (6.5% of the issued and outstanding shares of our common stock and common units and LTIP units of our operating partnership as of March 12, 2018). The aggregate authorization under the Amended 2011 Plan represents an increase of 3,000,000 shares of common stock more than the number of shares of common stock that were reserved in the aggregate for issuance under the Plan as of March 12, 2018.
If any award or portion of an award granted under the Amended 2011 Plan expires or terminates unexercised, becomes unexercisable, is settled in cash without the delivery of common stock or is forfeited or otherwise terminated, then any shares of common stock (or LTIP units) covered by such lapsed, cancelled, expired, unexercised or cash-settled portion of such award will be available for the grant of other awards. If any option is exercised and the exercise price is paid by tendering or withholding shares of common stock or if a tax withholding obligation under an award is satisfied by tendering or withholding shares of common stock, then the number of shares tendered or withheld will not be available for the grant of other awards. If shares of common stock are issued in settlement of a stock appreciation right, the number of shares of common stock available for the grant of other awards will be reduced by the number of shares of common stock for which the stock appreciation right was exercised (rather than the number of shares of common stock issued in settlement of the stock appreciation right). Upon the exercise of any award granted in tandem with any other award, the related award will be cancelled to the extent of the number of shares of common stock as to which the award is exercised and, notwithstanding the foregoing, that number of shares will no longer be available for award under the Amended 2011 Plan.
The Amended 2011 Plan requires a participant to reimburse us for certain payments received under an award and any profits realized by the participant from certain sales of our securities if we are required to prepare an accounting restatement due to our material noncompliance, as a result of misconduct, with any financial reporting requirements under the securities laws. This requirement applies to any participant who knowingly or through gross negligence engaged in the misconduct, any participant who knowingly or through gross negligence failed to prevent the misconduct and any participant who is subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002.
In the event of a stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger or other similar corporate transaction or event, that affects shares of our common stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of participants under the Amended 2011 Plan, then the plan administrator will make equitable changes or adjustments to:
· the aggregate number and kind of shares of common stock that may thereafter be issued in connection with awards;
· the limits on the number of shares that may be granted to any individual in any fiscal year;
· the number and kind of shares of common stock issued or issuable in respect of outstanding awards; and
· the exercise price, grant price, purchase price or other terms relating to any outstanding award.
In addition, the plan administrator may determine that any equitable adjustment may be accomplished by making a payment to the award holder, in the form of cash or other property (including but not limited to shares of our common stock).
We may make certain awards in the form of LTIP units. LTIP units are a separate series of units of limited partnership interests in our operating partnership. LTIP units, which can be granted either as free-standing awards or in tandem with other awards under the Amended 2011 Plan, will be valued by reference to the value of shares of
our common stock, and will be subject to such conditions and restrictions as the compensation committee may determine, including continued employment or service, computation of financial metrics and/or achievement of pre-established performance goals and objectives. If applicable conditions and/or restrictions are not attained, participants will forfeit their LTIP units. Unless otherwise provided, LTIP unit awards, whether vested or unvested, will entitle the participant to receive current distributions from our operating partnership equivalent to the dividends that would be payable with respect to the number of shares of our common stock underlying the LTIP unit award.
LTIP units are structured as “profits interests” for U.S. federal income tax purposes, and the grant, vesting or conversion of LTIP units does not produce a tax deduction for us. As profits interests, LTIP units when granted initially will not have full parity, on a per unit basis, with the operating partnership’s common units with respect to liquidating distributions. Upon the occurrence of specified events, LTIP units can over time achieve full parity with common units and therefore accrete to an economic value for the participant equivalent to common units. If such parity is achieved, LTIP units may be converted, subject to the satisfaction of applicable vesting conditions, on a one-for-one basis into common units, which in turn are redeemable by the holder for shares of common stock on a one-for-one basis or for the cash value of such shares, at our election. However, there are circumstances under which LTIP units will not achieve parity with common units, and until such parity is reached, the value that a participant could realize for a given number of LTIP units will be less than the value of an equal number of shares of common stock and may be zero. Under the Amended 2011 Plan, each LTIP unit awarded is equivalent to an award of one share of common stock reserved under the Amended 2011 Plan, thereby reducing the number of shares of common stock available for other equity awards on a one-for-one basis.
