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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No.     )
 
 
Filed by the Registrant  
                                               Filed by a Party other than the Registrant  
Check the appropriate box:
 
Preliminary Proxy Statement
 
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
 
Definitive Proxy Statement
 
Definitive Additional Materials
 
Soliciting Material under
§240.14a-12
Air Lease Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
 
No fee required.
 
Fee paid previously with preliminary materials.
 
Fee computed on table in exhibit required by Item 25(b) per Exchange Act
Rules 14a-6(i)(1)
and
0-11.
 
 
 
 


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LOGO

Air Lease Corporation

2000 Avenue of the Stars, Suite 1000N

Los Angeles, California 90067

(310) 553-0555

March 17, 2023

Dear Fellow Stockholder:

Your officers and directors join me in inviting you to attend the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) at 7:30 a.m. Pacific Time, on Wednesday, May 3, 2023. The Annual Meeting will be held online in a virtual only meeting format via a live audio webcast at www.cesonlineservices.com/al23_vm. There will not be a physical location for the Annual Meeting. Stockholders may only participate online and must pre-register to attend.

If you plan to attend the virtual meeting, you will need to pre-register at www.cesonlineservices.com/al23_vm by 7:30 a.m. Pacific time on Tuesday, May 2, 2023. To pre-register for the Annual Meeting, please follow the instructions provided under “Other Matters – General Information – How do I pre-register to attend the Annual Meeting?” found in the accompanying Proxy Statement. Once registered, you will be able to attend the Annual Meeting, vote and submit your questions during the Annual Meeting via live online webcast by visiting www.cesonlineservices.com/al23_vm.

The expected items of business for the Annual Meeting are described in detail in the attached Notice of 2023 Annual Meeting of Stockholders and Proxy Statement.

We look forward to your participation on May 3rd. We encourage you to submit your vote as soon as possible, whether or not you expect to attend the Annual Meeting. Your vote is very important to us.

Sincerely,

 

 

LOGO

Steven F. Udvar-Házy

Executive Chairman of the Board


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LOGO

 

 

 

   Notice of 2023 Annual Meeting of Stockholders

 

 

Time and Date:    7:30 a.m., Pacific Time, on Wednesday, May 3, 2023
Location:    www.cesonlineservices.com/al23_vm
Agenda:    (1)    Elect nine directors, each to serve for a one-year term until the next annual meeting of stockholders, and until their respective successors are duly elected and qualified or until his or her resignation or removal;
   (2)    Ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2023;
   (3)    Advisory vote to approve named executive officer compensation;
   (4)    Approve the Air Lease Corporation 2023 Equity Incentive Plan; and
   (5)    Act upon such other matters as may properly come before the meeting or any postponement or adjournment.
Record Date:    You can vote at the meeting and at any postponement or adjournment of the meeting if you were a stockholder of record as of the close of business on March 6, 2023. A list of all stockholders entitled to vote at the meeting will be available for examination at our principal executive offices at 2000 Avenue of the Stars, Suite 1000N, Los Angeles, CA 90067, for 10 days before the meeting, and during the meeting, such list will be available to registered stockholders as a link on the meeting platform.
Voting:    Please vote as soon as possible, even if you plan to attend the meeting, to ensure that your shares will be represented. You do not need to attend the meeting to vote if you vote your shares before the meeting. If you are a record holder, you may vote your shares by mail, telephone or the Internet. If your shares are held by a broker, bank or other nominee, you must follow the instructions provided by your broker, bank or other nominee to vote your shares. To vote at the Annual Meeting, you must pre-register at www.cesonlineservices.com/al23_vm by 7:30 a.m. Pacific time on Tuesday, May 2, 2023. See additional instructions in section “Other Matters – General Information – How do I vote in the Annual Meeting webcast?” found in the accompanying Proxy Statement.
Annual Report:    Copies of our 2022 Annual Report to Stockholders (the “Annual Report”), including our 2022 Annual Report on Form 10-K, are being made available to stockholders concurrently with the accompanying Proxy Statement. We anticipate that these materials will first be made available to stockholders on or about March 23, 2023. You may also access our 2022 Annual Report on Form 10-K, which we have filed with the Securities and Exchange Commission (the “SEC”), on the investor section of our website at http://www.airleasecorp.com. The other information on our website does not constitute part of this Proxy Statement.

 

 

Important Notice Regarding the Availability of Proxy Materials for the 2023 Annual Meeting of Stockholders to be Held on May 3, 2023: Our Proxy Statement and Annual Report are available online at http://www.proxyvote.com.

By Order of the Board of Directors,

Carol H. Forsyte

Executive Vice President, General Counsel, Corporate

Secretary and Chief Compliance Officer

Los Angeles, California

March 17, 2023


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 Table of Contents

 

 

     Page  

PROXY STATEMENT SUMMARY

     i  

 

Proposals to be Voted On

     i  

2022 Financial and Business Highlights

     ii  

Environmental Highlights

     iv  

Social Highlights

     v  

Corporate Governance Highlights

     vi  

Director Nominees

     vii  

Board Matrix

     viii  

Executive Compensation Highlights

 

     ix  
OUR BOARD OF DIRECTORS      1  

 

Members and Meetings of the Board of Directors

     1  

Director Independence

     1  

Board of Directors’ Leadership

     2  

Corporate Governance Guidelines

     3  

Executive Sessions of Non-Employee Directors

     3  

Committees of the Board of Directors

     3  

The Board and Committee Annual Self-Evaluation

     6  

Consideration of Director Candidates

     7  

Communications with the Board of Directors

 

     8  

BOARD OF DIRECTORS’ ROLE IN THE OVERSIGHT OF THE COMPANY’S GOVERNANCE PRACTICES

     9  

 

The Board of Directors’ Role in Risk Oversight

     9  

The Board of Directors’ Role in Governance Oversight

     10  

The Board of Directors’ Role in Leadership Development and Succession Planning

     10  

The Board of Directors’ Role in Environmental Oversight

     11  

Certain Relationships and Related Person Transactions

 

     12  

BOARD COMPENSATION AND STOCK OWNERSHIP

     13  

 

Director Compensation

     13  

Director Compensation Summary

     15  

Director Stock Ownership Guidelines

 

     16  

ITEMS OF BUSINESS

     17  

 

Proposal 1: Election of Directors

     17  

Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm

     27  

Proposal 3: Approve the Air Lease Corporation 2023 Equity Incentive Plan

     28  

Proposal 4: Advisory Vote to Approve Named Executive Officer Compensation

 

     38  

LEADERSHIP DEVELOPMENT AND COMPENSATION COMMITTEE LETTER

 

 

     39  

EXECUTIVE COMPENSATION

     40  

Compensation Discussion and Analysis

     40  

Executive Compensation Program

     45  

Leadership Development and Compensation Committee Report

     65  

Executive Compensation Tables

     66  

Employment Agreements and Arrangements and Potential Payments upon Termination or Change in Control

     72  

Pay versus Performance

     86  

2022 CEO Pay Ratio

 

     91  


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FORWARD-LOOKING STATEMENTS

Statements in this proxy statement that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are based on our current intent, belief and expectations. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements. Words such as “can,” “could,” “may,” “predicts,” “potential,” “will,” “projects,” “continuing,” “ongoing,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and “should,” and variations of these words and similar expressions, are used in many cases to identify these forward-looking statements. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results, performance or achievements, or industry results to differ materially from those expressed in such statements. Our actual results, performance or achievements, or industry results could differ materially from those anticipated in such forward-looking statements as a result of the following factors, among others: our inability to obtain additional capital on favorable terms, or at all, to acquire aircraft, service our debt obligations and refinance maturing debt obligations; increases in our cost of borrowing or changes in interest rates; our inability to generate sufficient returns on our aircraft investments through strategic acquisition and profitable leasing; our failure to close our aircraft acquisition commitments; the failure of an aircraft or engine manufacturer to meet its delivery obligations to us, including or as a result of technical or other difficulties with aircraft before or after delivery; our ability to pursue insurance claims to recover losses related to aircraft detained in Russia; obsolescence of, or changes in overall demand for, our aircraft; changes in the value of, and lease rates for, our aircraft, including as a result of aircraft oversupply, manufacturer production levels, our lessees’ failure to maintain our aircraft, rising inflation, appreciation of the U.S. Dollar, and other factors outside of our control; impaired financial condition and liquidity of our lessees, including due to lessee defaults and reorganizations, bankruptcies or similar proceedings; increased competition from other aircraft lessors; the failure by our lessees to adequately insure our aircraft or fulfill their contractual indemnity obligations to us; increased tariffs and other restrictions on trade; changes in the regulatory environment, including changes in tax laws and environmental regulations; other events affecting our business or the business of our lessees and aircraft manufacturers or their suppliers that are beyond our or their control, such as the threat or realization of epidemic diseases, natural disasters, terrorist attacks, war or armed hostilities between countries or non-state actors; and any additional factors discussed under “Part I — Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2022 and other filings we make with the SEC, including future SEC filings.

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from our expectations. You are therefore cautioned not to place undue reliance on such statements. Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout the documents incorporated by reference in this proxy statement. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect actual results or events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.


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   Proxy Statement Summary

 

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement and our Annual Report on Form 10-K before voting. We anticipate that these materials will first be made available to stockholders on or about March 23, 2023.

References throughout this Proxy Statement to “Air Lease Corporation,” “we,” “us,” and “our” refer to Air Lease Corporation and its subsidiaries, unless the context indicates otherwise.

Proposals to be Voted On

 

 

 

Proposal   Description       

Board

Recommendation

 

 

More

Information

 

 

Proposal 1

 

 

Election of Nine Director Nominees

 

 

  FOR Each Nominee

 

 

pages 17 to 26

   

Matthew J. Hart

Yvette Hollingsworth Clark

Cheryl Gordon Krongard

Marshall O. Larsen

Susan McCaw

 

 

Robert A. Milton

John L. Plueger

Ian M. Saines

Steven F. Udvar-Házy

   

 

Proposal 2

 

 

Ratification of Appointment of Independent Registered Public Accounting Firm

 

 

 

  FOR

 

 

page 27

 

Proposal 3

 

 

Approve the Air Lease Corporation 2023 Equity Incentive Plan

 

 

 

  FOR

 

 

page 28

 

Proposal 4

 

 

Advisory Vote to Approve Named Executive Officer Compensation

 

 

 

  FOR

 

 

page 38

 

2023 Proxy Statement   |  Air Lease Corporation  |  i


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2022 Financial and Business Highlights

 

 

Air Lease Corporation had several key accomplishments in 2022. Our total assets reached $28 billion and our total revenues reached $2.3 billion, both the highest in our company’s history. The lease utilization rate for our owned fleet of 417 aircraft was 99.6% for 2022. Our orderbook of new, fuel-efficient commercial aircraft is 90% placed for aircraft delivering through the end of 2024, and we ended 2022 with $31.4 billion in committed minimum future rental payments. During the year, we issued $2.2 billion in aggregate principal amount of senior unsecured notes with a weighted average interest rate of 3.59% and we ended the year with $6.9 billion in liquidity.

 

 

LOGO

 

  *

Lease utilization rate is calculated based on the number of days each aircraft was subject to a lease or letter of intent during the period, weighted by the net book value of the aircraft.

 

Aircraft Activity. During the year ended December 31, 2022, we purchased and took delivery of 60 aircraft from our new order pipeline and sold six aircraft, ending the period with a total of 417 aircraft in our owned aircraft portfolio. The weighted average age of our fleet was 4.5 years, and the weighted average lease term remaining was 7.1 years as of December 31, 2022. The net book value of our fleet grew by 7.2%, to $24.5 billion as of December 31, 2022 compared to $22.9 billion as of December 31, 2021. Our managed fleet was comprised of 85 aircraft as of December 31, 2022 as compared to 92 aircraft as of December 31, 2021. We have a globally diversified customer base comprised of 117 airlines in 62 countries as of

 

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December 31, 2022. As of February 16, 2023, all aircraft in our fleet, except for one aircraft, were subject to lease agreements or letters of intent and our lease utilization rate for 2022 was 99.6%.

New Aircraft Pipeline. As of December 31, 2022, we had commitments to purchase 398 aircraft from Boeing and Airbus for delivery through 2029 with an estimated aggregate commitment of $25.5 billion. We have placed approximately 90% of our committed orderbook on long-term leases for aircraft delivering through the end of 2024 and have placed 60% of our entire orderbook. We ended 2022 with $31.4 billion in committed minimum future rental payments, consisting of $15.6 billion in contracted minimum rental payments on the aircraft in our existing fleet and $15.8 billion in minimum future rental payments related to aircraft which will deliver between 2023 through 2028.

Financing. In 2022, we issued $2.2 billion in aggregate principal amount of senior unsecured notes with maturities ranging from 2027 to 2032 with a weighted average interest rate of 3.59%. Additionally, we ended 2022 with an aggregate borrowing capacity under our revolving credit facility of $6.1 billion and total liquidity of $6.9 billion. We had total debt outstanding of $18.8 billion, of which 91.3% was at a fixed rate and 99.3% was unsecured. As of December 31, 2022, our composite cost of funds was 3.07%.

Financial Highlights. Our total revenues for the year ended December 31, 2022 increased by 11.0% to $2.3 billion as compared to 2021. The increase in total revenues was primarily driven by the continued growth in our fleet, and significantly lower COVID-19 related lease restructuring and cash basis losses. For the year ended December 31, 2022, we reported consolidated net loss attributable to common stockholders of $138.7 million, or net loss of $1.24 per diluted share, compared to a consolidated net income attributable to common stockholders of $408.2 million, or $3.57 per diluted share, for the year ended December 31, 2021. Despite the growth of our fleet, our net income attributable to common stockholders and diluted earnings per share decreased due to the impact of the write-off of our Russian fleet. During the year ended December 31, 2022, our adjusted net income before income taxes was $659.9 million compared to $589.7 million for the year ended December 31, 2021. Our adjusted diluted earnings per share before income taxes for the full year 2022 was $5.89 compared to $5.15 for the full year 2021. The increase for the year ended December 31, 2022 as compared to 2021 was primarily due to the continued growth of our fleet and the increase in revenues as discussed above. Our adjusted net income before income taxes and adjusted diluted earnings per share before income taxes exclude the effects of certain non-cash items, one-time or non-recurring items that are not expected to continue in the future and certain other items, such as the net impact of the write-off of our Russian fleet. Adjusted net income before income taxes and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by U.S. Generally Accepted Accounting Principles (“GAAP”). See Appendix A for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes as non-GAAP measures and a reconciliation of these measures to net income attributable to common stockholders.

Return of Capital. On November 2, 2022, our Board of Directors approved an increase in our quarterly cash dividend on our Class A Common Stock by approximately 8%, from $0.185 per share to $0.20 per share. This dividend, paid on January 10, 2023, marked our 40th consecutive dividend since we declared our first dividend in 2013, and our tenth consecutive annual dividend increase over that time. In addition, our Board of Directors approved a new share repurchase program, which authorized repurchase of up to $150.0 million of our Class A Common Stock through September 30, 2022. During the year ended December 31, 2022, we repurchased 3,420,874 shares of Class A Common Stock under our stock repurchase program at an average purchase price of $43.85 per share. Such repurchases completed the repurchase of the entire $150.0 million of outstanding shares authorized under our stock repurchase program. We completed the share repurchase program in April 2022.

 

2023 Proxy Statement   |  Air Lease Corporation  |  iii


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Productivity. As of December 31, 2022, we had 151 employees and $28.4 billion of total assets. Per employee, our revenue, net loss before income taxes and adjusted net income before income taxes for the year ended December 31, 2022 was approximately $15.3 million, $(0.9) million and $4.4 million, respectively.

For a comprehensive discussion of our financial results, please review our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 16, 2023 and is available at http://www.airleasecorp.com/investors.

Environmental Highlights

 

 

Since our inception in 2010, we have been dedicated to growing our business responsibly as we serve our airline customers. Our core strategy is to work with our airline customers to replace their older aircraft with the most modern, fuel-efficient aircraft available.

 

   

As of December 31, 2022, our owned fleet of 417 aircraft had a weighted average age of 4.5 years, making it approximately 7 years younger than the average of the world’s fleet of commercial passenger aircraft.

 

   

As of December 31, 2022 our orderbook was comprised of 398 of the most environmentally friendly commercial passenger aircraft available.

 

   

The new aircraft we have on order from the manufacturers are generally 20% to 25% more fuel-efficient than those they will replace, as shown in the chart below, and have a significantly smaller noise footprint.

 

 

LOGO

 

Source: Boeing & Airbus 2022. Aircraft comparisons: A220-300 compared to A319ceo. A320neo compared to A320ceo. A321neo compared to A321ceo. A330-900neo compared to B767-300ER. A350-900 compared to B777-200ER. A350-1000 compared to B777-300ER. 737-8 compared to 737NG (no winglet). 787 compared to 767-300ER. 737-8 is 20% lower and 737-9 is 21% lower. 787-9 and 787-10 are both 25% lower. A320neo is 20% lower, A321neo is 22% lower. A350-900 and A350-1000 are both 25% lower.

 

   

Our headquarters in Los Angeles are located in a LEED GOLD certified building.

 

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Social Highlights

 

 

We are committed to operating with the highest standard for social responsibility. As such, we strive to cultivate an environment where all our employees can succeed. We seek out partners that uphold these ethical standards and we aim to support the communities in which we do business and educational and charitable organizations within the aviation industry.

 

   

We provide a comprehensive benefits package benchmarked in the 90th percentile of coverage for similarly sized companies. Our benefits package includes various employee assistance programs that provide wellness benefits.

 

   

We offer competitive compensation to our employees worldwide. U.S. employees, and, to the extent permissible, those outside the U.S., are eligible to participate in our long-term stock-based incentive plan.

 

   

We are building a diverse organization that respects different backgrounds and experiences. More than 30% of our employees were multicultural and over 50% were female as of December 31, 2022.

 

   

We have codes and policies in place which outline expectations for our employees and the companies with which we do business, such as a Code of Business Conduct and Ethics, Supplier Code of Conduct, Anti-Corruption Policy, and Human Rights Policy.

 

   

We support and pay for training and education programs that provide continual improvement for our employees, including continuing education, leasing seminars, and conferences related to the employee’s role in the Company.

 

   

We require all employees to participate in our training programs, including anti-harassment, compliance and cybersecurity.

 

   

We require all employees to participate in training focused on promoting equity in the workplace.

 

   

We support various charitable causes with both financial and human resources to advance aviation, education and humanitarian assistance.

 

   

As of December 31, 2022, we had aircraft in our owned fleet leased to customers across 29 countries considered emerging markets and developing economies.

 

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Corporate Governance Highlights

 

 

We maintain governance practices that we believe establish meaningful accountability for our company and our Board, including:

 

   

All Directors except Executive Chairman and Chief Executive Officer are Independent

 

   

All Standing Board Committees Comprised Entirely of Independent Directors

 

   

Independent Lead Director with Clearly Defined Role and Responsibilities

 

   

Commitment to Board Refreshment with Two New Directors in Last Four Years

 

   

Commitment to Board Diversity with Three Female Directors, One of Whom is from an Underrepresented Community

 

   

Requirement to Actively Include Women and Individuals From Minority Groups in the Pool of Potential Director Candidates

 

   

Majority Vote Standard for Director Elections With Mandatory Director Resignation if Not Elected

 

   

All Directors Elected on an Annual Basis

 

   

Annual Board and Committee Evaluations

 

   

All Audit Committee Members are Financial Experts

 

   

Focus on Critical Risk Oversight Role

 

   

Ongoing Board Succession Planning—Management and Board Dialogue to Ensure Successful Oversight of Succession Planning

 

   

Active Board Oversight of the Company’s Governance

 

   

Robust Director and Executive Officer Stock Ownership Guidelines

 

   

Prohibition on Short Sales, Transactions in Derivatives and Hedging of Company Stock by Directors and all Employees

 

   

Prohibition on Pledging of Company Stock by Directors and Executive Officers

 

   

Clawback Policy for Executive Compensation

 

   

All Independent Directors are Invited to Attend Meetings of Committees they are not Members of and Regularly Attend those Meetings

 

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Director Nominees

 

 

 

  Name   Age   Director
Since
  Independent     Committee Memberships   Other Public
Boards
 
  Audit     Nominating
and
Corporate
Governance
  Leadership
Development
and
Compensation

Matthew J. Hart

Retired President & COO, Hilton Hotels Corporation

  70   2010                                 American
Airlines Group,
Inc.

 

American
Homes 4 Rent

       

 

Yvette Hollingsworth Clark

Executive Vice President and Global Chief Compliance Officer, State Street Corporation

 

  56   2021                                            

 

Cheryl Gordon Krongard

Retired Senior Partner, Apollo Management

 

  67   2013                                       

 

Marshall O. Larsen

Retired Chairman, President & CEO, Goodrich Corporation

 

  74   2014                              Becton,
Dickinson and
Company
       

 

Susan McCaw

President of SRM Capital Investments

 

  60   2019                                Lionsgate
Entertainment
Corp.
       

 

Robert A. Milton

Retired Chairman & CEO, ACE Aviation Holdings and Air Canada

 

  62   2010                                        

 

John L. Plueger

CEO & President, Air Lease Corporation

 

  68   2010                           Spirit
AeroSystems
Holdings
       

 

Ian M. Saines

Former Chief Executive, Funds Management Challenger Limited

 

  60   2010                                   Macquarie
Bank Limited
       

 

Steven F. Udvar-Házy

Executive Chairman, Air Lease Corporation

 

 

  77   2010                                    

Member     Chair

 

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Board Matrix

 

 

Our nine director nominees are highly experienced and possess the necessary skills and balance of perspectives to oversee our unique business. Set forth below is a summary of each director nominee’s qualifications, background and experience. More detailed information is provided in each director nominee’s biographical information beginning on page 18. In response to stakeholder feedback, we are also including enhanced disclosure regarding diversity demographics for each of our nine director nominees.

 

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO
                 
    Udvar-Házy   Plueger   Milton   Hart   Krongard   Hollingsworth
Clark
  Larsen   McCaw   Saines
 

Qualifications, Background and Experience

Executive Leadership Experience

                 

Airline Industry/Aviation Expertise

                       

Financial/Capital Allocation Expertise

                   

International Experience

                 

Risk Management and Oversight Experience

                 

Other Public Company Board Experience

                   
 

Demographics

Gender

                                   

Female

                             

Male

                 

Race/Ethnicity

                                   

African American or Black

                                 

White

                 

Board Tenure

                                   

Years

  13   13   13   13   9   2   9   3   13

 

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Executive Compensation Highlights

 

 

Compensation Philosophy

Our executive compensation program is designed to attract, retain and motivate the highest caliber executives in the aircraft leasing industry by offering a comprehensive compensation program that is attractive enough to entice and retain successful senior executives. We also believe it is important that our compensation program attracts the highly talented executive who is experienced and capable of managing our aircraft fleet with a small team to help drive our profitability.

At the end of 2022, we had total revenues of $2.3 billion and we had 151 employees, resulting in 2022 revenue per employee of approximately $15.3 million and total compensation expense representing 3.7% of revenues. We believe that the ratio of employees to total revenue and total compensation as a percentage of revenues compares favorably to other companies in capital-intensive businesses.

Pay-for-Performance Philosophy

Our executive compensation program is also designed to reward our executives for contributing to the achievement of our annual and long-term objectives. We set robust goals to align performance-based compensation with the creation of long-term value for our stockholders. In 2022, we made changes to our compensation program based on stockholder feedback. These changes included returning to our historical long-term incentive award structure which we had modified in 2021 due to the impact of the COVID-19 pandemic. As a result, the relative split between performance and time-based long-term incentive awards for 2022 consisted of 50% Book Value RSUs, 25% TSR RSUs and 25% time-based RSUs. In addition, we returned the measurement period for all of the financial and strategic objectives under our annual cash bonus plan to a full year and added a new strategic objective tied to ESG and leadership development related metrics.

