In determining the total direct compensation for each NEO, the Compensation Committee generally considers a number of factors on a subjective basis, including:
Although the Compensation Committee reviews the officers’ compensation relative to the peer group, target compensation is not mechanically set at a particular percentage of the peer group average. An officer’s target compensation may vary from the peer group data for the following reasons:
The Compensation Committee believes that the ultimate decision as to appropriate target compensation for a particular officer should be made based on the full review described above.
The Compensation Committee uses the peer group described below when evaluating the appropriate levels of executive compensation. In determining the peer group composition, the Compensation Committee considers the following elements:
The peer group for 2021 compensation decisions consisted of the companies listed below.
The Compensation Committee regularly reviews the peer group to ensure they remain relevant to our business. While the total capitalization of Prologis and Equinix are beyond the 2x multiple of AvalonBay’s total capitalization, the Compensation Committee decided to retain these companies in the peer group for the following reasons: (i) the impact of COVID-19 has resulted in different financial performance among the various companies in the REIT sector and such impact might be temporary, and (ii) these companies have been in the peer set for the past five years and were not recently added.
The Compensation Committee uses a different peer group for determining performance under the executives’ performance awards. This peer group emphasizes multifamily peers rather than similarly sized companies since the performance metrics—operating performance and shareholder return—are more appropriately compared with direct competitors in our specific sector of the real estate industry.
For the 2021-2023 performance awards relating to three-year relative TSR, we used two indices. The FTSE Nareit Equity Apartments Index represents REITs in the U.S. multifamily housing industry. The FTSE Nareit Equity REITS Index represents a comprehensive group of REITs that spans the U.S. commercial real estate industry, and includes all investment and property sectors other than REITs that have been designated as Timber REITs or Infrastructure REITs.
For the 2021-2023 performance awards relating to operating metrics, the peer group consisted of the following multifamily REITs:
These companies were chosen primarily because they are publicly traded companies in the multifamily industry.
At the beginning of each year, the Board of Directors reviews and approves the Company’s business plan and budget, and management proposes corporate goals for that year for the annual cash bonus program and the multiyear performance program. The Compensation Committee reviews these proposed goals, adopts any revisions it deems appropriate, and approves and recommends the final corporate goals to the full Board of Directors for ratification and approval by a vote of the independent directors. The approved targets are intended to be rigorous, and our annual goals are consistent with our short-term business outlook provided to the investment community and our business plan.
Annual business unit goals are drafted by the head of each business unit and reviewed, modified, and approved by the Chief Executive Officer and presented to the Compensation Committee.
The individual goals for the annual bonus program are determined in a similar manner. The goals for the Chief Executive Officer are determined by the Compensation Committee and ratified by the independent directors of the Board who would qualify for membership on the Compensation Committee. Goals for the other NEOs are determined by the Chief Executive Officer and presented to the Compensation Committee.
At the end of each year, the CEO reviews and reports to the Compensation Committee his assessment of the achievement of the corporate goals for both the annual bonus program and the long-term incentive program, as well as achievement of the business unit and individual goals for the annual bonus programs for the other NEOs. Recommendations for bonus awards and compensation changes for the CEO, and all executive officers, are approved by the Compensation Committee and ratified by the independent directors of the Board who would qualify for membership on the Compensation Committee.
The Compensation Committee has engaged Steven Hall & Partners, an executive compensation consulting firm, to provide general advice regarding trends and changes in executive and Board compensation regulation and governance and their impact on the Company, particularly in light of the Company’s compensation structure and levels, and general commentary regarding the Company’s executive compensation structure, goals and levels. The firm also reviews, and, if appropriate, comments to the Committee on the work prepared by Ferguson Partners Consulting, L.P. (“FPC”), management's consultant. Steven Hall & Partners did not provide any services directly to the Company or management and after review, taking into account relevant factors in accordance with SEC guidelines, the Compensation Committee concluded that no conflicts of interest exist in connection with the services of Steven Hall & Partners to the Committee.
Management uses the services of FPC, another compensation consulting firm, to provide information about competitive pay practices and data that is shared with the Compensation Committee. In 2020 and 2021, an affiliate of FPC provided recruitment services to management and the Board of Directors with respect to potential officer and director candidates. The Compensation Committee considered whether FPC’s work for the Company raised any conflict of interest, taking into account relevant factors in accordance with SEC guidelines, and determined that, in light of the nature of the advisory work that FPC does for the Company and the policies that FPC and its affiliates have put in place to prevent compensation advisor conflicts of interest, the engagement of FPC does not create any material conflict of interest.
With respect to 2021 compensation matters for our NEOs, the Compensation Committee reviewed and approved the following: (i) base salaries, (ii) target cash and stock bonuses, (iii) criteria and metrics for the 2021 annual cash bonuses to be paid in 2022, and (iv) 2021-2023 multi-year performance awards. In February 2021, the Compensation Committee also approved a non-routine supplemental employee stock option award for each officer. These reviews and determinations are discussed below.
The Compensation Committee reviews the executive officers’ base salaries annually by considering the information from the relevant peer group, internal pay equity, and each executive’s position, experience, demonstrated abilities, and level of achievement. In establishing the base salary for each NEO, we determined a reference market rate after considering comparator group company data and evaluated whether that rate should be adjusted up or down based on differences in the scope of the NEO’s position as compared to the scope of comparable positions in the industry and the comparator group companies. The reference market rate is for review purposes only and base salaries are not determined by the reference market rate. Due to the pandemic and other considerations, there were no changes to the NEOs’ base salaries in 2021.
Our annual cash bonus program emphasizes short-term goals. The performance measures we assessed to determine payouts under the 2021 Annual Cash Incentive Program are described below.
Annual Cash Incentive Mix
For each metric, the payout is as follows:
Performance level
|
Payout percentage
|
|
Below threshold
|
No payout
|
|
Threshold
|
50%
|
|
Target
|
100%
|
|
Maximum or better
|
200%
|
|
Payouts for achievement that falls between two performance levels is determined by linear interpolation.
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2022 PROXY STATEMENT |
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Core FFO per Share
Core FFO per share is a key measure of the Company’s performance and is, with some variation among REITs, an industry-wide measure. Due to the uncertainty in 2021 related to the COVID-19 pandemic, the Company provided to the investment community quarterly guidance on Core FFO per share in lieu of full-year guidance. Consistent with that approach, for our annual bonus program the Core FFO per share metric was also measured quarterly rather than annually, with each quarter’s achievement weighted equally. During 2021, apartment fundamentals and Company performance outperformed our quarterly budgets and guidance, and achievement on this metric was 156.3%.