Each stock option and stock appreciation right granted under the Amended 2011 Plan will have a term of no longer than 10 years, and will have an exercise price that is no less than 100% of the fair market value of our common stock on the date of grant of the award. Stock appreciation rights confer on the participant the right to receive cash, common stock or other property, as determined by the plan administrator, equal to the excess of the fair market value of our common stock on the date of exercise over the exercise price of the stock appreciation right. The other terms of stock options and stock appreciation rights granted by us under the Amended 2011 Plan will be determined by the plan administrator. The exercise price of an option or stock appreciation right cannot be reduced (by amendment, cancellation, substitution or otherwise) without stockholder approval.
The plan administrator will determine the terms and conditions of each grant of restricted stock or restricted stock units under the Amended 2011 Plan. Restricted stock units confer on the participant the right to receive cash, common stock or other property, as determined by the plan administrator, having a value equal to the number of shares of common stock that are subject to the award. The holders of awards of restricted stock or restricted stock units may be entitled to receive dividends or, in the case of restricted stock units, dividend equivalents, which may be payable immediately or on a deferred basis at a time determined by the plan administrator.
The plan administrator may determine to make grants of our common stock that are not subject to any restrictions or a substantial risk of forfeiture or to grant other stock-based awards to eligible participants. The plan administrator will determine the terms and conditions at the time of grant.
Unless otherwise determined by the plan administrator and set forth in an individual award agreement, upon a change in control (as defined in the Amended 2011 Plan), each outstanding award under the Amended 2011 Plan will become immediately vested, exercisable and/or payable, unless provision is made in the transaction for the continuation or assumption of awards or for the substitution of equivalent awards in the surviving or successor entity or the parent thereof.
The Amended 2011 Plan provides that awards may not be made under the Amended 2011 Plan after April 30, 2028, the 10th anniversary of the date of stockholder approval of the Amended 2011 Plan. The board of directors may terminate, amend, modify or suspend the Amended 2011 Plan at any time, subject to stockholder approval as required by law or stock exchange rules. The plan administrator may amend the terms of any outstanding award under the Amended 2011 Plan at any time. No amendment or termination of the Amended 2011 Plan or any outstanding award may adversely affect any of the rights of an award holder without the holder’s consent.
As soon as practicable after receiving stockholder approval of the Amended 2011 Plan, we intend to file a registration statement on Form S-8 to register the additional shares of common stock that may be issued under the Amended 2011 Plan.
Vote Required
The affirmative vote of a majority of the votes cast at a meeting at which a quorum is present is required to approve the Amended 2011 Plan. For purposes of the vote on the Amended 2011 Plan, abstentions will have the same effect as votes against the proposal and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote.
Recommendation
The board of directors recommends a vote FOR the approval of the Amended 2011 Plan.
PROPOSAL 5:
ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
Proposal
Section 14A(a)(1) of the Exchange Act generally requires each public company to include in its proxy statement a separate resolution subject to a non-binding stockholder vote to approve the compensation of the company’s named executive officers, as disclosed in its proxy statement pursuant to Item 402 of Regulation S-K, not less frequently than once every three years. This is commonly known as a “say-on-pay” proposal or resolution.
At our 2012the 2018 annual meeting of stockholders held on May 7, 2012,April 30, 2018, our stockholders voted on, among other matters, a proposal regarding the frequency of holding a non-binding, advisory vote on the compensation of the named executive officers. A majority of the votes cast on the frequency proposal were cast in favor of holding a non-binding, advisory vote on the compensation of the named executive officers every year, which was consistent with the recommendation of our board of directors. Our board of directors considered the voting results with respect to the frequency proposal and other factors, and the board currently intends to hold a non-binding, advisory vote on the executive compensation program every year until the next required advisory vote on the frequency of holding the non-binding, advisory vote on the compensation of the named executive officers at the upcoming 20182024 annual meeting of stockholders. See “Proposal 6: Advisory (Non-Binding) Vote on Frequency of Executive Compensation Votes.”
Accordingly, we are presenting the following proposal, which gives you as a stockholder the opportunity to endorse or not endorse our executive compensation program for the named executive officers by voting for or against the following resolution.
