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|
GOVERNANCE PRACTICES
|
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|
|
WHAT WE DO:
|
|
WHAT WE DON'T DO:
|
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|
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|
|
|
✔
|
|
We have robust stock ownership guidelines for our CEO (6x base salary) and directors (5x cash retainer)
|
|
✘
|
|
We do not provide NEOs with tax gross-ups on executive or severance benefits, including upon a change in control
|
|
|
|
|
|
|
|
✔
|
|
We maintain a clawback policy whereby we can recoup incentive compensation in the event of certain financial restatements
|
|
✘
|
|
We do not re-price outstanding stock options, whether vested or unvested
|
|
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|
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✔
|
|
We prohibit pledging and hedging of our common stock
|
|
✘
|
|
We do not pay dividends on unvested performance awards rather, such amounts are paid only if and to the extent that the applicable performance targets are in fact met
|
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✔
|
|
The Compensation Committee retains an independent compensation consultant.
|
|
✘
|
|
We do not provide separate benefit plans for our NEOs; our NEOs participate in the same benefit plans available to salaried employees
|
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✔
|
|
We perform an annual compensation risk assessment
|
|
✘
|
|
We do not provide pension benefits or supplemental retirement plans
|
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✔
|
|
We engage with our stockholders on compensation and governance matters
|
|
✘
|
|
We do not provide excessive perquisites to our NEOs
|
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2020
Proxy
Statement
|
|
27
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Table of Contents
Alignment of Pay with Performance
Our executive compensation program provides significant alignment between pay and performance by linking a meaningful portion of our NEOs' compensation to the
achievement of pre-established financial and strategic goals under our annual incentive bonus program and the Company's relative total shareholder return ("TSR") under our long-term incentive grants.
The following charts present the allocation of total pay among different components for our CEO and for our other NEOs as a group, in 2019, as set forth in the 2019 Summary Compensation Table,
excluding amounts shown in the "All Other Compensation" column.
How We Make Compensation Decisions
Role of the Compensation Committee
All compensation for the NEOs (including the CEO) is set by the Compensation Committee annually. The Committee also determines measurements and targets, and
performance relative to them, under our annual and long-term incentive plans. Individual base salaries, along with annual and long-term incentive targets, are determined by the Committee after taking
into consideration a number of internal and external factors, including the external marketplace and peer group data, the executive's position and responsibility, the demand for executive talent in
the marketplace, the Company's performance, and the individual's performance and future potential. The Committee also considers the CEO's self-performance evaluation when setting the CEO's
compensation and, with respect to each of the other NEOs, the CEO's recommendations based on his assessment of their individual performance.
Use of Judgment
The Compensation Committee believes that the application of its collective experiences and judgment is as important to excellence in compensation as the use
of data and formulae while market data provides an important tool for analysis and decision-making, the Committee believes that over-reliance on data can give a false illusion of precision.
Consequently, the Committee also gives consideration and emphasis to an individual's personal contributions to the organization, as well as his or her skill set, qualifications and experience. The
Committee also values and seeks to reward performance that develops talent within the Company, embraces the sense of urgency that we believe distinguishes the Company and demonstrates the qualities of
imagination and drive that enables
a Company executive to resolve longer-term challenges and address important new issues. The Committee believes these and similar qualities and attributes are not easily correlated to typical
compensation data, but also deserve consideration and weight in reaching compensation decisions.
Role of Compensation Consultant
Since 2017, the Compensation Committee has engaged FPL Associates, L.P. ("FPL") to assist it in the performance of its duties and to
make recommendations to the Committee with respect to NEO and director compensation. FPL assisted the Committee in development of the peer group framework for
|
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28
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2020
Proxy
Statement
|
Table of Contents
2019
and advised the Committee on the 2019 base salaries, target bonuses and long-term incentive ("LTI") awards for our NEOs. The Committee also worked with FPL to conduct a competitive market
assessment of the compensation elements for each of our executive officers and the design of our annual incentive plan and long-term incentive awards, compared to our peer groups. FPL did not perform
any other work for the Company in 2019.