Performance Measure
|
Weight
|
Quarter
|
Threshold
|
|
Target Range
|
Max
|
Actual
|
% of
Payout
|
2021 Quarterly Core FFO
per Share
|
40%
|
1st
|
$
|
1.82
|
$
|
1.86 - 1.94
|
$
|
1.98
|
$
|
1.95
|
125%
|
2nd
|
$
|
1.82
|
$
|
1.86 - 1.94
|
$
|
1.98
|
$
|
1.98
|
200%
|
3rd
|
$
|
1.88
|
$
|
1.92 - 2.00
|
$
|
2.04
|
$
|
2.06
|
200%
|
4th
|
$
|
2.16
|
$
|
2.20 - 2.28
|
$
|
2.32
|
$
|
2.27
|
100%
|
Total
|
156.3%
|
Net Debt-to-Core EBITDAre
EBITDAre is comparable to the more traditional measure EBITDA, but it incorporates adjustments that are specific to real estate companies. Uncertainty related to the pandemic increased the importance of focusing on balance sheet strength and financial stability and flexibility. As a result, we replaced Development Yield, which was a metric for the 2020 annual bonus, with Net Debt-to-Core EBITDAre in 2021.
For the annual cash incentive program, we define Net Debt-to-Core EBITDAre as the straight average of adjusted Net Debt to EBITDAre, calculated on a Last Quarter Annualized (LQA) basis for each of the four quarters during the calendar year. Adjusted Net Debt-to-Core EBITDAre is calculated based on the straight average of the monthly average Net Debt outstanding for each month of the quarter being measured (e.g., the average Net Debt outstanding for January 2021 is the sum of Net Debt as of 12/31/2020 and Net Debt as of 1/31/2021, divided by two), divided by full-quarter Core EBITDAre multiplied by four. This calculation is different from the Company’s earnings release because the net debt is based on the last quarter annualized rather than an average.
GRESB
GRESB is an organization that provides ESG data, scores and benchmarks on the real estate and infrastructure industries. The GRESB score is an overall measure of ESG performance, including commitment, disclosure and implementation. Our ESG goals include Approved Science-Based Targets, reductions in Scope 1, 2 and 3 greenhouse gas emissions, reduction in waste, and increased community investment.
For our 2021 performance, GRESB assigned AvalonBay a score of 85 (out of a possible 100). We believe this score reflects our continued progress on our science-based targets and our public commitment to a low-carbon and renewable energy future. At 85, the Company also outperformed the peer group that GRESB used for the review.
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Customer Satisfaction – Mid-Lease Net Promoter Score (“NPS”) and Online Reputation Sentiment
Mid-Lease NPS
Mid-Lease NPS measures customer feedback from residents who have an active six-month or longer lease agreement and are at the midpoint of that lease term. The NPS is calculated by determining the percentage of responding residents who would promote us (those who gave us a 9 or 10 rating) and subtracting the percentage of responding residents who rated us a 6 or below. Residents are surveyed by an independent third party.
We achieved an NPS of 31 for stabilized communities, which exceeded the top end of our target range by three, resulting in 175.0% of target performance. Key drivers of NPS include: (i) being friendly, helpful and responsive, (ii) keeping our properties clean, (iii) focusing on the safety of our residents, (iv) addressing noise, and (v) timely maintenance service.
Online Reputation Sentiment
Online reputation sentiment measures the average rating of all reviews on all of our communities (including communities in lease-up or undergoing redevelopment) that are written during the calendar year and are still live on Google or Facebook as of the end of the calendar year. This information is monitored and scored by a third party.
Our online reputation sentiment improved from 4.4 in 2020 to 4.6 out of 5.0 in 2021. Our positive online reputation sentiment continued to be driven by the outstanding service of our maintenance teams and the responsiveness of on-site leasing staff through their interactions with prospects and residents.
Qualitative Performance Metrics
The following metrics represent qualitative assessments of AvalonBay’s performance.
Strategic & Corporate Technology Initiatives
Determining our progress on strategic and corporate initiatives requires a qualitative judgment about the Company’s achievement on multi-year corporate investments and projects. Our 2021 strategic initiatives included:
•
Further market penetration, through both acquisitions and new developments, into our recent and new expansion markets. Our expansion markets for this initiative are the Denver, Southeast Florida, Dallas and Austin, Texas, and Raleigh-Durham and Charlotte, North Carolina markets
•
Pursuing mixed-use development through partnerships with shopping mall owners and retailers
•
Penetrating new residential segments such as furnished housing and a limited-service model with simplified living spaces and amenities
•
Implementing value-added product features and services (such as package rooms and smart building)
•
Reimagining our operating model through the implementation of artificial intelligence and digital applications to improve the customer experience and reduce operating expenses
•
Using data science capabilities to implement a single view of a customer over their entire lifecycle with AvalonBay
•
Modernizing our technology infrastructure to improve the customer experience and enable other value-creating initiatives
•
Consolidating all third-party vendors in use for treasury management using new technology to streamline processing and improve working capital efficiencies
•
Developing the compliance infrastructure for employee personal information in accordance with the California Consumer Protection Act
•
Transitioning to a new renter’s insurance product for our residents
We made considerable progress on our market expansion objective through the acquisition of four communities in Texas and North Carolina, marking our entrance into the Dallas and Charlotte metropolitan regions, as well as the addition of two other communities, expanding our presence in Florida and Colorado. We also secured our first development opportunity in North Carolina. We expanded our residential offerings to include on-demand furnished housing and extended our limited-service model to additional communities while also adding new services such as smart access and high-speed, reliable internet at an attractive price to select communities. We designed and developed a new website experience and a new application and leasing experience that is expected to be launched in 2022 and piloted a new mobile maintenance platform that is expected to be fully deployed in 2022. We also deployed a new renter’s insurance product portfolio wide in 2021. Based on the above and progress on other initiatives, the Compensation Committee determined that the achievement on Strategic & Corporate initiatives in 2021 was 115% of target.
