UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Hersha Hospitality Trust
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Supplemental Information for 2023 Annual Meeting of
Shareholders
Introduction
Dear Fellow Hersha Shareholder:
We are writing to ask you for your support by voting in accordance
with the recommendations of our Board of Trustees on all of the
proposals and election of all Trustees included in our 2023 Proxy
Statement, which was filed on April 13, 2023. In particular, we are
requesting your vote
FOR
Proposal 4, to amend our 2012 Equity Incentive Plan (“Equity
Incentive Plan”) which has been depleted (see our “Equity Incentive
Plan is Depleted” on page 4). A vote
FOR
Proposal 4 will allow the continued use of the Company’s equity as
an essential part of our compensation programs, a key tool in
promoting further alignment with our shareholders.
We are pleased that Institutional Shareholder Services (“ISS”) has
recognized the enhancements we have made to our compensation
programs, which were the result of conversations with our investors
(see “We are Engaging with Investors and Enhancing our Compensation
Practices” on page 7), and has recommended a vote
FOR
proposal 2, the annual vote on compensation paid to our Named
Executive Officers (“NEOs”). However, we are disappointed that ISS
recommended a vote AGAINST the amendment to our Equity Incentive
Plan in Proposal 4.
We maintain a compensation program that is more equity-focused than
the majority of our peers
and each of our NEOs have elected to receive
ALL
of their cash incentive compensation in the form of equity for the
past 6 consecutive years.
We have demonstrated an appropriate and effective use of equity and
it is a cornerstone of our compensation program
(see “Use of Equity Aligns Compensation and Performance” on pages
5).
Thank you for your continued support,
COMPENSATION COMMITTEE OF THE BOARD OF TRUSTEES OF HERSHA
HOSPITALITY TRUST
Thomas J. Hutchinson (Chair), Jackson Hsieh, Michael A. Leven,
Dianna F. Morgan, and John M. Sabin
Compensation Plan Designed to Create Value
Our Equity Incentive Plan is Depleted
■As
of March 31, 2023 there are only 24,160 common shares available
under the 2012 Plan. Unless the plan amendment is approved by
shareholders, the company will only be able to compensate its CEO
and other NEOs with cash, which is not in the long-term interest of
the Company
■The
Board of Trustees believes that the 2012 Equity Incentive Plan (the
“2012 Plan”) is instrumental in recruiting and retaining the
services of highly talented individuals by enabling such
individuals to participate in the future success of the
Company
■The
Board of Trustees also believes that Equity Awards have strongly
aligned the interests of those individuals with the interests of
the Company and its shareholders
■On
April 13, 2023, the Board of Trustees amended the 2012 Equity
Incentive Plan, subject to the approval of shareholders, in order
to continue the Company’s ability to grant Awards under the 2012
Plan. If approved by shareholders, the Amendment
will
◦Increase
the aggregate number of common shares that may be issued by
3,000,000 shares (thereby increasing the aggregate share
authorization to 11,875,000 shares)
◦Extend
the expiration date from April 16, 2031 to April 16,
2033
◦Update
the effective date of the 2012 Equity Incentive Plan
Use of Equity Aligns Compensation and Performance
■Shareholder
alignment
has always been and continues to be an important cornerstone of the
Company’s compensation philosophy
◦For
the
6th CONSECUTIVE YEAR,
100% of our NEOs elected to take 100% of their cash bonuses in
equity, subject to additional two-year vesting
◦84%
of CEO potential target compensation and
81%
of all other NEO potential target compensation is settled in
equity
–If
shareholders do not approve the plan amendment, virtually all CEO
and NEO compensation for 2023 will be in cash and not subject to
longer-term risk
Our Executive Alignment is Delivering Results
We are Engaging with Investors and Enhancing our Compensation
Practices
■Entering
2021 and like that of nearly all hotel REITs, the COVID-19 pandemic
had lingered, which resulted in very low visibility and outlook for
the year; consequently, establishing rigorous quantitative goals
was not feasible
■In
2022 as the recovery continued we reverted back to our pre-covid
compensation plan and set about rigorous quantitative metrics for
over 80% of the compensation plan
■The
Compensation Committee Chair and other members of the Compensation
Committee engaged in stockholder outreach.
2023 Executive Transition and Lowered Target
Compensation
■On
January 1, 2023, upon the retirement and resignation of Mr. Hasu P.
Shah from his position as Chairman of the Board, the Board of
Trustees:
■Appointed
Mr. Jay H. Shah as Executive Chairman of the Board and he departed
his position as Chief Executive Officer.
■Promoted
Mr. Neil Shah to President and Chief Executive Officer. Mr. Neil
Shah will continue to serve as the Company’s Chief Investment
Officer and Head of the Company’s Asset Management
function.
■Eliminated
role of Chief Operating Officer in an effort to reduce the
Company’s general and administrative expense.
■As
a result of this transition, 2023 target compensation was reduced
by $3.5 million, or 33%.
The Board of Trustees Recommends You Vote:
Appendix
Equity Compensation Plan Information: Updated
Equity Compensation Plan Information
As of March 31, 2023, no options or warrants to acquire our
securities pursuant to equity compensation plans were outstanding.
The following table sets forth the number of securities to be
issued upon exercise of outstanding options, warrants and rights;
weighted average exercise price of outstanding options, warrants
and rights; and the number of securities remaining available for
future issuance under our equity compensation plans as of March 31,
2023:
As of March 31, 2023, there were 2,158,995 unvested LTIP Unit
Awards outstanding and 165,647 unvested Restricted Share Awards
outstanding.
11
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