In
connection with the engagement of FPL, the Committee conducts an annual evaluation of the independence of FPL and its individual consultants, which includes reviewing information from FPL and the
Company's directors and executive officers addressing any potential conflicts of interest. For 2019, as with prior years, the Committee concluded that FPL and its individual consultants are
independent and that their work did not raise any conflicts of interest.
Use of Data
The Compensation Committee believes that data plays an important role in the design and implementation of optimal compensation programs, and considers a
number of types of internal and external data in making both individual and plan-level compensation decisions. In particular, the Committee uses peer groups to maintain an awareness of market data and
pay practices, but considers various factors each as discussed in greater detail below in this Compensation Discussion and Analysis and does not
target any element of compensation at a particular percentile or percentile range of the peer group data. Rather, the Committee uses data and the market median as an initial reference point and to aid
its judgment in its decision-making process.
Peer Groups
The Compensation Committee evaluates the members of our peer group and the use of peer data each year to ensure that they continue to be appropriate. In the
second half of 2017, after considering feedback from our stockholders received as part of our outreach efforts, the Compensation Committee, with the assistance of FPL, determined to revise our
compensation peer groups to take into account our size and our complex business model. Based on a review of market data, with the assistance of FPL, the Compensation Committee determined to use two
peer groups for reference points in evaluating and determining compensation, an approach it continued to use in 2019:
-
-
a size-based peer group, comprised of high growth REITs of similar size (0.5x to 2x of our total capitalization) and asset focus (such as data
center/industrial or specialty); and
-
-
a technology real estate peer group.
|
|
|
2020
Proxy
Statement
|
|
29
|
Table of Contents
The
table below identifies the companies in each of these peer groups:
|
|
|
|
|
SIZE-BASED REIT PEER GROUP
|
Alexandria Real Estate Equities, Inc.*
|
|
First Industrial Realty Trust, Inc.*
|
|
Liberty Property Trust*
|
American Campus Communities, Inc.*
|
|
Gramercy Property Trust*
|
|
Medical Properties Trust, Inc.*
|
Camden Property Trust*
|
|
Healthcare Trust of America, Inc.*
|
|
STAG Industrial, Inc.*
|
CubeSmart
|
|
Hudson Pacific Properties, Inc.*
|
|
STORE Capital Corporation*
|
DCT Industrial Trust Inc.*
|
|
Invitation Homes Inc.*
|
|
Sun Communities, Inc.*
|
Duke Realty Corporation*
|
|
Iron Mountain Incorporated*
|
|
|
|
|
|
|
|
TECHNOLOGY REAL ESTATE PEER GROUP
|
American Tower Corporation*
|
|
Equinix, Inc.*
|
|
Uniti Group Inc.*
|
CoreSite Realty Corporation*
|
|
QTS Realty Trust, Inc.*
|
|
Zayo Group Holdings Inc.*
|
Crown Castle International Corp.*
|
|
SBA Communications Corporation*
|
|
|
Digital Realty Trust, Inc.*
|
|
Switch, Inc.
|
|
|
*Included in prior year Peer Group
Stockholder Engagement & Say-on-Pay Vote
We continue to maintain an active dialogue with our stockholders regarding our executive compensation program. Since 2017, our Board, primarily through the
Compensation Committee, has held individual meetings with stockholders who collectively owned approximately 60% of our outstanding stock. We remain committed to listening to feedback from our
stockholders and will continue to actively engage with our investors to solicit feedback on our executive compensation program and governance practices generally. At our 2019 annual meeting,
approximately 86.5% of the votes cast were in favor of the Company's executive compensation for fiscal 2018. We hold annual Say-on-Pay votes.
|
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|
30
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2020
Proxy
Statement
|
Table of Contents
2019 Executive Compensation Components
|
|
|
|
|
|
|
|
|
Component
|
|
Objective
|
|
Key features
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
To provide salary levels sufficient to attract and retain NEOs.
|
|
Fixed cash salary that is
both market-derived and market-driven.