Our 2022 long-term incentive performance award payouts (for awards granted in 2020) demonstrate the rigor of the long-term performance targets set by the leadership development and compensation committee:

 

2022 TSR RSU Vesting

(2020-2022 performance)

  

2022 Book Value RSU Vesting

(2020-2022 performance)

0% vesting    0% vesting

We believe that our directors’ and employees’ ownership of our stock is critical to alignment with our stockholders. Our employees and independent directors collectively owned approximately 7% of the Company’s outstanding Class A Common Stock as of March 6, 2023.

 

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Compensation Governance

Our leadership development and compensation committee regularly reviews our compensation governance practices to ensure we are incentivizing hard work and high performance while also managing risk. Highlights of our executive compensation program include:

 

What We Do:

 

 

Pay for Performance

 

Double-Trigger Change in Control Provisions

 

Manage the use of equity incentives conservatively with a net equity burn rate of less than 1% in 2022

 

Tally Sheets

 

Robust Stock Ownership Guidelines for Directors and Executive Officers

 

Mitigate Undue Risk

 

Independent Compensation Consultant

 

Annual Compensation Analysis Against Custom Benchmark Group

 

Clawback Policy

 

Annual “Say-on-Pay”

 

Robust Stockholder Engagement Program

What We Don’t Do:

 

  x

Directors or Employee Hedging

  x

Executive Officer or Director Pledging

  x

Tax Gross-Ups (except in connection with foreign assignments)

  x

Dividend or Dividend Equivalents on Unvested Equity Awards

  x

Re-Price Stock Options

  x

Pension Benefits (other than 401(k))

  x

Employment Agreements (except in connection with foreign assignments)

  x

Equity awards with less than 1-year vesting

  x

Stock Option Awards

  x

Equity plan evergreen provisions

  x

Guaranteed cash incentives, equity compensation or salary increases for NEOs (except upon death or disability)

  x

Excessive perquisites or other benefits

 

 

Extensive Stockholder Engagement and Demonstrated Responsiveness

To better understand our investors’ perspectives regarding our executive compensation program as well as a variety of corporate governance and environmental, social and governance (“ESG”) topics, we engage with our investors throughout the year via individual or group meetings, at industry and bank conferences, as well as through our investor relations team. This engagement helps us better understand evolving stockholder priorities and perspectives, gives us an opportunity to elaborate upon our initiatives with relevant experts, and fosters constructive dialogue. We take feedback and insights from our engagement with investors into consideration as we review and evolve our business and governance practices and disclosures, and further share them with our Board of Directors as appropriate.

 

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After issuing our proxy statement in March 2022, we engaged with holders of over 60% of outstanding shares of our Class A Common Stock (none of whom were our employees or directors). We continued our outreach during 2022 and early 2023, focusing conversations on investor feedback on our compensation practices and ESG disclosures. Based on this engagement, we took the following actions in 2022 and 2023:

 

 

Actions that Support Stronger Executive Pay with Company Performance Alignment

 

         

Returned to our Historical Long-Term Incentive Award Structure.    We structured our 2022 and 2023 long-term incentive awards to return to our historical long-term incentive award structure which we had modified in 2021 due to the impact of the COVID-19 pandemic. As a result, the relative split between performance and time-based awards for 2022 consisted of 50% Book Value RSUs, 25% TSR RSUs and 25% time-based RSUs. Time-based RSUs vest ratably each year over three years, while Book Value RSUs and TSR RSUs cliff vest at the end of three years.

 

All performance-based long-term incentive awards have three-year performance periods where performance is measured at the end of year three.

 

         

All Performance-Based Awards Forfeited for the 3-Year Performance Period Ending in 2022.    100% of the outstanding Book Value RSUs and TSR RSUs that were eligible to vest at the end of the 3-year performance period ending on December 31, 2022 were forfeited by our NEOs. Despite the headwinds created during the performance period by the COVID-19 pandemic and Russia’s invasion of Ukraine, our leadership and development committee determined not to make any adjustments to the original performance targets, and our 3-year performance resulted in a 0% payout for the outstanding performance-based awards eligible to vest at the end of 2022.

 

Our leadership development and compensation committee strongly believes in setting rigorous performance goals for our long-term incentive awards and limiting after-the-fact adjustments to the underlying performance goals.

 

         

Added First ESG Metrics to our Strategic Performance Metrics for our Annual Bonus Opportunity.    For our 2022 annual bonus program, our leadership development and compensation committee added new ESG and leadership development metrics to our strategic performance objectives. Our 2023 annual bonus program continues to include an ESG metric.

 

We believe including an ESG performance metric in our annual bonus plan structure will help drive accountability for progress on our sustainability strategy.

 

         

Added Disclosure of the Strategic Objective Performance Goals Included in our Annual Bonus Opportunity.    We are providing additional disclosure of the performance goals underlying the strategic objectives included in our annual bonus opportunity in response to stakeholder feedback.

 

We believe additional disclosure of the goals underlying each performance objective included in our annual bonus program will better help stockholders evaluate our pay for performance goals.

 

         

Increased the Weighting of the Financial Metrics in our Annual Bonus Opportunity.    For our 2023 annual bonus program, our leadership development and compensation committee increased the weighting of the financial metrics from 60% to 70%, while simultaneously reducing the weighting of the strategic objectives from 40% to 30%. We had reduced the relative weighting of the financial metrics included in our annual bonus program during the COVID-19 pandemic given the difficulty in forecasting our financial performance during that period.

 

Returning our annual bonus program to be more heavily weighted towards financial performance metrics will incentivize our executives to achieve profitable, long-term growth.

 

 

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Actions that Support Additional Information Requests about ESG Topics

 

 

         

Added Scope 1 and 2 Emissions to our ESG Report.    In response to stakeholder feedback, we included Scope 1 and 2 emissions in our annual ESG Report in 2022. We believe our ESG Report helps provide stakeholders with additional information regarding our business strategies, including our efforts to assist our airline customers as they work to achieve their sustainability goals and reduce their carbon footprint. As in prior years, our ESG Report also addressed our efforts and accomplishments in creating and supporting a diverse and inclusive workplace and diversifying our Board of Directors.

 

By annually publishing our ESG Report, we are better able to provide our stakeholders with information about our commitment to environmental, social and governance matters and more effectively engage on these topics in our outreach and interactions with stakeholders as we continue to evolve the program.

 

 

         

Enhanced Focus on Climate-Related Risks and Opportunities.    Our core strategy is helping our airline customers modernize their fleets through our fleet planning services and our portfolio of aircraft that are generally 20-25% more fuel-efficient and have a significantly smaller noise footprint than the aircraft they will replace. Our dedicated ESG committee regularly discusses how we can best address and move forward our priorities related to environmental sustainability, and we have included this topic as a reporting item at each of our regularly scheduled Board of Directors meetings.

 

By engaging more frequently with our Board of Directors about climate-related risks and opportunities, we benefit from their experiences and views on these critical issues.

 

        

 

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LOGO

Air Lease Corporation

2000 Avenue of the Stars, Suite 1000N

Los Angeles, California 90067

(310) 553-0555

 

 

   Proxy Statement for the 2023 Annual Meeting of

   Stockholders

 

 

 

   Our Board of Directors

 

 

Members and Meetings of the Board of Directors

 

 

The Board of Directors (the “Board of Directors”) of Air Lease Corporation (“we,” “our,” “us,” or the “Company”) is currently composed of nine members: Matthew J. Hart, Yvette Hollingsworth Clark, Cheryl Gordon Krongard, Marshall O. Larsen, Susan McCaw, Robert A. Milton, John L. Plueger, Ian M. Saines, and Steven F. Udvar-Házy. Our directors serve for one-year terms until the next annual meeting of stockholders, and until their respective successors are duly elected and qualified or until his or her resignation or removal. Certain information regarding our directors is set forth below in Proposal 1: Election of Directors.

Our Board of Directors held six meetings in 2022. Each of the director nominees standing for election at the Annual Meeting attended 100% of the meetings of the Board of Directors and the committees of the Board of Directors on which he or she served in 2022 other than one director who attended 92% of the meetings of the Board of Directors and the committees of the Board of Directors on which they served in 2022. We expect, but do not require, our directors to attend the annual meeting of stockholders each year. All director nominees attended the 2022 annual meeting.

Director Independence

 

 

Under the corporate governance rules of the New York Stock Exchange (the “NYSE”), a majority of the members of the Board of Directors must satisfy the NYSE criteria for “independence.” No director qualifies as independent unless the Board of Directors affirmatively determines that he or she has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. The Board of Directors has determined that seven of our nine current directors, Mr. Hart, Ms. Hollingsworth Clark, Ms. Krongard, Mr. Larsen, Ms. McCaw, Mr. Milton and Mr. Saines were independent in accordance with NYSE rules during the periods in 2022 and 2023 that such directors served on the Board of Directors. Messrs. Udvar-Házy and Plueger are not independent because they are employees of the Company.

 

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Board of Directors’ Leadership

 

 

The Board of Directors currently has no firm policy as to whether the roles of Chairman of the Board of Directors and Chief Executive Officer should be combined or separate. Instead, our Board of Directors believes that our leadership structure should be considered in the context of our Company’s circumstances at any given time, including company culture, strategic objectives and any challenges we may be facing. Therefore, our Board of Directors evaluates its leadership structure annually to ensure that the most optimal structure is in place for our Company’s needs, which may evolve over time.

Our Corporate Governance Guidelines provide that in the event that the Chairman of the Board of Directors is not an independent director, the nominating and corporate governance committee may designate an independent director to serve as “Lead Director,” who shall be approved by a majority of the independent directors. The Board of Directors believes having an independent Lead Director provides an appropriate balance between strong Company leadership and appropriate oversight by independent directors.

Mr. Udvar-Házy, our founder and former Chief Executive Officer, serves as the Executive Chairman of the Board of Directors, and in addition to his executive officer role, chairs the meetings of the Board of Directors and works closely with Robert A. Milton, our independent Lead Director. The role of the independent Lead Director helps ensure oversight by an active and involved independent Board of Directors, while Mr. Udvar-Házy’s continued engagement as Executive Chairman of the Board enables the Company and the Board of Directors to benefit from his deep knowledge, industry relationships, and operational experience. John L. Plueger, our Chief Executive Officer, also works closely with Mr. Milton in his role as independent Lead Director.

In this role, Mr. Milton has the following responsibilities as set forth in our Corporate Governance Guidelines and as requested by the Board of Directors:

 

   

chair meetings of the non-management or independent directors;

 

   

call meetings of the non-management or independent directors, if deemed appropriate;

 

   

provide input on the selection of any new director;

 

   

lead the annual Board of Directors and committee self-evaluations;

 

   

meet with any director who is not adequately performing his or her duties as a member of the Board or any committee;

 

   

facilitate communications between other members of the Board and the Executive Chairman and/or Chief Executive Officer;

 

   

work with the Executive Chairman in the preparation of the agenda for each meeting;

 

   

work with the Executive Chairman in determining the need for special meetings;

 

   

otherwise consult with the Executive Chairman and/or the Chief Executive Officer on matters of governance and Board performance;

 

   

report the results of the annual performance evaluation of the Executive Chairman and the Chief Executive Officer, to each individual; and

 

   

be available, as appropriate, for consultations and direct communication with stockholders.

Mr. Milton also serves on each committee of the Board. The Board of Directors believes that Mr. Milton’s extensive aviation industry experience, chief executive officer experience, as well as other board experience make him well suited to serve as its independent Lead Director.

The Board of Directors believes that the leadership structure with a strong independent Lead Director on the one hand, and knowledgeable and experienced Executive Chairman of the Board of Directors on the other, provides balance and is in the best interest of the Company.

 

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Corporate Governance Guidelines

 

 

Our Board of Directors has adopted Corporate Governance Guidelines (the “Guidelines”) to assist it in the exercise of its duties and responsibilities and to serve the best interests of the Company and our stockholders. The Guidelines describe (i) the Lead Director’s and the Board of Directors’ responsibilities, (ii) the qualification criteria for serving as a director, including diversity considerations and over-boarding limits, (iii) the requirement that a director must offer to resign if the Board has determined that an actual conflict of interest arises with respect to the director which is not waived by the Board or such director fails to receive a majority vote at an annual meeting, (iv) the requirement that directors are subject to the Company’s Code of Business Conduct described below in the section captioned “The Board of Directors’ Role in Governance Oversight” and (v) the standards for the conduct of meetings and establishing and maintaining committees. In addition the Guidelines (i) confirm that the directors will have full and free access to officers and employees of the Company and have authority to retain independent advisors as necessary and appropriate in carrying out their activities, (ii) establish frameworks for director compensation, director orientation and continuing education, and an annual evaluation of the Board and its committees and of the Guidelines, (iii) charge the leadership development and compensation committee with oversight of management evaluation and succession, and (iv) detail the Company’s policies regarding confidentiality and communications between our Board of Directors and the press and media on matters pertaining to the Company and clarify our practices regarding communications to our Board of Directors by stockholders and other interested parties.

Our Board of Directors periodically reviews the Guidelines and makes amendments from time to time. For example, in 2021, our Board of Directors amended the Guidelines to, among other items, adopt a (i) “Rooney Rule” requirement to actively include women and minority candidates in the pool of qualified director candidates from which directors are to be selected and (ii) mandatory resignation policy for directors who fail to receive a majority vote at an annual meeting of stockholders. Any such resignation is subject to review and acceptance by the full Board of Directors.

Our Guidelines are available on our website at www.airleasecorp.com.

Executive Sessions of Non-Employee Directors

 

 

As part of the Board of Directors’ regularly scheduled meetings, the non-employee directors meet in executive session. Any non-employee director can request additional executive sessions. Mr. Milton, as independent Lead Director, schedules and chairs the executive sessions.

Committees of the Board of Directors

 

 

Our Board of Directors has three standing committees: an audit committee, a leadership development and compensation committee and a nominating and corporate governance committee. Our Board of Directors has determined that each of these committees is composed solely of independent directors under the applicable NYSE rules. Our Board of Directors has adopted a charter for each committee that is available on our website at www.airleasecorp.com.

All of the independent members of the Board of Directors are invited to attend all committee meetings and it is the practice of the independent directors to attend the meetings of committees upon which they do not serve. The independent directors believe that their attendance at these meetings enhances their understanding of the business and permits them to more substantively contribute at the meetings of the full Board of Directors.

 

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Audit Committee

 

Members

 

    Mr. Hart (Chair)

 

    Ms. Hollingsworth Clark

 

    Mr. Milton

 

    Mr. Saines

 

All Independent/Financially Literate/Financial Experts(1)

 

 

 

2022 Meetings

 

•  Held four meetings

 

•  100% attendance

 

 

Responsibilities. The responsibilities of the audit committee include, but are not limited to, overseeing:

 

•  the integrity of the financial statements of the Company;

 

•  the independent registered public accounting firm’s qualifications and independence;

 

•  the performance of our internal audit function and independent registered public accounting firm;

 

•  our compliance with legal and regulatory requirements;

 

•  our accounting and system of internal controls;

 

•  our cybersecurity program; and

 

•  our overall policies and practices with respect to risk assessment and risk management.

 

 

(1)

Our Board of Directors has determined that each member of our audit committee is “financially literate” under applicable rules of the NYSE and is an “audit committee financial expert,” as defined under the rules and regulations of the Securities and Exchange Commission (“SEC”). In addition, each member of our audit committee also meets the enhanced independence requirements pursuant to Rule 10A-3(b)(i) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and NYSE rules for purposes of serving on an audit committee.

 

 

Nominating and Corporate Governance Committee

 

Members

 

Mr. Milton (Chair)

 

Mr. Hart

 

Ms. Krongard

 

Mr. Larsen

 

All Independent

 

 

 

2022 Meetings

 

•  Held four meetings

 

•  100% attendance

 

 

Responsibilities. Our nominating and corporate governance committee monitors the implementation of sound corporate governance principles, practices and risks and will, among other things:

 

•  identify individuals qualified to become a member of our Board and recommend to the Board of Directors candidates to be appointed to fill vacancies and newly created directorships consistent with criteria approved by the Board and as further described under the section captioned “Consideration of Director Candidates”;

 

•  periodically review and recommend changes, as appropriate, to our corporate governance documents;

 

•  review stockholder proposals submitted in accordance with our bylaws;

 

•  annually oversee the evaluation of the Board of Directors and its committees; and

 

•  review and approve all related person transactions in accordance with our Related Persons Transaction Policy.

 

 

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Leadership Development and Compensation Committee

 

Members

 

    Ms. Krongard (Chair)

 

    Ms. McCaw

 

    Mr. Larsen

 

    Mr. Milton

 

All Independent(1)

 

 

 

2022 Meetings

 

•  Held five meetings

 

•  100% attendance

 

 

Responsibilities. The responsibilities of the leadership development and compensation committee include, but are not limited to:

 

•  overseeing our overall compensation structure, policies and programs;

 

•  reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and Executive Chairman, reviewing the performance of each such individual in light of those goals and objectives and recommending to the independent directors of the Board the compensation level for each such individual based on this evaluation;

 

•  reviewing and approving corporate goals and objectives relevant to the compensation of our other named executive officers, reviewing the performance of each such individual in light of those goals and objectives and determining the compensation level for each such individual based on this evaluation and the recommendation of our Chief Executive Officer and/or Executive Chairman;

 

•  administering, and making recommendations to the Board of Directors with respect to our incentive-compensation and equity-based compensation plans that are subject to Board approval;

 

•  reviewing and evaluating the Company’s programs and practices related to leadership development and human capital management, including periodically reviewing diversity and inclusion programs and practices and succession plans relating to positions held by executive officers and making recommendations to the Board regarding the selection of individuals to fill these positions;

 

•  at least annually reviewing the compensation (both cash and equity-based compensation) of non-employee directors for service on the Board and its committees and recommending any changes to the Board for approval;

 

•  broadly overseeing matters relating to the attraction, motivation, development and retention of employees; and

 

•  reviewing the risk exposure related to the areas of its responsibility.

 

 

(1)

Our Board of Directors has determined that each member of the leadership development and compensation committee satisfies the additional independence requirements specific to compensation committee membership under NYSE rules and qualifies as a “non-employee director” under SEC rules for purposes of serving on a compensation committee. In making this determination, the Board of Directors considered whether the director has a relationship with the Company that is material to the director’s ability to be independent from management in connection with the duties of a member of the leadership development and compensation committee.

In fulfilling its responsibilities, the leadership development and compensation committee may delegate to management or to a subcommittee of the leadership development and compensation committee. The leadership development and compensation committee has delegated to the Company’s Executive

 

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Chairman and the Chief Executive Officer, each of whom is a member of the Board of Directors, the authority to make RSU grants in 2022 and 2023 to employees (other than executive vice presidents) on the same terms as grants made by the leadership development and compensation committee to executive officers, subject to a cap on both the aggregate number of RSUs approved for issuance by the leadership development and compensation committee and the dollar amount of any individual award.

The leadership development and compensation committee also oversees preparation of the compensation discussion and analysis to be included in our annual proxy statement, recommends to the Board of Directors whether to include the compensation discussion and analysis, and provides an accompanying report to be included in our annual proxy statement. The committee also considers the results of the most recent stockholder advisory vote on executive compensation and to the extent the committee determines it appropriate to do so, takes such results into consideration in connection with its review and approval of executive officer compensation.

In accordance with the leadership development and compensation committee’s charter, the leadership development and compensation committee may retain independent compensation advisors and other management consultants. In 2022, the leadership development and compensation committee retained Exequity LLP (“Exequity”), a nationally recognized independent compensation consultant, to provide advice with respect to compensation decisions for the non-employee directors of our Board of Directors and our executive officers.

Compensation Committee Interlocks and Insider Participation

Each of Ms. Krongard, Ms. McCaw, Mr. Larsen and Mr. Milton served on the leadership development and compensation committee for all of 2022. None of the members of our leadership development and compensation committee has at any time been one of our officers or employees. None of our executive officers serves, or in the past year has served, as a member of the board of directors or the leadership development and compensation committee of any entity that has one or more executive officers who serve on our Board of Directors or leadership development and compensation committee.

The Board and Committee Annual Self-Evaluation

 

 

To ensure that the Board of Directors and each Board committee functions effectively, the nominating and corporate governance committee annually conducts a self-evaluation to identify and assess areas for improvement. The written assessment focuses on the Board composition and its role, the operation of the Board, the Board’s processes relating to the Company’s strategy, financial position and corporate governance and the function and effectiveness of the Board committees. The independent Lead Director leads the evaluation process which includes collecting the assessment feedback and conducting a one-on-one conversation with each director.

In connection with the one-on-one conversation with each director, the Lead Director asked the directors to discuss with him several additional questions on critical topics impacting the Company in 2022, including the Board’s oversight of succession planning and diversity, equity and inclusion efforts, climate change and environmental sustainability priorities and commitments, as well as the Company’s risk management strategy in light of ongoing geopolitical instability in certain regions.

The Lead Director discusses the results of the evaluations and feedback received with the non-employee directors in executive session at its February meeting each year, then shares the results with the employee directors and, as necessary, the Board implements resulting recommendations.

 

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Consideration of Director Candidates

 

 

Qualifications of Director Candidates

Our nominating and corporate governance committee is responsible for identifying and evaluating director candidates based on the perceived needs of the Board of Directors at the time. Our Board of Directors has established criteria for identifying and evaluating individuals qualified to become members of the Board of Directors, which it uses as a guideline in considering director nominations. The criteria, which are included in our Guidelines, include but are not limited to:

 

   

The nominee’s reputation for integrity, honesty and adherence to high ethical standards.

 

   

The nominee’s judgment and independence of thought, financial literacy, leadership experience and a fit of abilities and personality that helps build an effective, collegial, and responsive Board of Directors.

 

   

The nominee’s demonstrated business acumen, experience and ability to exercise sound judgments in matters that relate to the current and long-term objectives of the Company and willingness and ability to contribute positively to the decision-making process of the Company.

 

   

The nominee’s commitment to understand the Company and its industry, including its competitors.

 

   

The absence of conflicting time commitments and the nominee’s commitment to regularly attend and participate in meetings of the Board and its committees.

 

   

The nominee’s background, knowledge, education, experience, skills, age, and gender, ethnic and geographic diversity. The nominating and corporate governance committee will actively include, and will instruct any search firms utilized to include, women and racial and/or ethnic minority candidates in the pool of potential director candidates from which new directors are selected.

 

   

The nominee’s interest and ability to understand the sometimes conflicting interests of the various constituencies of the Company, which include stockholders, employees, customers, creditors and the general public, and to faithfully represent the interests of all stockholders.

 

   

The impact of the nominee’s appointment on overall Board of Directors balance, breath of experience, collective knowledge, perspective and ability.

The criteria established by the Board of Directors are not exhaustive and the nominating and corporate governance committee and the Board of Directors may consider other qualifications and attributes that they believe are appropriate in evaluating the ability of an individual to serve as a director. The nominating and corporate governance committee reviews and assesses the nomination criteria annually.

The nominating and corporate governance committee does not have a formal policy specifying how diversity of background and personal experience should be applied in identifying or evaluating director candidates, and a candidate’s background and personal experience, while important, does not necessarily outweigh other attributes or factors the nominating and corporate governance committee considers in evaluating candidates. However, the Board of Directors is committed to identifying candidates with gender, racial and/or ethnic diversity and our Guidelines contain a “Rooney Rule” requirement to actively include women and minority candidates in the pool of qualified director candidates from which directors are to be selected. We currently have three female directors, one of whom is from an underrepresented community.

Our nominating and corporate governance committee has not retained professional search firms to assist it in recruiting potential director candidates.