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2022 PROXY STATEMENT |
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Effectiveness of Management
This measure considers capital allocation, portfolio allocation, balance sheet management, and associate engagement. During 2021, we increased development activity, started 10 new developments totaling $1.246 billion, and accelerated our asset trading activity significantly by taking advantage of a favorable transaction market to make progress on our portfolio allocation goals through expanded acquisitions in our targeted expansion markets and dispositions from our established legacy regions. Our balance sheet ratios remain strong, and we are well-positioned to pursue growth opportunities or portfolio repositioning through strategic transactions. To ensure associate engagement, throughout the year we provided ongoing communications regarding the Company’s actions to keep employees safe and healthy, offered training and development opportunities, launched a mentorship program and continued to promote and support our associate resource groups, held associate appreciation events, and created a new internal career portal. Based on review and assessment of management’s achievements with respect to the above, the Compensation Committee determined that achievement on this category was 125% of target.
Pandemic Response
This goal addressed our performance and responsiveness with respect to aspects of our business and planning affected by the pandemic, including associate matters (engagement, safety, designing and implementing new protocols, and maintaining associate engagement), property operations (compliance with changing regulations, managing leasing and customer processes, and maintaining leasing volume and customer satisfaction), development and construction (maintaining schedules in light of pandemic related challenges), and finance (maintaining financial flexibility and balance sheet strength).
Our Coronavirus Task Force, formed in 2020 at the outset of the pandemic, met at least weekly throughout 2021 to discuss and implement changes to our Safety Plan, Operating Guidelines, and COVID-related associate policies. We implemented a vaccine mandate for associates (with accommodations for associates with approved medical or religious exemptions), monitored the varied and fluid landlord tenant restrictions created by local and state jurisdictions in response to COVID-19, and adjusted operating practices for restrictions on rent increases, charging of late fees, required payment plans, and changing rules about group access to amenities. We also monitored rent relief programs available through state and local governments to ensure that applications were made. Lastly, we returned to in-office operations at our corporate and regional offices in November 2021 under a new, hybrid work model.
Based on the Company’s response to the developing pandemic environment and adherence to our core values and cultural norms, the Compensation Committee determined achievement at 125% of target for this metric.
Cash Bonus Performance Measures
|
|
Metric
|
Weight
|
Performance
(%
of target)
|
Weighted
payout
|
|
Quarterly Core FFO per Share
|
40%
|
|
156.3%
|
62.52%
|
|
Net Debt-to-Core EBITDAre
|
15%
|
|
134.0%
|
20.1%
|
|
GRESB Score
|
7.5%
|
|
141.7%
|
10.63%
|
|
Mid-Lease NPS
|
3.75%
|
|
175.0%
|
6.56%
|
|
Online Reputation Sentiment
|
3.75%
|
|
170.0%
|
6.4%
|
|
Strategic and Corporate Initiatives
|
10%
|
|
115.0%
|
11.5%
|
|
Effectiveness of Management
|
10%
|
|
125.0%
|
12.5%
|
|
Pandemic Response
|
10%
|
|
125.0%
|
12.5%
|
|
Total Payout
|
100.0%
|
|
|
142.7%
|
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AvalonBay Communities |
40 |
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2022 PROXY STATEMENT |
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Business Unit Component of the Bonus Program
Mr. O’Shea
|
Key Responsibilities:
Mr. O’Shea’s business unit goals were based on the achievements of the Financial Services Group, for which Mr. O’Shea has direct supervisory responsibility. The Financial Services Group includes the areas of corporate responsibility, capital markets, accounting, financial reporting, financial planning and analysis, risk management, tax, internal audit (for which he has administrative oversight), investor relations, and investment fund management, as well as our call center operations, which support our apartment communities.
|
Major achievements of the Financial Services Group in 2021 included:
•
Effectively managed the Company’s 2021 capital plan
•
Provided underwriting support for investment and development with higher levels of starts volume
•
Managed ongoing ESG programs for AvalonBay
•
Successful renewal of insurance programs in a challenging insurance market
•
Effectively performed the Company’s core accounting and financial reporting activities, including analyzing and accounting for the financial impact of the pandemic, elevated levels of uncollectible revenue and the receipt of rent relief from governmental agencies
•
Successfully managed and improved on-site financial administrative functions that are provided through the Company’s centralized shared service center, including managing resident payment plans and higher levels of resident delinquencies related to the pandemic
•
Collaborated internally to implement technology and processes to support our limited service segment (e.g., Kanso Twinbrook) and ongoing strategic initiatives through the Customer Support Operations team
|
For 2021, the overall achievement for Mr. O’Shea’s business unit was determined to be 115% of target.
|
Mr. Birenbaum
|
Key Responsibilities:
Mr. Birenbaum’s business unit goals were based on the achievements of the Investments, Market Research, West Coast Development, Asset Management (including Retail and Design), Construction Support Services and Operations and Investment Services groups, for which Mr. Birenbaum has direct oversight responsibility.
|
Major achievements in 2021 included:
•
Increased development starts activity aided by the overall rental market recovery and a more favorable cost of capital
•
Achieved record transaction volume for the Company, including $725 million of acquisitions in four different regions and $1.0 billion of dispositions
•
Completed an organizational restructuring of the Asset Management function
•
Delivered higher than expected construction and operating sourcing savings through centralized procurement efforts.
•
Commenced the multi-year rollout of community-wide WiFi service to the stabilized portfolio
|
For 2021, the overall achievement for Mr. Birenbaum’s business unit was determined to be 149.6% of target.
|
Mr. Breslin
|
Key Responsibilities:
Mr. Breslin’s business unit goals were based on the achievements of the Residential Services, Marketing, Enterprise Technology, Digital Technology (including Data Analytics), Human Resources and Strategic Initiatives functions, for which Mr. Breslin has direct oversight responsibility.
|
Major achievements of these groups in 2021 included:
•
Greater portfolio NOI relative to the business plan
•
Execution of the initial phase of the Company’s furnished housing strategy, including the expansion of our furnished housing inventory across multiple markets and the development of a new partnership with a leading provider of furnished housing
•
Designed and deployed a new organizational model and related principles with respect to the development and delivery of new digital products
•
Navigated the ongoing health and regulatory protocols related to COVID-19 and the impact on daily operations, while providing key and timely resources to the largest population of associates in the Company
•
Led the planning and execution of the Company’s return to the office protocols and vaccine requirement
|
For 2021, the overall achievement for Mr. Breslin’s business unit was determined to be 123.2% of target.
|
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AvalonBay Communities |
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2022 PROXY STATEMENT |
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Individual Goals and Achievement
Individual goals for officers include the executive’s leadership and managerial performance, as well as specific business-related objectives that are evaluated on a subjective basis annually.