Adjustments considered yearly based on performance, market data and other factors described below.
|
|
|
|
|
|
|
|
|
|
Annual Incentive Bonus
|
|
To encourage NEOs to pursue annual goals that will benefit the Company and stockholders in both the short- and long-term.
|
|
80% of our annual cash
bonus awards are tied to achievement of financial goals-30% is tied to revenue and 50% is tied to Normalized FFO.
20% of our annual cash bonus awards are tied to individual performance.
|
|
|
|
|
|
|
|
|
|
Long-Term Incentive*
|
|
To promote NEO retention and to create an ownership culture that closely aligns the interests of the NEOs with those of our stockholders.
|
|
75% of our LTI awards
consist of a performance-based restricted stock unit component, which vests over a three-year period contingent upon achievement of relative TSR goals.
25% of our LTI awards
consist of a time-based restricted stock unit component, which vests ratably over three years.
|
|
|
|
|
|
|
|
-
-
*As
discussed below in "2020 Compensation Decisions," the Committee implemented certain design changes effective with the 2020 LTI grants, including the
addition of a second TSR metric and the elimination of the annual vesting feature for performance awards.
Base Salary
Policy and Process. Base salary, which under our compensation program is market-derived and market-driven, represents the fixed component of our executive officer
compensation program paid in cash. The main purpose of base salary compensation is to provide cash compensation levels sufficient to attract and retain executive officers. Because one of the primary
objectives of our executive compensation program in to instill an ownership mentality base salary is targeted to be approximately 10% to 30% or less of total target annual compensation opportunity for
each of the NEOs. The actual percentages will vary from year to year based on each NEO's performance, as well as the Company's performance, within
|
|
|
2020
Proxy
Statement
|
|
31
|
Table of Contents
that
year. On an annual basis, the Compensation Committee reviews the base salary of each of the NEOs and considers adjustments to executive officer base salaries based primarily on the individual's
performance, but also taking into account the base salary paid to similarly situated executives of the peer group companies and other factors such as Company performance.
2019 Base Salaries. The table below summarizes the base salaries approved for each of our NEOs for 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
Base Salary
($)
|
|
|
2018
Base Salary
($)
|
|
|
2019 vs. 2018
Change
(%)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Wojtaszek
|
|
|
800,000
|
|
|
800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Morefield
|
|
|
475,000
|
|
|
475,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Durvasula(1)
|
|
|
550,000
|
|
|
475,000
|
|
|
16%
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Timmons(2)
|
|
|
475,000
|
|
|
425,000
|
|
|
12%
|
|
|
|
|
|
|
|
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|
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|
Mr. Jackson
|
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|
352,000
|
|
|
352,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Effective
December 1, 2018, Mr. Durvasula received a base salary increase to $550,000 in connection with his promotion to Executive Vice President and
President, Europe.
-
(2)
-
Effective
April 1, 2019, Mr. Timmons received a base salary increase to $475,000 in connection with enhanced responsibility for construction, design
and operations oversight.
Annual Incentive Bonus Opportunity
Policy and Process. Our annual incentive bonus awards are designed to encourage our executive officers to pursue annual goals that will inure to the benefit of our
Company and stockholders in both the short- and long-term. Annual incentive bonus award opportunities are intended to reward NEOs whose contributions improve the operational performance of our
existing portfolio and the Company, enhance short-term strategic goals and generate new business opportunities and investments, all of which are intended to create stockholder value over the
long-term.
Each
of our NEOs participated in our annual incentive bonus plan for 2019, pursuant to which each NEO had an opportunity to earn additional cash compensation based on achievement of pre-established
financial goals (weighted 80%) and individual performance (weighted 20%).