 

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Stockholder-Recommended Director Candidates

Any stockholder may recommend a director candidate for our nominating and corporate governance committee to consider by submitting the candidate’s name and qualifications to us in care of the Corporate Secretary (the “Secretary”) at the address for our principal executive office listed on the cover page of this Proxy Statement. Candidates recommended by a stockholder are evaluated in the same manner and using the same criteria as used for any other director candidate.

Stockholders of record seeking to nominate a candidate for election as a director at our annual meeting of stockholders (as opposed to making a recommendation to the nominating and corporate governance committee as described above) or to bring other business before our annual meeting of stockholders, may do so by providing timely notice of their intent in writing by the deadlines specified in our Fourth Amended and Restated Bylaws (the “Bylaws”). For more information, see the section below titled Stockholder Proposals and Director Nominations for our 2024 Annual Meeting of Stockholders.

Communications with the Board of Directors

 

 

Stockholders and any other interested parties who wish to communicate with the Board of Directors or an individual director, including our independent Lead Director or our independent directors as a group, or any Board committee or any chairperson of any Board committee, by either name or title, may send written communications care of the Secretary at the address for our principal executive office listed on the cover page of this Proxy Statement. All such communications will be opened by the Secretary or his or her designee for the sole purpose of determining whether the contents represent a message to the Company’s directors. The Secretary will forward copies of all correspondence that, in the opinion of the Secretary, deals with the functions of the Board or its committees or that he or she otherwise determines requires the attention of any member, group or committee of the Board. The Secretary will not forward junk mail, job inquiries, business solicitations, offensive or otherwise inappropriate materials.

 

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   Board of Directors’ Role in the Oversight of the Company’s
   Governance Practices

 

The Board of Directors’ Role in Risk Oversight

 

 

The Board of Directors has delegated to the audit committee primary responsibility for risk oversight. In accordance with its charter, the audit committee is responsible for monitoring the Company’s policies and practices with respect to risk assessment and risk management. This includes oversight of management’s implementation of the Company’s annual enterprise risk management assessment (the “ERM program”), which is an ongoing, enterprise-wide program designed to enable effective and efficient identification of, and management visibility into, critical enterprise risks over the short-, intermediate-, and long-term, and to facilitate the incorporation of risk considerations into decision making across the Company. In particular, the annual enterprise risk management assessment clearly defines risk management roles and responsibilities, brings together senior management and the Company’s external auditor to discuss risk, promotes visibility and constructive dialogue around risks relevant to the Company’s strategy and operations, and facilitates appropriate risk response strategies at the Board, committee, and management levels. Under the ERM program, management develops a holistic portfolio of the Company’s enterprise risks by performing targeted risk vulnerability assessments and incorporating information regarding specific categories of risk gathered from the Company’s technical, procurement, treasury, human resources, IT and legal teams, who provide input into this process and are responsible for the day-to-day monitoring, evaluating, reporting, and mitigating of their respective risk categories. The ERM program works in tandem with the Company’s accounting and financial reporting teams to align the risk identification and assessment with the Company’s existing disclosure controls and procedures. The audit committee also periodically meets with representatives of the Company’s independent registered public accounting firm. As needed, the Chair of audit committee escalates issues relating to risk oversight to the full Board of Directors, in a continuous effort to keep the Board of Directors adequately informed of developments that could affect the Company’s risk profile or other aspects of its business. The Board of Directors also considers specific risk topics in connection with strategic planning and other matters.

The audit committee’s risk management oversight also includes oversight of the Company’s compliance program. The Company’s compliance program is led by the Company’s General Counsel, Secretary and Chief Compliance Officer, who reports directly to the Company’s Chief Executive Officer. The Company’s General Counsel, Secretary and Chief Compliance Officer meets at least quarterly with the audit committee and Board of Directors to report on key ethics and compliance risks facing the Company and provides an annual compliance program update to the audit committee. Additional risk management oversight by the audit committee includes oversight of the Company’s cybersecurity program. Throughout the year at each quarterly meeting, the audit committee receives updates on the cybersecurity program, including in connection with program enhancements, audits of the program, and employee cybersecurity training.

The leadership development and compensation committee provides oversight with respect to risks that may arise from our compensation arrangements and policies. This is accomplished on an ongoing basis through the committee’s review and approval of specific arrangements and policies to ensure that they are consistent with our overall compensation philosophy and our business goals. The leadership development and compensation committee periodically discusses any compensation risk-related concerns with senior management and with its independent compensation consultant. The Chair of the committee will report to the full Board of Directors regarding any material risks as deemed appropriate. In view of this oversight and based on our ongoing assessment, we do not believe that our present employee compensation arrangements, plans, programs or policies are likely to have a material adverse effect on the Company.

 

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The leadership development and compensation committee also provides oversight with respect to risks related to the Company’s leadership development and human capital management. This is accomplished through regular involvement by the committee with senior management in matters relating to the attraction, motivation, development and retention of employees.

The Board of Directors provides oversight of the risks related to ESG practices that are not addressed by the audit and leadership development and compensation committees, including environmental risks as discussed below. The Board of Directors has retained direct oversight of environmental risks given that one of the Company’s core business strategies includes focusing on the replacement market to assist airlines looking to replace aging aircraft with new, modern technology, fuel efficient jet aircraft.

The Board of Directors believes that its governance structure supports the Board’s role in risk oversight. With the exception of environmental risk oversight conducted by the full Board of Directors, independent directors chair each of the Board committees responsible for risk oversight and the Company’s independent Lead Director facilitates communication between management and directors.

The Board of Directors’ Role in Governance Oversight

 

 

The Board of Directors’ role in governance oversight is embedded in a broad range of its activities. Throughout this Proxy Statement, we highlight our governance practices, including the evolution of many of these practices. The Board of Directors regularly reviews developing governance practices and actively considers enhancements to our governance practices. Each year the Board of Directors has a separate meeting to discuss the business and competitive environment and evaluate the Company’s strategic goals and direction. Thereafter, the Board of Directors has ongoing discussions of these topics at its regular meetings.

The Board of Directors also exercises increased oversight as appropriate. For example, over the last several years, the Board of Directors has increased its oversight of ESG matters, leadership and human capital matters, geopolitical risks and cybersecurity.

Code of Business Conduct and Ethics

Our Board of Directors has adopted a Code of Business Conduct and Ethics that applies to all of our directors and employees, including our officers. Among other things, the Code of Business Conduct and Ethics is intended to ensure fair and accurate financial reporting, to promote ethical conduct and compliance with applicable laws and regulations given our worldwide operations, to provide guidance with respect to the handling of ethical issues, to foster a culture of honesty and accountability and to deter wrongdoing. It also requires disclosure to us of any situation, transaction or relationship that may give rise to any actual or potential conflict of interest. Such conflicts must be avoided unless approved by our nominating and corporate governance committee. The Code of Business Conduct and Ethics prohibits our employees, officers and directors from taking, or directing a third party to take, a business opportunity that is discovered through the use of company resources. We encourage all employees to report concerns or wrongdoing. A copy of our Code of Business Conduct and Ethics is available on our website at www.airleasecorp.com.

The Board of Directors’ Role in Leadership Development and Succession Planning

 

 

The Company’s leadership is comprised of a small number of talented individuals, with extensive industry experience, capable of managing a capital-intensive business responsibly to drive our profitability and

 

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growth. At the end of 2022, we had total assets of $28.4 billion and we had 151 full-time employees. Our Board of Directors recognizes that the Company’s human capital management is critical to our success and is actively engaged on overseeing it.

The Board of Directors and the leadership development and compensation committee regularly engage with senior management, including human resources, on a broad range of human capital management matters. Engagement is focused on our culture, succession planning, compensation (including pay equity), benefits, talent development, talent recruiting and retention, and diversity and inclusion. During 2022, one aspect of the Board of Director’s oversight included direct senior management engagement with the Board of Directors on a number of occasions to provide updates and discussion on their respective areas of focus.

The leadership development and compensation committee is actively involved in reviewing and evaluating the Company’s programs and practices related to leadership development and human capital management, including reviewing succession plans relating to positions held by executive officers and making recommendations to the Board regarding the selection of individuals to fill these positions. In the most recent review of our succession planning in November 2022, all the independent directors participated.

Annually, our Chief Executive Officer and Executive Chairman report to the leadership development and compensation committee on succession planning for other senior executive positions. Our Board of Directors also maintains an emergency Chief Executive Officer succession plan which will become effective in the event our Chief Executive Officer becomes unable to perform his duties in order to minimize potential disruption to our business and operations.

The Board of Directors’ Role in Environmental Risk Oversight

 

 

Since our inception, our strategy has been to invest in the most modern, fuel-efficient, new technology commercial aircraft. We believe focusing on these priorities aligns us with our airline customers’ need to replace ageing aircraft in their fleets with aircraft that offer reduced fuel consumption, emissions and noise. John Plueger, our CEO, leads our environmental sustainability efforts and reports regularly to the Board of Directors on these matters. Working collaboratively with key functions within the Company and our ESG Committee, our CEO and other senior-level executives assess and manage our climate-related risks. They regularly engage with our customers on environmental sustainability topics and concerns as well as with our suppliers, including Airbus and Boeing and the major aircraft engine manufacturers, to develop the next generation aircraft that reduce fuel consumption, emissions and noise, which we believe are vital to helping our industry achieve its sustainability goals over time. They also participate in industry events to highlight the importance of the aviation industry’s sustainability efforts and need for industry-wide improvement.

Environmental sustainability continues to be a focus of the investor community and our stakeholders. During 2022, we continued to discuss ESG matters with our stakeholders, including environmental sustainability and, based on feedback we received in prior years, included Scope 1 and Scope 2 emissions in our annual ESG Report for the first time.

In addition to engagement with our stakeholders, our Board of Directors actively oversees our climate-related risks and opportunities, which are now included as an agenda item at every quarterly Board of Directors meeting, with a more focused environmental risk review at our annual Board of Directors strategy session. In addition, for 2022 and continuing in 2023, our Board of Directors has included an ESG metric in our annual bonus plan.

 

 

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Our ESG Committee is comprised of our CEO, who leads it, our chief financial officer, general counsel, a senior member of our marketing department, a senior member of our finance department, and the heads of human resources and investor relations. The ESG Committee meets at least quarterly to guide our ESG programs and related disclosures.

Certain Relationships and Related Person Transactions

 

 

Our Board of Directors has adopted a written Related Person Transaction Policy that is intended to comply with Item 404 of Regulation S-K. The purpose of the policy is to describe the procedures used to identify, review, approve and disclose, if necessary, any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which (i) the Company (including any of its subsidiaries) was, is or will be a participant; (ii) the amount involved exceeds $120,000; and (iii) a related party had, has or will have a direct or indirect material interest (a “Related Person Transaction”). For purposes of the policy, a related party is any of our directors, director nominees, executive officers, beneficial owners of more than 5% of our Class A Common Stock, or any of their respective immediate family members.

Under our Related Person Transaction Policy, the nominating and corporate governance committee is responsible for reviewing and approving each Related Person Transaction. In determining whether to approve a Related Person Transaction, the nominating and corporate governance committee will consider the relevant facts and circumstances of the Related Person Transaction available to the nominating and corporate governance committee and to take into account, among other factors it deems appropriate, whether the Related Person Transaction is on terms comparable to those available to an unaffiliated third party or to employees generally under the same or similar circumstances and the extent of the related party’s interest in the transaction. If a Related Person Transaction falls within one of certain specified pre-approved transaction categories set forth in the policy, it does not require review by the nominating and corporate governance committee and shall be deemed to be pre-approved even if the amount involved exceeds $120,000.

No member of the nominating and corporate governance committee who is a related party is permitted to vote on the approval or ratification of their own Related Person Transaction, but may, if requested by other members of the nominating and corporate governance committee, participate in some or all of the nominating and corporate governance committee’s discussions of the Related Person Transaction. Out of an abundance of caution, the nominating and corporate governance committee will sometimes review and approve or ratify transactions with a related person or an entity affiliated with a related person, even if the related person does not have a direct or indirect material interest in the transaction. We did not have any Related Person Transactions (other than pre-approved transactions) during 2022.

 

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   Board Compensation and Stock Ownership

 

 

Director Compensation

 

 

Our Board of Directors sets non-employee director compensation based on recommendations from the leadership development and compensation committee. The committee periodically reviews the cash and equity-based award compensation of non-employee directors serving on the Board and its committees. The leadership development and compensation committee’s independent compensation consultant, Exequity, assists in this review, including obtaining market information, annually benchmarking our director compensation and designing various aspects of our compensation program for directors. After its review, the committee recommends any changes to the Board of Directors for approval. Directors who are also employees of the Company (currently Messrs. Udvar-Házy and Plueger) do not receive any additional compensation for their service as a director.

Annual Retainer Fees and Other Cash Fees

Retainers under our non-employee director compensation program for 2022 consisted of:

 

  Retainer Type    Annual Cash Compensation

Annual Board Retainer

   $  80,000    

Committee Member Retainer

  

•  Audit

   $  15,000    

•  Leadership Development and Compensation

   $  10,000    

•  Nominating and Corporate Governance

   $  10,000    

Additional Retainer for Committee Chair

  

•  Audit

   $  20,000    

•  Leadership Development and Compensation

   $  10,000    

•  Nominating and Corporate Governance

   $  10,000    

Additional Retainer for Lead Independent Director

   $  50,000    

There has been no change in our retainer fees since 2012. All cash retainers are paid quarterly and prorated based on the number of days that a director serves in the applicable capacity.

A non-employee director will receive a meeting fee of $1,500 per meeting (i) if he or she attends a number of Board meetings in excess of the number of scheduled meetings plus two additional Board meetings during the applicable calendar year or (ii) if he or she attends during the applicable year a number of meetings of a committee on which he or she serves, in excess of the number of scheduled meetings plus two additional meetings of that committee for that year. No fees for attending additional meetings were paid in 2022.

Non-employee directors may be paid a per diem fee of $2,500 for non-ordinary course Board or committee activity (excluding any educational events) subject to the approval of the Board, the Chairman of the Board or the Lead Independent Director of the Board. No per diem fees were paid in 2022.

As a matter of policy, each director could elect to have his or her retainer paid in cash or shares of our Class A Common Stock, or a combination thereof.

 

 

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Equity Awards

Each non-employee director who joins our Board of Directors receives an initial grant of RSUs to be settled in shares of our Class A Common Stock (“Initial Director Grant”) with an aggregate value of $180,000. Thereafter, each year our non-employee directors receive an annual RSU award to be settled in shares of Class A Common Stock (the “Annual Director Grant”) with an aggregate value of $130,000. There has been no change in the dollar value of the equity awards since May 2019, when we increased the aggregate value of the Annual Director Grant from $120,000 to $130,000.

The value of all grants of RSUs is based on the closing price of our Class A Common Stock on the date of grant. All RSUs awarded to our non-employee directors vest in full on the first anniversary of the grant date, and if the director’s service terminates for any reason, other than following a change in control, the RSUs will vest on a daily prorated basis according to the number of days between the grant date and the termination of service, divided by 365. If the director’s service terminates following a change in control, the RSUs will vest in full. The Initial Director Grants and the Annual Director Grants are made pursuant to the Air Lease Corporation 2014 Equity Incentive Plan or any successor plan.

Each director may annually elect to defer the receipt of his or her Annual Director Grant shares beyond the one-year vesting period. Directors may elect to defer his or her shares until separation from service or alternatively, may elect a deferral period of five years or ten years from the date of grant, provided, that shares will be distributed upon a separation from service, a change of control or at death, if earlier than the elected deferral date. After the applicable vesting date, deferred RSUs receive dividend equivalents which are reinvested in additional RSUs based on the market price of the Company’s Class A Common Stock on the date the dividends are paid.

On May 4, 2022, each non-employee director received an Annual Director Grant.

Expense Reimbursement/Other Arrangements

We reimburse directors for travel and lodging expenses incurred in connection with their attendance at meetings and other expenses incurred in connection with their service to the Company. We also have entered into agreements with each of our non-employee directors to provide them with indemnification and advancement of expenses to supplement that provided under our certificate of incorporation and Bylaws, subject to certain requirements and limitations.

 

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Director Compensation Summary

 

 

The following table sets forth compensation paid to or earned by the individuals who served as non-employee directors of the Company during 2022.

 

Name

    

Fees earned or
paid in cash
($)(1)


 
    
Stock Awards
($)(2)

 
    
Total
($)

 

Mr. Hart

     125,000        130,000        255,000 

Ms. Hollingsworth Clark

     95,000        130,000        225,000 

Ms. Krongard

     110,000        130,000        240,000 

Mr. Larsen

     100,000        130,000        230,000 

Ms. McCaw

     90,000        130,000        220,000 

Mr. Milton

     175,000        130,000        305,000 

Mr. Saines

       95,000          130,000          225,000 

 

(1)

Fees Earned or Paid in Cash: The amount shown for each non-employee director is composed of his or her annual retainer fees, committee member fees and any additional committee chair fees.

 

(2)

Stock Awards: On May 4, 2022, each non-employee director was granted an Annual Director Grant of 3,159 RSUs which vest in full on May 4, 2023. The dollar amounts shown for the Annual Director Grants to Mses. Krongard, McCaw and Hollingsworth Clark, and Messrs. Hart, Larsen, Milton and Saines reflect $41.15 per share, which is the grant date fair value of one share of Class A Common Stock computed in accordance with FASB ASC Topic 718. Each RSU represents a contingent right to receive one share of our Class A Common Stock. Except as described above, none of the non-employee directors held any unvested RSUs as of December 31, 2022. As of December 31, 2022, our non-employee directors held the following vested RSUs:

 

   Name    Number of RSUs   

Mr. Hart

     —   

Ms. Hollingsworth Clark

     —   

Ms. Krongard (a)

     18,219 

Mr. Larsen (a)

     25,891 

Ms. McCaw (a)

     8,425 

Mr. Milton

     —   

Mr. Saines (a)

     25,891 

 

  (a)

Amount includes accrued dividend equivalents in connection with the deferral of certain Annual Director Grants of RSUs. Fractional shares have been rounded to the nearest whole share.

 

 

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Director Stock Ownership Guidelines

 

 

Our Board of Directors has adopted robust stock ownership guidelines for all non-employee directors which requires all non-employee directors to maintain ownership of Class A Common Stock equivalents with an aggregate market value equal to five times the amount of the then current annual cash retainer fee for service on our Board of Directors. Each non-employee director has five years from the time he or she becomes subject to these guidelines to achieve the required ownership threshold. For a non-employee director, Class A Common Stock equivalents are shares of Class A Common Stock personally owned by the director, shares of Class A Common Stock underlying vested RSUs awarded to a director and shares of Class A Common Stock underlying unvested RSUs awarded to a director that are subject to time vesting only. As of March 6, 2023, all of our non-employee directors have met the ownership requirement. The table below sets forth the ownership of Class A Common Stock equivalents held by our independent directors as of such date:

 

Target Ownership

    Actual Ownership  

Current Outside
Director
Annual Cash
Retainer Fee

   

Multiple of Annual

Retainer

 

 

   

Multiple
Expressed in
Dollars


 
  Non-employee Director   Multiple of Annual
Retainer(1)
   
Value of Shares
held by Director(1)

 

$ 80,000

    5x       $ 400,000     Mr. Hart   27x     $  2,182,768  
      Ms. Hollingsworth Clark   7x     $     584,356  
      Ms. Krongard   26x     $  2,080,257  
      Mr. Larsen   22x     $  1,783,653  
      Ms. McCaw   11x     $     900,065  
      Mr. Milton   22x     $  1,759,634  
                    Mr. Saines   23x     $  1,879,471  
(1)

Based on the closing price of the Company’s Class A Common Stock on March 6, 2023. Includes Class A Common Stock equivalents held by the applicable director as of March 6, 2023 as calculated under our stock ownership guidelines.

 

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   Items of Business

 

Proposal 1: Election of Directors

 

 

At the Annual Meeting, the Board of Directors is recommending to stockholders that Mr. Matthew J. Hart, Ms. Yvette Hollingsworth Clark, Ms. Cheryl Gordon Krongard, Mr. Marshall O. Larsen, Ms. Susan McCaw, Mr. Robert A. Milton, Mr. John L. Plueger, Mr. Ian M. Saines and Mr. Steven F. Udvar-Házy each be elected as a director to serve for a one-year term ending at the 2024 annual meeting of stockholders and until their respective successors are duly elected and qualified or until his or her earlier resignation or removal.

Each of the director nominees named below is currently a director and was elected at the annual meeting of stockholders held on May 4, 2022.

No arrangement or undertaking exists between any nominee and any other person or persons pursuant to which any nominee was or is to be selected as a director or nominee, and there are no family relationships among any of our directors or executive officers. Each nominee has consented to be nominated and has agreed to serve as a director if elected. Should any of these nominees become unable or unwilling to serve as a director prior to the Annual Meeting, the proxies for the Annual Meeting will, unless otherwise directed, vote for the election of such other individual as the Board of Directors may recommend, unless the Board of Directors in its discretion reduces the number of directors constituting our Board. As of the date of this Proxy Statement, the Board of Directors has no reason to believe that any of the director nominees will be unable or unwilling to stand as a nominee or to serve as a director if elected.

Vote Required:

Under our Bylaws, a director nominee will be elected to the Board of Directors by a majority of the votes cast, meaning the number of votes cast “FOR” such nominee’s election must exceed the number of votes cast “AGAINST” such nominee’s election at the Annual Meeting. Abstentions and broker non-votes will have no effect on the outcome of the director election because they are not treated as votes cast.

Under Delaware law, if an incumbent director is not re-elected at a meeting of stockholders at which he or she stands for re-election, then the incumbent director continues to serve in office as a holdover director until his or her successor is elected. To address this “holdover” issue, our Guidelines provide that if an incumbent director is not re-elected due to his or her failure to receive a majority of the votes cast in an uncontested election, the director will promptly tender his or her resignation as a director, subject to acceptance by the Board of Directors. The nominating and corporate governance committee will then make a recommendation to our Board of Directors as to whether to accept or reject the tendered resignation, or whether other action should be taken. Our Board of Directors will act on the nominating and corporate governance committee’s recommendation and publicly disclose its decision, along with its rationale, within 90 days after the date of the certification of the election results.

Recommendation:

 

The Board of Directors recommends that you vote FOR the election of each director nominee set forth below.

 

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A summary of each nominee’s principal occupation, recent professional experience, directorships at other public companies for at least the past five years, and certain other qualifications, is provided below:

 

 

 

LOGO   

 

 

  

 

Matthew J. Hart

 

Retired President and Chief Operating Officer of Hilton Hotels Corporation

 

Age: 70

 

Director since May 2010

Board Committees:

 

   

Audit (Chair)

 

   

Nominating and Corporate Governance

Other Current Public Company Directorships:

 

   

Director, American Airlines Group Inc.

 

   

Trustee, American Homes 4 Rent

Mr. Hart served as President and Chief Operating Officer of Hilton Hotels Corporation, a global hospitality company, from May 2004 until the buyout of Hilton by a private equity firm in October 2007. Mr. Hart also served as Executive Vice President and Chief Financial Officer of Hilton from 1996 to 2004. Prior to joining Hilton, Mr. Hart served as the Senior Vice President and Treasurer of The Walt Disney Company and Executive Vice President and Chief Financial Officer for Host Marriott Corp.

Qualifications:

Mr. Hart possesses significant executive experience in the hotel industry and currently serves on the board of directors of a major U.S. airline. Mr. Hart provides our Board of Directors with an important combination of management, airline industry and financial expertise. His past experience as the chief financial officer of two Fortune 500 companies, and his current service on various committees of two other public companies, make him instrumental in helping our Board of Directors implement business and financial strategy.