Mr. Naughton
|
Mr. Naughton’s individual goals for 2021 included:
•
Organizational and talent management with respect to executive level succession
•
Leadership of construction and development functions
•
Evaluating the future-state organizational structure and responsibilities for the Asset Management department
•
Positioning the Company to aggressively respond during the early stage of the next apartment cycle
•
Advancing strategic objectives including portfolio management and operating model innovation
Under Mr. Naughton’s leadership, the Company accelerated development start volume, completed the highest level of acquisition volume, reduced our leverage ratio, navigated our operations through a challenging economic and regulatory environment, and continued to be recognized for our leadership in corporate sustainability and workplace matters.
|
Mr. Schall
|
Mr. Schall’s individual goals for 2021 included:
•
Preparing to assume the CEO leadership role for the Company in January 2022
•
Building and retaining an engaged workforce in an ever-challenging pandemic environment
•
Developing effective relationships with shareholders and other stakeholders
•
Advancing key strategic initiatives including expansion into new markets through a combination of development and acquisitions and operating model innovation
•
Maintaining the company’s focus on ESG
|
With Mr. Schall’s leadership, the Company delivered improved financial results, expanded into four new markets, and made significant progress towards our science-based emission reduction targets, and continued to grow our Inclusion and Diversity efforts. Mr. Schall was appointed to the additional role of CEO effective January 3, 2022.
|
Mr. O’Shea
|
Mr. O’Shea’s individual goals for 2021 included:
•
Effective management of the Company’s capital plan, including the issuance of debt and equity, as well as joint venture activity
•
Providing effective oversight of the accounting, financial reporting, financial planning and analysis, risk management, tax, treasury, investment management and corporate responsibility functions
•
Providing oversight of the Company’s shared service center
•
Providing administrative oversight of the Company’s internal audit group
•
Directing the Company’s investor relations efforts
•
Strengthening talent management and leadership development in the Financial Services department
|
Under Mr. O’Shea’s leadership, the Finance team effectively managed the Company’s capital plan, with over $1.7 billion in capital activity, a meaningful decrease in interest expense, and management of debt maturities. Mr. O’Shea also led the Finance team to play an important role in advancing the Company’s goal in entering new markets, engaging in accelerated portfolio allocation, and increasing development activity by conducting strategic analyses and providing underwriting support. Under Mr. O’Shea’s guidance, the Company issued its first two “green bond” offerings and continued to gain momentum in our ESG initiatives.
|
Mr. Birenbaum
|
Mr. Birenbaum’s individual goals for 2021 related to:
•
Finalizing the leadership and organizational structure for the Development, Construction and Asset Management groups
•
Adopting new long-term allocation targets to enable continued growth in established and new markets
•
Determining the structure for efficient capital deployment through new channels
•
Making progress in market and mixed-use expansion
|
With Mr. Birenbaum’s guidance, the organizational structure of the Development and Construction groups was revised, incorporating several planned retirements and the addition of new expansion markets. Long-term portfolio allocation goals were established that reflect the expanded geographic footprint of the Company, and asset trading activity accelerated substantially by taking advantage of a robust transaction market to make progress on these goals. In 2021, Mr. Birenbaum was instrumental in formalizing additional channels for efficient capital deployment.
|
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2022 PROXY STATEMENT |
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Mr. Breslin
|
Mr. Breslin’s individual goals for 2021 included
•
Achieving absolute and relative performance goals for the Company’s portfolio during a volatile operating environment
•
Maintaining an engaged workforce that represented approximately two-thirds of the Company during a pandemic
•
Continuing to execute the strategy for the reimagined operating model, including both digital and non-digital solutions
•
Overseeing the Company’s investment strategy and relationships with venture capital and other firms related to property technology investments
|
Mr. Breslin met or exceeded portfolio performance goals, steered the operating organization through the challenging environment created by the pandemic (including revising operating protocols that impacted associate and customer related processes and experiences), advanced design and development of the new operating model and led the Company’s investments in various venture capital and property technology companies.
|
The individual performance achievement for each the named executive officers was determined to be between 110% and 115%.
Annual Cash Bonus
|
Weight of Each Component (%)
|
Name
|
Corporate
|
|
Business Unit
|
|
Individual
|
|
Mr. Naughton
|
90
|
%
|
—
|
|
10
|
%
|
Mr. Schall
|
80
|
%
|
—
|
|
20
|
%
|
Mr. O’Shea
|
40
|
%
|
40
|
%
|
20
|
%
|
Mr. Birenbaum
|
40
|
%
|
40
|
%
|
20
|
%
|
Mr. Breslin
|
40
|
%
|
40
|
%
|
20
|
%
|
Target Bonus Opportunities and Actual Bonuses
Name
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Actual Cash
Bonus
($)
|
Mr. Naughton
|
1,000,000
|
2,000,000
|
4,000,000
|
2,798,600
|
Mr. Schall
|
750,000
|
1,500,000
|
3,000,000
|
2,057,400
|
Mr. O’Shea
|
375,000
|
750,000
|
1,500,000
|
938,100
|
Mr. Birenbaum
|
450,000
|
900,000
|
1,800,000
|
1,259,280
|
Mr. Breslin
|
450,000
|
900,000
|
1,800,000
|
1,164,240
|
For 2021, Messrs. Naughton’s and Schall’s 2021 annual stock bonus metrics, goals and achievements were identical, as noted below. Annual stock bonuses for Messrs. O’Shea, Birenbaum and Breslin were based on the achievement of their respective business unit goals, as described above.
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2022 PROXY STATEMENT |
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The annual stock bonus for Messrs. Naughton and Schall was based on the following one-year performance measures:
| Performance Measure |
Original
Weight |
Threshold
(Payout 50%) |
Target
(Payout 100%) |
Max
(Payout 200%) |
Actual |
% of Target
Payout |
| Quarterly Same Store Residential Revenue vs. Target |
25% |
 |
Based
on each
quarter |
105.8% |
| Same Store Base Rental Revenue vs. Submarket Composite |
25% |
 |
-0.3% |
100.0% |
| Review and Assessment of Development Completions
Against Plan in Terms of Capital Cost |
10% |
Completion Volume:
Target $1.071 billion versus
Actual $1.070 billion |
100.0% |
| Review and Assessment of Construction
Budget (vs. projection) and Safety* Performance for Full Year Performance |
Budget
10% |
 |
Project
based |
97% |
Safety
5% |
 |
|
177.9% |
| Leadership Effectiveness |
25% |
Effective capital
allocation, strategic & financial planning and
decision making, pandemic response, CEO leadership transition |
150.0% |
| Total |
100% |
|
|
117.5% |
| * |
Safety is measured based on the average of the AvalonBay “safety scorecard” for active construction sites. The
scorecard uses 12 items to rate safety performance. |
These performance measures intentionally do not duplicate the performance measures for the corporate annual cash bonus program to ensure that the CEO and the President focus on all aspects of the Company’s business. Similar to the Core FFO per share metric, for 2021 the same store revenue metric was set and reviewed on a quarterly basis instead of annually due to uncertainty related to the pandemic.