“—RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 20182021 annual meeting of stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Executive Officer Compensation Discussion and Analysis, the compensation tables and the other related disclosure.”
While this vote is advisory and not binding on us, it will provide information to us and the compensation committee regarding stockholder sentiment about our executive compensation philosophy, policies and practices, which the compensation committee will be able to consider when determining executive compensation for the remainder of 20182021 and beyond.
Additional Information
The earlier discussion of executive compensation under “Executive Officer Compensation Discussion and Analysis” and information disclosed in the compensation tables reflect executive compensation paid and grants awarded during the year ended December 31, 2017.
Following is a discussion of the role of certain components of our executive compensation program. We urge our stockholders to review the “Executive Officer Compensation Discussion and Analysis” and “Executive Officer Compensation Tables” sections of this proxy statement for more information.
We emphasize pay-for-performance with regard to cash compensation. We believe that a significant portion of our executive officers’ cash compensation should be variable, at risk and tied to our near-term success and should align the interest of management with our stockholders. Performance-based compensation motivates and rewards individual efforts and company success.
We believe that our equity compensation programs further align our executives’ interests with those of our stockholders. We grant equity awards as a substantial component of our compensation program to reward long-term performance and further align the interests of management with those of our stockholders. We use LTIP units and performance units as our equity incentive awards because these awards serve our objectives of promoting long-term equity ownership by executives, aligning the interests of executives with the interests of stockholders and
enabling us to remain competitive with our peers in recruiting and retaining talented executives. These awards tie our executive officers’ interests to those of long-term stockholders and serve to motivate our executives to lead us to achieve long-term financial goals that are expected to lead to increased stockholder value. In addition, both LTIP unit and performance unit awards generally require continued service over a multi-year period as a condition to vesting, which creates a strong retention incentive and helps ensure the continuity of our operations.
We are committed to strong governance standards with respect to our compensation programs. As part of its commitment to strong corporate governance and best practices, the compensation committee engaged and received advice on the compensation program from a third-party compensation consultant to supplement the committee’s collective knowledge and experience and provide important empirical compensation data. The compensation committee meets as necessary to address compensation matters in a timely manner and reviews our executive compensation program to ensure that it provides competitive pay opportunities to help attract and retain the highly-qualified and dedicated executive talent that is so important to our business. We believe that the severance protections we provide to the named executive officers are within market norms. We further believe that the “double trigger” change-in-control cash severance benefits we provide properly incentivize our executive officers by providing appropriate protections against job loss without creating the potential for “single trigger” cash severance windfalls just for completing a transaction. Moreover, our executive officers are not entitled to any excise tax gross-ups in connection with change in control payments.
Vote Required
The affirmative vote of a majority of the votes cast at a meeting at which a quorum is present is required to approve, by non-binding vote, executive compensation. For purposes of this advisory vote, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote.
Recommendation
The board of directors recommends a vote FOR the approval of the compensation of the named executive officers as disclosed in this proxy statement.
PROPOSAL 6:
ADVISORY (NON-BINDING) VOTE
ON FREQUENCY OF EXECUTIVE COMPENSATION VOTES
In addition to the advisory approval of our executive compensation program, we are also presenting the following proposal, which gives you as a stockholder the opportunity to inform us as to how often you wish us to include a proposal, similar to Proposal 5, in our proxy statement. While the board of directors intends to carefully consider the stockholder vote resulting from the proposal, the final vote will not be binding on us and is advisory in nature.
“RESOLVED, that the stockholders determine, on an advisory basis, whether the preferred frequency of an advisory vote on the executive compensation of the Company’s named executive officers as set forth in the Company’s proxy statement should be every year, every two years, or every three years.”
After careful consideration, the board of directors has determined that an advisory vote on named executive officer compensation that occurs every year is the most appropriate alternative, and therefore the board of directors recommends that you vote for a one-year interval for the advisory vote on executive compensation.
Annual votes will provide us with the clearest feedback regarding the compensation of the named executive officers. The primary focus of the disclosure of the compensation of the named executive officers required to be included in our proxy statements is compensation granted in or for the prior fiscal year. Additionally, the compensation committee evaluates the compensation of the named executive officers each year. An annual say-on-pay resolution will match the annual focus of this proxy statement disclosure and provide us with the clearest and most timely feedback of the three alternatives. This feedback may then be considered by the compensation committee in its next annual decision making process. Additionally, the administrative process of submitting a non-binding, advisory say-on-pay proposal to stockholders on an annual basis is not expected to impose substantial additional costs.