 

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LOGO   

 

 

  

 

Yvette Hollingsworth Clark

 

Executive Vice President and Global Chief Compliance Officer, State Street Corporation

 

Age: 56

 

Director since May 2021

Board Committees:

 

   

Audit

Other Current Public Company Directorships:

 

   

None

Ms. Hollingsworth Clark is currently Executive Vice President and Global Chief Compliance Officer, State Street Corporation, a position she has held since October 2022. Prior to joining State Street Corporation, Ms. Hollingsworth Clark was Senior Director, Trust - Global Head of Compliance at Google LLC, from October 2021 to October 2022. Prior to joining Google LLC, Ms. Hollingsworth Clark was President and CEO of Hollingsworth Compliance Consulting, LLC, a risk management and advisory firm. Ms. Hollingsworth Clark has held progressive leadership roles in financial services as Executive Vice President & Regulatory Innovation Officer with Wells Fargo & Company, as Managing Director & Global Head of Financial Crimes at Barclays Corporate & Investment Bank, and Managing Director and North America Anti-Money Laundering Regional Compliance Head with Citigroup. Prior to her private sector roles, Ms. Hollingsworth Clark was a regulator with the Federal Reserve System for approximately 10 years. Ms. Hollingsworth Clark serves on the board of Diligent Corporation, a private company. Additionally, she is a member of the Executive Leadership Council and the International Women’s Forum Northern California.

Qualifications:

Ms. Hollingsworth Clark has extensive experience and knowledge of financial risk management, as well as corporate governance and regulatory compliance. She provides our Board of Directors with key insights with respect to financial risk management and the banking industry.

 

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LOGO   

 

 

  

 

Cheryl Gordon Krongard

 

Private Investor

 

Age: 67

 

Director since December 2013

Board Committees:

 

   

Leadership Development and Compensation (Chair)

 

   

Nominating and Corporate Governance

Other Current Public Company Directorships:

 

   

None

Ms. Krongard is engaged in private investment activities. Ms. Krongard was a senior partner of Apollo Management, L.P., a private investment company, from January 2002 to December 2004. From 1994 to 2000, she served as the Chief Executive Officer of Rothschild Asset Management and as Senior Managing Director for Rothschild North America. Additionally, she served as a director of Rothschild North America, Rothschild Asset Management, Rothschild Asset Management BV, and Rothschild Realty Inc. and as Managing Member of Rothschild Recovery Fund. Ms. Krongard also served as a director of Xerox Holdings Corporation from 2017 until May 2022, a director of US Airways Group, Inc. from 2003 until its December 2013 merger with American Airlines Group Inc. and as a director of Legg Mason, Inc. from 2006 until July 2017. Ms. Krongard was elected a lifetime governor of the Iowa State University Foundation in 1997 and has served as Chairperson of its Investment Committee. She also is a member of the Deans Advisory Council, Iowa State University College of Business.

Qualifications:

Ms. Krongard brings substantial asset management expertise and leadership experience serving as a senior executive at large, complex asset management organizations. Ms. Krongard also has significant compensation, finance, and corporate governance experience acquired through her service on the boards and committees of other publicly traded companies. Her strategic planning experience and airline experience gained as a director of a public company is a key resource to our Board of Directors for financial investments and business strategy.

 

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LOGO   

 

 

  

 

Marshall O. Larsen

 

Retired Chairman, President and Chief Executive Officer of Goodrich Corporation

 

Age: 74

 

Director since May 2014

 

Board Committees:

 

   

Nominating and Corporate Governance

 

   

Leadership Development and Compensation Committee

Other Current Public Company Directorships:

 

   

Becton, Dickinson and Company

Mr. Larsen served as Chairman, President and Chief Executive Officer of Goodrich Corporation, a supplier of systems and services to the aerospace and defense industry, from 2003 until his retirement in July 2012 when the company was acquired by United Technologies Corporation. He was elected as President and Chief Operating Officer of Goodrich in February 2002, and as a director in April 2002. From 1995 through January 2002, Mr. Larsen served as Executive Vice President of Goodrich and President and Chief Operating Officer of Goodrich Aerospace division of Goodrich. Mr. Larsen joined Goodrich in 1977. Mr. Larsen served as a director of Raytheon Technologies Corporation from 2012 until April 2022 and a director of Lowe’s Companies, Inc. from 2004 until his retirement in May 2019. Mr. Larsen is a former director of the Federal Reserve Bank of Richmond and former Chairman of the U.S. Aerospace Industries Association. He is active in numerous community activities and is a member of the Krannert School of Management Advisory Board, Purdue University.

Qualifications:

Mr. Larsen brings substantial business and leadership experience as the chairman and chief executive officer of a publicly-traded company for nine years including insights in governance, regulatory and management issues facing public companies. His in-depth knowledge of the aerospace industry and the conditions that affect the industry significantly benefits the discussions of our Board of Directors.

 

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LOGO   

 

 

  

 

Susan McCaw

 

President of SRM Capital Investments

 

Age: 60

 

Director since November 2019

 

Board Committees:

 

   

Leadership Development and Compensation

Other Current Public Company Directorships:

 

   

Lionsgate Entertainment Corp.

Ms. McCaw is currently the President of SRM Capital Investments, a private investment firm. Before this, Ms. McCaw served as President of COM Investments from April 2004 to June 2019 except while serving as U.S. Ambassador to the Republic of Austria from November 2005 to December 2007. Prior to April 2004, Ms. McCaw was a Principal at Robertson Stephens & Company, a San Francisco-based investment bank and an Associate in Robertson Stephens Venture Capital Group. Ms. McCaw started her career as a business analyst at McKinsey & Company in New York and Hong Kong. Ms. McCaw serves on the boards of several not-for-profits including Teach for America, the Ronald Reagan Presidential Foundation and the Stanford Institute for Economic Policy Research. She is also an Overseer at the Hoover Institution where she is vice chair of the Executive Committee. In addition, Ms. McCaw is a founding board member and board chair of the Malala Fund for Girls’ Education. Ms. McCaw also serves on the Khan Academy Global Advisory Board and the Knight-Hennessy Scholars Global Advisory Board. She is a former member of Harvard Business School’s Board of Dean’s Advisors and is Trustee Emerita of Stanford University where she chaired the Development and Globalization committees.

Qualifications:

Ms. McCaw brings deep experience and relationships in global business and capital markets to the Board of Directors through her private sector experience in investment banking and investment management, and through her public service as a former U.S. Ambassador. Ms. McCaw’s experience both as an investor and diplomat brings broad and meaningful insight to the Board of Director’s oversight of the Company’s business.

 

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LOGO   

 

 

  

 

Robert A. Milton

 

Retired Chairman and Chief Executive Officer of ACE Aviation Holdings, Inc.

 

Age: 62

 

Director since April 2010

 

Board Committees:

 

   

Audit

 

   

Leadership Development and Compensation

 

   

Nominating and Corporate Governance (Chair)

Other Current Public Company Directorships:

 

   

None

Mr. Milton was the Chairman and Chief Executive Officer of ACE Aviation Holdings, Inc., a holding company for Air Canada and other aviation interests (“ACE”) from 2004 until June 2012. He also was the President of ACE from 2004 until 2011. Mr. Milton was the Chairman of Air Canada from 2004 until 2007. He held the position of President and Chief Executive Officer of Air Canada from August 1999 until December 2004. Mr. Milton is a director of Breeze Aviation Group, Inc., the holding company of Breeze Airways. Mr. Milton was a director of Cathay Pacific Airways Limited from May 2019 to May 2022 and non-executive chairman of United Continental Holdings, Inc. from April 2016 to April 2018. Mr. Milton is a trustee of the Georgia Tech Foundation, a Director (Emeritus) of the Smithsonian Air and Space Museum and served as Chair of the International Air Transport Association’s Board of Governors from 2005 to 2006.

Qualifications:

Mr. Milton’s extensive experience in the aviation industry, including his many years with Air Canada, and his past service on the board of directors of several airlines, provides our Board of Directors with deep industry experience. Our Board of Directors has benefited from Mr. Milton’s many relationships in the aircraft manufacturing, aircraft leasing and airline industries. Mr. Milton’s management experience and understanding of the aircraft leasing industry make him an ideal choice to act as our lead independent director.

 

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LOGO   

 

 

  

 

John L. Plueger

 

Chief Executive Officer and President of Air Lease Corporation

 

Age: 68

 

Director since April 2010

 

Other Current Public Company Directorships:

 

   

Spirit AeroSystems Holdings, Inc.

Mr. Plueger has served as our Chief Executive Officer and President since July 2016, and previously served as our President and Chief Operating Officer from March 2010 until July 2016. Mr. Plueger has more than 36 years of aviation industry and aircraft leasing experience, 23 of which were with International Lease Finance Corporation (“ILFC”) where he served as acting Chief Executive Officer from February 2010 to March 2010, as President and Chief Operating Officer from 2002 to February 2010 and on its board of directors from 2002 to 2010. Mr. Plueger’s professional experience also includes testifying before the U.S. House of Representatives as an aircraft leasing industry expert witness as well as responding to European Commission formal inquiries concerning aerospace industry related mergers and acquisitions. Mr. Plueger is a Certified Public Accountant and is an FAA Airline Transport Pilot, with multiple jet type ratings and instructor ratings. Mr. Plueger is a member of the Pepperdine University Board of Regents and a director (Emeritus) of the Smithsonian National Air and Space Museum.

Qualifications:

Mr. Plueger has more than 36 years of aviation industry and aircraft leasing experience, providing our Board of Directors with an in-depth understanding of our business. His many years of business, financial, accounting, managerial and executive experience in our industry make him an invaluable member of our Board of Directors.

 

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LOGO   

 

 

  

 

Ian M. Saines

 

Private Investor

 

Age: 60

 

Director since June 2010

Board Committees:

 

   

Audit

Other Current Public Company Directorships:

 

   

Macquarie Bank Limited

Mr. Saines is engaged in private investment activities. He was the Chief Executive, Funds Management of Challenger Limited, an Australian investment management firm from March 2015 to November 2019. From December 2013 to March 2015 he was engaged in private investment activities. From December 2008 to December 2013, Mr. Saines was employed by Commonwealth Bank of Australia in the role of Group Executive of the Institutional Banking and Markets Division. Prior to joining Commonwealth Bank of Australia in May 2004, Mr. Saines was a Management Committee member of Zurich Capital Markets Asia, the investment banking arm of the Zurich Financial Services Group. He previously held various senior roles with Bankers Trust Australia Limited and was also employed by the Reserve Bank of Australia. He is currently Deputy Chair of the United States Study Centre at the University of Sydney and a director of New South Wales Treasury Corporation (TCorp), the organization that provides investment management, debt and other risk management services and advice to the New South Wales public sector. Mr. Saines also serves as Deputy Chair of American Australian Association Limited and as a Fellow of the Australian Institute of Company Directors (FAICD).

Qualifications:

Mr. Saines brings to our Board of Directors a wealth of experience in investment and commercial banking and deep knowledge of financial risk management. He provides our Board of Directors with key insights with respect to financial products, the financial markets, capital raising activities and the management of a large, complex business.

 

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LOGO   

 

 

  

 

Steven F. Udvar-Házy

 

Executive Chairman of the Board of Directors of Air Lease Corporation

 

Age: 77

 

Director since February 2010

Other Current Public Company Directorships:

 

   

None

Mr. Udvar-Házy has served as our Executive Chairman of the Board of Directors since July 2016, and previously served as our Chairman and Chief Executive Officer from our launch in February 2010 until July 2016. In 1973, Mr. Udvar-Házy co-founded the aircraft leasing business that became ILFC and from 1973 to February 2010 served as Chairman and Chief Executive Officer of ILFC. ILFC became a subsidiary of American International Group, Inc. in 1990. Mr. Udvar-Házy currently serves as a senior strategic advisor to the Board of Directors of SkyWest, Inc., where he served as Lead Director of the Board of Directors until May 2022. Mr. Udvar-Házy is an FAA Airline Transport Pilot with type ratings on multiple jet aircraft and has over 45 years of experience flying jet aircraft.

Qualifications:

Mr. Udvar-Házy brings extensive industry, managerial and leadership experience to our Board of Directors. With more than 50 years of aviation industry experience, Mr. Udvar-Házy provides our Board of Directors with a critical understanding and appreciation of our business and the know-how to craft and execute on our business and strategic plans. He is the founder, and a substantial stockholder, of our Company.

 

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Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm

 

We are seeking stockholder ratification of our appointment of KPMG LLP (“KPMG”), as our independent registered public accounting firm to audit our financial statements for the fiscal year ending December 31, 2023. During 2022, KPMG served as our independent public accounting firm and provided certain other audit-related services as described in this Proxy Statement under “Independent Auditor Fees and Services.” Representatives of KPMG are expected to attend the Annual Meeting, be available to respond to appropriate questions and, if they desire, make a statement.

Stockholder ratification of the appointment of KPMG as our independent registered public accounting firm is not required by our Bylaws or otherwise. However, our Board of Directors is submitting the appointment of KPMG to the stockholders for ratification as a matter of good corporate governance. As a result, this is a non-binding vote. If KPMG’s appointment is not ratified, the audit committee may reconsider whether or not to retain KPMG. Even if KPMG’s appointment is ratified, the audit committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be appropriate.

Vote Required:

Approval of the ratification of KPMG as our independent registered public accounting firm for 2023 requires the affirmative vote of a majority of the shares of Class A Common Stock present or represented, and entitled to vote on the proposal, at the Annual Meeting. Abstentions will have the same effect as a vote “AGAINST” the proposal.

Recommendation:

 

The Board of Directors recommends that you vote FOR the ratification of KPMG as our independent registered public accounting firm for 2023.

 

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Proposal 3: Approve the Air Lease Corporation 2023 Equity Incentive Plan

 

 

General

At the Annual Meeting, stockholders will be asked to approve the Air Lease Corporation 2023 Equity Incentive Plan (the “2023 Plan”), which was adopted, subject to stockholder approval, by the Board of Directors on March 8, 2023.

The Company believes that incentives and stock-based awards focus employees on the objective of creating stockholder value and promoting the success of the Company, and that incentive compensation plans like the proposed 2023 Plan are an important attraction, retention and motivation tool for participants in the plan.

The Company currently maintains the Air Lease Corporation 2014 Equity Incentive Plan (the “2014 Plan”), which is the Company’s only active equity compensation plan. The 2014 Plan is set to expire by its terms on May 7, 2024, and the Board of Directors has approved the 2023 Plan to replace the 2014 Plan. If stockholders approve the 2023 Plan, no new awards will be granted under the 2014 Plan after the Annual Meeting. In that case, the number of shares of the Company’s Class A common stock that remain available for award grants under the 2014 Plan immediately prior to the Annual Meeting will become available for award grants under the 2023 Plan. An additional 100,000 shares of the Company’s Class A common stock will also be made available for award grants under the 2023 Plan. In addition, if stockholders approve the 2023 Plan, any shares of common stock subject to outstanding awards under the 2014 Plan that expire, are cancelled, or otherwise terminate after the Annual Meeting will also be available for award grant purposes under the 2023 Plan.

If stockholders do not approve the 2023 Plan, the Company will continue to have the authority to grant awards under the 2014 Plan. If stockholders approve the 2023 Plan, the termination of our grant authority under the 2014 Plan will not affect awards then outstanding under the 2014 Plan.

Summary Description of the 2023 Plan

The principal terms of the 2023 Plan are summarized below. The following summary is qualified in its entirety by the full text of the 2023 Plan, a copy of which is attached as Appendix B.

Purpose.    The purpose of the 2023 Plan is to promote the success of the Company by providing an additional means for us to attract, motivate, retain and reward selected employees and other eligible persons through the grant of awards. Equity-based awards are also intended to further align the interests of award recipients and our stockholders.

Administration.    Our Board of Directors or one or more committees appointed by our Board of Directors will administer the 2023 Plan. Our Board of Directors has delegated general administrative authority for the 2023 Plan to the leadership development and compensation committee. The Board of Directors or a committee thereof (within its delegated authority) may delegate different levels of authority to different committees or persons with administrative and grant authority under the 2023 Plan. The appropriate acting body, be it the Board of Directors or a committee or other person within its delegated authority is referred to in this proposal as the “Administrator”.

The Administrator has broad authority under the 2023 Plan, including, without limitation, the authority:

 

   

to select eligible participants and determine the type(s) of award(s) that they are to receive;

 

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to grant awards and determine the terms and conditions of awards, including the price (if any) to be paid for the shares or the award and, in the case of share-based awards, the number of shares to be offered or awarded;

 

   

to determine any applicable vesting and exercise conditions for awards (including any applicable performance and/or time-based vesting or exercisability conditions) and the extent to which such conditions have been satisfied, or determine that no delayed vesting or exercise is required, to determine the circumstances in which any performance-based goals (or the applicable measure of performance) will be adjusted and the nature and impact of any such adjustment, to establish the events (if any) on which exercisability or vesting may accelerate (including specified terminations of employment or service or other circumstances), and to accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards (subject in the case of options and stock appreciation rights to the maximum term of the award);

 

   

to cancel, modify, or waive the Company’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consents;

 

   

subject to the other provisions of the 2023 Plan, to make certain adjustments to an outstanding award and to authorize the conversion, succession or substitution of an award;

 

   

to determine the method of payment of any purchase price for an award or shares of the Company’s common stock delivered under the 2023 Plan, as well as any tax-related items with respect to an award, which may be in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of the Company’s common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the Administrator may authorize, or any other form permitted by law;

 

   

to modify the terms and conditions of any award, establish sub-plans and agreements and determine different terms and conditions that the Administrator deems necessary or advisable to comply with laws in the countries where the Company or one of its subsidiaries operates or where one or more eligible participants reside or provide services;

 

   

to approve the form of any award agreements used under the 2023 Plan; and

 

   

to construe and interpret the 2023 Plan, make rules for the administration of the 2023 Plan, and make all other determinations for the administration of the 2023 Plan.

No Repricing.    In no case (except due to an adjustment to reflect a stock split or other event referred to under Adjustments below, or any repricing that may be approved by stockholders) will the Administrator (1) amend an outstanding stock option or stock appreciation right to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for an option or stock appreciation right with an exercise or base price that is less than the exercise or base price of the original award.

Eligibility.    Persons eligible to receive awards under the 2023 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. As of March 1, 2023, approximately 148 officers and employees of the Company and its subsidiaries (including all of the Company’s currently employed NEOs), and each of the seven independent members of the Board who are not employed by the Company or any of its

 

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subsidiaries (“Non-Employee Directors”), were considered eligible under the 2023 Plan. In addition, no individual consultants or advisors engaged by the Company and its subsidiaries were then considered eligible under the 2023 Plan.

Aggregate Share Limit.     The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2023 Plan equals the sum of the following (such total number of shares, the “Share Limit”):

 

   

100,000 shares, plus

 

   

the number of shares available for additional award grant purposes under the 2014 Plan as of the date of the Annual Meeting and determined immediately prior to the termination of the authority to grant new awards under the 2014 Plan as of the date of the Annual Meeting, plus

 

   

the number of any shares subject to stock options granted under the 2014 Plan and outstanding as of the date of the Annual Meeting which expire, or for any reason are cancelled or terminated, after the date of the Annual Meeting without being exercised, plus

 

   

the number of any shares subject to restricted stock and restricted stock unit awards granted under the 2014 Plan that are outstanding and unvested as of the date of the Annual Meeting that are forfeited, terminated, cancelled or otherwise reacquired after the date of the Annual Meeting without having become vested.

As of March 1, 2023, approximately 4,055,168 shares were available for additional award grant purposes under the 2014 Plan, approximately 1,642,691 shares were subject to restricted stock unit awards then outstanding under the 2014 Plan, and no shares were subject to stock option awards then outstanding under the 2014 Plan. As noted above, no additional awards will be granted under the 2014 Plan if stockholders approve the 2023 Plan at the Annual Meeting.

Additional Share Limits.    The following other limits are also contained in the 2023 Plan. These limits are in addition to, and not in lieu of, the Share Limit for the 2023 Plan described above.

 

   

The maximum number of shares that may be delivered pursuant to options qualified as incentive stock options granted under the plan is 1.0 million shares. For clarity, any shares issued in respect of incentive stock options granted under the 2023 Plan will also count against the overall Share Limit above.

 

   

The maximum number of shares subject to awards that are granted under the 2023 Plan during any one calendar year to any person who, on the grant date of the award, is a Non-Employee Director shall not exceed the number of shares that produce a grant date fair value for the award that, when combined with (i) the grant date fair value of any other awards granted under the 2023 Plan during that same calendar year to that individual in his or her capacity as a Non-Employee Director and (ii) the dollar amount of all other cash compensation payable by the Company to such Non-Employee Director for his or her services in such capacity during that same calendar year (regardless of whether deferred and excluding any interest or earnings on any portion of such amount that may be deferred), is $600,000, provided that this limit is $650,000 as to (1) a Non-Employee Director who is serving as the independent Chair of the Board of Directors or as a lead independent director at the time the applicable grant is made or (2) any new Non-Employee Director for the calendar year in which the non-employee director is first elected or appointed to the Board of Directors.

 

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Share-Limit Counting Rules.     The Share Limit of the 2023 Plan is subject to the following rules:

 

   

Shares that are subject to or underlie awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2023 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2023 Plan.

 

   

Except as described below, to the extent that shares are delivered pursuant to the exercise of a stock appreciation right granted under the 2023 Plan, the number of underlying shares which are actually issued in payment of the award shall be counted against the Share Limit. For clarity, if a stock appreciation right relates to 100,000 shares and is exercised at a time when the payment due to the participant is 15,000 shares, 100,000 shares shall be charged against the Share Limit with respect to such exercise.

 

   

Shares that are exchanged by a participant or withheld by the Company to pay the exercise price of a stock option or stock appreciation right granted under the 2023 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any stock option or stock appreciation right, will be counted against the Share Limit and will not again be available for subsequent awards under the 2023 Plan. Shares that are exchanged by a participant or withheld by the Company as full or partial payment in connection with any full-value award granted under the 2023 Plan, as well as any shares exchanged by a participant or withheld by the Company to satisfy the tax withholding obligations related to any full-value award granted under the 2023 Plan, will not be counted against the Share Limit and will again be available for subsequent awards under the 2023 Plan.

 

   

In addition, shares that are exchanged by a participant or withheld by the Company after the date of the Annual Meeting as full or partial payment in connection with any full-value award (but not any stock option or stock appreciation award) granted under the 2014 Plan, as well as any shares exchanged by a participant or withheld by the Company after the date of the Annual Meeting to satisfy the tax withholding obligations related to any full-value award (but not any stock option or stock appreciation award) award granted under the 2014 Plan, shall be available for new awards under the 2023 Plan.

 

   

To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the Share Limit and will again be available for subsequent awards under the 2023 Plan.

 

   

In the event that shares are delivered in respect of a dividend equivalent right, the actual number of shares delivered with respect to the award shall be counted against the Share Limit. For clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Company pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the Share Limit.

 

   

The Company may not increase the Share Limit by repurchasing shares on the market (by using cash received through the exercise of stock options or otherwise).

In addition, the 2023 Plan generally provides that shares issued in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the 2023 Plan. The Company may not increase the applicable share limits of the 2023 Plan by repurchasing shares of common stock on the market (by using cash received through the exercise of stock options or otherwise).

 

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Types of Awards.    The 2023 Plan authorizes stock options, stock appreciation rights, and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock, as well as cash bonus awards. The 2023 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash.

A stock option is the right to purchase shares of the Company’s common stock at a future date at a specified price per share (the “exercise price”). The per share exercise price of an option generally may not be less than the fair market value of a share of the Company’s common stock on the date of grant. The maximum term of an option is ten years from the date of grant. An option may either be an incentive stock option or a nonqualified stock option. Incentive stock option benefits are taxed differently from nonqualified stock options, as described under Federal Income Tax Consequences of Awards Under the 2023 Plan below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the U.S. Internal Revenue Code and the 2023 Plan. Incentive stock options may only be granted to employees of the Company or a subsidiary.