Once the final achievement for the annual stock bonus is determined, the number of shares of restricted stock earned by each NEO is calculated and awarded in February of the year following the performance period. The restricted stock will vest ratably over three years after the grant date as long as the NEO remains employed by the Company through each vesting date. Vesting will be accelerated in the event of a termination due to death, disability, retirement, or termination by the Company without cause.
Annual Stock Bonus (based on business unit performance for NEOs other than Messrs. Naughton and Schall)
Name
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Actual Stock
Bonus
($)
|
Mr. Naughton
|
1,025,000
|
2,050,000
|
4,100,000
|
2,408,750
|
Mr. Schall
|
625,000
|
1,250,000
|
2,500,000
|
1,468,750
|
Mr. O’Shea
|
400,000
|
800,000
|
1,600,000
|
920,000
|
Mr. Birenbaum
|
450,000
|
900,000
|
1,800,000
|
1,346,400
|
Mr. Breslin
|
450,000
|
900,000
|
1,800,000
|
1,108,800
|
Annual stock bonus awards for 2022 will be disclosed in the 2023 proxy statement Summary Compensation Table as they were granted in February 2022.
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Under our multi-year, long-term incentive award program, performance awards are granted each year with a target number of performance units that may be reduced or increased at the end of the three-year performance period depending on achievement against established metrics. For the 2021-2023 performance period, payouts will be determined based on the Company’s performance against two relative TSR metrics and three financial operating metrics, described below. The performance units that are earned at the end of the performance period will be settled in shares of common stock and a cash payment equal to the dividends that would have been earned on that number of shares during the performance period.
The performance awards strengthen the alignment of executive compensation with long-term stockholder value creation. The two indices selected for the relative TSR metric represent the broader REIT industry and the REIT apartment industry, which we believe are complementary investment vehicles for our investors. The operating metrics—Core FFO per share growth, Net Debt-to-Core EBITDA ratio and net asset value (“NAV”) per share growth, each measured relative to the performance of our peers—motivate our officers to focus on critical operating performance objectives that we believe will contribute to sustainable stockholder returns over the long term.
The targets set for the five performance metrics are intended to be challenging. The threshold and maximum goals for the majority of the 2021-2023 performance awards metrics were widened from the prior year’s award to reflect the increased variability and volatility in financial performance in the REIT industry. This increased variability and volatility is attributable to differences between coastal and sunbelt apartment markets and the varying impact of the pandemic on different REIT sectors (e.g., data, retail, apartment, etc.). Achievement of maximum performance levels would require meaningful outperformance over the performance period.
The metrics under the performance awards made in 2021 with a three-year performance period ending on December 31, 2023, are as follows:
2021–2023 Performance Awards
| |
Performance
Level and Payouts(1)
(relative performance stated as percentage points above or below index performance) |
TSR Metrics
(Weighted 50%) |
Threshold
50% payout |
Target
100% payout |
Max
200% payout |
Percent of
TSR Metrics |
| Relative
to FTSE Nareit Equity Apartments Index |
 |
35.0% |
| Relative
to FTSE Nareit Equity REITs Index |
 |
15.0% |
| |
|
|
|
|
| |
Performance
Level and Payouts(1)
(relative performance stated as (i) percentage points above or below average peer
performance(2) or (ii) difference between AVB performance and average peer performance) |
Operating Metrics
(Weighted 50%) |
Threshold
50% payout |
Target
100% payout |
Max
200% payout |
Percent of
Operating Metrics |
| Core
FFO per share growth vs. peers |
 |
20% |
| Net
Debt-to-Core EBITDA ratio vs. peers |
 |
15% |
| Net
Asset Value per share growth vs. peers |
 |
15% |
(1)
For results between threshold and target, or between target and maximum, payouts will be determined using straight-line interpolation. There is no payout for performance below threshold.
(2)
The peers used in calculating the operating metrics are Apartment Income REIT Corp., Camden Property Trust, Equity Residential, Essex Property Trust, Inc., Mid-America Apartment Communities, Inc., and UDR, Inc. Operating metrics for companies that are acquired during the performance period will be factored in for the portion of the performance period that they were publicly traded companies that published operating results. A peer company may also be excluded for a period of time in the case of a business reorganization, merger, split or other transaction after which results are no longer comparable.
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2021–2023 Performance Awards
The target, threshold and maximum number of performance units granted in 2021 that may be earned for the 2021-2023 performance period are shown below.
Name
|
|
2021 – 2023 TSR Metric
|
|
2021 – 2023 Operating Metric
|
Target Dollar
Value
($)
|
Threshold
(#)
|
Target(1)
(#)
|
Maximum
(#)
|
|
Threshold
(#)
|
Target(1)
(#)
|
Maximum
(#)
|
Mr. Naughton
|
5,750,000
|
8,846
|
17,691
|
35,382
|
|
8,846
|
17,691
|
35,382
|
Mr. Schall
|
3,750,000
|
5,769
|
11,538
|
23,076
|
|
5,769
|
11,538
|
23,076
|
Mr. O’Shea
|
1,200,000
|
1,846
|
3,692
|
7,384
|
|
1,846
|
3,692
|
7,384
|
Mr. Birenbaum
|
1,350,000
|
2,077
|
4,154
|
8,308
|
|
2,077
|
4,154
|
8,308
|
Mr. Breslin
|
1,350,000
|
2,077
|
4,154
|
8,308
|
|
2,077
|
4,154
|
8,308
|
(1).