The
Compensation Committee reviewed the bonus targets, as a percentage of base salary, of our NEOs in February 2019 as part of its annual compensation review and determined no adjustments were
necessary for 2019. The annual incentive target remained 175% of base salary for our CEO and 100% of base salary for other NEOs.
The
table below depicts the annual incentive bonus opportunity for each NEO for 2019:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
Threshold
(25% of Target)
($)
|
|
|
Target
($)
|
|
|
Maximum
(200% of Target)
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Wojtaszek
|
|
|
350,000
|
|
|
1,400,000
|
|
|
2,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Morefield
|
|
|
118,750
|
|
|
475,000
|
|
|
950,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Durvasula
|
|
|
137,500
|
|
|
550,000
|
|
|
1,100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Timmons
|
|
|
118,750
|
|
|
475,000
|
|
|
950,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Jackson
|
|
|
88,000
|
|
|
352,000
|
|
|
704,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
in the table above assume annualized 2019 base salary rates. Each NEO's actual bonus is calculated using actual salary earned for 2019, as reported in the Salary Column of the 2019 Summary
Compensation Table.
|
|
|
32
|
|
2020
Proxy
Statement
|
Table of Contents
Financial Goals. The following graphs show the threshold, target, maximum and actual performance levels for each financial component of the 2019 bonus
opportunities for our NEOs, in millions:
|
|
|
Revenue: The Compensation Committee considers revenue to be an important indicator of financial performance. It also is a metric typically evaluated by investors and analysts and is used by many
of our peers to evaluate performance. The revenue target established for 2019 was approximately 19% higher than the actual revenue for 2018 ($975.0M vs. $821.4M). Actual revenue for 2019 was $981.3 million.
|
|
Revenue (30%)
|
Normalized FFO(1): The Compensation Committee considers Normalized Funds From Operations ("Normalized FFO" or "NFFO"), to be an important indicator of the Company's
overall financial performance. It also is a metric typically used by investors and analysts, as well as many of our peers, to evaluate performance. The Normalized FFO target established for 2019 was approximately 9% higher than the actual Normalized
FFO results for 2018 ($361.2M vs. $332.3M). Actual Normalized FFO for 2019 was $409.0 million.
|
|
NFFO (50%)
|
(1) Normalized FFO is a non-GAAP financial measure calculated from the Company's financial statements as
set forth in Appendix A.
|
|
|
In
determining payouts, the following sliding scale is applied to the financial performance targets, with data between points interpolated on a straight-line basis.
|
|
|
|
|
Performance Percentage of Target
|
|
|
Payout Percentage
|
|
|
|
|
|
|
<80%
|
|
|
0%
|
|
|
|
|
|
|
80%
|
|
|
25%
|
|
|
|
|
|
|
90%
|
|
|
50%
|
|
|
|
|
|
|
100%
|
|
|
100%
|
|
|
|
|
|
|
115%
|
|
|
200%
|
|
|
|
|
|
|
Based
on this, the Company's performance relative to the financial goals resulted in a weighted payout of 145.2% of target on the financial component, which accounts for 80% of each NEO's bonus.
Individual Performance. The remaining 20% of each NEO's bonus is based on individual performance. For 2019, the Committee determined to pay the individual
component at 200% of target for each NEO. This determination was based on each NEO's contributions and accomplishments during the year, including the
following:
-
-
extraordinary performance relative to our annual bonus plan notwithstanding evolving market dynamics and aggressive actions to right-size the
Company's cost structure;
-
-
outperformance of European expansion plans, with sales bookings contributing to overall Company performance well ahead of original
underwriting;
|
|
|
2020
Proxy
Statement
|
|
33
|
Table of Contents
-
-
achievement of second investment grade rating, a milestone achievement for the Company and central to our long-term strategy; and
-
-
continued successful development of multiple layers of leadership in the Company, creating a deep bench of talent to leverage opportunistically
and as part of a well-developed comprehensive succession plan.