A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of share of the Company’s common stock on the date of exercise of the stock appreciation right over the base price of the stock appreciation right. The base price will be established by the Administrator at the time of grant of the stock appreciation right and generally may not be less than the fair market value of a share of the Company’s common stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of a stock appreciation right is ten years from the date of grant.

The other types of awards that may be granted under the 2023 Plan include, without limitation, stock bonuses, restricted stock, performance stock, stock units or phantom stock (which are contractual rights to receive shares of stock, or cash based on the fair market value of a share of stock), dividend equivalents which represent the right to receive a payment based on the dividends paid on a share of stock over a stated period of time, or similar rights to purchase or acquire shares, and cash awards.

Any awards under the 2023 Plan (including awards of stock options and stock appreciation rights) may be fully-vested at grant or may be subject to time- and/or performance-based vesting requirements.

Dividend Equivalents; Deferrals.    The Administrator may provide for the deferred payment of awards and may determine the other terms applicable to deferrals. The Administrator may provide that awards under the 2023 Plan (other than options or stock appreciation rights), and/or deferrals, earn dividends or dividend equivalents based on the amount of dividends paid on outstanding shares of Class A Common Stock, provided that any dividends and/or dividend equivalents as to the portion of an award that is subject to unsatisfied vesting requirements will be subject to termination and forfeiture to the same extent as the corresponding portion of the award to which they relate in the event the applicable vesting requirements are not satisfied (or, in the case of a restricted stock or similar award where the dividend must be paid as a matter of law, the dividend payment will be subject to forfeiture or repayment, as the case may be, if the related vesting conditions are not satisfied).

Assumption and Termination of Awards.    If an event occurs in which the Company does not survive (or does not survive as a public company in respect of its Class A Common Stock), including, without limitation, a dissolution, merger, combination, consolidation, conversion, exchange of securities, or other reorganization, or a sale of all or substantially all of the business, stock or assets of the Company, awards then-outstanding under the 2023 Plan will not automatically become fully vested pursuant to the provisions of the 2023 Plan so long as such awards are assumed, substituted for or otherwise continued. However, if awards then-outstanding under the 2023 Plan are to be terminated in such circumstances (without being assumed or substituted for), such awards would generally become fully vested (with any performance goals applicable to the award being deemed met at the “target” performance level), subject

 

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to any exceptions that the Administrator may provide for in an applicable award agreement. The Administrator also has the discretion to establish other change in control provisions with respect to awards granted under the 2023 Plan. For example, the Administrator could provide for the acceleration of vesting or payment of an award in connection with a corporate event or in connection with a termination of the award holder’s employment. For the treatment of outstanding equity awards held by the Named Executive Officers in connection with a termination of employment and/or a change in control of the Company, please see Potential Payments Upon Change in Control and Termination below in this Proxy Statement.

Transfer Restrictions.    Subject to certain exceptions contained in Section 5.6 of the 2023 Plan, awards under the 2023 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or representative. The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable federal and state securities laws and are not made for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting securities are held by the award recipient or by the recipient’s family members).

Adjustments.    As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2023 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the stockholders.

No Limit on Other Authority.    Except as expressly provided with respect to the termination of the authority to grant new awards under the 2014 Plan if stockholders approve the 2023 Plan, the 2023 Plan does not limit the authority of the Board of Directors or any committee to grant awards or authorize any other compensation, with or without reference to the Company’s Class A Common Stock, under any other plan or authority.

Termination of or Changes to the 2023 Plan.    The Board of Directors may amend or terminate the 2023 Plan at any time and in any manner. Stockholder approval for an amendment will be required only to the extent then required by applicable law, then existing requirements of any applicable listing exchange on which the Company’s Class A Common Stock is registered, or as deemed necessary or advisable by the Board of Directors. Unless terminated earlier by the Board of Directors and subject to any extension that may be approved by stockholders, the authority to grant new awards under the 2023 Plan will terminate on the tenth anniversary of stockholder approval of the 2023 Plan, which is currently expected to be May 3, 2033. Outstanding awards, as well as the Administrator’s authority with respect thereto, generally will continue following the expiration or termination of the plan. Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder.

U.S. Federal Income Tax Consequences of Awards under the 2023 Plan

The U.S. federal income tax consequences of the 2023 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the 2023 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the U.S. Internal Revenue Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local, or international tax consequences.

 

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With respect to nonqualified stock options, the company is generally entitled to deduct and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, the company is generally not entitled to a deduction nor does the participant recognize income at the time of exercise, although the participant may be subject to the U.S. federal alternative minimum tax.

The current federal income tax consequences of other awards authorized under the 2023 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, stock appreciation rights, cash and stock-based performance awards, dividend equivalents, stock units, and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, the company will generally have a corresponding deduction at the time the participant recognizes income.

If an award is accelerated under the 2023 Plan in connection with a “change in control” (as this term is used under the U.S. Internal Revenue Code), the company may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under the U.S. Internal Revenue Code (and certain related excise taxes may be triggered). Furthermore, under Section 162(m) of the Code, the aggregate compensation in excess of $1.0 million payable to current or former Named Executive Officers (including amounts attributable to equity-based and other incentive awards) may not be deductible by the Company in certain circumstances.

Specific Benefits under the 2023 Plan

The Company has not approved any awards that are conditioned upon stockholder approval of the 2023 Plan. The Company is not currently considering any other specific award grants under the 2023 Plan. If the 2023 Plan had been in existence in fiscal 2022, the Company expects that its award grants for fiscal 2022 would not have been substantially different from those actually made in that year under the 2014 Plan. For information regarding stock-based awards granted to the Company’s NEOs during fiscal 2022, see Executive Compensation below.

As described under Director Compensation above, our current compensation policy for Non-Employee Directors provides for each Non-Employee Director to receive an annual award of restricted stock units, with the number of shares subject to each award to be determined by dividing $130,000 by the closing price of our common stock on the grant date (or the immediately preceding trading day if the grant date is not a trading day) as described above. Assuming, for illustrative purposes only, that the price of the common stock used for the conversion of the dollar amount set forth above into shares is $40.00, the aggregate number of shares that would be allocated to the Company’s seven Non-Employee Directors as a group pursuant to the annual grant formula is approximately 227,500. This figure represents the aggregate number of shares that would be granted under the director equity grant program for calendar years 2023 through 2032 (the ten remaining years in the term of the 2023 Plan, assuming the 2023 Plan is approved) based on that assumed stock price. This calculation also assumes that there are no new eligible directors, there continue to be seven eligible directors seated and there are no changes to the awards granted under the director equity grant program.

 

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Potential Dilution

The following paragraphs include additional information to help you assess the potential dilutive impact of the Company’s equity awards and the 2023 Plan.

“Overhang” refers to the number of shares of the Company’s Class A Common Stock that are subject to outstanding awards or remain available for new award grants. The following table shows the total number of shares of the Company’s Class A Common Stock that were (i) subject to outstanding restricted stock and restricted stock unit awards granted under the 2014 Plan, (ii) subject to outstanding stock options granted under the 2014 Plan, and (iii) available for new award grants under the 2014 Plan, in each case as of December 31, 2022 and as of March 1, 2023. In this 2023 Plan proposal, the number of shares of the Company’s Class A Common Stock subject to restricted stock unit awards granted during any particular period or outstanding on any particular date is presented based on the actual number of shares of the Company’s Class A Common Stock covered by those awards. As to the number of shares of the Company’s Class A Common Stock subject to restricted stock unit awards outstanding on any particular date, the information is presented including the crediting of dividend equivalents on the awards through that date, to the extent the dividend equivalents are payable in shares of Class A Common Stock. For awards subject to performance-based vesting requirements, the number of shares presented is based on the maximum level of performance.

 

  2014 Plan   As of December 31,
2022
   

As of March 1,

2023

 

Shares subject to outstanding restricted stock and restricted stock unit awards (including vested but deferred RSUs and excluding performance-based vesting awards)

    613,285       664,576  

Shares subject to outstanding performance-based vesting restricted stock unit awards

    976,509       978,115  

Shares subject to outstanding stock options

           

Shares available for new award grants

    4,221,026       4,055,168  

The weighted-average number of shares of the Company’s Class A Common Stock issued and outstanding in each of the last three fiscal years was 113,684,782 shares issued and outstanding in 2020; 114,050,578 shares issued and outstanding in 2021; and 111,626,508 shares issued and outstanding in 2022. The number of shares of the Company’s Class A Common Stock issued and outstanding as of December 31, 2022 and March 1, 2023 was 110,892,097 and 111,015,418 shares, respectively.

“Burn rate” refers to the number of shares that are subject to awards that we grant over a particular period of time. The total number of shares of the Company’s Class A Common Stock subject to awards that the Company granted under the 2014 Plan in each of the last three fiscal years, and to date (as of March 1, 2023) for 2023, are as follows:

 

   

670,621 shares in 2020 (which was 0.59% of the weighted-average number of shares of the Company’s Class A Common Stock issued and outstanding in 2020), of which 232,414 shares were subject to restricted stock unit awards (excluding performance-based vesting awards), and 438,207 shares were subject to performance-based vesting restricted stock unit awards;

 

   

597,728 shares in 2021 (which was 0.52% of the weighted-average number of shares of the Company’s Class A Common Stock issued and outstanding in 2021), of which 294,569 shares were subject to restricted stock unit awards (excluding performance-based vesting awards), and 303,159 shares were subject to performance-based vesting restricted stock unit awards;

 

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652,016 shares in 2022 (which was 0.58% of the weighted-average number of shares of the Company’s Class A Common Stock issued and outstanding in 2022), of which 321,342 shares were subject to restricted stock unit awards (excluding performance-based vesting awards), and 330,674 shares were subject to performance-based vesting restricted stock unit awards; and

 

   

614,512 shares in 2023 (which was 0.55% of the weighted-average number of shares of the Company’s Class A Common Stock issued and outstanding in 2023), of which 249,698 shares were subject to restricted stock unit awards (excluding performance-based vesting awards), and 364,814 shares were subject to performance-based vesting restricted stock unit awards.

Thus, the total number of shares of the Company’s Class A Common Stock subject to awards granted under the 2014 Plan per year over the last three fiscal years (2020, 2021 and 2022) has been, on average, 0.57% of the weighted-average number of shares of the Company’s common stock issued and outstanding for the corresponding year, and this percentage is consistent with the Company’s 2023 awards under the 2014 Plan through March 1, 2023 (which, as noted above, cover 0.55% of the number of shares of the Company’s common stock issued and outstanding shares on March 1, 2023). Performance-based vesting awards have been included above in the year in which the award was granted. The actual number of performance-based vesting restricted stock unit awards that became eligible to vest each year because the applicable performance-based condition was satisfied in that year (subject to the satisfaction of any applicable time-based vesting requirements) was as follows: 311,169 in 2020, 185,422 in 2021, 249,312 in 2022, and no shares to date (as of March 1, 2023) in 2023.

The total number of shares of our Class A Common Stock that were subject to awards granted under the 2014 Plan that terminated or expired, and thus became available for new award grants under the 2014 Plan, in each of the last three fiscal years, and to date (as of March 1, 2023) in 2023, are as follows: 49,407 in 2020, 68,974 in 2021, 162,184 in 2022, and 10,360 in 2023. The total number of shares of Class A Common Stock that were subject to awards granted under the 2014 Plan that were withheld to cover tax withholding obligations arising with respect to the award, and thus became available for new award grants under the 2014 Plan, in each of the last three fiscal years, and to date (as of March 1, 2023) in 2023, are as follows: 198,108 in 2020, 162,981 in 2021, 211,442 in 2022, and 75,086 in 2023. Shares subject to 2014 Plan awards that terminated expired, or were withheld to cover tax withholding obligations arising with respect to the award, and became available for new award grants under the 2014 Plan have been included when information is presented in this 2023 Plan proposal on the number of shares available for new award grants under the 2014 Plan.

The number of shares credited as dividend equivalents under the 2014 Plan with respect to then-outstanding restricted stock unit awards, to the extent the dividend equivalents are payable in shares of the Company’s Class A Common Stock, in each of the last three fiscal years, and to date (as of March 1, 2023) in 2023, are as follows: 749 in 2020, 798 in 2021, 1,436 in 2022, and 364 in 2023.

The Compensation Committee anticipates that the 100,000 additional shares requested for the 2023 Plan (together with the shares available for new award grants under the 2014 Plan on the Annual Meeting date and assuming usual levels of shares becoming available for new awards as a result of forfeitures of outstanding awards) will provide the Company with flexibility to continue to grant equity awards under the 2023 Plan through approximately the end of 2026 (reserving sufficient shares to cover potential payment of performance-based awards at maximum payment levels and covering dividend equivalents that may be credited with respect to the awards based on the Company’s recent dividend payments). However, this is only an estimate, in the Company’s judgment, based on current circumstances. The total number of shares that are subject to the Company’s award grants in any one year or from year-to-year may change based on a number of variables, including, without limitation, the value of the Company’s common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation

 

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practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the number of dividend equivalent rights outstanding, the extent to which they provide for settlement in stock and the amount and frequency of the Company’s dividend payments, the type of awards the Company grants, and how the Company chooses to balance total compensation between cash and equity-based awards.

The closing market price for a share of the Company’s Class A Common Stock as of March 1, 2023 was $43.39 per share.

Equity Compensation Plan Information

Set forth below is certain information about the Class A common stock authorized for issuance under the 2014 Plan as of December 31, 2022.

 

  Plan Category

 

 

Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights

(a)

   

Weighted-average exercise
price of outstanding
options, warrants and
rights

(b)

   

Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))

(c)

 

Equity Compensation Plans Approved by Security Holders

                4,221,026  

Equity Compensation Plans Not Approved by Security Holders

                 

Total

                4,221,026  

Vote Required:

Approval of the Air Lease Corporation 2023 Equity Incentive Plan requires the affirmative vote of a majority of shares of Class A Common Stock present or represented and entitled to vote on the proposal at the Annual Meeting. Abstentions will have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

Recommendation:

 

 

The Board of Directors recommends that you vote FOR the approval of the Air Lease Corporation 2023 Equity Incentive Plan.

 

 

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Proposal 4: Advisory Vote to Approve Named Executive Officer Compensation

 

 

We are seeking an advisory vote from our stockholders to approve our named executive officer compensation as disclosed in the section titled Executive Compensation in this Proxy Statement. For 2022, our named executive officers include Mr. Plueger, our Chief Executive Officer and President, Mr. Udvar-Házy, our Executive Chairman of the Board of Directors, the three other current executive officers and one former executive officer of the Company named in the tables that appear in the Executive Compensation section. This is commonly referred to as a “Say-on-Pay” vote.

Our executive compensation program is designed to attract, motivate and retain the most talented individuals in the aircraft leasing business, to align pay with the attainment of operational and financial goals established by the leadership development and compensation committee and to create long-term value for our stockholders. The leadership development and compensation committee and our Board of Directors believe that the program has been successful in accomplishing these objectives.

The combination of a competitive base salary and bonus, and the potential for even greater rewards as a stockholder, has helped us assemble and retain a formidable management team focused on growing the long-term value of the Company. We believe having a small, highly experienced and motivated senior management team is essential to the success of the Company and provides us with an important competitive advantage.

Stockholders are urged to read the section titled Executive Compensation—Compensation Discussion and Analysis, which contains a detailed description of the design of our executive compensation program and describes how our compensation program implements our compensation philosophy.

We are asking our stockholders to vote FOR the following advisory resolution:

RESOLVED, that the stockholders of Air Lease Corporation approve, on an advisory basis, the compensation paid to its named executive officers, as disclosed pursuant to Item 402 of Regulation S-K under the Securities Exchange Act of 1934, as amended, including the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth below in the section titled Executive Compensation.

This is a non-binding vote and is being provided as required pursuant to Section 14A of the Exchange Act. The leadership development and compensation committee and our Board of Directors will continue to review the voting results in connection with their regular evaluation of our compensation program. They also will continue to consider any input from our stockholders throughout the year in connection with their annual evaluation.

Consistent with the recommendation of the Board of Directors and the majority of votes cast at our 2018 annual meeting of stockholders, our current policy is to provide our stockholders with an advisory Say-on-Pay vote on an annual basis. It is expected that the next advisory Say-on-Pay vote will be held at the 2024 annual meeting of stockholders.

Vote Required:

Approval of this advisory vote requires the affirmative vote of a majority of shares of Class A Common Stock present or represented and entitled to vote on the proposal at the Annual Meeting. Abstentions will have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of the advisory vote.

Recommendation:

 

The Board of Directors recommends that you vote FOR the approval, on an advisory basis, of our named executive officer compensation.

 

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Leadership Development and Compensation Committee Letter

Dear Fellow Stockholder,

We remain committed to structuring an executive compensation program that is linked to financial, strategic and long-term stock price performance. Our executive compensation program continues to be highly motivating, retentive and linked to stockholder value. It is heavily weighted towards performance-based, at-risk pay with 75% of our NEOs’ 2022 long-term equity awards tied to vesting conditions based on book value and total stockholder return metrics and 100% of our NEOs 2022 short-term annual bonus awards tied to the achievement of financial and strategic objectives. Consistent with prior years, the Leadership Development and Compensation Committee set challenging performance goals, aligned with our financial plan and strategic goals, that provided a strong incentive to advance our business objectives and build sustainable value for our stockholders.

In 2022 our industry continued to recover from the impact of the COVID-19 pandemic but was faced with new challenges. Early in the year, the Russian government detained more than $10 billion western-made aircraft leased to Russian airlines, including the Company’s fleet of aircraft leased to Russian airlines at the time of Russia’s invasion of Ukraine. As a result, in 2022 the Company recorded a net write-off totaling approximately $771.5 million. The year also brought rapidly increasing interest rates, which impacted our 2022 results given the historical lag between rising interest rates and corresponding increases in lease rates. The hard work of our management team navigating yet another year of unprecedented challenges facing the Company is reflected in our 2022 performance. We ended the year with $28.4 billion in assets and $2.3 billion in revenue, both the highest in the Company’s history. We also continued to maintain a strong lease utilization rate of 99.6% and, due to staggered debt maturities and the use of primarily fixed rate debt, kept the increase in our composite cost of funds to a modest 0.28% increase for the 2022 fiscal year.

Despite the solid financial performance in 2022, the Leadership Development and Compensation Committee exercised its discretion to reduce the total company performance factor for awards under the annual cash bonus plan from 142% to 130% to reflect the challenges associated with 2022. In addition, and further evidencing the Leadership Development and Compensation Committee’s rigorous targets and pay-for-performance philosophy, the 2020 performance-based Book Value RSUs and TSR RSUs that vested on December 31, 2022 expired with a 0% payout for these awards.

In response to stockholder feedback received during 2022, we are providing enhanced disclosure of the strategic objective performance goals included in our annual bonus plan which you can find in this Proxy Statement. Looking ahead to 2023, we also increased the weighting of the financial metrics in our annual bonus plan from 60% to 70%, while simultaneously reducing the weighting of the strategic objectives from 40% to 30%.

We remain highly focused on ensuring adherence to our compensation philosophy and sound compensation policies and practices and believe that open and constructive stockholder engagement has led to positive modifications to our executive compensation program. We encourage you to reach out with any questions or feedback related to our compensation program.

Sincerely,

Cheryl Gordon Krongard, Chair

Marshall O. Larsen

Susan McCaw

Robert A. Milton

Leadership Development and Compensation Committee members

 

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   Executive Compensation

Compensation Discussion and Analysis

 

 

This Compensation Discussion and Analysis should be read together with the executive compensation tables that follow, which disclose the compensation awarded to, earned by or paid to our NEOs (as defined below) with respect to 2022.

Our Named Executive Officers

This Compensation Discussion and Analysis (“CD&A”) discusses executive compensation for the following Named Executive Officers (“NEOs”) for fiscal year 2022:

 

 
Named Executive Officers
   
John L. Plueger  

Chief Executive Officer and President

   
Steven F. Udvar-Házy  

Executive Chairman of the Board

   
Grant A. Levy  

Executive Vice President, Marketing and Commercial Affairs

   
Kishore Korde  

Executive Vice President, Marketing

   
Gregory B. Willis  

Executive Vice President and Chief Financial Officer

   
Jie Chen (1)  

Former Executive Vice President and Managing Director, Asia

 

(1)

Mr. Chen’s employment with the Company ended June 30, 2022.

Compensation Philosophy: Pay for Performance

Our executive compensation program is designed for a company with a small team of talented individuals with extensive industry experience who manage and lead a highly capital-intensive business. We do this by tying compensation to the achievement of robust performance goals that promote the creation of stockholder value and by designing compensation to reward and retain our high-caliber executives in a competitive market. This balancing of objectives is demonstrated by the substantial portion of our executives’ compensation that is variable and at risk based on individual and Company performance. In 2022, 70% of our CEO’s pay mix at target was at risk. Our compensation structure and pay for performance philosophy have incentivized our 151-employee team to deliver outstanding long-term performance at a very low cost to stockholders. In fact, in 2022 our entire compensation expense for all employees represented just 3.7% of revenues. In addition, all of our employees in the U.S. (and to the extent permissible outside the U.S.) are eligible to receive RSUs and our employees and independent directors own approximately 7% of our outstanding Class A Common Stock as of March 6, 2023. We believe that this significant ownership by our employees and independent directors also helps ensure that we are aligned with the interests of our stockholders and that our compensation program drives sustainable growth.

 

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Business Overview and Strategy

Business Overview

Air Lease Corporation is a leading aircraft leasing company that was founded by aircraft leasing industry pioneer, Steven F. Udvar-Házy. We are principally engaged in purchasing the most modern, fuel-efficient new technology commercial jet aircraft directly from aircraft manufacturers, such as Boeing and Airbus, and leasing those aircraft to airlines throughout the world with the intention to generate attractive returns on equity. As of December 31, 2022, we had 417 aircraft in our owned fleet and we had commitments to purchase 398 aircraft from Boeing and Airbus for delivery through 2029. In addition to our leasing activities, we sell aircraft from our fleet to third parties, including other leasing companies, financial services companies, airlines and other investors. We also provide fleet management services to investors and owners of aircraft portfolios for a management fee. As of December 31, 2022, we had 85 aircraft in our managed fleet. Our operating performance is driven by the growth of our fleet, the terms of our leases, the interest rates on our debt, and the aggregate amount of our indebtedness, supplemented by gains from aircraft sales and our management fees. We have relationships with over 200 airlines across 70 countries, and as of December 31, 2022, our globally diverse customer base was comprised of 117 airlines in 62 countries.

Strategy for Value Creation

Our strategy is primarily to purchase new commercial aircraft directly from aircraft manufacturers and lease those aircraft to airlines throughout the world, while prioritizing strong financial management and a conservative capital structure. We believe this strategy will continue to generate sustainable growth and attractive returns on equity over the long term.

 

 
Strategy for Value Creation
   
Aircraft Acquisition  

•  Focus on the most in-demand and widely distributed, modern technology, fuel-efficient aircraft

•  Capitalize on our orderbook – a key competitive advantage that (i) provides access to a steady pipeline of attractively priced new aircraft which we order in advance and purchase directly from the manufacturers and (ii) gives us strong visibility into growth and revenue streams

 

   
Aircraft Leasing  

•  Prioritize long-term contracted cash flows:

   Manage customer concentrations by geography and region

   Enter into long-term leases with staggered maturities

   Balance exposure by aircraft type

 

   
Aircraft Sales  

•  Supplement our liquidity and net income

•  Help to maintain a young aircraft portfolio by selling aircraft, typically at the end of the first third of their expected useful life

 

   
Fleet Management      

•  Provide fleet management services that further bolster market intelligence and provide strong insight into market trends and future aircraft demands

 

   
Financial Management  

•  Aim to maintain a conservative capital structure:

   Strong balance sheet with substantial liquidity of $6.9 billion*

   Low debt/equity target of 2.5x

   High fixed rate debt target of 80%

   Large unencumbered asset base of approximately $27.0 billion*

 

   
Return of Capital  

•  Maintain a balanced approach to capital allocation which includes returning excess cash to stockholders through our dividend policy as well as regular evaluation of share repurchases, as appropriate

 

*

Information as of December 31, 2022. We define liquidity as unrestricted cash plus undrawn balances under our unsecured revolving credit facility. We define unencumbered asset base as unrestricted cash plus unencumbered flight equipment plus deposits on flight equipment purchases plus certain other assets.