To derive the target number of TSR Metric units and the number of Operating Metric units, 100% of the target dollar value was divided by the 20-day average closing stock price ending on December 31, 2020, of $162.5075. For the Summary Compensation Table, the value of the TSR Metric target units was determined using a Monte Carlo value of $213.16 for each unit, and the value of the operating metric units was determined based on the closing stock price on the grant date on February 25, 2021 of $180.32. The shares of stock that may be issued upon settlement of awards are not subject to further additional time vesting requirements and will be delivered together with a cash payment representing the dividends that were paid on the number of earned shares during the performance period.
|
Settlement of 2019–2021 Performance Awards
Our 2019–2021 Performance Awards were structured similarly to the 2021–2023 Performance Awards, with a focus on TSR metrics and operating metrics, but some of the specific metrics and weightings were not the same.
TSR Metrics
(Weighted 59.04%) |
Weight |
Threshold |
Target |
Max |
%
of Target Payout |
| Absolute
3-yr TSR(1) |
25% |
 |
200.0% |
AvalonBay 3-yr TSR vs.
Nareit Equity REIT Index |
25% |
 |
90.4% |
AvalonBay 3-yr TSR vs.
Nareit Apt Index |
50% |
 |
— |
| TSR Metrics % |
100% |
|
|
|
72.6% |
| |
|
|
|
|
|
Operating Metrics
(Weighted 40.96%) |
Weight |
Threshold |
Target |
Max |
%
of Target Payout |
3-yr Core FFO per share growth
vs.
Peers |
66.7% |
 |
50%* |
3-yr Net Debt-to-Core EBITDA
vs.
Peers |
33.3% |
 |
118.0% |
| Operating Metrics % |
100% |
|
|
|
72.7% |
Final Achievement %
(weighted by units) |
100% |
|
|
|
72.6% |
| * |
Although our performance in the Core FFO/share growth metric came in at 27 basis points below threshold, for the reasons explained
in the text accompanying the graphic, the Compensation Committee determined that a finding of threshold achievement was appropriate. |
| (1) |
As disclosed in last year’s proxy statement, starting with the 2020–2022 Performance Awards, we replaced the absolute
three-year TSR metric with three-year relative NAV/share growth against multi-family peer companies. |
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Sixty percent of each NEO’s total performance award target value was tied to the TSR metrics identified above and 40% of the award target value was tied to the operating metrics identified above. However, because we used the Monte Carlo value of a unit to calculate the number of target performance units tied to TSR metrics and the actual stock price to calculate the number of target performance units tied to operating metrics, the actual total number of units awarded reflected 59.04% based on the TSR metrics and 40.96% based on the operating metrics.
Although the 3-year Core FFO per share growth vs. peers resulted in below threshold performance at -3.27%, the Compensation Committee exercised discretion to provide for threshold achievement on that metric. The Compensation Committee believes that such discretion should be used only in very unique circumstances. In making this decision, the Committee considered that the impact on consumers, consumer preferences, and regulatory responses resulting from the COVID-19 pandemic varied markedly and unexpectedly by region and market, making the original range for measuring relative performance versus peers in other markets less appropriate. As well, the Committee recognized that the calculation of Core FFO among companies varies, such that applying below threshold achievement because of a narrow 27 basis point miss was inappropriate, particularly given the level of effort by officers to respond to and address the challenges of 2020 and 2021 and the competitive market for retaining senior talent. As a result of setting achievement on the Core FFO/share growth at threshold rather than below threshold, the total (combined) achievement on the 2019-2021 award was 72.6% rather than 59.0%. As this use of discretion was applied in 2022, the impact of the adjustment will be reflected in the Summary Compensation Table and Grants of Plan-Based Awards Table in our 2023 proxy statement.
The following table shows the actual performance units earned at the completion of the three-year performance period ended December 31, 2021. These awards were settled in unrestricted shares of stock.
Name
|
Target Number of
Performance Units
|
Overall Performance
Achievement
Awarded (%)
|
Actual Number of
Performance
Units Earned
|
Cash Dividend
Equivalent Paid Based
on Earned Units ($)
|
Total Dollar Value of
Earned Perf Units
|
Mr. Naughton
|
27,903
|
72.6
|
20,270
|
$381,076
|
$5,167,634
|
Mr. Schall*
|
--
|
--
|
--
|
--
|
--
|
Mr. O’Shea
|
5,680
|
72.6
|
4,126
|
77,569
|
1,051,882
|
Mr. Birenbaum
|
6,427
|
72.6
|
4,668
|
87,758
|
1,190,060
|
Mr. Breslin
|
6,427
|
72.6
|
4,668
|
87,758
|
1,190,060
|
*
Mr. Schall did not receive 2019-2021 performance awards as he joined the Company in January 2021.
|
In early 2021, our Compensation Committee granted a supplementary award to officers to encourage retention, engagement and consistency of management during a period of uncertainty created by both the announcement of a planned CEO leadership transition and challenging pandemic-impacted business climate. The Compensation Committee also considered that Mr. Schall was an external hire and was the first outside hire for the CEO role in the Company’s history. The awards are focused on maintaining stability and retaining important institutional knowledge, which is necessary to facilitate our leadership team’s execution of the Company’s strategic goals.
After review and analysis, the Compensation Committee approved, and the independent directors on the Board of Directors who qualify for service on the Compensation Committee ratified, a non-routine supplementary stock option award to each officer (other than Mr. Schall) with an exercise price equal to the closing price of our common stock on the award date (February 25, 2021) and with cliff vesting on March 1, 2023. The value of the supplementary stock options awarded to the NEOs (based on the Black-Scholes value of the options) was approximately 18.5% of the 2021 target total compensation for Mr. Naughton and an average of 12.9% for the other NEOs who received options. These options will be forfeited if the officer’s employment or other business relationship terminates prior to the March 1, 2023 vesting date except in the case of death, disability or termination without cause.
The supplementary stock option grant amounts for the NEOs are shown below.
Name
|
No. of Shares Underlying
Stock Options Granted (#)
|
Black-Scholes Value
$
|
Mr. Naughton
|
69,832
|
1,999,988
|
Mr. Schall
|
--
|
--
|
Mr. O’Shea
|
13,966
|
399,986
|
Mr. Birenbaum
|
17,458
|
499,997
|
Mr. Breslin
|
17,458
|
499,997
|
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The following chart shows one of the ways our Compensation Committee evaluated compensation paid to the NEOs for service and performance with respect to 2021. This chart differs from the Summary Compensation Table, which includes several items that are driven by accounting and reporting requirements that do not necessarily reflect the compensation actually realized by the executives during or with respect to 2021. The primary difference between this supplemental table and the Summary Compensation Table is the timing and method used to value multi-year performance award units and stock awards.