2019 Annual Incentive Bonus Payouts. The following table sets forth the award earned by each NEO under the 2019 annual incentive bonus plan (and, for reference,
under the 2018 annual incentive bonus plan):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
($)
|
|
|
% of
Target(1)
|
|
|
($)
|
|
|
% of
Target(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Wojtaszek
|
|
|
2,312,800
|
|
|
165.2
|
%
|
|
1,683,101
|
|
|
120.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Morefield
|
|
|
784,700
|
|
|
165.2
|
%
|
|
610,147
|
|
|
131.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Durvasula
|
|
|
908,600
|
|
|
165.2
|
%
|
|
527,117
|
|
|
111.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Timmons
|
|
|
760,873
|
|
|
165.2
|
%
|
|
468,071
|
|
|
111.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Jackson
|
|
|
581,504
|
|
|
165.2
|
%
|
|
453,686
|
|
|
131.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Bonus
and % of Target are based on actual salary earned during the fiscal year as presented in the Summary Compensation Table.
Long-Term Incentives
Policy and Purpose. The third component of NEO compensation is targeted toward providing rewards for long-term stockholder value creation. We believe that
outstanding long-term performance is achieved through an ownership culture that encourages a focus on long-term stockholder value creation by our executive officers through the use of equity-based
awards. Accordingly, at the target level, long-term incentive awards constitute the highest targeted percentage of any of the compensation components paid to each of our NEOs.
|
|
|
2019 LTI Awards. The LTI awards granted to our NEOs in 2019 consisted of a performance-based restricted stock unit component (75%), which vests based upon achievement of specified
TSR goals as compared to the MSCI US REIT Index over a three-year performance period (2019-2021), and a time-based restricted stock unit component (25%), which vests ratably over three years.
|
|
Long-Term Incentive Program
|
In
selecting relative TSR as the sole performance metric for the 2019 (and 2018) awards, the Compensation Committee considered relevant peer data as well as market practices. The Compensation
Committee believes TSR is widely accepted by investors and demonstrates the strong alignment between executive pay and performance.
In
determining 2019 LTI award values for our NEOs, the Compensation Committee considered the market and peer data provided by FPL, individual and Company performance in 2018, and the value of the
other components that make up each NEO's target total direct compensation. Based on these considerations, the Compensation Committee increased the target dollar value of 2019 LTI awards by
|
|
|
34
|
|
2020
Proxy
Statement
|
Table of Contents
approximately
6% for Mr. Wojtaszek and by approximately 10% to 40% for Messrs. Durvasula and Jackson. In addition, to reflect Mr. Timmons's enhanced responsibility for
construction, design and operations, he was awarded additional grants of time-based restricted stock units on April 1, 2019 and May 2, 2019, each of which vests ratably over three years.
The
grant date fair value of the LTI awards to our NEOs made in 2019, as determined in accordance with FASB ASC 718, was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Target
LTI Award Value
($)
|
|
|
Performance Share
Units
(at target)
($)(1)
|
|
|
Time-Based
Restricted Stock
Units
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Wojtaszek
|
|
|
3,978,260
|
|
|
2,840,717
|
|
|
1,137,543
|
|
|
|
|
|
|
|
|
|
|
|
|
Ms. Morefield
|
|
|
1,049,241
|
|
|
749,222
|
|
|
300,019
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Durvasula
|
|
|
1,442,704
|
|
|
1,030,159
|
|
|
412,545
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Timmons
|
|
|
1,349,231
|
|
|
749,222
|
|
|
600,009
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Jackson
|
|
|
699,547
|
|
|
499,517
|
|
|
200,030
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Reflects
FASB ASC 718 value. The number of units granted represents 75% of the total award.