Vote Required
The frequency of the advisory vote on executive compensation receiving the greatest number of votes (every one, two or three years) will be considered the frequency recommended by the stockholders. For purposes of this advisory vote, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote.
Recommendation
The board of directors recommends a vote FOR the option of every year (box “1 YEAR” on the proxy card) as the preferred frequency for advisory votes on executive compensation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares of our common stock and common units in our operating partnership for (i) each stockholder of our company that is known to us to be the beneficial owner of 5% or more of our common stock based upon filings made with the SEC, (ii) directors and named executive officers and (iii) all directors and named executive officers as a group as of the record date, March 12, 2018.11, 2021.
In accordance with SEC rules, each listed person’s beneficial ownership includes all shares the person actually owns beneficially or of record, all shares over which the person has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund), and all shares the person has the right to acquire within 60 days.
Unless otherwise indicated, each person named in the table has sole voting and investment power with respect to all of the shares of common stock shown as beneficially owned by such person and none of the executive officers or directors has pledged shares of common stock as collateral. Furthermore, unless otherwise indicated, the business address for each of the identified stockholders is our principal executive office, One Federal Street, 23rd Floor, Boston, Massachusetts 02110.
Name of Beneficial Owner | | Number of Shares
and/or Common
Units Beneficially
Owned(1) | | Percent of
All Shares(2) | | Percent of
All Shares and
Common Units(3) | |
BlackRock, Inc.(4) | | 8,387,711 | | 8.6 | % | 8.3 | % |
The Vanguard Group—23-1945930(5) | | 14,830,849 | | 15.3 | % | 14.6 | % |
Vanguard Specialized Funds—Vanguard REIT Index Fund—23-2834924(6) | | 6,210,206 | | 6.4 | % | 6.1 | % |
Benjamin S. Butcher(7) | | 784,571 | | * | | * | |
William R. Crooker(7) | | 74,547 | | * | | * | |
Stephen C. Mecke(7) | | 287,997 | | * | | * | |
Jeffrey M. Sullivan(7) | | 124,426 | | * | | * | |
David G. King(7) | | 181,675 | | * | | * | |
Virgis W. Colbert(8) | | 25,393 | | * | | * | |
Michelle Dilley(8) | | 3,930 | | * | | * | |
Jeffrey D. Furber(8) | | 69,165 | | * | | * | |
Larry T. Guillemette(8) | | 58,021 | | * | | * | |
Francis X. Jacoby III(8) | | 51,731 | | * | | * | |
Christopher P. Marr(8) | | 36,219 | | * | | * | |
Hans S. Weger(8) | | 57,459 | | * | | * | |
All directors and executive officers as a group (12 persons) | | 1,755,134 | | 1.8 | % | 1.7 | % |
Name of Beneficial Owner | | Number of Shares
and/or Common
Units Beneficially
Owned(1) | | Percent of
All Shares(2) | | Percent of
All Shares and
Common Units(3) |
| BlackRock, Inc. (4) | | 16,399,214 | | 10.3% | | 10.1% |
| The Vanguard Group—23-1945930 (5) | | 21,434,384 | | 13.5% | | 13.2% |
| Benjamin S. Butcher (6) | | 810,094 | | * | | * |
| William R. Crooker (6) | | 132,378 | | * | | * |
| Stephen C. Mecke (6) | | 257,276 | | * | | * |
| Jeffrey M. Sullivan (6) | | 167,162 | | * | | * |
| David G. King (6) | | 223,062 | | * | | * |
| Jit Kee Chin (7) | | 8,712 | | * | | * |
| Virgis W. Colbert (7) | | 41,532 | | * | | * |
| Michelle S. Dilley (7) | | 19,660 | | * | | * |
| Jeffrey D. Furber (7) | | 86,552 | | * | | * |
| Larry T. Guillemette (7) | | 76,124 | | * | | * |
| Francis X. Jacoby III (7) | | 67,870 | | * | | * |
| Christopher P. Marr (7) | | 53,337 | | * | | * |
| Hans S. Weger (7) | | 43,180 | | * | | * |
| All directors and executive officers as a group (13 persons) | | 1,986,939 | | 1.2% | | 1.2% |
| * | Represents ownership of less than 1.0%. |
| (1) | Ownership consists of shares of common stock, common units and LTIP units. Subject to certain restrictions, common units may be redeemed for cash, or at our option, an equal number of shares of common stock. Upon achieving parity with the common units and becoming “redeemable” in accordance with the terms of the partnership agreement of our operating partnership, LTIP units may be redeemed for cash, or at our option, an equal number of shares of common stock, subject to certain restrictions. |