SEC rules require that the grant date fair value of all performance award units and stock awards be reported in the Summary Compensation Table in the row for the year in which they were granted, regardless of the year for which the awards were made or the year the awards will pay out. As a result, a significant portion of the total compensation for 2021 reported in the Summary Compensation Table relates to restricted stock awards granted in early 2021 for performance in 2020 and performance awards for the 2021–2023 performance cycle. The actual awards for the 2021-2023 performance cycle will not be determined until the performance period ends, so the value of these awards is uncertain (and may end up being $0).
In contrast, the chart below illustrates the actual value of the restricted shares received by each NEO for service and performance in 2021 and the actual cash and the value of unrestricted shares received by each NEO for the 2019–2021 maturing performance period. As a result, these amounts differ substantially from the amounts determined under SEC rules and reported in the Summary Compensation Table. This chart is not a substitute for the Summary Compensation Table.
Realized Pay for 2021 Performance
1.
The NEOs did not receive a base salary increase in March 2021 and therefore their base salary earnings were equal to the target base salary. Mr. Schall started with the Company on January 25, 2021 and his base salary earnings are slightly lower than his annual base salary rate.
2.
Cash bonus reflects the cash awards made in February 2022 with respect to performance under the annual cash bonus program in 2021 in the following amounts: Mr. Naughton - $2,798,600, Mr. Schall - $2,057,400, Mr. O’Shea - $938,100, Mr. Birenbaum - $1,259,280, Mr. Breslin - $1,164,240.
3.
2021 earned annual stock bonuses in the following amounts: Mr. Naughton - $2,408,750, Mr. Schall $1,468,750, Mr. O’Shea - $920,000, Mr. Birenbaum - $1,346,400, Mr. Breslin - $1,108,800. (These bonuses were in the form of time-based restricted stock issued in February 2022 and will be reflected in the 2023 proxy statement).
4.
Target value reflects the dollar value used by the Company to determine the number of 2019 – 2021 performance award units granted to the officer. Earned 2019–2021 performance awards (unrestricted shares and a dividend equivalent cash payment on those shares) were in the following amounts: Mr. Naughton - $5,167,634, Mr. O’Shea - $1,051,882, Mr. Birenbaum - $1,190,060, Mr. Breslin - $1,190,060.
5.
Reflects grant date fair value of the one-time supplemental stock options in both target and realized values.
6.
Cash sign-on bonus of $1,500,000 and stock sign-on bonus of $4,575,384 awarded on February 1, 2021.
The realized long-term incentive amounts were calculated using a price of $236.14 per share, the closing price of the Company’s common stock on the NYSE on February 17, 2022.
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Aligning 2020-2022 Performance Goals with 2021-2023 Performance Awards
For the 2021-2023 performance awards that were granted in early 2021, at the time of grant the Compensation Committee widened the ranges of four of the metrics from the prior years to take into account that the impact of the pandemic on consumers, consumer preferences, and regulatory responses varied markedly and unexpectedly by region, market and real estate asset class, making the original ranges for measuring threshold and maximum performance too narrow. These ranges were incorporated again for the 2022-2024 performance awards.
In early 2022, the Compensation Committee determined that it was appropriate to align the ranges of the 2020-2022 performance awards, which were granted in February 2020 before the beginning of the full impact of the pandemic in the United States. After alignment, the new ranges for the 2020-2022 performance awards align with the 2021-2023 and 2022-2024 awards. The metrics and targets remain unchanged, but the ranges for four of the metrics were widened by 100 basis points on both ends of the threshold and maximum range as described in more detail below.
•
For the relative Total Shareholder Return to FTSE Nareit Equity REITs index, the threshold and maximum goals were widened from -/+5.0% to -/+6.0%
•
For the relative Total Shareholder Return to FTSE Nareit Equity Apartments index, the threshold and maximum goals were widened from -/+3.0% to -/+4.0%
•
For the Core FFO per share growth vs. peers, the threshold and maximum goals were widened from -/+3.0% to -/+4.0%
•
For the Net Asset Value per share growth vs. peers, the threshold and maximum goals were widened from -/+3.0% to -/+4.0%.
No change was made to the threshold and maximum goals for the Net Debt-to-Core EBITDA ratio vs. peers metric. As the determination to modify the award was made in early 2022, the incremental fair value associated with the modification will be reflected in the Summary Compensation Table and Grants of Plan-Based Awards Table in the 2023 proxy statement. The Compensation Committee believes that changes to goal ranges should be made only in unique circumstances. As noted above, the impact on consumers, consumer preferences and regulatory responses resulting from the COVID-19 pandemic varied markedly and unexpectedly by region, market, and real estate asset class. Pandemic-related effects included decreased apartment demand in major urban cities and a shift towards suburban and sunbelt markets, as well as state and local restrictions on rent increases and evictions that had less impact on many sunbelt markets where the Company has only limited presence. For these reasons, the Compensation Committee determined that it was appropriate to align the ranges for the 2020-2022 performance award with the ranges for the 2021-2023 and 2022-2024 awards. As noted previously, no modification was made to the 2020-2022 metrics themselves nor the target goals.
By widening the ranges for four metrics, while retaining the same target goals, it becomes more difficult to achieve maximum performance on those metrics but less difficult to achieve performance that is above threshold. Overall, based on performance for the first two years of the 2020-2022 performance award, mid-flight performance achievement was below target but above threshold both before the change (29.1%) and after the change (58.4%). There can be no assurance what overall achievement will be upon completion of the full three-year performance period.
Pursuant to our Deferred Compensation Plan, certain employees, including the NEOs, may defer up to 25% of annual base salary and up to 50% of annual cash bonus on a pre-tax basis and receive a tax-deferred return on those deferrals. Deferral elections are made by eligible employees during an open enrollment period each year for amounts to be earned in the following year. Participating employees direct the deemed investment of their deferral accounts by selecting among certain available investments in mutual funds.
We have an employee stock purchase plan that provides our employees the opportunity to purchase our common stock at a 15% discount to the lower of the closing price of the common stock, as reported on the NYSE, on the first business day of the purchase period or the closing price of the common stock on the last day of the purchase period. There were two purchase periods in 2021: January 1 through June 10 and July 1 through December 10. Employees had the opportunity to purchase up to $12,500 of our common stock at the discounted rate during each of the two purchase periods.