LTI Payout Determinations
In February 2020, the Compensation Committee certified the performance results under outstanding performance awards granted in 2017, 2018 and 2019 based upon
the performance period ending December 31, 2019, as described below. Our performance awards vest over a three-year period contingent upon TSR achievement relative to the MSCI US REIT Index for
the applicable one,
two and three-year performance period(s). However, even if our TSR achievement exceeds the index performance, if absolute TSR achievement is negative, then the vesting amount is reduced by 50%.
2017 LTI Performance Awards - Final Vesting Determination
The performance awards granted in 2017 vested in February 2020. These awards consisted of restricted stock units which vested over a three-year performance
period ending in December 31, 2019 based upon achievement of TSR targets compared to the MSCI US REIT Index. Up to one-third of the total target award could be earned after each of the first
year and first two years of the performance period if actual performance over such periods met or exceeded the target performance for such period. Actual TSR for 2017 awards for the 2019 performance
period (the three years ending December 31, 2019) was 59.3%, which outperformed the MSCI US REIT Index by 32%, resulting in achievement at 200%. Actual shares that vested for each NEO as a
result of 2019 performance are as follows: Mr. Wojtaszek-74,796; Ms. Morefield-17,660; Mr. Durvasula-18,700; Mr. Timmons-16,640; and Mr. Jackson-13,296. Additional
information about the 2017 performance award is disclosed in the Outstanding Equity Awards at 2019 Fiscal Year End table.
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2017 Awards Performance:
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Performance Measure
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Target
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Maximum
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Actual Cumulative Performance
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Payout%(1)
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TSR(2)
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³ Index
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> 2.0% above Index
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32.0% above Index
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200.0%
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-
(1)
-
2019
is the third year for this performance award, in which up to 200% of the total target award may be earned (less any portion previously earned). TSR payout was
based on the three-year performance period from January 1, 2017 through December 31, 2019.
For
purposes of LTI awards, TSR is defined as (i) the trailing one-month average adjusted closing stock price at the end of the performance period minus the trailing one-month average adjusted
closing stock price at the beginning of the performance period, divided by (ii) the trailing one-month average adjusted closing stock price at the beginning of the performance period.
2018 LTI Performance Awards
The performance awards granted in 2018 vest solely upon achievement of TSR targets compared to the MSCI US REIT Index. Up to one-third of the total target
award can be earned after each of the first year and first two years of the performance period if actual performance over such periods meets or exceeds the target performance. Actual TSR for 2018
awards for the 2019 performance period (the two years ending December 31, 2019) was 14.9%, which underperformed the MSCI US REIT Index, resulting in achievement at 0%. The target and maximum
number of shares that may be earned by the NEOs under the 2018 performance awards over the full three-year performance period are disclosed in the Grants of Plan-Based Awards Table for 2018 in our
proxy statement for our 2019 annual meeting of stockholders.
2018 Awards Performance:
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Performance Measure
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Target
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Maximum
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Actual Cumulative Performance(1)
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Payout%
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TSR
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³ Index
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> 2.0% above Index
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4.0% below Index
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0.0%
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-
(1)
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Based
on performance period of January 1, 2018 through December 31, 2019.
2019 LTI Performance Awards
The performance awards granted in 2019 vest solely upon achievement of TSR targets compared to the MSCI US REIT Index. Up to one-third of the total target
award can be earned after each of the first year and first two years of the performance period if actual performance over such periods meets or exceeds the target performance. Actual TSR for 2019
awards for the 2019 performance period was 17.5%, which underperformed the MSCI US REIT Index, resulting in achievement at 0%. The target and maximum number of shares that may be earned by the NEOs
under the 2019 performance awards over the full three-year performance period are disclosed in the Grants of Plan-Based Awards Table for 2019.
2019 Awards Performance:
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Performance Measure
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Target
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Maximum
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Actual Cumulative Performance(1)
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Payout%
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TSR
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³ Index
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> 2.0% above Index
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1.6% below Index
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0.0%
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-
(1)
-
Based
on performance period of January 1, 2019 through December 31, 2019.