| (2) | Based on 159,082,448 shares of common stock outstanding as of March 11, 2021. In computing the percentage ownership of a person or group, we have assumed that the common units and LTIP units held by that person or the persons in the group have been redeemed for shares of common stock and that those shares are outstanding but that no common units or LTIP units held by other persons are redeemed for shares of common stock, notwithstanding that not all of the LTIP units have vested to date. |
| (3) | Based on 162,676,371 shares of common stock and units outstanding as of March 11, 2021 on a fully-diluted basis, comprised of 1,592,815 shares of common stock and 2,001,108 shares of common stock issuable upon exchange or conversion of outstanding common units and LTIP units of our operating partnership, respectively. |
| (4) | This information and the information in this footnote were obtained from a Schedule 13G/A filed with the SEC on January 27, 2021. BlackRock, Inc., in its capacity as a parent holding company, is deemed to have sole power to vote or to direct the vote with respect to 15,592,585 shares of common stock and is deemed to have the sole power to dispose or direct the disposition with respect to 16,399,214 shares of common stock. The business address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. |
| (5) | The information and the information in this footnote were obtained from a Schedule 13G/A filed with the SEC on February 10, 2021. The Vanguard Group—23-1945930 (“Vanguard Group”), in its capacity as an investment adviser, is deemed to have shared power to vote or to direct the vote with respect to 491,418 shares of common stock, is deemed to have sole power to dispose or to direct the disposition with respect to 20,823,157 shares of common stock, and is deemed to have shared power to dispose or to direct the disposition with respect to 611,227 shares of common stock. The business address for Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
| (6) | Includes 753,686, 132,378, 240,118, 167,162 and 222,553 LTIP units held by each of Messrs. Butcher, Crooker, Mecke, Sullivan and King, respectively, and 9,320 common units held by Mr. Butcher. Not all of the LTIP units have vested. |
| (7) | Includes 6,948, 14,706, 27,466, 42,607, 42,607, 42,607, 35,197 and 42,607 LTIP units held by each of Dr. Chin, Ms. Dilley and Messrs. Colbert, Furber, Guillemette, Jacoby, Marr and Weger, respectively. Not all of these LTIP units have vested. |
* Represents ownership of less than 1.0%.
(1) Ownership consists of shares of common stock, common units and LTIP units. Subject to certain restrictions, common units may be redeemed for cash, or at our option, an equal number of shares of common stock. Upon achieving parity with the common units and becoming “redeemable” in accordance with the terms of the partnership agreement of our operating partnership, LTIP units may be redeemed for cash, or at our option, an equal number of shares of common stock, subject to certain restrictions.
(2) Based on 97,229,588 shares of common stock outstanding as of March 12, 2018. In computing the percentage ownership of a person or group, we have assumed that the common units and LTIP units held by that person or the persons in the group have been redeemed for shares of common stock and that those shares are outstanding but that no common units or LTIP units held by other persons are redeemed for shares of common stock, notwithstanding that not all of the LTIP units have vested to date.
(3) Based on 101,505,405 shares of common stock and units outstanding as of March 12, 2018 on a fully-diluted basis, comprised of 97,229,588 shares of common stock and 4,275,817 shares of common stock issuable upon exchange or conversion of outstanding common units and LTIP units of our operating partnership.
(4) This information and the information in this footnote were obtained from a Schedule 13G/A filed with the SEC on January 23, 2018. BlackRock, Inc., in its capacity as a parent holding company, is deemed to have sole power to vote or to direct the vote with respect to 7,919,932 shares of common stock and is deemed to have the sole power to dispose
or direct the disposition with respect to 8,387,711 shares of common stock. The business address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.