 

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2022 Performance Highlights

In 2022, we continued to execute on our operational strategy which is designed to drive long-term stockholder value.

 

 

LOGO

 

  *

Lease utilization rate is calculated based on the number of days each aircraft was subject to a lease or letter of intent during the period, weighted by the net book value of the aircraft.

 

Aircraft Activity.    During the year ended December 31, 2022, we purchased and took delivery of 60 aircraft from our new order pipeline and sold six aircraft, ending the period with a total of 417 aircraft in our owned aircraft portfolio. The weighted average age of our fleet was 4.5 years, and the weighted average lease term remaining was 7.1 years as of December 31, 2022. The net book value of our fleet grew by 7.2%, to $24.5 billion as of December 31, 2022 compared to $22.9 billion as of December 31, 2021. Our managed fleet was comprised of 85 aircraft as of December 31, 2022 as compared to 92 aircraft as of December 31, 2021. We have a globally diversified customer base comprised of 117 airlines in 62 countries as of December 31, 2022. As of February 16, 2023, all aircraft in our fleet, except for one aircraft, were subject to lease agreements or letters of intent and our lease utilization rate for 2022 was 99.6%.

New Aircraft Pipeline.    As of December 31, 2022, we had commitments to purchase 398 aircraft from Boeing and Airbus for delivery through 2029 with an estimated aggregate commitment of $25.5 billion. We have placed approximately 90% of our committed orderbook on long-term leases for aircraft delivering through the end of 2024 and have placed 60% of our entire orderbook. We ended 2022 with $31.4 billion in committed minimum future rental payments, consisting of $15.6 billion in contracted

 

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minimum rental payments on the aircraft in our existing fleet and $15.8 billion in minimum future rental payments related to aircraft which will deliver between 2023 through 2028.

Financing.    In 2022, we issued $2.2 billion in aggregate principal amount of senior unsecured notes with maturities ranging from 2027 to 2032 with a weighted average interest rate of 3.59%. Additionally, we ended 2022 with an aggregate borrowing capacity under our revolving credit facility of $6.1 billion and total liquidity of $6.9 billion. We had total debt outstanding of $18.8 billion, of which 91.3% was at a fixed rate and 99.3% was unsecured. As of December 31, 2022, our composite cost of funds was 3.07%.

Financial Highlights.    Our total revenues for the year ended December 31, 2022 increased by 11.0% to $2.3 billion as compared to 2021. The increase in total revenues was primarily driven by the continued growth in our fleet, and significantly lower COVID-19 related lease restructuring and cash basis losses. For the year ended December 31, 2022, we reported consolidated net loss attributable to common stockholders of $138.7 million, or net loss of $1.24 per diluted share, compared to a consolidated net income attributable to common stockholders of $408.2 million, or $3.57 per diluted share, for the year ended December 31, 2021. Despite the growth of our fleet, our net income attributable to common stockholders and diluted earnings per share decreased due to the impact of the write-off of our Russian fleet. During the year ended December 31, 2022, our adjusted net income before income taxes was $659.9 million compared to $589.7 million for the year ended December 31, 2021. Our adjusted diluted earnings per share before income taxes for the full year 2022 was $5.89 compared to $5.15 for the full year 2021. The increase for the year ended December 31, 2022 as compared to 2021 was primarily due to the continued growth of our fleet and the increase in revenues as discussed above. Our adjusted net income before income taxes and adjusted diluted earnings per share before income taxes exclude the effects of certain non-cash items, one-time or non-recurring items that are not expected to continue in the future and certain other items, such as the net impact of the write-off of our Russian fleet. Adjusted net income before income taxes and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by U.S. Generally Accepted Accounting Principles (“GAAP”). See Appendix A for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes as non-GAAP measures and a reconciliation of these measures to net income attributable to common stockholders.

Return of Capital.    On November 2, 2022, our Board of Directors approved an increase in our quarterly cash dividend on our Class A Common Stock by approximately 8%, from $0.185 per share to $0.20 per share. This dividend, paid on January 10, 2023, marked our 40th consecutive dividend since we declared our first dividend in 2013, and our tenth consecutive annual dividend increase over that time. In addition, our Board of Directors approved a new share repurchase program, which authorized repurchase of up to $150.0 million of the Company’s Class A Common Stock through September 30, 2022. During the year ended December 31, 2022, we repurchased 3,420,874 shares of Class A Common Stock under our stock repurchase program at an average purchase price of $43.85 per share. Such repurchases completed the repurchase of the entire $150.0 million of outstanding shares authorized under our stock repurchase program. We completed the share repurchase program in April 2022.

Productivity.    As of December 31, 2022, we had 151 employees and $28.4 billion of total assets. Per employee, our revenue, net loss before income taxes and adjusted net income before income taxes for the year ended December 31, 2022 was approximately $15.3 million, $(0.9) million and $4.4 million, respectively.

For a comprehensive discussion of our financial results, please review our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 16, 2023 and is available at http://www.airleasecorp.com/investors.

 

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Stockholder Outreach and Executive Compensation Program Refinements

To better understand our investors’ perspectives regarding our executive compensation program, we engage with our investors throughout the year. After issuing our proxy statement in March 2022, we engaged with holders of over 60% of outstanding shares of Class A Common Stock (none of whom were our employees or directors) to specifically discuss our compensation practices and to listen to their feedback. We continued our outreach during 2022 and early 2023. Based on this engagement, the leadership development and compensation committee took the following actions with respect to our compensation program in 2022 and 2023:

 

 

Actions that Support Stronger Executive Pay with Company Performance Alignment

 

   
     

Returned to our Historical Long-Term Incentive Award Structure.    We structured our 2022 and 2023 long-term incentive awards to return to our historical long-term incentive award structure which we had modified in 2021 due to the impact of the COVID-19 pandemic. As a result, the relative split between performance and time-based awards for 2022 consisted of 50% Book Value RSUs, 25% TSR RSUs and 25% time-based RSUs. Time-based RSUs vest ratably each year over three years, while Book Value RSUs and TSR RSUs cliff vest at the end of three years.

 

All performance-based long-term incentive awards have three-year performance periods where performance is measured at the end of year three.

 

     

All Performance-Based Awards Forfeited for the 3-Year Performance Period Ending in 2022.    100% of the outstanding Book Value RSUs and TSR RSUs that were eligible to vest at the end of the 3-year performance period ending on December 31, 2022 were forfeited by our NEOs. Despite the headwinds created during the performance period by the COVID-19 pandemic and Russia’s invasion of Ukraine, our leadership and development committee determined not to make any adjustments to the original performance targets, and our 3-year performance resulted in a 0% payout for the outstanding performance-based awards eligible to vest at the end of 2022.

 

Our leadership development and compensation committee strongly believes in setting rigorous performance goals for our long-term incentive awards and limiting after-the-fact adjustments to the underlying performance goals.

 

     

Added First ESG Metrics to our Strategic Performance Metrics for our Annual Bonus Opportunity.    For our 2022 annual bonus program, our leadership development and compensation committee added new ESG and leadership development metrics to our strategic performance objectives. Our 2023 annual bonus program continues to include an ESG metric.

 

We believe including an ESG performance metric in our annual bonus plan structure will help drive accountability for progress on our sustainability goal strategy.

 

     

Added Disclosure of the Strategic Objective Performance Goals Included in our Annual Bonus Opportunity.    We are providing additional disclosure of the performance goals underlying the strategic objectives included in our annual bonus opportunity in response to stakeholder feedback.

 

We believe additional disclosure of the goals underlying each performance objective included in our annual bonus program will better help stockholders evaluate our pay for performance goals.

 

     

Increased the Weighting of the Financial Metrics in our Annual Bonus Opportunity.    For our 2023 annual bonus program, our leadership development and compensation committee increased the weighting of the financial metrics from 60% to 70%, while simultaneously reducing the weighting of the strategic objectives from 40% to 30%. We had reduced the relative weighting of the financial metrics included in our annual bonus program during the COVID-19 pandemic given the difficulty in forecasting our financial performance.

 

Returning our annual bonus program to be more heavily weighted towards financial performance metrics will incentivize our executives to achieve profitable, long-term growth.

 

 

 

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Executive Compensation Program

 

 

The leadership development and compensation committee designed our 2022 compensation program in February 2022 to incentivize, reward and retain leaders who create long-term value for our stockholders. Material components of our 2022 compensation program are included in the chart below.

 

 

  Pay Element  

 

 

 

Form

  

 

2022 Metrics and Objectives*

 

 

2022 Performance Link

 

  Salary

 

  Cash

 

  

N/A

 

 

N/A

 

  Annual   Incentive   Plan   Cash/
RSUs
  

Financial Metrics (60%)

 

   

 

    

 

     

Total Revenue (30%)

 

    

Revenue incentivizes our executives to grow our top line

 

      Adjusted Pre-tax Margin (30%)     

Adjusted pre-tax margin keeps our executives focused on profitable growth and the efficient use of stockholders’ capital

 

         
         
             
  

 

Strategic Objectives (40%)

 

   

 

    

 

  

 

  

 

Meet or exceed cumulative aircraft placement goals through 2024 (20%)

 

 

  

 

Cumulative aircraft placements are directly linked to our long-term financial stability and revenue generation/growth

 

  

 

  

 

Meet or exceed cumulative aircraft utilization goals (10%)

 

 

  

 

Cumulative aircraft utilization keeps our executives focused on maintaining strong lessee relationships and is directly linked to our financial stability and revenue growth

 

  

 

  

 

Leadership Development and Succession Initiatives (5%)

 

 

  

 

Incentivizes development of our small employee base for long-term business stability and continuity

 

            ESG Initiatives (5%)  

 

  

Incentivizes performance on various quantitative and qualitative ESG initiatives tied to the Company’s long-term strategy

 

                  

2022 bonus for our Executive Chairman was paid in RSUs that cliff vest two years from the grant date of February 25, 2023 for an extended vesting period

 

               
               
                   
  Long-Term   Incentive   Plan   RSUs      

 

Book Value (50%)

 

    

Book value is a key value driver of stockholder value

 

      Relative TSR (25%)     

Relative TSR focuses executives on actions that will generate sustainable value creation

 

        Time-based RSUs (25%)     

Time-based RSUs provide a retention incentive

 

*

All 2022 financial metrics and strategic objectives measured on a full-year basis.

 

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Compensation Governance Best Practices

Another important objective of our executive compensation program is to incorporate pay and governance best practices, as highlighted below.

 

What We Do:

 

 

Pay for Performance

 

Double-Trigger Change in Control Provisions

 

Manage the use of equity incentives conservatively with a net equity burn rate of less than 1% in 2022

 

Tally Sheets

 

Robust Stock Ownership Guidelines for Directors and Executive Officers

 

Mitigate Undue Risk

 

Independent Compensation Consultant

 

Annual Compensation Analysis Against Custom Benchmark Group

 

Clawback Policy

 

Annual “Say-on-Pay”

 

Robust Stockholder Engagement Program

What We Don’t Do:

 

  x

Director or Employee Hedging

  x

Executive Officer or Director Pledging

  x

Tax Gross-Ups (except in connection with foreign assignments)

  x

Dividend or Dividend Equivalents on Unvested Equity

  x

Re-Price Stock Options

  x

Pension Benefits (other than 401(k))

  x

Employment Agreements (except in connection with foreign assignments)

  x

Equity awards with less than 1-year vesting

  x

Stock Option Awards

  x

Equity plan evergreen provisions

  x

Guaranteed cash incentives, equity compensation or salary increases for NEOs (except upon death or disability)

  x

Excessive perquisites or other benefits

 

 

Stockholder Advisory Vote Approving Executive Compensation

Consistent with the recommendation of the Board and the majority of votes cast at the 2018 annual meeting of stockholders, our current policy is to provide our stockholders with an advisory vote to approve executive compensation of our NEOs on an annual basis.

At our 2022 annual meeting of stockholders, the advisory vote to approve executive compensation of our NEOs (“compensation proposal”) received the affirmative support of 78% of our stockholders represented at the meeting and entitled to vote on the matter. Our four-year average stockholder support for our executive compensation program is 91%. In evaluating our executive compensation program for 2023, our leadership development and compensation committee considered the voting results for the compensation proposal, the payouts of our annual cash bonus plan and long-term incentive awards for 2022, our stockholder outreach and other factors as discussed in this CD&A. We also note that 100% of the Book Value RSUs and TSR RSUs that were eligible to vest for the 3-year performance period ending on December 31, 2022 were forfeited by our NEOs. Despite the headwinds created during the performance period by the COVID-19 pandemic and Russia’s invasion of Ukraine, our leadership and development committee determined not to make any adjustments to the original performance targets, and our 3-year performance resulted in a 0% payout for these awards. We believe this demonstrates the rigor of our performance-based long-term incentive program.

Compensation Philosophy and Objectives

Our executive compensation program is designed to attract, retain and motivate the highest caliber executives in the aircraft leasing industry by offering a comprehensive compensation program that is attractive enough to entice and retain successful senior executives. We also believe it is important that our compensation program attracts the highly talented executive who is experienced and capable of

 

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managing our significant aircraft fleet with a small team to help drive our profitability. At the end of 2022, we had total revenues of $2.3 billion and 151 employees, resulting in 2022 total revenue per employee of approximately $15.3 million. Our entire compensation expense (for all employees) represented just 3.7% of revenues in 2022, which we believe represents outstanding long-term performance at a very low cost to stockholders.

Our executive compensation program is also designed to reward our executives for contributing to the achievement of our annual and long-term objectives. We set robust goals to align performance-based compensation with the creation of long-term value for our stockholders. We also believe that ownership of our stock is critical to alignment with our stockholders. Our employees and independent directors collectively owned approximately 7% of the Company’s Class A Common Stock as of March 6, 2023.

How We Determine Compensation

Role of the Leadership Development and Compensation Committee.    The leadership development and compensation committee oversees the design, administration and evaluation of our overall executive compensation program. The leadership development and compensation committee also reviews and approves corporate goals and objectives relevant to the compensation of the Chief Executive Officer and the Executive Chairman, evaluates their performance in light of those goals and objectives and recommends to the independent directors of the Board their compensation level based on this evaluation. It also approves the total compensation for the other NEOs. Among other things, the leadership development and compensation committee will at least annually:

 

   

Review and adjust (or recommend adjustments to) each NEO’s compensation in order to ensure an appropriate mix of cash and equity, and an appropriate balance of fixed and at-risk compensation, in light of, among other factors, each individual’s particular role and responsibilities, personal motivations, stock ownership exposure and wealth accumulation.

 

   

Consult with the leadership development and compensation committee’s independent compensation consultant to help ensure that the total compensation paid to each NEO is appropriate in light of our compensation objectives, tax and accounting considerations and compensation best practices. The leadership development and compensation committee and our independent compensation consultant also annually assess the competitiveness of our NEOs’ compensation to determine if adjustments are warranted.

 

   

Consider specific input from stockholders on our executive compensation programs in the design of the next year’s executive compensation program.

 

   

Design annual incentive awards with quantitative factors and qualitative milestones applicable to all our officers that further our overall business objectives and approve award payouts based on performance actually achieved.

Role of Stockholder Input.    To better understand our investors’ perspectives regarding our executive compensation program, we regularly engage in stockholder outreach, including after issuing our proxy statement each year and again ahead of the leadership development and compensation committee meeting each February. The feedback received during this outreach and the changes made to our executive compensation program in response are more fully described in the section titled Stockholder Outreach and Executive Compensation Program Refinements. Over the last several years we made significant changes to our compensation program in response to stockholder outreach. For example, we:

 

   

changed the performance metrics for our NEOs’ annual cash bonus to better incentivize profitable long-term growth;

 

 

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returned our long-term incentive award structure to be 75% performance-based awards, which we had modified during the COVID-19 pandemic;

 

   

changed the structure of our Executive Chairman’s annual bonus for grants made after 2018 so that any bonus earned is paid in RSUs subject to an additional two-year vesting period;

 

   

changed our Book Value RSUs to eliminate one-year performance periods and moved to a three-year performance period to further drive long-term, sustainable book value growth; and

 

   

terminated the ability of our executive officers to participate in our deferred cash bonus plan.

We also worked with our independent compensation consultant to develop a more refined custom benchmark group, which we assess the adequacy of on an annual basis, to ensure that our NEOs’ total direct compensation remains competitively positioned relative to similarly situated executives at companies within the benchmark group. We encourage stockholders to reach out with any questions or feedback related to our compensation program, and we are committed to regular engagement with our stockholders as part of our annual outreach process.

Role of Management.    Neither the Chief Executive Officer nor the Executive Chairman has any role in determining his compensation or the compensation of the other. Moreover, they are not present when their compensation is discussed and approved by the leadership development and compensation committee or the independent members of the Board of Directors. The leadership development and compensation committee determines the overall compensation of our other NEOs with input from our Chief Executive Officer and Executive Chairman. None of our NEOs are present when his compensation is discussed by the leadership development and compensation committee. Our management administers all compensation and benefits programs, subject to the oversight of the leadership development and compensation committee. This delegation to management is strictly limited to implementation of the programs and does not include any discretion to make material decisions regarding the overall executive compensation program.

Role of Independent Compensation Consultant.    The leadership development and compensation committee has engaged Exequity as its independent compensation consultant to provide advice with respect to compensation decisions for our executive officers. Exequity assists in evaluating our compensation objectives, obtaining market information, and designing various aspects of our compensation program. Exequity attends all regular meetings of the leadership development and compensation committee, and committee members have direct access to Exequity without management involvement. Exequity will also consult with our senior executives as directed by the leadership development and compensation committee. The committee has the sole authority to hire and fire the independent compensation consultant. To help ensure impartiality and objectivity, the leadership development and compensation committee requires that the independent compensation consultant provide services only to the committee and not to management, absent specific committee approval. In 2022, Exequity did not perform any services unrelated to its leadership development and compensation committee engagement, including any separate work for our management or employees. The Board of Directors has evaluated the independence of Exequity in accordance with SEC and NYSE rules, and determined that Exequity’s work did not raise any conflicts of interest.

Peer Group and Benchmarking

We operate in a highly-specialized industry in which most of the companies are foreign, private or are subsidiaries of other large companies. For this reason, traditional industry-specific peer group benchmarking is challenging and would produce incomparable data.

 

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Given that we have only one publicly-traded peer, it is equally challenging to find relevant and directly comparable compensation benchmarking data for our industry. Nevertheless, since 2012, Exequity has collected compensation information about similarly sized U.S.-based employers for the leadership development and compensation committee’s consideration derived from the entire S&P MidCap 400 Index. This is the group against which the Company benchmarks relative total stockholder return for TSR RSU performance purposes and reflects comparably capitalized companies regardless of industry affiliation.

Since 2018, the leadership development and compensation committee has used compensation data from a custom benchmark group that the committee reviews and updates, as needed, on an annual basis. The U.S. publicly traded companies included in the custom benchmark group were identified based on analysis comparing key characteristics of the Company’s business, including exposure to real assets, dependence on a highly skilled management team, credit exposure/underwriting expertise, and significant capital expenditures, to the characteristics of traditional and alternative asset managers, specialty finance lenders, insurance companies and REITs (real estate investment trusts). The analysis includes all companies within the Diversified Financial Services Benchmark. A range of REITs were included because of their exposure to real assets, income from lease revenue, highly skilled management teams, large capital bases and significant capital expenditures. The remaining companies included represent an array of asset management and specialty finance firms which the Company believes exhibit in-depth knowledge of their asset classes akin to the Company’s expertise in managing aircraft. Companies such as institutional brokerage firms, information services companies and consumer finance companies were excluded from the benchmark group given the disparity in their business models to aircraft leasing.

 

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For 2022, the leadership development and compensation committee’s custom benchmark group consisted of the following companies (the “Custom Benchmark Group”):

 

2022 Custom Benchmark Group

 

   Company  

Trading
Symbol

 

 

Market Cap
($M)(1)

 

   

Employees(2)

 

    Sector

Affiliated Managers Group, Inc.

  AMG   $ 5,681       250    

Investment Management

 

Artisan Partners Asset Management, Inc.

  APAM   $ 2,017       549    

Investment Management

 

Chimera Investment Corporation(3)

  CIM   $ 1,275       39    

REIT

 

Digital Bridge Group, Inc.

  DBRG   $ 1,749       300    

Investment Management

 

Empire State Realty Trust, Inc.(3)

  ESRT   $ 1,086       667    

REIT

 

Extra Space Storage Inc.(3)

  EXR   $  19,711       4,781    

REIT

 

Federal Realty Investment Trust

  FRT   $ 8,219       314    

REIT

 

Federated Hermes, Inc.

  FHI   $ 3,242       1,961    

Investment Management

 

Franklin Resources, Inc.

  BEN   $ 13,197       9,800    

Investment Management

 

GATX Corporation

  GATX   $ 3,750       1,904    

Financing/Leasing

 

Healthpeak Properties, Inc.

  PEAK   $ 13,704       199    

REIT

 

Host Hotels & Resorts, Inc.

  HST   $ 11,450       165    

REIT

 

Invesco Ltd.

  IVZ   $ 8,182       8,611    

Investment Management

 

Kennedy-Wilson Holdings, Inc.

  KW   $ 2,167       230    

REIT

 

Kilroy Realty Corporation

  KRC   $ 4,520       259    

REIT

 

Sculptor Capital Management, Inc.(3)

  SCU   $ 496       343    

Investment Management

 

W.P. Carey Inc.

  WPC   $ 16,460       193    

REIT

 

Median

      $ 4,520       314      

Average

      $  6,877       1,798      

Air Lease Corporation

  AL   $ 4,260       151    

Financing/Leasing

 

(1)

As of December 31, 2022, from Bloomberg.

(2)

Based on applicable company’s most recent publicly reported information.

(3)

The 2023 Custom Benchmark Group was updated to remove certain size outliers based on market capitalization and to maintain a balanced industry representation. As a result, Chimera Investment Corporation (CIM), Sculptor Capital Management, Inc. (SCU), Extra Space Storage Inc. (EXR) and Empire State Realty Trust, Inc. (ESRT) were removed and H&E Equipment Services, Inc. (HEES), Herc Holdings Inc. (HRI), Janus Henderson Group plc (JHG), and Triton International Limited (TRTN) were added to the 2023 Custom Benchmark Group.

We use the Custom Benchmark group to help assess the Company’s compensation competitiveness for our NEOs and make adjustments as warranted for future years. For 2022 compensation decisions, the leadership development and compensation committee considered data from the S&P MidCap 400 Index and the Custom Benchmark Group provided by its independent compensation consultant, and reviewed compensation practices and program design at the S&P MidCap 400 Index and Custom Benchmark Group to inform its decision-making process so it could set total compensation levels that it believes are commensurate with the relative size, scope and performance of the Company. However, because of the important difference between our aircraft leasing business and the companies included in the Custom Benchmark Group or S&P MidCap 400 Index, our leadership development and compensation committee does not set compensation components to meet specific benchmarks as compared to the Custom Benchmark Group or S&P MidCap 400 Index, such as targeting salaries or total compensation at a specific market percentile. We use this information as a starting point in our compensation review process, to supplement the collective knowledge and experience of our Board of Directors, senior executives and the compensation consultant. Our final compensation decisions continue to be based on

 

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individual performance and guided by what we consider to be the amount and form of compensation that will best enable us to attract, motivate and retain the most talented executives and to focus them on the growth and long-term success of our business.