Other Elements of Compensation
Retirement and Other Benefits
Benefits are established based upon a determination of what is needed to aid in attracting and retaining a talented and motivated work force. The Compensation
Committee does not view benefits and
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perquisites
for our NEOs as a key component of our executive compensation program. Our NEOs participate in benefit plans on the same terms as our other participating employees and their total value
remains a negligible percentage of each executive officer's total compensation package.
We
do not provide perquisites or other personal benefits to our NEOs that are not available to all employees of the Company other than offering an annual physical to certain of our executives and
their spouses. In addition, in connection with his appointment as President, Europe, we required Mr. Durvasula to relocate to our London office and reimbursed certain costs associated with such
relocation, as
described in more detail in the Summary Compensation Table. We provide the following benefits to all employees of the Company: medical, dental, vision and disability insurance, parking at our
corporate offices or public transportation credit, 401(k) employer match and group life insurance premiums. We do not maintain any defined benefit or supplemental retirement plans.
The
Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to our NEOs and may revise, amend or add to any such benefits and perquisites in the
future as it deems advisable.
Severance Benefits
In order to achieve our compensation objective of attracting, retaining and motivating qualified executives, we believe that we need to provide the NEOs with
severance protections provided in an employment agreement. Each NEO is entitled to certain severance benefits based on the nature of their termination. See "Employment Agreements" and "Executive
Compensation TablesPotential Payments Upon Termination of Employment or Change in Control" below for complete details of severance benefits payable to the NEOs upon certain terminations
of employment.
Other Compensation-Related Policies
Stock Ownership Guidelines. The Company's corporate governance guidelines specify that the CEO is expected to hold shares worth at least six times his or her
annual base pay, and each other NEO is expected to hold at least one and a half times his or her annual base pay. As of December 31, 2019, each of our NEOs has met the minimum requirements for
stock ownership.
Hedging and Pledging. The Company has a written policy prohibiting the purchase or sale of puts, calls, options or other derivative securities based on the
Company's securities by directors, officers or employees, including Company securities granted to a director, officer or employee by the Company as part of the compensation of such individual or held,
directly or indirectly, by the director, officer or
employee. This prohibition also includes hedging or monetization transactions, such as exchange funds, equity swaps, collars and prepaid variable forward contracts, in which the stockholder continues
to own the underlying Company security without all the risks or rewards of ownership. Directors and officers of the Company are also prohibited from pledging Company securities or from holding Company
securities in a margin account, absent specific preapproval. This same prohibition applies to any employee as set out in the Company's policy on insider trading, and any exceptions to this prohibition
must be authorized in advance in accordance with the pre-clearance requirements of such policy. No such preapprovals have been requested or provided.
Clawback. The Company has a written clawback policy allowing it to recover incentive payments and equity awards realized by our NEOs in the preceding three years
in the event of a material restatement of the Company's financial statements, if the incentive payments or amount of equity awards received would have been lower if calculated based on the restated
financials, and the executive engaged in actual fraud or willful unlawful misconduct that materially contributed to the need for the restatement. To the extent that the SEC adopts final rules for
clawback policies that require changes to our policy, we will revise our policy accordingly.
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Repricing Prohibition. The Company maintains prohibitions on the re-pricing of underwater stock options, and cash buyouts of underwater stock options.
Double-Trigger Change-in-Control Benefits. Severance benefits under an executive's employment agreement are not payable and equity awards do not vest upon a change
in control unless the executive is terminated without cause or experiences a constructive termination, in each case, within 12 months following the change in control.