(5) The information and the information in this footnote were obtained from a Schedule 13G/A filed with the SEC on February 12, 2018. The Vanguard Group—23-1945930 (“Vanguard Group”), in its capacity as an investment adviser, is deemed to have sole power to vote or to direct the vote with respect to 216,509 shares of common stock, is deemed to have shared power to vote or to direct the vote with respect to 126,024 shares of common stock, is deemed to have sole power to dispose or to direct the disposition with respect to 14,609,045 shares of common stock, and is deemed to have shared power to dispose or to direct the disposition with respect to 221,804 shares of common stock. Vanguard Funds has its principal business office at 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(6) The information and the information in this footnote were obtained from a Schedule 13G/A filed with the SEC on February 2, 2018. Vanguard Specialized Funds—Vanguard REIT Index Fund—23-2834924 (“Vanguard Funds”), in its capacity as an investment company, is deemed to have sole power to vote or to direct the vote with respect to 6,210,206 shares of common stock. Vanguard Funds has its principal business office at 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(7) Includes 696,548, 59,943, 274,749, 118,626 and 181,311 LTIP units held by each of Messrs. Butcher, Crooker, Mecke, Sullivan and King, respectively, and 15,935 and 11,248 common units held by each of Messrs. Butcher and Mecke, respectively. Not all of the LTIP units have vested.
(8) Includes 3,930 LTIP units held by Ms. Dilley and 16,690, 31,831, 31,831, 31,831, 24,421 and 31,831 LTIP units held by Messrs. Colbert, Furber, Guillemette, Jacoby, Marr and Weger, respectively. Not all of these LTIP units have vested.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Former Services Agreement
In connection with our formation transactions and our initial public offering, we entered into a services agreement with STAG Investments II, LLC, a private, fully-invested fund (“Fund II”). Fund II did not own any properties, and was fully wound down and terminated, at December 31, 2017. Pursuant to the former services agreement with Fund II, we managed its properties in return for an annual asset management fee based on the equity investment in such assets, which equaled 1.25% of the equity investment. As of December 31, 2017, the services agreement was terminated. Certain of our executive officers and their affiliates had direct or indirect interests in Fund II, including residual interests, or contingent profit interests, in Fund II.
Review and Approval of Future Transactions with Related Persons
The board of directors has adopted a policy for the review and approval of related person transactions requiring disclosure under Rule 404(a) of Regulation S-K. The policy provides that the nominating and corporate governance committee is responsible for reviewing and approving or disapproving all interested transactions, meaning any transaction, arrangement or relationship in which (i) the amount involved may be expected to exceed $120,000 in any fiscal year, (ii) we will be a participant and (iii) a related person has a direct or indirect material interest. A related person will be defined as an executive officer, director or nominee for election as director, or a greater than 5% beneficial owner of our common stock, or an immediate family member of the foregoing.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities (“10% Holders”), to file reports of ownership and changes in ownership with the SEC. Officers, directors and 10% Holders are required by SEC regulations to furnish our company with copies of all Section 16(a) forms that they file.
To our knowledge, based solely on review of the copies of such reports furnished to us, or written representations from reporting persons that all reportable transactions were reported, we believe that during the fiscal year ended December 31, 2017, the executive officers, directors and 10% Holders timely filed all reports they were required to file under Section 16(a), except for two sales by Mr. Marr for 601 shares of common stock on October 16, 2014 and 685 shares of common stock on February 6, 2015, which were reported on a Form 5 on February 14, 2018, and a conversion by Mr. King of common units into 7,568 shares of common stock on March 6, 2017, which was reported on a Form 4 on March 9, 2017.
Stockholder Proposals
Stockholder proposals intended to be presented at the 20192022 annual meeting of stockholders must be received by the corporate secretary of the company no later than November 21, 201824, 2021 in order to be considered for inclusion in our proxy statement relating to the 20182022 meeting pursuant to Rule 14a-8 under the Exchange Act (“Rule 14a-8”).