Risk Management

We believe we have designed an executive compensation program which encourages our executives, including our NEOs, to achieve robust long-term incentive goals and discourages our executives from taking unnecessary risks that could threaten the long-term performance of our Company. We also base our executive rewards on a variety of internal performance measures, as explained below, to avoid an over-reliance on any singular indicator of performance.

Compensation Program Safeguards

 

   

Align NEO compensation with stockholders: We believe the best way to ensure our NEOs’ and other employees’ personal commitment to our long-term goals is to ensure that their financial rewards as stockholders will, over the long term, far outweigh any cash compensation they earn as employees. In this regard, the interests of our NEOs and our stockholders are strongly aligned. Our NEOs as a group, excluding Mr. Chen, beneficially owned approximately 6% of our outstanding Class A Common Stock as of March 6, 2023, and each of our current NEOs has made a meaningful personal investment in our stock.

 

   

Long-Term Incentive Program: 75% of our NEOs’ long-term equity awards for 2022 were tied to performance-based vesting conditions based on book value and total stockholder return metrics, as described in more detail in this CD&A.

 

     

Book Value: 50% of our long-term incentive-based compensation for 2022 was tied to an increase in our book value, and not to metrics that may encourage risk-taking behavior focused on short-term results. Awards tied to an increase in book value only vest if, at the end of three years, the book value performance measure is met.

 

     

Total Stockholder Return: 25% of our long-term incentive-based compensation for 2022 was tied to total stockholder return. Since 2012, a portion of our long-term incentive awards has been based on stockholder returns relative to the S&P MidCap 400 Index. Awards tied to an increase in total stockholder return only vest if, at the end of three years, the performance measures are met.

 

     

Time-Based: 25% of our long-term compensation for 2022 was tied to employee retention. These time-based awards will vest in three annual installments beginning on the first anniversary of the grant date.

 

   

Incentive Awards are Capped: Both our short and long-term incentive opportunities are capped to avoid excessive payouts for unforeseen occurrences.

 

     

Performance-based RSUs that vest based on book value and total stockholder return (TSR) are capped at 200% of target to limit potential payouts even in instances of superior performance.

 

     

The annual bonuses of our Chief Executive Officer and our Executive Chairman are capped at 200% of target.

As an additional safeguard, our Board of Directors also adopted a clawback policy relating to incentive compensation and anti-hedging and pledging policies as described below.

 

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We believe that the above design safeguards align our executive incentives and corresponding payouts with stockholder value creation.

Also, annually, the leadership development and compensation committee, together with its independent compensation consultant, performs a compensation risk analysis of our compensation programs. In addition, the chair of our leadership development and compensation committee reports to, and discusses compensation risk issues with, the full Board of Directors.

Stock Ownership Guidelines

We also believe that our executives’ significant equity ownership in our Company aligns their long-term interests with those of our stockholders. Our Board of Directors has adopted stock ownership guidelines for our executive officers at the level of Executive Vice President or higher. Our Executive Chairman and Chief Executive Officer are each required to own Class A Common Stock equivalents with an aggregate market value equal to six times his annual rate of salary. As shown in the table below, both Mr. Plueger and Mr. Udvar-Házy beneficially own shares of our Class A Common Stock that far exceed their ownership requirements.

 

   

Target Ownership

 

         

Actual Ownership

 

 
   

Multiple of Base
Salary

 

   

Multiple
Expressed in
Dollars

 

         

Multiple of Base
Salary(1)

 

   

Value of Shares
Held by Executive(2)

 

 

John L. Plueger, Chief Executive Officer

    6x     $ 6,000,000         36x     $ 35,786,490  

Steven Udvar-Házy, Executive Chairman

    6x     $ 10,800,000               135x     $ 243,520,185  

 

(1)

Based on 2022 base salary at December 31, 2022.

(2)

Based on the closing price of the Company’s Class A Common Stock on March 6, 2023. Includes Class A Common Stock equivalents held by the applicable officer as of March 6, 2023 as calculated under our stock ownership guidelines.

Each of our other executive officers is required to own Class A Common Stock equivalents with an aggregate market value equal to two times his or her annual rate of salary. All of our executive officers, including NEOs Messrs. Levy, Korde and Willis, each own shares of our Class A Common Stock that exceed this requirement. In addition, our guidelines require executive officers to retain 50% of after-tax profits realized from Company equity incentive awards until ownership guidelines are met. Class A Common Stock equivalents are shares of Class A Common Stock owned personally by an executive officer and shares of Class A Common Stock underlying unvested RSUs that are subject to time-based vesting only. Executive officers have five years from the time he or she becomes subject to the guidelines to achieve the required level of ownership.

Policy Prohibiting Hedging and Pledging

The Company has an anti-hedging policy applicable to our directors and all employees, including our executive officers. These individuals are prohibited from engaging in hedging transactions such as short-term or speculative transactions in the Company’s securities, including our Class A Common Stock or any preferred stock. These transactions include, but are not limited to, prepaid variable forward contracts, equity swaps, collars and exchange funds. The anti-hedging policy applies regardless of whether such Company securities (i) were granted to the director or employee as part of their compensation and (ii) are held directly or indirectly by the director or employee. In addition, directors and executive officers may not pledge their Company securities as collateral for a loan or in similar transactions.

 

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Clawback Policy

In February 2014, our Board of Directors adopted a clawback policy. The policy provides that we will require reimbursement of any incentive payments to an executive officer which were predicated upon achieving certain financial results that were subsequently the subject of a substantial restatement of Company financial statements filed with the SEC, if our Board of Directors determines that the executive engaged in intentional misconduct that caused or substantially caused the need for a substantial restatement of financial results and a lower payment would have been made to the executive based on the restated financial results. In each such instance, we will, to the extent practicable, seek to recover from the individual executive the amount by which the individual executive’s incentive payments for the relevant period exceeded the lower payment that would have been made based on the restated financial results. We are monitoring planned updates to the NYSE listing standards regarding clawback policy requirements and will adopt any changes to our current policy necessary to satisfy updated NYSE requirements when effective.

Elements of the Executive Compensation Program

We have three primary elements of our executive compensation program: annual compensation consisting of base salary, annual performance-based incentive bonuses and long-term equity incentive awards. Their significant performance-based compensation, coupled with their significant ownership of the Company’s equity, aligns each NEO’s interests with the interests of our stockholders.

Annual Compensation

Annual compensation is delivered in cash (or for Mr. Udvar-Házy, a combination of cash and RSUs) with a substantial variable portion at risk and contingent on the successful accomplishment of pre-established performance measures.

Base Salary

Base salary is the main “fixed” component of our executive compensation program, and it is aimed primarily at attracting and retaining the best possible executive talent. The relative levels of base salary for our NEOs are based on the particular responsibilities and expectations associated with each executive’s position. Another factor that we consider extremely important is the experience of each NEO in our industry.

None of our NEOs are guaranteed an annual salary increase. The salaries for Messrs. Plueger and Udvar-Házy have remained unchanged since 2016. For Mr. Udvar-Házy, his 2022 base salary was the only cash compensation he received in 2022, as his 2022 annual bonus was paid in RSUs that are subject to an additional two-year vesting requirement. The base salaries of our other NEOs are determined by the leadership development and compensation committee, with the input of Messrs. Plueger and Udvar-Házy and taking into consideration the objectives and philosophies of our overall executive compensation program, including market information.

 

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We review salaries annually and consider possible merit increases, increases in connection with promotions and changes in responsibilities and market competitive factors. Based on this review, the 2022 base salary percentage changes for our NEO’s compared to 2021 are as follows:

 

 

   NEO

 

  

 

% Increase
compared to 2021  

 

 

Mr. Plueger, Chief Executive Officer and President

     0.00%  

Mr. Udvar-Házy, Executive Chairman

     0.00%  

Mr. Levy, Executive Vice President

     3.66%  

Mr. Korde, Executive Vice President

     4.08%  

Mr. Willis, Executive Vice President and Chief Financial Officer

     5.00%  

Mr. Chen, Former Executive Vice President

     0.00%  

Annual Performance-Based Incentives

Annual performance-based incentives are earned under the terms of our Annual Cash Bonus Plan. All of our current NEOs and other officers are eligible to participate in the Annual Cash Bonus Plan. These annual performance-based bonuses are paid to drive the achievement of key business results for the year and to recognize individuals based on their contributions to those results.

Each year, the leadership development and compensation committee establishes performance metrics and objectives for bonus payments (the “performance measures”). These performance measures are developed taking into account the Company’s applicable fiscal year business plan and its long-term strategy. They also take into consideration expectations regarding the probability of achieving certain performance goals and include “stretch” goals that are supported by the business plan. Performance measures are set at the beginning of the performance period. For 2022, we returned to our historical practice of using a one-year performance period to measure the achievement of all performance measures, which we had temporarily modified during the COVID-19 pandemic because of the challenges the Company faced in forecasting its performance during that time. The leadership development and compensation committee retains the discretion to reduce any NEO’s incentive award otherwise becoming payable on any basis it deems appropriate (such as its assessment of the Company’s performance or the NEO’s individual performance). For 2022, the leadership development and compensation committee used its discretion to reduce the total company performance factor for awards under the annual cash bonus plan from 142% to 130% as described in more detail below under 2022 Performance Measures Results.

The formula for determining annual performance-based bonuses at the end of the year is:

Target Award × Company Performance Factor for the Performance Period × Individual Performance Factor

 

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2022 Performance Measures

In developing the 2022 performance measures, the leadership development and compensation committee selected performance measures that it considers to be important financial metrics that allow for the evaluation of company success across the aircraft leasing landscape, as well as offering the ability to measure growth in our top-line performance and profitability on a year-over-year basis. For 2022, these performance measures included:

 

   Performance Measures(1)    Component
Weighting
   Link to Strategy

Financial Metrics

     

•  Total Revenue

   30%    Incentivizes top line growth

•  Adjusted Pre-tax Margin(2)

   30%    Incentivizes profitable growth and efficient use of stockholders’ capital

Strategic Objectives

     

•  Cumulative Placement of Aircraft through 2024

   20%    Limits future placement risk and provides visibility to future cash flow

•  Cumulative Aircraft Utilization Goals

   10%    Focuses our executives on oversight of lessee credit risk, maintaining strong lessee relationships and maximizes cash flow from our fleet

•  Leadership Development and Succession Initiatives

   5%    Incentivizes development of our small employee base for long-term stability and business continuity

•  ESG Initiatives

   5%    Incentives performance of initiatives tied to the Company’s long-term strategy
(1)

All 2022 financial metrics and strategic objectives measured on a full-year basis.

(2)

As defined and reported in the Company’s financial statements as filed with the SEC.

Key changes from the performance measures utilized in 2021 include:

 

   

Added Leadership Development and ESG Initiative Strategic Objectives. For 2022, the leadership development and compensation committee added new strategic objectives related to meeting certain leadership development and succession initiatives as well as ESG initiatives. These new strategic objectives were 30% weighted based on the achievement of quantitative initiatives and 10% weighted based on the achievement of qualitative initiatives. The committee believes that leadership development is important to the Company’s long-term success given the vast industry knowledge held by its executive officers and its small employee base relative to the value of the assets held by the Company. In addition, by incentivizing management to increase employee engagement initiatives and ESG-related data collection and disclosures, our executives will both satisfy increasing stakeholder interest in receiving certain ESG disclosures while continuing to focus on delivering new aircraft in the replacement market to assist airlines looking to replace aging aircraft with new, modern technology, fuel efficient jet aircraft, which is one of the Company’s core business strategies.

For 2022, the leadership development and compensation committee measured our performance to the performance measures, using a rating scale based on expectations as follows:

 

   

0% - did not meet expectations

 

   

80% - mostly meets expectations

 

   

100% - meets expectations

 

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120% - exceeds expectations

 

   

200% - significantly exceeds expectations

If the Company’s performance on a metric meets expectations, payout is at 100% and if the Company’s performance for that metric significantly exceeds expectations, payout is capped at 200%. Results between the points are interpolated on a linear basis. We believe our interpolation methodology aligns company performance and executive compensation for performance results between the minimum and target performance levels, and between the target and maximum performance levels.

In lieu of Mr. Udvar-Házy’s 2022 annual cash bonus, he was granted a stock bonus award in the form of RSUs on February 25, 2023, the date the amount of his 2022 annual bonus was determined by the leadership development and compensation committee. These RSUs cliff vest on the second anniversary of the date of grant. The number of RSUs was equal to the dollar amount of his 2022 cash bonus divided by the closing price of our Class A Common Stock on the date of grant. The amount of the bonus was determined under the bonus framework described above. We believe denominating our Executive Chairman’s annual bonus in stock instead of cash and requiring an extended vesting period before payment further aligns our Executive Chairman’s compensation with stockholders’ long-term interests.

Goal Setting for 2022 Performance Measures and 2021 Comparison

In developing the 2022 goals for the performance measures, the Company prepared a detailed financial plan for fiscal 2022 that incorporated fleet and orderbook specific assumptions. The Company then integrated those assumptions with the Company’s funding strategies against the backdrop of existing aircraft leasing conditions to create financial and strategic goals that were directly tied to the Company’s existing fleet and orderbook and the broader business objectives for 2022. The leadership development and compensation committee then reviewed and approved the performance metrics at its February meeting.

While our performance measures are generally set at levels that are higher than the performance levels achieved in the prior year, the leadership development and compensation committee will make adjustments if the composition of the Company’s leasing or sales expectations are expected to be different for the upcoming year such that the performance level in the prior year may not accurately reflect the difficulty of achieving the specified level of performance in the current year (for example, because of the impact of lease restructuring agreements or customers on cash basis accounting, changes in lease utilization rates, scheduled lease expirations, increases in interest rates, or the timing of capital expenditures or aircraft sales). In these cases, the leadership development and compensation committee may set performance measure goals at levels that are the same or lower than the performance results achieved in the prior year but at levels that, after taking into account the status of the Company’s fleet and lessees at the start of the performance period, the leadership development and compensation committee believes are comparatively as, or more, rigorous. This was the case with our 2022 pre-tax return on margin, cumulative aircraft placement, and aircraft utilization goals. We adjusted these goals as follows:

 

   

Adjusted pre-tax margin. We lowered our adjusted pre-tax margin target slightly below our actual 2021 results to reflect the impact of COVID-era lease restructurings for which the full effect of these restructurings was expected to have an impact in 2022. Additionally, in 2021 our adjusted pre-tax margin benefitted from the sale of our claims from the Aeromexico bankruptcy, which was a one-time occurrence and not expected to occur in 2022. Our 2022 financial projections also incorporated the expectation of higher interest rates in 2022, as well as ongoing OEM production delays. The Company relies on the debt capital markets to fund its asset growth and refinance existing debt. In a rising interest rate environment, this will result in incremental interest expense which directly impacts our adjusted pre-tax margin. Finally, our 2022 financial projections incorporated the expectation of

 

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ongoing OEM production delays in 2022 and related uncertainty in forecasting capital expenditures due to these delays which we believed would reduce the number of aircraft able to be delivered to our airline customers thus reducing revenue and profitability.

 

   

Cumulative Aircraft Placements. We lowered our cumulative aircraft placement target from actual 2021 results due to large new aircraft orders placed with Airbus and Boeing in the fourth quarter of 2021 and first quarter of 2022. These orders were expected to add over 150 aircraft to our orderbook, which would substantially increase the percentage of cumulative unplaced aircraft. In addition, we also considered the impact of 2022 deliveries on this metric. As each aircraft is delivered, the cumulative placement percentage declines and requires us to proactively place additional forward positions to maintain the same placement level. The cumulative placement percentage of forward orderbook deliveries through 2024 reflected 85 aircraft expected to deliver in 2022. As a result, we believe the metric was appropriately set to incentivize management to proactively manage its forward orderbook positions which is critical to our long-term success.

 

   

Aircraft Utilization. We lowered our aircraft utilization target slightly below actual 2021 results because of the uncertain recovery in global air traffic at the start of 2022 and ongoing geopolitical volatility at the time our 2022 performance metrics were set in early February 2022. International passenger traffic at the beginning of 2022 remained well below pre-COVID passenger traffic, at approximately 25% of 2019 levels. The Omicron variant outbreak at the end of 2021 resulted in new travel rules and negatively impacted both capacity and passenger demand. Because our fleet contains a number of aircraft which are primarily used on international routes, our 2022 utilization targets reflected this uncertainty. In addition, the expectation for heightened geopolitical volatility in 2022 was incorporated into our outlook for utilization. The management team has a track record of delivering a high rate of aircraft utilization and we believe this benchmark was appropriately set to incentivize a continued focus on this metric which is critical to the Company’s success.

 

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2022 Performance Measures Results

In 2022, we delivered strong financial performance in the face of a rapidly rising interest rate environment. Based on the performance factors under the annual bonus program established at the beginning of 2022, the weighted earned payout based on our performance for 2022 (Company Performance Factor) was 142%. However, the leadership development and compensation committee exercised its discretion to adjust the Company Performance Factor down to 130% to reflect challenges associated with 2022. A summary of the 2022 performance measures as well as the related 2022 results are as follows (dollars in millions):

 

 Performance Measure  

2022 Goals

   

2022

Result

(Actual)

       
  Did Not
Meet
    Mostly
Meets
    Meets     Exceeds     Significantly
Exceeds
   

Component

Weighting

   

Weighted  

Payout  

 

Financial Metrics

               

Total Revenue

    $2,139.6       $2,289.6       $2,339.6       $2,389.6       $2,539.6       $2,317.3       30%       27%  

Adjusted pre-tax margin(1)

    22.2%       25.8%       27.4%       28.9%       31.7%       28.5%       30%       35%  

Strategic Goals

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

   

 

 

 

 

 

Cumulative aircraft placements through 2024

    30%       40%       50%       60%       70%       89.8%       20%       40%  

Cumulative aircraft utilization(1)

    90%       93%       95%       98%       99%       99.6%       10%       20%  

Leadership Development and Succession

    0%       50%       100%       150%       200%       200%       5%       10%  

ESG Initiatives

    0%       50%       100%       150%       200%       200%       5%       10%  

Total (Company Performance Factor)

 

   

 

 

 

 

 

    142%(2)  
                   
(1)

Adjusted pre-tax margin and cumulative aircraft utilization are as defined and reported in the Company’s financial statements as filed with the SEC.

(2)

The leadership development and compensation committee exercised its discretion to adjust the total company performance factor down to 130%.

Our revenue performance in 2022 mostly met our 2022 goal. This was primarily driven by the continued growth of our fleet despite ongoing aircraft production delays. Although the net book value of our fleet increased by 7% in 2022, this was below management’s expectations due to aircraft production delays from manufacturers.

Our adjusted pre-tax margin met our target performance level for 2022 due to gains on aircraft sales that exceeded management’s expectations helping offset the impact of OEM manufacturing delays.

Aircraft placements significantly exceeded our 2022 goal due to a strong demand environment for aircraft. The robust recovery in international traffic in 2022 resulted in airlines seeking to accelerate fleet planning decisions to ensure adequate capacity to meet future demand. Additionally, OEM supply chain issues continue to limit aircraft production rates further increasing interest for our orderbook of next-generation, fuel efficient aircraft.

Similarly, our aircraft utilization significantly exceeded expectations in 2022. This outperformance was largely driven by the strong demand environment for aircraft amidst a continued rebound in global passenger traffic.

Finally, for our 2022 annual bonus program, our leadership development and compensation committee added new leadership development and ESG metrics to our strategic performance objectives. We significantly exceeded our leadership development goals, which had a 5% weighting, by (i) implementing

 

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a new performance management program throughout the Company,(ii) establishing a new senior leadership development program to help develop the leadership and management skills of our senior employees and give them exposure to Board members through formal presentations at Board and committee meetings, as well as through informal events, and (iii) enhancing our succession planning process. We also significantly exceeded our ESG goals for 2022, which had a 5% weighting, by (i) preparing and disclosing our Scope 1 and 2 emissions for the first time, (ii) publishing an enhanced third annual ESG report, (iii) increasing our engagement with ESG rating agencies, and (iv) expanding our community involvement programs, in each case to the satisfaction of the leadership development and compensation committee.

2022 Individual Opportunities and Performance Results

Each NEO (other than Mr. Chen who departed before year end) had the opportunity to earn his target award (a percentage of base salary) based on Company performance, as modified by an individual performance factor (determined by the leadership development and compensation committee for 2022 to be between 0% and 120%), based on the achievement relative to individual performance goals. In the case of our Executive Chairman and our Chief Executive Officer, in no event can the award be in excess of 200% of target. We believe this individual performance modifier—which includes 100% downside leverage and only 20% upside leverage—provides the leadership development and compensation committee with the ability to adjust each individual NEO’s bonus opportunity to reflect the individual’s performance during the year.

In considering the individual performance of each of the NEOs, the leadership development and compensation committee took into account, among other things, their individual contributions to leadership within the Company, including their response to the extremely challenging conditions in the aviation industry as a result of Russia’s invasion of Ukraine.

The leadership development and compensation committee recognized our NEOs for the following contributions in 2022: Messrs. Plueger’s and Udvar-Házy’s individual contributions leading the Company to continue growing our fleet and maintaining strong relationships with the Company’s lessees; Mr. Levy’s management of our airframe and engine manufacturing agreements in the face of ongoing delivery delays; Mr. Korde’s contributions within Asia and other critical regions to the Company’s operations; and Mr. Willis’ facilitating strategic financing transactions in the face of high interest rates.

2022 Annual Performance-Based Bonus Results

After evaluating the Company’s performance relative to the guidelines established at the beginning of 2022 and taking into account individual contributions in 2022, the leadership development and compensation committee awarded Messrs. Levy, Korde, and Willis annual cash performance bonuses in the amounts set forth below and the committee approved and recommended, and our independent Board of Directors approved, annual performance bonuses for Messrs. Udvar-Házy and Plueger in the amounts set forth below.

 

   Name    Target
Bonus
     Corporate
Factor
    Individual
Factor
    Actual
Bonus
 

Mr. Plueger

   $   1,500,000        130     100 %(1)    $   1,950,000  

Mr. Udvar-Házy(2)

   $ 2,160,000        130     100 %(1)    $ 2,808,000    

Mr. Levy

   $ 850,000        130     102   $ 1,127,100    

Mr. Korde

   $ 765,000        130     100   $ 994,500    

Mr. Willis

   $ 735,000        130     98   $ 936,390    

Mr. Chen(3)

                        —    
 
(1)

Except for any highly unusual circumstances, the leadership development and compensation committee and our Board of Directors deem that the Individual Factor assigned for our Chief

 

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  Executive Officer and our Executive Chairman will be 100% so that their bonus is the Corporate Factor. The 2022 Corporate Factor was also reduced in the leadership development and compensation committee’s discretion from 142% achieved performance to 130%.

 

(2)

Our Executive Chairman’s 2022 annual bonus is structured so that in lieu of cash he was granted a stock bonus award in the form of restricted stock units (“RSUs”) on February 25, 2023, the date the dollar amount of his 2022 annual bonus was determined. These RSUs cliff vest on the second anniversary of the date of grant. The number of RSUs was equal to $2,808,000 (the dollar amount of his 2022 cash bonus) divided by $42.85 (the closing price of our common stock on February 24, 2023, the last trading day before the grant date). We believe denominating our Executive Chairman’s annual bonus in stock instead of cash and requiring an extended vesting period before payment further aligns our Executive Chairman’s compensation with stockholders’ long-term interests.

 

(3)

Mr. Chen did not receive an annual bonus award as his employment with the Company ended June 30, 2022.

Long-Term Equity Incentive Awards

Philosophy of Awarding Performance-Based Equity Incentive Compensation.    Consistent with our executive compensation objectives, the leadership development and compensation committee believes that an important aspect of attracting and retaining exceptionally talented executives and aligning their interests with those of our stockholders is to provide long-term equity incentive compensation comprised of both performance-based and time-based equity awards. In determining the value of annual long-term equity grants, the leadership development and compensation committee considers the executive’s total compensation, target cash, mix of long-term and short-term compensation and internal guidelines.