We maintain a 401(k) retirement savings plan and match 50% of the contributions up to the first six percent of a participant’s eligible compensation (subject to certain tax limitations). We offer medical, dental and vision insurance plans, with a portion of the cost paid by the employee. We also provide life insurance, accidental dismemberment insurance, and short-term and long-term disability insurance for each employee.
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Executive Stock Ownership Guidelines
The Company believes it is important for senior officers to hold Company stock. To that end, the Board has established the Senior Officer Stock Ownership Guidelines for officers who are at the senior vice president level or above. These guidelines provide that the following classes of senior officers are expected to maintain ownership of common stock (including unvested restricted shares) equal to the indicated multiple of base salary.
|
|
Chairman of the Board, CEO and President
|
6 times
|
Chief Financial Officer and Executive Vice Presidents
|
3 times
|
Senior Vice Presidents
|
1.5 times
|
Covered officers must achieve the required ownership within five years of the date they become subject to these guidelines. The full text of the Senior Officer Stock Ownership Guidelines, which includes a retention policy for executives who have not achieved the required ownership level, is posted on the Investor Relations section of the Company’s website (www.avalonbay.com) under “Corporate Governance Documents.” All of our covered executives who have been in office for at least five years are in compliance with the stock ownership guidelines.
The Board has adopted the following Anti-Hedging and Anti-Speculation Policy, which applies to all officers, employees, and directors:
“Associates (including officers) and members of the Board of Directors of AvalonBay Communities, Inc. (the “Company”) may not, directly or indirectly (including, without limitation, through trading done by immediate family members sharing the person’s household and/or not financially independent of such person or through trading done through an account over which the person has investment power or authority):
1.
Sell Company equity securities short (i.e., sell Company equity securities that are not owned by the seller at the time of sale).
2.
Buy or sell securities or financial instruments that are derivatives of Company equity securities, including, without limitation, puts, calls, futures contracts and options (other than receiving employee stock options under the Company’s Stock Incentive Plan).
3.
Purchase financial instruments or engage in other transactions for the purpose of speculating in Company equity securities, including, without limitation, financial instruments and transactions designed for the purpose of providing the economic equivalent of profiting from a change in the value of Company equity securities.
4.
Purchase financial instruments or engage in other transactions for the purpose of hedging or offsetting a decrease in the price of Company equity securities, including, without limitation, prepaid variable forward contracts, equity swaps and collars.”
The Board has also adopted the following No Pledging Policy:
“No officer and no member of the Board of Directors of AvalonBay Communities, Inc. (the “Company”) may, directly or indirectly (including, without limitation, through accounts owned by immediate family members sharing the person’s household and/or not financially independent of such person or through trading done through an account over which the person has investment power or authority), purchase Company equity securities on margin, hold Company equity securities in a margin account, or borrow money from a broker or other lender that is secured by Company Securities.”
The Board has adopted a Policy Regarding Shareholder Approval of Future Severance Agreements (the “Severance Policy”). The Severance Policy generally provides that the Company will not, without stockholder approval or ratification, enter into or bind the Company to the terms of any severance agreement with a senior executive officer that provides for severance benefits (as defined) in excess of 3.0 times the sum of the officer’s base salary plus annual bonus. The full text of the Severance Policy is posted on the Investor Relations section of the Company’s website (www.avalonbay.com) under “Corporate Governance Documents.”
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The Board has adopted a compensation clawback policy, which applies to senior officers (generally senior vice presidents and above). Pursuant to this policy, in the event the Company is required to prepare an accounting restatement due to material non-compliance with any financial reporting requirement, then an independent committee of the Board of Directors may require any covered officer to repay to the Company all or part of any “Excess Compensation” that such officer previously received. Excess Compensation is defined as that part of the incentive compensation received by a covered officer during the three-year period preceding the publication of the restated financial statement that exceeded the amount such officer would have received had such incentive compensation been calculated based on the financial results reported in the restated financial statement. The full text of the policy is posted on the Investor Relations section of the Company’s website (www.avalonbay.com) under “Corporate Governance Documents.”
The Compensation Committee determines the number of shares underlying options or the number of shares of restricted stock to award to officers as part of the annual compensation. Those members of the Board of Directors who would qualify for service on the Compensation Committee review and ratify these awards for executive officers at the Board’s regularly scheduled February meeting. The award date for options and stock grants is generally the date of ratification, but that date may be delayed if there is a pending announcement by the Company of material non-public information, such as an earnings release. In all cases, our options are granted: (i) on the date described above; (ii) on the date of (or a date set in connection with) a new employee’s start with the Company, as approved by the Chief Executive Officer or the Board of Directors in advance of the start date; or (iii) on the date of approval by the Chief Executive Officer for retention or recognition purposes (under his delegated authority to grant equity awards to certain employees of up to a Board-authorized maximum value of $250,000). Option exercise prices are equal to the NYSE closing price of our common stock on the date of grant.
All officers must receive prior authorization for any purchase or sale of our common stock (unless made pursuant to a previously approved Rule 10b5-1 plan, by automatic dividend reinvestment, or through our employee stock purchase plan), which, in the case of open market transactions, is generally only given during approved trading windows that are generally established in advance based upon earnings release dates.
The Compensation Committee reviewed and considered risks arising from the Company’s compensation policies and practices for its employees. This review included consideration of the following specific elements of the Company’s executive compensation policies and procedures:
•
preexisting, defined goals are set for annual bonuses and long-term incentive awards;
•
annual goals contain multiple financial targets, including performance against a pre-approved budget;
•
performance goals include both absolute performance and performance relative to industry peers;
•
annual goals balance financial and non-financial performance;
•
incentive plans incorporate goals for corporate, business unit, and individual performance;
•
performance goals include achievement against both single year and multi-year metrics;
•
executive compensation is structured as a mix among salary, cash bonus, and equity awards;
•
equity awards vest over time with a minimum vesting period of one year;
•
bonus and long-term equity programs include maximum achievement levels;
•
all unvested equity awards are forfeited upon a termination for cause or voluntary termination under certain circumstances;
•
the metrics that determine our incentive awards include a goal addressing appropriate leverage ratios; and
•
while awards are generally made in relation to performance against specific goals, the Compensation Committee retains the discretion to adjust annual bonuses of cash and restricted stock as may be warranted by specific circumstances.
Following this review, the Compensation Committee concluded that any risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company at this time.
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