Our bylaws currently provide that in order for a proposal of a stockholder to be presented at our 2019the 2022 annual meeting of stockholders, other than a stockholder proposal included in our proxy statement pursuant to Rule 14a-8, it must be received at our principal executive offices no earlier than the close of business on October 22, 2018,25, 2021, and on or before November 21, 2018.24, 2021. If the 20192022 annual meeting of stockholders is scheduled to take place before March 31, 2019,April 3, 2022, or after May 30, 2019,June 2, 2022, then notice must be delivered no earlier than the close of business on the 150th day prior to the 20192022 annual meeting of stockholders and not later than the close of business on the later of the 120th day prior to the 20192022 annual meeting of stockholders or the tenth day following the day on which public announcement of the date of the 20192022 annual meeting of stockholders is first made public by our company. Any such proposal should be mailed to: STAG Industrial, Inc., One Federal Street, 23rd Floor, Boston, Massachusetts,
02110, Attention: Jeffrey M. Sullivan, Corporate Secretary. A copy of the bylaws may be obtained from our corporate secretary by written request to the same address.
Additional Matters
The board of directors does not know of any matters other than those described in this proxy statement that will be presented for action at the annual meeting. If other matters are presented, proxies will be voted in accordance with the best judgment of the proxy holders.
| By order of the board of directors: |
|
|
| | JEFFREY M. SULLIVAN |
| Executive Vice President, General Counsel and Secretary |
Boston, Massachusetts
March 24, 2021
Appendix A
definitions and Non-GAAP Financial Measures
Certain Definitions
In this proxy statement, we define:
| ● | “net debt” as our total long-term indebtedness outstanding less cash and cash equivalents on hand; |
| ● | “long-term indebtedness” as the principal outstanding on our unsecured credit facility, unsecured term loans, unsecured notes and mortgage notes; |
| ● | “real estate cost basis” as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization; and |
| ● | “enterprise value” as the market value of our common stock and operating partnership units (including LTIP units) outstanding (based on the period-end closing price on the NYSE) plus the liquidation value of our preferred stock and amounts outstanding on our long-term indebtedness. |
Boston, Massachusetts
March 21, 2018
Appendix A
Non-GAAP Financial Measures
Funds Fromfrom Operations
Funds from operations (“FFO”) should not be considered as an alternative to net income (determined in accordance with generally accepted accounting principles (“GAAP”)) as an indication of our performance, and we believe that to understand our performance further, FFO should be compared with our reported net income or net loss(loss) in accordance with GAAP, as presented in our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017.2020.
We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”Nareit”). FFO represents GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating buildings, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO as a supplemental performance measure because it is a widely recognized measure of the performance of real estate investment trusts.REITs. FFO may be used by investors as a basis to compare our operating performance with that of other real estate investment trusts.trusts (“REITs”).
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our buildings that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other real estate investment trustsREITs may not calculate FFO in accordance with the NAREITNareit definition, as we do, and, accordingly, our FFO may not be comparable to such other real estate investment trusts’REITs’ FFO. FFO should not be used as a measure of our liquidity, and is not indicative of funds available for our cash needs, including our ability to pay dividends.
The following table sets forth a reconciliation of our FFO attributable to common stockholders and unit holders for the periods presented to net income, the nearest GAAP equivalent.
| | Year ended December 31, | | Year ended December 31, | |
Reconciliation of Net Income to FFO (in thousands) | | 2017 | | 2016 | | 2020 | | 2019 | |
Net income | | $ | 32,200 | | $ | 35,588 | | $ 206,795 | | $ 50,665 | |
Rental property depreciation and amortization | | 150,591 | | 125,182 | | 214,464 | | 185,154 | |
Loss on impairments | | 1,879 | | 16,845 | | 5,577 | | 9,757 | |
Gain on the sales of rental property, net | | (24,242 | ) | (61,823 | ) | (135,733 | ) | (7,392 | ) |
FFO | | $ | 160,428 | | $ | 115,792 | | $ 291,103 | | $ 238,184 | |
Preferred stock dividends | | (9,794 | ) | (13,897 | ) | (5,156 | ) | (5,156 | ) |
Other expenses | | — | | (384 | ) | |
| Amount allocated to restricted shares of common stock and unvested units | | (756 | ) | (891 | ) |
FFO attributable to common stockholders and unit holders | | $ | 150,634 | | $ | 101,511 | | $ 285,191 | | $ 232,137 | |
| | | | | | |
A-1