On February 25, 2022, we made long-term equity incentive awards to all of our NEOs as part of our planned equity grant cycle. These long-term equity incentive awards were in the form of performance-based Book Value and TSR RSU awards and Time-based RSU awards. These awards were made under our 2014 Equity Incentive Plan. All RSUs awarded in 2022 are denominated in share units, each of which is equivalent to one share of our Class A Common Stock.

Our leadership development and compensation committee established an overall value for each executive officer and applied a mix of 50% Book Value RSUs that vest based on attainment of book value goals, 25% TSR RSUs that vest based on attainment of total stockholder return goals, and 25% Time-based RSUs that vest in three annual installments beginning on the first anniversary of the grant date. The weighting resulted in 75% of each executive officer’s 2022 annual award being comprised of performance-based Book Value RSUs and TSR RSUs, a 10% increase over the performance-based weighting for our 2021 long-term incentive awards.

The leadership development and compensation committee believes that a mix of both Book Value RSUs and TSR RSUs creates a balanced performance-based incentive because the RSUs provide executives with the incentive to steadily increase the book value of the Company while also seeking an overall increase in total stockholder return over a three-year period. In 2022, the committee continued to more heavily weight Book Value RSUs relative to TSR RSUs because it believed that incentivizing the executives to grow our long-term book value per share in a capital-intensive business like ours will lead to value creation for stockholders and create a mix of incentives that we believe will drive long-term performance.

 

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The chart below shows the number of shares of Class A Common Stock underlying the 2022 long-term incentive awards at the time of grant:

 

     Target / Maximum
Number of Book
Value RSUs
     Target / Maximum
Number of
TSR RSUs
    

Number of  

Time-based  

RSUs  

 

Mr. Plueger

 

    

 

55,581/111,162

 

 

 

    

 

27,791/55,582

 

 

 

    

 

27,791  

 

 

 

Mr. Udvar-Házy

 

    

 

38,675/77,350

 

 

 

    

 

19,338/38,676

 

 

 

    

 

19,338  

 

 

 

Mr. Levy

 

    

 

11,190/22,380

 

 

 

    

 

5,596/11,192

 

 

 

    

 

5,596  

 

 

 

Mr. Korde

 

    

 

10,060/20,120

 

 

 

    

 

5,031/10,062

 

 

 

    

 

5,031  

 

 

 

Mr. Willis

 

    

 

9,647/19,294

 

 

 

    

 

4,823/9,646

 

 

 

    

 

4,823  

 

 

 

Mr. Chen(1)

 

    

 

 

 

 

    

 

 

 

 

    

 

—  

 

 

 

   
  
(1)

Mr. Chen did not receive a long-term incentive award as his employment with the Company ended June 30, 2022.

Book Value RSUs.    Book Value RSUs comprised 50% of the 2022 annual award. Because the Company’s business of acquiring and leasing commercial aircraft is capital-intensive, the book value, which is the Company’s assets minus its liabilities, is an important measure of the Company’s value. The degree to which Book Value RSUs vest depends on performance over a three-year measurement period. The number of shares to be received at the end of the three-year performance period, which runs from January 1, 2022 through December 31, 2024, will depend on the growth of our book value per share from the actual book value per share on December 31, 2021 as set forth in the table below. Results between the points in the table will be interpolated on a linear basis.

 

   Required Book Value Growth   

Per Share

Book Value
12/31/2024

    

Applicable  

Payout  

Percentage  

 

20.25%

   $   64.97        200 %  

8.25%

   $ 58.49        100 %  

6.25%

   $ 57.41        0 %  
  

In considering the required book value growth for payouts, the leadership development and compensation committee considered the current challenges facing our industry due to ongoing manufacturer delivery delays. Our book value growth can be impacted by impairments or write downs of our aircraft and increases or decreases in aircraft sales.

TSR RSUs.    TSR RSUs comprised 25% of the 2022 annual award. The degree to which TSR RSUs vest depends on performance over a three-year measurement period. The number of shares to be received at the end of the three-year performance period, which runs from January 1, 2022 through December 31, 2024, will depend on our ranking within the S&P MidCap 400 Index as set forth in the table below. Results between the points in the table will be interpolated on a linear basis.

 

   Actual TSR Percentile Ranking   

Applicable  

Payout  
Percentage  

 

85th or higher

     200 %  

70th

     150 %  

55th

     100 %  

40th

     50 %  

Below 25th

     0 %  
 

 

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The Company’s TSR is the change in price of a share of Class A Common Stock plus accumulated dividends over a specified period of time and is an indicator of management’s achievement of long-term growth in stockholder value. Comparing the Company’s TSR over a specified period of time to index companies’ returns over the same period of time is an objective external measure of the Company’s effectiveness in translating its results into stockholder returns. The committee uses the TSR goals against the S&P MidCap 400 Index as the leadership development and compensation committee believes it represents a broad range of investment alternatives with similar market capitalization as our Company. The committee also believes that tying a portion of our executive compensation to stockholder returns measured against stockholder returns of similarly capitalized companies emphasizes our pay-for-performance philosophy. As previously discussed, we operate in a highly specialized industry with a finite number of other direct comparator companies, many of which are foreign, private or are subsidiaries of other companies. For this reason, traditional industry-specific peer group benchmarking is challenging and would produce incomparable data.

Time-Based RSUs.    Time-based RSUs comprised 25% of the total 2022 annual award. Time-based rewards promote the retention of our talented management team, while still incentivizing a focus on long-term results because the ultimate value of the time-based RSUs is tied to our stock price. These awards vest in three annual installments of 33% on February 25, 2023, 33% on February 25, 2024, and 34% on February 25, 2025.

Vesting of Performance Awards Previously Granted.    The Company’s December 31, 2022 per share book value was $52.27, resulting in the vesting of 0% of the 2020 Book Value RSUs. The Company’s December 31, 2022 total stockholder return over the three-year performance period was 15.2%, placing it in the 23rd percentile of the companies included in the S&P 400 MidCap Index over the performance period, resulting in the vesting of 0% of the 2020 TSR RSUs. Consistent with the Company’s compensation practices throughout the COVID-19 pandemic, we did not make any adjustments to the original per share book value targets to take into account the financial impacts of Russia’s invasion of Ukraine and the related net impact of the write-off of our Russian fleet, which totaled approximately $771.5 million for the year ended December 31, 2022, on our business. We believe these payouts demonstrate the rigor of the long-term performance targets set by the leadership development and compensation commmittee.

 

 

2022 TSR RSU Vesting

(2020-2022 performance)

  

 

2022 Book Value RSU Vesting

(2020-2022 performance)

   

0% vesting

   0% vesting

Other Compensation

Retirement Programs.     We maintain a 401(k) savings plan for our employees and, under the terms of the plan, will make matching contributions in amounts equal to 116% of up to 6% of the contributions made by each NEO.

Benefits and Perquisites.     Our NEOs generally receive the same healthcare benefits as our other employees during the term of their employment. We pay Mr. Plueger’s premiums for a $2.0 million term life insurance policy payable to his beneficiaries and we pay Mr. Udvar-Házy’s premiums for a $5.0 million term life insurance policy payable to his beneficiaries. In addition, we pay the premiums for Messrs. Plueger, Udvar-Házy, Levy, Korde and Willis (and for Mr. Chen through the date of his service with the Company) under our group term life insurance program, in which all of our employees participate.

Personal Use of Company Aircraft.    The Board of Directors adopted a travel policy that requires the Chief Executive Officer and President and the Executive Chairman to use, to the maximum extent practicable, Company-owned aircraft for personal use as well as business travel. In 2022, the incremental cost of Messrs. Plueger’s and Udvar-Házy’s personal use of Company aircraft was approximately $96,298 and $51,080, respectively.

 

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Executive Severance Plan

Under the Air Lease Corporation Executive Severance Plan effective as of February 21, 2017, as amended, Company employees who are senior vice presidents and above, who are designated by the leadership development and compensation committee (or persons appointed by the committee) and who are not party to an individual severance agreement (“Covered Employees”) would generally be entitled to receive severance benefits under the Severance Plan. The committee has designated our executives and senior vice presidents as participants. The Executive Chairman of the Board of Directors and the Chief Executive Officer and President of the Company are not participants because they are each a party to individual severance agreements. The severance benefits are generally conditioned upon execution of a release of claims and continued compliance with non-competition, confidentiality and non-solicitation provisions as set forth in the Executive Severance Plan.

2023 Executive Compensation Program

As described above, in determining 2023 target compensation, the leadership development and compensation committee considered, among other things, data from the S&P MidCap 400 Index and the Custom Benchmark Group for 2023, and then compared the proposed 2023 compensation to 2022 target compensation for each NEO currently employed by the Company. Specifically, the committee analyzed base salary, actual bonus paid, long-term incentive and total compensation. The leadership development and compensation committee also reviewed the mix of pay and compared that to the Custom Benchmark Group for 2023 and S&P MidCap 400 Index. Consideration of this analysis was critical to the committee’s decision to change the design of the 2023 executive compensation program.

Annual Compensation

Base Salary.    The 2023 base salaries for Messrs. Plueger and Udvar-Házy, did not change. The 2023 base salaries for Mr. Levy increased from $850,000 to $875,000, Mr. Korde increased from $765,000 to $785,000 and Mr. Willis increased from $735,000 to $785,000. In determining our NEO’s base salaries, the leadership development and compensation committee considered the market information described above.

Performance-Based Annual Incentives.    Subject to the achievement of key business results for 2023, we plan to pay performance-based annual incentives for 2023 to recognize individuals based on their contributions to those results. The leadership development and compensation committee developed the following 2023 performance-based guidelines for the payment of annual incentive awards to our NEOs:

 

   Performance Measures    Component  
Weighting  

Financial Metrics

   70%

•  Total Revenue

   35%

•  Adjusted Pre-tax Margin(1)

   35%

Strategic Objectives

   30%

•  Cumulative placement of aircraft through 2025

   10%

•  Cumulative aircraft utilization goals for 2023

   10%

•  ESG Initiatives

   10%
(1)

As defined and reported in the Company’s financial statements as filed with the SEC.

For 2023, the leadership development and compensation committee is continuing to include many of the same performance measures as in 2022, but is increasing the weighting of the financial metrics by 10% and reducing the weighting of the strategic objections by 10%.

 

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Mr. Udvar-Házy’s 2023 annual incentive will continue to be paid in a stock bonus award in the form of RSUs that have a grant date value equal to the amount of his incentive earned for 2023 performance, and will cliff vest two years from the date of grant, which will not occur until the amount of the annual bonus is determined in 2024. As a result, Mr. Udvar-Házy’s annual incentive will not be paid in cash. We continue to believe denominating our Executive Chairman’s annual bonus in stock and requiring an extended vesting period before payment further aligns our Executive Chairman’s compensation with stockholders’ long-term interests.

Long-Term Equity Incentive Awards

We made long-term equity incentive awards to each of our NEOs on February 25, 2023 under the 2014 Equity Incentive Plan (the “2023 Awards”). These long-term equity incentive awards were in the form of Book Value, RSUs, TSR RSUs and Time-based RSUs:

 

LOGO   

Book Value RSUs.    These awards comprise 50% of the total 2023 Awards, provide our executives with the incentive to increase the book value of the Company, which is the Company’s assets minus its liabilities, and is an important measure of the Company’s value as a capital-intensive business (acquiring and leasing commercial aircraft). The degree to which the 2023 Book Value RSUs will vest will depend on whether the Company, over a three-year performance period, meets the book value performance measure. The leadership development and compensation committee reset the beginning per share book value for the 2023 Book Value RSUs grants to the actual book value per share on December 31, 2022, so that the Company’s per share book value must increase from December 31, 2022 to December 31, 2025 for the shares to vest at the end of the three-year performance period. The 2023 Book Value RSUs cliff vest at the end of three years.

 

TSR RSUs.    These awards comprise 25% of the total 2023 Awards, provide an incentive for our executives during the same three-year performance period to seek an overall increase in total shareholder return relative to the S&P 400 MidCap Index.

 

Time-based RSUs.    These awards comprise 25% of the total 2023 Award, provide a retention incentive and vest in three annual installments of 33%, 33%, and 34% on February 25th in each of 2024, 2025, and 2026, respectively.

 

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The chart below shows the number of shares of Class A Common Stock underlying the 2023 Awards at the time of grant:

 

   Neo    Target / Maximum
Number of Book
Value RSUs
     Target / Maximum
Number of
TSR RSUs
    

Number of  

Time-based  

RSUs  

 

 

Mr. Plueger

  

 

 

 

60,651/121,302

 

 

  

 

 

 

30,325/60,650

 

 

  

 

 

 

30,325  

 

 

Mr. Udvar-Házy

  

 

 

 

42,941/85,882

 

 

  

 

 

 

21,470/42,940

 

 

  

 

 

 

21,470  

 

 

Mr. Levy

  

 

 

 

11,586/23,172

 

 

  

 

 

 

5,793/11,586

 

 

  

 

 

 

5,793  

 

 

Mr. Korde

  

 

 

 

10,378/20,756

 

 

  

 

 

 

5,190/10,380

 

 

  

 

 

 

5,190  

 

 

Mr. Willis

  

 

 

 

10,287/20,574

 

 

  

 

 

 

5,144/10,288

 

 

  

 

 

 

5,144  

 

 

   
  

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code (the “Code”) generally prohibits a publicly-held company from deducting compensation paid to a current or former NEO that exceeds $1.0 million during the tax year. However, certain amounts payable to executives pursuant to written binding contracts that were in effect on November 2, 2017, including certain awards granted before November 2, 2017, that were based upon attaining pre-established performance measures that were set by the leadership development and compensation committee under a plan approved by our stockholders, may qualify for an exception to the $1.0 million deductibility limit.

As one of the factors in its consideration of compensation matters, the leadership development and compensation committee notes this deductibility limitation. However, the committee has the flexibility to take any compensation-related actions that it determines are in the best interests of the Company and our stockholders, including awarding compensation that may not be deductible for tax purposes. There can be no assurance that any compensation will in fact be deductible. Section 409A of the Code imposes an excise tax on the recipient of certain non-qualified deferred compensation. The committee attempts to structure all executive compensation to comply with, or be exempt from, Section 409A.

The Company accounts for stock-based compensation in accordance with FASB ASC Topic 718, which requires the Company to recognize compensation expense for share-based payments (including stock options and other forms of equity compensation). FASB ASC Topic 718 is taken into account by the leadership development and compensation committee when determining equity-based compensation awards.

Compensation Committee Report

 

 

Management has prepared the Compensation Discussion and Analysis set forth above. The leadership development and compensation committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis with the Company’s management. Based on this review and discussion, the leadership development and compensation committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

Leadership Development and Compensation Committee

Cheryl Gordon Krongard, Chair

Marshall O. Larsen

Susan McCaw

Robert A. Milton

The foregoing report of the leadership development and compensation committee does not constitute soliciting material and shall not be deemed filed, incorporated by reference into or a part of any other filing by us (including any future filings) under the Securities Act or the Exchange Act, except to the extent we specifically incorporate such report by reference therein.

 

2023 Proxy Statement   |  Air Lease Corporation  |  65


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Executive Compensation Tables

 

 

Summary Compensation Table

The following table summarizes compensation paid to or earned by our NEOs during the fiscal years ended December 31, 2022, 2021 and 2020.

 

  Name and principal position   Year    

Salary

($)

    Bonus
($)
    Stock
awards*
($)(1)
    Non-Equity
Incentive Plan
Compensation
($)(2)
    All other
compensation
($)(3)
   

Total

($)

 

 John L. Plueger

 Chief Executive Officer and

 President

 

    2022       1,000,000             5,390,906       1,950,000       201,200       8,542,106   
    2021       1,000,000             5,143,812       2,835,000       170,181       9,148,993   
   

 

2020

 

 

 

   

 

1,000,000

 

 

 

   

 

 

 

 

   

 

4,250,305

 

 

 

   

 

600,000

 

 

 

   

 

143,510

 

 

 

   

 

5,993,815 

 

 

 

 

 Steven F. Udvar-Házy

 Executive Chairman

 

    2022       1,800,000             6,559,177 (4)      (4)      263,275       8,622,452   
    2021       1,800,000             7,593,600 (4)      (4)      299,812       9,693,412   
   

 

2020

 

 

 

   

 

1,800,000

 

 

 

   

 

 

 

 

   

 

3,704,010

 

(4)  

 

   

 

 

(4)  

 

   

 

280,990

 

 

 

   

 

5,785,000 

 

 

 

 Grant A. Levy

 Executive Vice President

    2022       845,000             1,085,433       1,127,100       48,089       3,105,622   
    2021       820,000             935,949       1,549,800       44,960       3,350,709   
   

 

2020

 

 

 

   

 

820,000

 

 

 

   

 

 

 

 

   

 

872,445

 

 

 

   

 

344,400

 

 

 

   

 

44,960

 

 

 

   

 

2,081,805 

 

 

 

 

 Kishore Korde(5)

 Executive Vice President

    2022       760,000             975,833       994,500       37,795       2,768,128   
    2021       732,500             1,032,268       1,389,150       35,165       3,189,083   
   

 

2020

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

 

 

 

   

 

— 

 

 

 

 

 Gregory B. Willis

 Executive Vice President and

 Chief Financial Officer

 

    2022       729,167             935,620       936,390       36,634       2,637,811   
    2021       695,000             1,131,360       1,323,000       34,227       3,183,587   
   

 

2020

 

 

 

   

 

666,667

 

 

 

   

 

 

 

 

   

 

1,046,798

 

 

 

   

 

294,800

 

 

 

   

 

34,227

 

 

 

   

 

2,042,492 

 

 

 

 

 Jie Chen(6)

 Former Executive Vice President and Managing Director, Asia

 

    2022       465,000 (7)            995,864 (8)            4,052,668 (9)      5,513,533   
    2021       930,000             924,376             168,722       2,023,098   
   

 

2020

 

 

 

   

 

930,000

 

 

 

   

 

 

 

 

   

 

989,497

 

 

 

   

 

372,000

 

 

 

   

 

216,887

 

 

 

   

 

2,508,384 

 

 

 

 

 

*

Stock awards consist of RSUs relating to shares of our Class A Common Stock.

 

(1)

Stock Awards:    Except as noted in footnote 4, these amounts represent the aggregate grant date fair value of awards of RSUs granted to our NEOs, computed in accordance with GAAP. Assumptions used in the calculations of these amounts, which do not correspond to the actual value that may be realized by the NEO, are included in Note 12 “Stock-based Compensation” to the financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The value of the full 2022 award for each of Messrs. Plueger, Udvar-Házy, Levy, Korde and Willis at 200% maximum performance for the Book Value and TSR RSUs is $9,530,939, $9,439,951, $1,918,989, $1,725,221, and $1,654,156.

 

(2)

Non-Equity Incentive Plan Compensation:    The amount set forth for each of Messrs. Plueger, Levy, Korde, Willis and Chen represents his annual incentive award for the applicable year. In lieu of Mr. Udvar-Házy’s cash bonus, he was granted a stock bonus award in the form of RSUs on February 25, 2023, the date the amount of his 2022 annual bonus was determined. These RSUs cliff vest on the second anniversary of the date of grant. The number of RSUs granted to Mr. Udvar-Hazy are equal to the dollar amount of his 2022 cash bonus divided by the closing price of our common stock on the date of grant.

 

(3)

Premium Payments:    In 2022, we paid premiums on term life insurance and long-term supplemental disability policies for Messrs. Plueger, Udvar-Házy, Levy, Korde and Willis, in the aggregate amounts of $73,582, $180,875, $16,769, $14,015, and $12,854, respectively.

 

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Table of Contents

401(k) Employer Matching Contributions:    In 2022, we made matching contributions to a 401(k) savings plan that we maintain for our employees of $31,320 for each of Messrs. Plueger, Udvar-Házy, and Levy and $23,780 for each of Messrs. Korde and Willis, in accordance with our policy.

Personal Aircraft Usage:    In 2022, the incremental cost of the personal use of the Company aircraft for Messrs. Plueger and Udvar-Hazy was $96,298 and $51,080 (see disclosure of Messrs. Plueger and Udvar-Házy’s personal use of company aircraft under Compensation Discussion and Analysis—Elements of the Executive Compensation Program—Personal Use of Company Aircraft).

 

(4)

In lieu of Mr. Udvar-Házy’s annual cash bonus, he was granted a stock bonus award in the form of RSUs. These RSUs cliff vest on the second anniversary of the date of grant. For his 2022 annual cash bonus the number of RSUs was equal to $2,808,000 (the dollar amount of his 2022 cash bonus) divided by $42.85 (the closing price of our common stock on February 24, 2023, the last trading day before the grant date). The value of these RSUs is included in the “Stock Awards” column which also includes the value of Mr. Udvar-Házy’s 2022 annual long-term incentive RSUs of $3,751,177.

 

(5)

Mr. Korde became a NEO of the Company based on his compensation for the year ended December 31, 2021. In accordance with applicable SEC rules, only compensation information for the years in which he was a NEO is included in the table above.

 

(6)

Mr. Chen’s employment with the Company ended effective June 30, 2022. Mr. Chen was not a NEO in 2021.

 

(7)

Mr. Chen’s annualized rate of base salary for 2022 was $930,000. The actual salary paid to Mr. Chen for 2022 was $465,000 as his employment with the Company ended effective June 30, 2022.

 

(8)

Consists of the incremental fair value adjustment of $995,864 associated with the modification of vesting of 37,596 shares of Class A common stock, calculated in accordance with ASC Topic 718. The expense recognition of these awards has been accelerated to fully recognize in 2022 rather than over the original vesting periods.

 

(9)

Represents a lump-sum cash severance payment of $3,823,000, $29,721 in COBRA payments, $6,609 in premiums on term life insurance and long-term supplemental disability policies through the date of Mr. Chen’s departure, $11,867 in matching contributions to a 401(k) savings plan that we maintain for our employees through the date of Mr. Chen’s departure, an overseas housing benefit valued at $170,094 in connection with Mr. Chen’s work supporting our activities in Hong Kong through the date of his departure ($80,540 represents the fair market value of housing lease payments made on behalf of Mr. Chen, and $89,554 represents the tax equalization payment for the tax year ending December 31, 2022, according to the terms set out in his employment arrangements), and $11,377 in tax equalization payments in relation to the 2020 tax year and in connection with his position as President of our Hong Kong subsidiary.

 

2023 Proxy Statement   |  Air Lease Corporation  |  67


Table of Contents

Grants of Plan-Based Awards

The following table sets forth information concerning grants of plan-based awards made to our NEOs during the fiscal year ended December 31, 2022.

 

    

    

    

    

    

    

 

    

    

    

    

    

    

   

    

    

    

    

    

    

  Estimated future
payouts under
Non-equity incentive
plan awards
    Estimated future payouts
under Equity incentive
plan awards
   

All Other
Stock
Awards
(#)

 

   

Grant
date
fair
value of
stock
and
option
awards
($)(4)(6)

 

 

 Name

 

 

Grant
date(s)(1)

 

   

Type of award

 

 

Target
($)

 

   

Maximum
($)

 

   

Threshold
(#)(2)

 

   

Target
(#)

 

   

Maximum
(#)(3)

 

 

 

 Mr. Plueger

                 
    Annual Bonus     1,500,000       3,000,000                                
    2/25/2022     Book Value RSU                 19,515       55,581       111,162             2,501,701  
    2/25/2022     TSR RSU                 6,948       27,791       55,582             1,638,332  
    2/25/2022     Time Vesting RSU                                   27,791       1,250,873  

 Mr. Udvar-Házy

                 
    Annual Bonus                       2,160,000 (5)      4,320,000 (5)             
    2/25/2022     Book Value RSU                 13,579       38,675       77,350             1,740,762  
    2/25/2022     TSR RSU