Employment Agreements
The Company has entered into written employment agreements with each of our NEOs. Employment agreements allow the Company the flexibility to make changes in
key positions with or without cause, and minimize the potential for disagreements or litigation, by establishing separation terms in advance, including arbitration provisions and the execution of
appropriate releases, and perpetuation of important confidentiality and non-competition restrictions. The benefits specified in the employment agreements, including the severance and change in control
payments, are important provisions designed to ensure the recruitment and retention of quality executive talent.
Information
regarding the severance payable to our NEOs pursuant to their employment agreements and treatment of outstanding equity awards can be found in "Executive Compensation
TablesPotential Payments Upon Termination of Employment or Change in Control."
Compensation Committee Analysis of Risk
The Compensation Committee engaged FPL to perform an annual assessment to determine whether the Company's compensation practices, plans and
policies encourage unnecessary risk taking or create risks that are reasonably likely to have a material adverse effect on the Company. These assessments reviewed the material elements of executive
and non-executive employee compensation. Based on these assessments, the Compensation Committee concluded these policies and practices do not encourage unnecessary risk taking or create risk that is
reasonably likely to have a material adverse effect on CyrusOne.
Developments in Early 2020
As previously disclosed, effective February 20, 2020, Mr. Wojtaszek stepped down as President & CEO and
Mr. Durvasula was elected as President & CEO on an interim basis. In connection with Mr. Wojtaszek's departure, to secure certain consulting services, and in order to facilitate
the transition of Mr. Wojtaszek's responsibilities, Mr. Wojtaszek and the Company entered into a Transition and Separation Agreement dated February 19, 2020. The agreement
provides that Mr. Wojtaszek will receive the severance payments and benefits he would have been entitled to upon a termination without cause under the terms of his employment agreement and
long-term incentive awards, except that his severance formula will be based on his full target bonus in lieu of a pro-rata target bonus and he will receive additional vesting of his outstanding
time-based restricted stock units and a pro-rata target bonus in respect of fiscal year 2020. Mr. Wojtaszek will also remain subject to all restrictive covenants with the Company pursuant to
their terms and conditions.
In
consideration of his election as President & CEO, the Company and Mr. Durvasula entered into an Omnibus Amendment Agreement, dated February 26, 2020, to reflect such election.
The agreement provides that Mr. Durvasula's employment will generally continue on the same terms as provided in his employment agreement, except his base salary and target bonus will be
$700,000 and 175% of his base salary, respectively, and in the event Mr. Durvasula's employment is terminated under conditions entitling him to severance, his cash severance will be no less
than the severance he would have received had he been terminated on December 31, 2019, his 2018 and 2019 LTI awards will vest in full (with
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performance
criteria deemed achieved at target) and he will receive a pro-rated target bonus. If Mr. Durvasula is elected as President & CEO on a permanent basis, Mr. Durvasula and the
Company have agreed to negotiate in good faith a new employment agreement in respect of such election as soon as practicable.
2020 Compensation Decisions
In
February 2020, the Compensation Committee approved the 2020 target compensation and LTI awards for our other NEOs. For 2020 LTI awards, the Compensation Committee approved a new framework that
incorporates a number of best practices and is responsive to feedback we have received from stockholders. In particular, (i) we have introduced a second TSR metric, which accounts for 25% of
the performance-conditioned payout, that compares our TSR to that of our Real Estate Technology Peer Group, (ii) the one- and two-year performance periods for accelerated vesting have been
eliminated so that the awards only vest at the end of the three-year performance period and (iii) achieving a target level performance payout on a metric now requires that we outperform our
comparators for that metric. In addition, we preserved a best practice with an absolute TSR modifier, whereby our payouts are reduced if our TSR is negative over the performance period, even if we
outperformed the index and peer
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benchmarks.
The following table highlights key design changes across the performance-based portion of the 2020 Long-Term Incentive Program:
The
performance-based portion of the 2020 LTI awards represented 60% of the LTI grant, with time-based restricted stock units, vesting annually over three years, representing 40%. The Compensation
Committee did not make any changes to the design of our annual incentive plan.
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